-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QtdW9r+FiqVxQ/jECq6a6zmnFbJu+Qx2hcbGosQ4VyrWcsV6mN3lVoHVBLdoWB9I hXisyVn94spGGgr1AFfP8w== 0000950153-97-000469.txt : 19970512 0000950153-97-000469.hdr.sgml : 19970512 ACCESSION NUMBER: 0000950153-97-000469 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICIS PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000859368 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 521574808 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18443 FILM NUMBER: 97598560 BUSINESS ADDRESS: STREET 1: 4343 EAST CAMELBACK RD CITY: PHOENIX STATE: AZ ZIP: 85018 BUSINESS PHONE: 2125992000 MAIL ADDRESS: STREET 1: 4343 E CAMELBACK RD STREET 2: SUITE 250 CITY: PHOENIX STATE: AZ ZIP: 85018 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or the transition period from to Commission file number 0-18443 MEDICIS PHARMACEUTICAL CORPORATION (Exact name of Registrant as specified in its charter) Delaware 52-1574808 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4343 East Camelback Road, Suite 250 Phoenix, Arizona 85018-2700 (Address of principal executive offices) (602) 808-8800 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at April 18, 1997 ----- ------------------------------ Class A Common Stock $.014 Par Value 13,944,750 Class B Common Stock $.014 Par Value 281,974
2 MEDICIS PHARMACEUTICAL CORPORATION TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page Item 1-- Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1997, and June 30, 1996 3 Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended March 31, 1997, and 1996 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 1997, and 1996 6 Notes to the Condensed Consolidated Financial Statements 7 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6 -- Exhibits and Reports on Form 8-K 14 SIGNATURE 15 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MEDICIS PHARMACEUTICAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
March 31, 1997 June 30, 1996 -------------- ------------- (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $ 27,823,391 $ 7,956,050 Short-term investments 49,167,969 -- Accounts receivable, net 8,726,545 5,210,704 Inventories, net 2,202,418 2,080,014 Deferred tax assets 5,000,000 3,000,000 Other current assets 2,296,891 738,911 ------------- ------------ Total current assets 95,217,214 18,985,679 ------------- ------------ Property and equipment: Furniture and equipment 448,982 336,544 Leasehold improvements 170,000 170,000 Less accumulated depreciation (180,914) (100,897) ------------- ------------ Net property and equipment 438,068 405,647 ------------- ------------ Intangible assets: Intangible assets related to product acquisitions 37,010,154 9,168,853 Other intangible assets 1,403,326 203,326 Less accumulated amortization (2,912,887) (2,450,705) ------------- ------------ Net intangible assets 35,500,593 6,921,474 ------------- ------------ Other non-current assets 1,000,000 -- ------------- ------------ $ 132,155,875 $ 26,312,800 ============= ============
The accompanying notes are an integral part of this statement. 3 4 MEDICIS PHARMACEUTICAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1997 June 30, 1996 -------------- ------------- (unaudited) (audited) LIABILITIES Current liabilities: Accounts payable $ 4,346,947 $ 3,371,184 Accrued salaries and wages -- 204,750 Notes payable 10,325 10,000 Accrued incentives 702,649 1,184,111 Accrued royalties 571,746 552,952 Other accrued liabilities 2,324,316 1,262,134 ------------- ------------ Total current liabilities 7,955,983 6,585,131 ------------- ------------ Long-term liabilities: Notes payable 111,335 116,580 Other non-current liabilities 127,528 151,437 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred Stock, $0.01 par value, 5,000,000 -- -- shares authorized; no shares issued Class A Common Stock, $0.014 par value, shares authorized: 50,000,000; 13,944,750 and 10,224,543 issued and outstanding at 195,227 143,143 March 31, 1997 and at June 30, 1996, respectively Class B Common Stock, $0.014 par value, 1,000,000 shares authorized; 281,974 issued and outstanding at March 31, 1997 and 3,948 3,948 at June 30, 1996 Additional paid-in capital 137,459,602 44,202,441 Accumulated deficit (13,697,748) (24,889,880) ------------- ------------ Total stockholders' equity 123,961,029 19,459,652 ------------- ------------ $ 132,155,875 $ 26,312,800 ============= ============
The accompanying notes are an integral part of this statement. 4 5 MEDICIS PHARMACEUTICAL CORPORATION CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Nine Months Ended ----------------------------- ----------------------------- March 31, March 31, March 31, March 31, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Net sales $ 10,976,107 $ 7,016,209 $ 26,752,138 $ 18,038,872 ------------ ------------ ------------ ------------ Operating costs and expenses: Cost of product revenue 2,477,062 1,975,273 6,684,535 5,074,519 Selling, general and administrative 4,435,926 2,965,373 11,199,278 8,067,885 Research and development 360,166 186,660 972,998 607,700 Depreciation and amortization 248,619 146,869 546,846 432,160 ------------ ------------ ------------ ------------ Operating costs and expenses 7,521,773 5,274,175 19,403,657 14,182,264 ------------ ------------ ------------ ------------ Operating income 3,454,334 1,742,034 7,348,481 3,856,608 Interest income 1,242,190 53,288 2,677,090 85,731 Interest expense (2,844) (28,941) (19,312) (66,755) Income tax benefit (expense), net (356,729) (7,235) 1,185,873 (66,413) ------------ ------------ ------------ ------------ Net income $ 4,336,951 $ 1,759,146 $ 11,192,132 $ 3,809,171 ============ ============ ============ ============ Net income per common and common equivalent share $ 0.29 $ 0.16 $ 0.81 $ 0.36 ============ ============ ============ ============ Shares used in computing net income per common and common equivalent share 15,149,944 10,846,818 13,850,304 10,439,318 ============ ============ ============ ============
5 6 MEDICIS PHARMACEUTICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended ------------------------------- March 31, 1997 March 31, 1996 -------------- -------------- Net income $ 11,192,132 $ 3,809,171 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 546,846 432,160 Provision for losses on accounts receivable 255,000 60,000 Deferred income tax benefit (2,000,000) -- Accretion of discount on investments (259,677) -- Non-cash interest -- 13,100 Other non-cash expenses 58,500 5,000 Change in operating assets and liabilities Inventories (122,404) (342,903) Accounts receivable (3,770,841) (830,631) Accounts payable 975,763 81,153 Interest payable -- 23,268 Accrued salaries and wages (204,750) -- Accrued royalty payable 18,794 (2,194) Accrued incentives (481,462) 138,588 Other current liabilities 259,952 (18,067) Other current assets (1,057,980) (454,923) ------------ ----------- Net cash provided by operating activities 5,409,873 2,913,722 ------------ ----------- Cash flows from investing activities: Purchase of property and equipment (117,086) (156,730) Payment for intangible assets (28,239,512) (16,667) Purchase of available-for-sale investments (56,270,461) -- Sale of available-for-sale investments 7,185,861 -- Increase in other assets (1,500,000) -- ------------ ----------- Net cash used in investing activities (78,941,198) (173,397) ------------ ----------- Cash flows from financing activities: Proceeds from the exercise of stock options 3,308,843 909,020 Payments of notes payable (4,478) (770,463) Payment of other non-current liabilities (23,909) -- Proceeds from common stock sale 90,118,210 -- Proceeds from the issuance of note payable -- 23,910 ------------ ----------- Net cash provided by financing activities 93,398,666 162,467 ------------ ----------- Net increase in cash and cash equivalents 19,867,341 2,902,792 Cash and cash equivalents at beginning of period 7,956,050 953,438 ------------ ----------- Cash and cash equivalents at end of period $ 27,823,391 $ 3,856,230 ------------ ----------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 19,312 $ 30,387 Taxes 759,364 136,147
The accompanying notes are an integral part of this statement. 6 7 MEDICIS PHARMACEUTICAL CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 1. ORGANIZATION AND BASIS OF PRESENTATION Medicis Pharmaceutical Corporation ("Medicis" or the "Company") is an independent pharmaceutical company headquartered in Phoenix, Arizona that develops, markets and sells prescription and non-prescription (over-the-counter) products exclusively to treat dermatological conditions. Emphasizing the clinical effectiveness, quality, affordability and cosmetic elegance of its products, the Company has achieved a leading position in the treatment of acne and acne-related conditions using prescription pharmaceuticals, while also offering the leading domestic over-the-counter ("OTC") fade cream product line. The Company has built its business through the successful introduction of the DYNACIN(R) and TRIAZ(R) products for the treatment of acne, and the acquisition of the ESOTERICA(R) fade cream product line. On February 24, 1997, Medicis acquired the prescription topical corticosteroid brands LIDEX(R) and SYNALAR(R). These topical corticosteroids combat inflammatory skin diseases by reducing swelling and pain, relieving itching and constricting blood vessels in the skin. The LIDEX(R) and SYNALAR(R) product lines consist of various potencies and cosmetically elegant formulations, allowing dermatologists to prescribe the most appropriate product based on the severity and location of the patients condition. Additionally, Medicis has formed a new business unit, TX SYSTEMS(TM) by Medicis to market cosmetic dermatology treatments to dermatologists nationwide for administration and dispensing to patients. Through the TX SYSTEMS(TM) by Medicis business unit, two new skin treatments were introduced to improve the texture and appearance of the skin - AFIRM(TM), a patented retinol cream, and BETA-LIFTX(TM), a new skin treatment procedure. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted in the second quarter of fiscal 1998 ended December 31, 1997. At that time, reporting Company's will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in primary earnings per share for the third quarter ended March 31, 1997 and March 31, 1996 of $0.02 to $0.31 per share and $0.01 to $0.17 per share, respectively. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarters is not expected to be material. Except as otherwise specified herein, all information in this Form 10-Q has been adjusted to give effect to a 3-for-2 stock split in the form of a 50% stock dividend paid on March 28, 1997 to holders of record on March 17, 1997. Certain immaterial amounts on the face of the balance sheet have been reclassified to conform with the current years presentation. The financial information is unaudited but reflects all adjustments, consisting only of normal recurring accruals, which are, in the opinion of the Company's management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The financial statements should be read in conjunction with the Company's audited financial statements for the fiscal year ended June 30, 1996. 7 8 2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Net income per common and common equivalent share have been computed by using the weighted average number of shares outstanding and common equivalent shares. 3. CONTINGENCIES The Company and certain of its subsidiaries, from time to time, are parties to certain actions and proceedings incident to their business. Liability in the event of final adverse determinations in any of these matters is either covered by insurance and/or established reserves or, in the opinion of management, after consultation with counsel, should not, in the aggregate, have a material adverse effect on the consolidated financial position or results of operations of the Company and its subsidiaries. 4. INVENTORIES Although the Company utilizes third parties to manufacture and package inventories held for sale, the Company takes title to certain inventories and records the associated liability once inventories are manufactured. Inventories are valued at the lower of cost or market as determined by net realizable value using the first-in-first-out method. Inventories, net of reserves, at March 31, 1997, and June 30, 1996, consist of the following:
March 31, 1997 June 30, 1996 -------------- ------------- Raw materials $ 296,177 $ 72,633 Work in process -- 23,749 Finished goods 1,906,241 1,983,632 ---------- ---------- Total inventories $2,202,418 $2,080,014 ========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the attached condensed consolidated financial statements and notes thereto and with the Company's audited financial statements, notes to the consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations relating thereto included or incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. The foregoing Form 10-Q contains certain forward-looking statements which are subject to risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, which are incorporated by reference herein. 8 9 RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1996 Net Sales Net sales for the three months ended March 31, 1997 (the "third quarter of fiscal 1997") increased 56.4%, or $4.0 million, to $11.0 million from $7.0 million for the three months ended March 31, 1996 (the "third quarter of fiscal 1996"). The Company's net sales increased in the third quarter of fiscal 1997 primarily as a result of continued unit and dollar growth in the Company's prescription products primarily the DYNACIN(R) and TRIAZ(R) products and the contribution from the LIDEX(R) and SYNALAR(R) products which were acquired on February 24, 1997 from various affiliates of Syntex Corporation and its parent F. Hoffmann-La Roche, Ltd. The Company has during the third quarter of Fiscal 1997 increased the full-time equivalent number of sales personnel and has expanded its clinical testing and marketing activities in order to facilitate the increased net sales. The Company's prescription products accounted for 87.9% of net sales in the third quarter of fiscal 1997 and 84.6% in the third quarter of fiscal 1996. The unit and dollar sales volume of the Company's ESOTERICA(R) products increased 38.4% primarily due to an increase in use of promotional vehicles in targeted markets. The over-the-counter products accounted for 12.1% of net sales in the third quarter of fiscal 1997 and 15.4% in the third quarter of fiscal 1996. Gross Profit Gross profit during the third quarter of fiscal 1997 increased 68.6%, or $3.5 million, to $8.5 million from $5.0 million in the third quarter of fiscal 1996. As a percentage of net sales, gross profit grew to 77.4% in the third quarter of fiscal 1997 from 71.8% in the third quarter of fiscal 1996 primarily as a result of higher average sales prices for the Company's DYNACIN(R) and ESOTERICA(R) products, and additional sales from the Company's higher margin products primarily TRIAZ(R), LIDEX (R) and SYNALAR(R) . Selling, General and Administrative Expenses Selling, general and administrative expenses in the third quarter of fiscal 1997 increased 49.9%, or $1.5 million, to $4.4 million from $2.9 million in the third quarter of fiscal 1996, primarily due to the introduction and administration of the LIDEX(R) and SYNALAR(R) products which the Company began actively promoting to dermatologists nationwide on February 24, 1997, the introduction of two new products; BETA-LIFTX(TM) and AFIRM(TM) through the Company's newly formed business unit TX SYSTEMS(TM) by Medicis and an increase in promotional costs associated with the advertising of the ESOTERICA(R) products. Additionally, selling, general and administrative expenses increased due to personnel costs attributable to an increase in variable compensation commensurate with increased sales volume, a rise in full-time equivalent employees and cost of living salary adjustments. Selling, general and administrative expenses, decreased 180 basis points as a percentage of sales to 40.5% from 42.3% in the third quarter of fiscal 1997 relative to the third quarter of fiscal 1996. 9 10 Research and Development Expenses Research and development expenses in the third quarter of fiscal 1997 increased 93.0%, or approximately $174,000, to approximately $360,000 from approximately $186,000 in the third quarter of fiscal 1996, primarily due to expansion of new product research and development activities and an increase in expenses associated with the expanded clinical support of the Company's existing products. Operating Income Operating income during the third quarter of fiscal 1997 increased 98.3%, or $1.7 million, to $3.4 million from $1.7 million in the third quarter of fiscal 1996. This increase was primarily a result of a 56.4% increase in sales volume, coupled with a 560 basis point increase in the Company's gross profit as a percentage of net sales and a 180 basis point decrease in selling, general, and administrative cost as a percentage of net sales. Interest Income (Expense) Interest income in the third quarter of fiscal 1997 increased to $1.2 million from approximately $53,000 in the third quarter of fiscal 1996, primarily due to higher cash equivalent and short-term investment balances in the third quarter of fiscal 1997 as a result of the Company's public offering which raised $95.7 million before related expenses, funds received throughout fiscal 1997 as the result of stock option exercises and the Company's cash flow from operations. Net Income Net income during the third quarter of fiscal 1997 increased approximately 146.5%, or $2.6 million, to $4.3 million from $1.7 million from the third quarter of fiscal 1996. The increase is primarily attributable to a 56.4% increase in sales volume, a 560 basis point increase in gross profit as a percentage of net sales and a 180 basis point decrease in selling, general and administrative costs as a percentage of net sales. NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE NINE MONTHS ENDED MARCH 31, 1996 Net Sales Net sales for the nine months ended March 31, 1997 (the "1997 nine months") increased 48.3%, or $8.7 million, to $26.7 million from $18.0 million for the nine months ended March 31, 1996 (the "1996 nine months") primarily as a result of continued unit and dollar growth in sales of the Company's prescription products primarily the DYNACIN(R) and TRIAZ(R) products and the contribution from the LIDEX(R) and SYNALAR(R) products which were acquired on February 24, 1997 from various affiliates of Syntex Corporation and its parent F. Hoffmann-La Roche, Ltd. The Company has during the 1997 nine months increased the full-time equivalent number of sales personnel and has expanded its clinical testing and marketing activities in order to facilitate the increase in net sales. The Company's prescription products accounted for 86.2% of net sales in the 1997 nine months as compared to 80.4% of net sales in the 1996 nine months. 10 11 Gross Profit Gross profit for the 1997 nine months increased 54.8%, or $7.1 million, to $20.1 million from $13.0 million in the 1996 nine months. As a percentage of net sales, gross profit grew to 75.0% in the 1997 nine months from 71.9% in the 1996 nine months primarily due to a higher average sales price of the DYNACIN(R) products and additional sales from the Company's higher margin products, primarily TRIAZ(R), LIDEX(R) and SYNALAR(R). Selling, General and Administrative Expenses Selling, general and administrative expenses in the 1997 nine months increased 38.9%, or $3.1 million, to $11.2 million from $8.1 million in the 1996 nine months. The increase is primarily due to the introduction and administration of the LIDEX(R) and SYNALAR(R) products which the Company acquired in the third quarter of fiscal 1997 and began actively promoting the products to dermatologists nationwide, the introduction of two new products; BETA-LIFTX(TM) and AFIRM(TM) through the Company's formation of the TX SYSTEMS(TM) by Medicis business unit and an increase in promotional costs associated with advertising of the ESOTERICA(R) products and the Company's existing prescription products. Selling, general and administrative expenses also increased due to personnel costs attributable to an increase in variable compensation commensurate with increased sales volume, personnel cost attributable to a rise in full-time equivalent employees, and cost of living salary adjustments. Selling, general and administrative costs, have decreased 280 basis points as a percentage of sales to 41.9% from 44.7% in the 1997 nine months compared to the 1996 nine months. Research and Development Expenses Research and development expenses in the 1997 nine months increased 60.1% or approximately $365,000 to approximately $973,000, from approximately $608,000 in the 1996 nine months primarily due to expansion of new product research and development activities and an increase in expenses associated with the clinical support of the Company's existing products. Operating Income Operating income during the 1997 nine months increased 90.5% or, $3.5 million to $7.4 million from $3.9 million in the 1996 nine months. This increase was primarily a result of a 48.3% increase in sales volume coupled with an increase of 310 basis points in the Company's gross profit as a percentage of net sales and decrease of 280 basis points in selling, general, and administrative costs as a percentage of net sales. 11 12 Interest Income (Expense) Interest income in the 1997 nine months increased to $2.7 million from approximately $86,000 in the 1996 nine months, primarily due to higher cash equivalent and short-term investment balances in the 1997 nine months. Cash equivalent and short-term investments balances have increased primarily due to the Company's public offering which raised $95.7 million before related expenses, the Company's cash flow from operations and funds received as a result of stock option exercises. Interest expense in the 1997 nine months decreased 71.1%, or approximately $47,000, to approximately $19,000 from approximately $66,000 in the 1996 nine months. Income Tax Benefit (Expense) Income tax benefit (expense) during the 1997 nine months increased $1.3 million to a benefit of $1.2 million from an expense of approximately $66,000 in the 1996 nine months. During the first quarter of fiscal 1997, the Company reassessed the estimated amount of valuation allowance required in light of the funds received from the public offering to reduce deferred tax assets in accordance with Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes ("SFAS No. 109") to an amount the Company, after consultation with its independent accountants, believed appropriate. Accordingly, a credit to income tax benefit of $2.0 million was reflected in the first quarter of fiscal 1997's Condensed Consolidated Statement of Operations and the corresponding deferred tax asset on the Company's Condensed Consolidated Balance Sheets. The amount of net deferred tax assets estimated to be recoverable was based upon the Company's assessment of the likelihood of near term operating income coupled with uncertainties with respect to the impact of future competitive and market conditions. No such income tax benefit was recorded in the 1996 nine months. The income tax benefit was partially offset by the Company's federal and state tax payments during the 1997 nine months. Net Income Net income during the 1997 nine months increased approximately 193.8%, or $7.4 million, to $11.2 million from $3.8 million in the 1996 nine months. The increase was primarily attributable to a 48.3% increase in sales volume, a 310 basis point increase in gross profit as a percentage of net sales, the decrease in selling, general and administrative as a percentage of net sales of 280 basis points and the recording of the $2.0 million income tax benefit in the 1997 nine months. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997 and June 30, 1996, the Company had cash equivalents and short-term investments of approximately $77.0 million and $8.0 million, respectively. The Company's working capital was $87.3 million and $12.4 million at March 31, 1997 and June 30, 1996, respectively. The increase in working capital is primarily attributable to the Company's public offering of $95.7 million before related expenses, income from operations of $7.3 million, and funds received due to the exercise of stock options of $3.3 million. 12 13 At March 31, 1997 and June 30, 1996, the Company had accounts receivable of $8.7 million and $5.2 million, respectively. The increase in the Company's accounts receivable balance is primarily due to an increase in sales volume in the third quarter of fiscal 1997 as compared to the quarter ended June 30, 1996. The Company also began recording sales for LIDEX(R) and SYNALAR(R) on February 24, 1997 pursuant to a transition service agreement with F. Hoffman-La Roche, Ltd. The Company will receive payment for sales recorded during the March 31, 1997 quarter in April, 1997. At March 31, 1997 and June 30, 1996, the Company had accounts payable balances of $4.3 million and $3.4 million, respectively. The increase in the Company's accounts payable balance is primarily due to inventory value associated with the Company's LIDEX(R), SYNALAR(R), AFIRM(TM) and BETA-LIFTX(TM) products. During fiscal 1997, the Company reassessed the estimated amount of valuation allowance required or necessary to reduce deferred tax assets available in accordance with SFAS No. 109 to an amount the Company, after consultation with its independent accounts, believed appropriate. Accordingly, a deferred tax asset of an additional $2.0 million was reflected in the consolidated balance sheet and a credit to deferred tax benefit of $2.0 million in the consolidated income statement. The amount of net deferred tax assets available that are estimated to be recoverable was based upon the Company's assessment of the likelihood of near-term operating income coupled with the uncertainties with respect to the impact of future competitive and market conditions. The amount of deferred tax asset available that ultimately will be realized will depend upon future events which are uncertain. On October 2, 1996, the Company completed a public offering for 2,775,000 primary shares of the Company's Class A Common Stock at a price of $30.00 per share. The underwriters also exercised the over allotment option of 416,250 shares at a price of $30.00 per share. Gross proceeds from the offering before related expenses totaled approximately $95,737,500. The Company anticipates using the proceeds from the offering for marketing expenses associated with new product introductions, the licensing or acquisition of formulations, technologies, products or businesses, research and development, expansion of marketing and sales capabilities and general corporate purposes. In November 1996, the Company increased its credit facility with Norwest Bank Arizona, N.A. from $5 million to $25 million. The credit facility is secured by principal assets of the Company. The Company is required to comply with certain covenants and restrictions, including covenants relating to the Company's financial condition and result of operations. This credit facility has not been accessed by Medicis. In January 1997, the Company agreed to acquire the United States and Canadian dermatology assets of Syntex USA, Inc. from various affiliates of Syntex and its parent company, F. Hoffmann-La Roche, Ltd. The Company, using cash reserves, paid $28 million, and will pay an additional $3 million under certain conditions, or less than 2.5 times sales over the past 12 months, for the purchased products. Medicis entered into four separate Asset Purchase Agreements with various Roche affiliates (the "Purchase Agreements") for the acquisition of the intellectual property rights, know-how and all finished goods inventory specifically associated with Syntex's topical corticosteroid dermatology products ("the Purchased Products") in the United States and Canada. The purchased products include the prescription 13 14 topical steroid brands LIDEX(R) and SYNALAR(R). These topical corticosteroids combat inflammatory skin diseases by reducing swelling and pain, relieving itching, and constricting blood vessels in the skin. The product lines consist of various potencies and cosmetically elegant formulations, allowing dermatologists to prescribe the most appropriate product based on the severity and location of a patient's condition. Prior to the acquisition, the Company did not market any products in this category of dermatological care. On March 7, 1997, the Company announced that its Board of Directors had approved a 3-for-2 stock split to be effected in the form of a 50% stock dividend. The dividend was paid to holders of record of the Class A and Class B Common Stock and all stock option holders on March 17, 1997, i.e., the record date. Holders of the Company's Class A and Class B Common Stock received one additional share of Common Stock for each two shares held. Similar adjustments will be made under the Company's Rights Agreement, dated as of August 15, 1995 (as amended from time-to-time) between the Company and Norwest Bank Minnesota, N.A., so that one additional right shall be issued to accompany each share of Common Stock issued pursuant to the dividend. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 4.1b Amendment No. 2 to Rights Agreement dated as of March 17, 1997 between the Company and Norwest Bank Minnesota, N.A. 10.79 Asset Purchase Agreement dated January 21, 1997 between the Company and Syntex Pharmaceuticals International Limited 10.80 Asset Purchase Agreement dated January 21, 1997 between the Company and Syntex (U.S.A.) Inc. 10.81 Asset Purchase Agreement dated January 21, 1997 between the Company and Hoffmann-La Roche Limited 10.82 Asset Purchase Agreement dated January 21, 1997 between the Company and Syntex Pharmaceuticals International Limited 10.83 Transition Services Agreement dated January 21, 1997 between the Company and Hoffman-La Roche, Inc. 10.84 Transition Services Agreement dated January 21, 1997 between the Company and Hoffman-La Roche Limited 10.85 Supply Agreement (Fluocinolone Acetonide and Fluocinonide) dated January 21, 1997 between the Company and Syntex Pharmaceuticals International Limited 10.86 License Agreement dated March 28, 1997 between the Company and Platinum(R) Software Corporation 14 15 10.87 Master Software License Agreement dated March 28, 1997 between the Company and FocusSoft, Inc. 11.1 Statements re: Computation of Per Share Earnings 27 Financial Data Schedule (b) Reports on Form 8-K During the third quarter of fiscal 1997, the Company filed the following report on Form 8-K: (i) Current report on Form 8-K dated January 22, 1997 reporting under Item 5, the Company acquired the United States and Canadian assets of Syntex USA, Inc. ("Syntex") from various affiliates of Syntex and its parent company, F. Hoffmann-La Roche, Ltd. (ii) Current report on Form 8-K dated March 28, 1997 reporting under Item 5, the Company effected a three-for-two stock split in the form of a 50% stock dividend. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDICIS PHARMACEUTICAL CORPORATION Date: By: /s/ Jonah Shacknai ------------- ------------------------------------ Jonah Shacknai Chairman and Chief Executive Officer Date: By: /s/ Mark A. Prygocki Sr. ------------- ------------------------------------ Mark A. Prygocki, Sr. Chief Financial Officer and Assistant Treasurer 15 16 MEDICIS PHARMACEUTICAL CORPORATION FORM 10-Q EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 4.1b Amendment No. 2 to Rights Agreement dated as of March 17, 1997 between the Company and Norwest Bank Minnesota, N.A. 10.79 Asset Purchase Agreement dated January 21, 1997 between the Company and Syntex Pharmaceuticals International Limited 10.80 Asset Purchase Agreement dated January 21, 1997 between the Company and Syntex (U.S.A.) Inc. 10.81 Asset Purchase Agreement dated January 21, 1997 between the Company and Hoffmann-La Roche Limited 10.82 Asset Purchase Agreement dated January 21, 1997 between the Company and Syntex Pharmaceuticals International Limited 10.83 Transition Services Agreement dated January 21, 1997 between the Company and Hoffman-La Roche, Inc. 10.84 Transition Services Agreement dated January 21, 1997 between the Company and Hoffman-La Roche Limited 10.85 Supply Agreement (Fluocinolone Acetonide and Fluocinonide) dated January 21, 1997 between the Company and Syntex Pharmaceuticals International Limited 10.86 License Agreement dated March 28, 1997 between the Company and Platinum(R) Software Corporation 10.87 Master Software License Agreement dated March 28, 1997 between the Company and FocusSoft, Inc. 11.1 Statements re: Computations of Per Share Earnings 27 Financial Data Schedule 16 EX-4.1.B 2 AMENDMENT #2 TO RIGHTS AGREEMENT 1 Exhibit 4.1b AMENDMENT NO. 2 TO RIGHTS AGREEMENT DATED AS OF MARCH 17, 1997 BETWEEN MEDICIS PHARMACEUTICAL CORPORATION AND NORWEST BANK MINNESOTA, N.A., AS SUCCESSOR-IN-INTEREST TO AMERICAN STOCK TRANSFER & TRUST COMPANY, AS RIGHTS AGENT 2 TABLE OF CONTENTS Section 1. Appointment of Rights Agent................................... 1 Section 2. Certain Amendments............................................ 2 Section 3. Successors.................................................... 5 Section 4. Benefits of this Amendment.................................... 5 Section 5. Severability.................................................. 5 Section 6. Governing Law................................................. 5 Section 7. Counterparts.................................................. 5 Section 8. Descriptive Headings.......................................... 5
Exhibit A - Form of Right Certificate Exhibit B - Summary of Rights to Purchase Preference Shares 3 AMENDMENT NO. 2 TO RIGHTS AGREEMENT THIS AMENDMENT NO. 2 TO RIGHTS AGREEMENT, dated as of March 17, 1997 (this "Amendment"), between Medicis Pharmaceutical Corporation, a Delaware corporation (the "Company"), and Norwest Bank Minnesota, N.A. ("Norwest"), a national banking association, as successor-in-interest to American Stock Transfer & Trust Company, a New York corporation ("American Stock"), as rights agent (the "Rights Agent"). W I T N E S S E T H: WHEREAS, on August 17, 1995, the Board of Directors of the Company authorized and declared a dividend of one preference share purchase right (a "Right") for each Class A Common Share (such capitalized term and all other capitalized terms used herein having the meanings set forth or as provided in Section 1 of the Rights Agreement, dated as of August 17, 1995 between the Company and the Rights Agent (the "Rights Agreement")) and Class B Common Share of the Company outstanding as of the Close of Business on August 30, 1995 (the "Record Date"), each Right representing the right to purchase one one-hundredth of a Preference Share, upon the terms and subject to the conditions set forth in the Rights Agreement, and further authorized and directed the issuance of one Right with respect to each Class A Common Share and each Class B Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date; and WHEREAS, on August 17, 1995, the Company and the Rights Agent have executed and delivered the Rights Agreement, and WHEREAS, on April 15, 1996, the Company and the Rights Agent executed and delivered Amendment No. 1 to the Rights Agreements, which amended certain terms and provisions of the original Rights Agreement; and WHEREAS, on December 12, 1996, the majority of the Board of Directors of the Company determined that it is in the best interest of the Company to change the rights agent under the Rights Agreement from the American Stock to Norwest; and WHEREAS, Norwest has agreed to serve as the successor to American Stock as rights agent under the Rights Agreement. NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: SECTION 1. APPOINTMENT OF RIGHTS AGENT. The Company does hereby appoint Norwest as the successor-in-interest to American Stock and as rights agent under the Rights Agreement, pursuant to Section 21 of the Rights Agreement, and Norwest hereby accepts the 1 4 appointment and agrees to undertake the duties and obligations of the rights agent set forth in the Rights Agreement and be bound by the terms and provisions of the Rights Agreement. SECTION 2. CERTAIN AMENDMENTS (a) The introductory paragraph of the Rights Agreement shall be amended to state: "THE RIGHTS AGREEMENT, dated as of August 17, 1995, as amended, (this "Agreement"), between Medicis Pharmaceutical Corporation, a Delaware corporation (the "Company"), and Norwest Bank Minnesota, N.A., a national banking association, as successor-in-interest to American Stock Transfer & Trust Company, a New York corporation, as rights agent (the "Rights Agent")." (b) The third sentence of Section 3(a) of the Rights Agreement is hereby amended to read as follows: As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the Rights Agent will, if requested by the Company, send) by first-class, insured, postage-prepaid mail, to each record holder of Class A Common Shares and Class B Common Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of EXHIBIT A to Amendment No. 2, dated as of March 17, 1997 ("Amendment No. 2") to this Agreement (a "Right Certificate"), evidencing one Right for each Class A Common Share and Class B Common Share so held. (c) Section 3(b) of the Rights Agreement is hereby amended by adding the following at the end thereof: Upon the effectiveness of Amendment No. 2, the Summary of Rights to Purchase Preference Shares, shall be in substantially the form of EXHIBIT B to Amendment No. 2 and thereafter all references in this Agreement to the Summary of Rights shall be references to the Summary of Rights as so amended. (d) Section 3(c) of the Rights Agreement is hereby amended to read as follows: (e) Certificates for Class A Common Shares and Class B Common Shares which become outstanding (including, without limitation, reacquired Class A Common 2 5 Shares and Class B Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement, dated as of August 17, 1995, between Medicis Pharmaceutical Corporation and Norwest Bank Minnesota, N.A., as successor-in-interest to American Stock Transfer & Trust Company, as Rights Agent (as amended, the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Medicis Pharmaceutical Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Medicis Pharmaceutical Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights issued to any Person who becomes an Acquiring Person (as defined in the Rights Agreement) may become null and void. (f) Certificates for Class A Common Shares and Class B Common Shares which become outstanding (including, without limitation, reacquired Class A Common Shares and Class B Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement, dated as of August 17, 1995, between Medicis Pharmaceutical Corporation and Norwest Bank Minnesota, N.A., as successor-in-interest to American Stock Transfer & Trust Company, as Rights Agent (as amended, the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Medicis Pharmaceutical Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this 3 6 certificate. Medicis Pharmaceutical Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights issued to any Person who becomes an Acquiring Person (as defined in the Rights Agreement) may become null and void. With respect to such certificates containing either of the foregoing legends, until the Distribution Date, the Rights associated with the Class A Common Shares and Class B Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Class A Common Shares and Class B Common Shares represented thereby. In the event that the Company purchases or otherwise acquires any Class A Common Shares and Class B Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Class A Common Shares or Class B Common Shares, as the case may be, shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the Class A Common Shares or Class B Common Shares, as the case may be, which are no longer outstanding. (g) The first sentence of Section 4 of the Rights Agreement is hereby amended to read as follows: The Right Certificates (and the forms of election to purchase Preference Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as EXHIBIT A to Amendment No. 2 and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. (h) The second sentence of Section 26 shall be amended to read as follows: Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: 4 7 Norwest Bank Minnesota, N.A. 161 North Concord Exchange P.O. Box 738 South St. Paul, Minnesota 55075 Attention: Shareholder Services SECTION 3. SUCCESSORS. All the covenants and provisions of this Amendment by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 4. BENEFITS OF THIS AMENDMENT. Nothing in this Amendment shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Class A Common Shares) any legal or equitable right, remedy or claim under this Amendment; but this Amendment shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Class A Common Shares). SECTION 5. SEVERABILITY. If any term, provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated. SECTION 6. GOVERNING LAW. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. SECTION 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 8. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Amendment are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 5 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and attested by their respective officers thereunto duly authorized as of the day and year first above written. Attest: MEDICIS PHARMACEUTICAL CORPORATION By By /s/ Jonah Shacknai ----------------------------- ----------------------------- Name: Mark A. Prygocki, Sr. Jonah Shacknai Title: Secretary Chairman and Chief Executive Officer Attest: NORWEST BANK MINNESOTA, N.A., as successor-in-interest to AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent By /s/ Barbara M. Novak By /s/ Kenneth P. Swanson ----------------------------- ----------------------------- Name: Barbara M. Novak Name: Kenneth P. Swanson Title: Vice President Title: Assistant Vice President 6 9 EXHIBIT A Form of Right Certificate Certificate No. R- ________ Rights NOT EXERCISABLE AFTER AUGUST 17, 2005 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT S.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. Right Certificate MEDICIS PHARMACEUTICAL CORPORATION This certifies that _____________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of August 17, 1995, between Medicis Pharmaceutical Corporation, a Delaware corporation (the "Company"), and Norwest Bank Minnesota, N.A., as successor-in-interest to American Stock Transfer & Trust Company, as rights agent (the "Rights Agent"), (as amended from time to time in accordance with its terms, the "Rights Agreement"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m., New York City time, on August 17, 2005 at the office or agency of the Rights Agent designated for such purpose, or of its successor as Rights Agent, one one-hundredth of a fully paid non-assessable share of Series A Junior Participating Preference Stock, par value $.01 per share (the "Preference Shares"), of the Company, at a purchase price of $185.00 per one one-hundredth of a Preference Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of one one-hundredths of a Preference Share which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of April 15, 1996, based on the Preference Shares as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of one one-hundredths of a Preference Share which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the principal executive office of the Company and the above-mentioned office or A-1 10 agency of the Rights Agent. The Company will mail to the holder of this Right Certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. This Right Certificate, with or without other Right Certificates, upon surrender at the office or agency of the Rights Agent designated for such purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preference Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not issued. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at a redemption price of $.001 per Right or (ii) may be exchanged by the Company in whole or in part for Preference Shares or shares of the Company's Class A Common Stock, par value $.001 per share. No fractional Preference Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a Preference Share, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preference Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of director or upon any matter submitted to stockholders at any meeting thereof, or to give or to withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. A-2 11 WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ________________ ATTEST: MEDICIS PHARMACEUTICAL CORPORATION By ________________________________ By _________________________________ Countersigned: NORWEST BANK MINNESOTA, N.A., as successor-in-interest to AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent By __________________________________ Authorized Signature A-3 12 Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificate.) FOR VALUE RECEIVED ____________________________ hereby sells, assigns and transfers unto______________________________________________________ ________________________________________________________________________________ (Please print name and address of transferee) ________________________________________________________________________________ this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________________________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: _______________________________ _______________________________ _______________________________ Signature(s) Signature Guaranteed: Signature(s) must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). _______________________________ Signature - -------------------------------------------------------------------------------- A-4 13 Form of Reverse Side of Right Certificate -- continued FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise Rights represented by the Right Certificate.) To Medicis Pharmaceutical Corporation The undersigned hereby irrevocably elects to exercise _____________ Rights represented by this Right Certificate to purchase the Preference Shares issuable upon the exercise of such Rights and requests that certificates for such Preference Shares be issued in the name of: Please insert social security or other identifying number ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ Dated:____________________________ __________________________________ __________________________________ Signature(s) Signature Guaranteed: Signature(s) must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. A-5 14 Form of Reverse Side of Right Certificate -- continued - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). __________________________________ Signature - -------------------------------------------------------------------------------- NOTICE The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. In the event the certificate set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored. A-6 15 EXHIBIT B MEDICIS PHARMACEUTICAL CORPORATION SUMMARY OF RIGHTS TO PURCHASE SHARES OF SERIES A JUNIOR PARTICIPATING PREFERENCE STOCK On August 17, 1995, the Board of Directors of Medicis Pharmaceutical Corporation, a Delaware corporation (the "Company"), declared a dividend of one preference share purchase right (a "Right") for each outstanding share of Class A Common Stock, par value $.014 (formerly $.001) per share (the "Class A Common Shares"), and Class B Common Stock, par value $.014 (formerly $.001) per share (the "Class B Common Shares" and, together with the Class A Common Shares, the "Common Shares") of the Company. The dividend is payable on August 30, 1995 (the "Record Date") to the holders of record of the Common Shares on that date. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preference Stock, par value $.01 per share (the "Preference Shares"), of the Company at a price of $185.00 per one one-hundredth of a Preference Share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of August 17, 1995, between the Company and Norwest Bank Minnesota, N.A., as successor-in-interest to American Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent"), as amended from time to time in accordance with its terms (the "Rights Agreement"). Until the earlier to occur of (i) ten days following a public announcement that a person or group of affiliated or associated person (an "Acquiring Person") have acquired beneficial ownership of 15% or more of the outstanding Class A Common Shares or (ii) ten business days (or such later date as may be determined by action of the Board of Directors of the Company prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding Class A Common Shares (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Share certificates outstanding as of the Record Date, by such Common Share certificate with a copy of this Summary of Rights attached thereto. The Rights Agreement provides that, until the Distribution Date (or earlier redemption or expiration of the Rights), the Rights will be transferred with and only with the Class A Common Shares. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Share certificates issued after the Record Date upon transfer or new issuance of Common Shares will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates for Common Shares outstanding as of the Record Date, even without such notation or a copy of this Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the Common Shares represented by such B-1 16 certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Common Shares as of the Close of Business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire on August 17, 2005 (the "Final Expiration Date"), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed or exchanged by the Company, in each case as described below. The Purchase Price payable, and the number of Preference Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (1) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preference Shares, (2) upon the grant to holders of the Preference Shares of certain rights or warrants to subscribe for or purchase Preference Shares at a price, or securities convertible into Preference Shares with a conversion price, less than the then-current market price of the Preference Shares or (3) upon the distribution to holders of the Preference Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in Preference Shares) or of subscription rights or warrants (other than those referred to above). The number of outstanding Rights and the number of one one-hundredths of a Preference Share issuable upon exercise of each Right are also subject to adjustment in the event of a stock split of the Class A Common Shares or a stock dividend on the Class A Common Shares payable in Class A Common Shares or subdivisions, consolidations or combinations of the Class A Common Shares occurring, in any such case, prior to the Distribution Date. Preference Shares purchasable upon exercise of the Rights will not be redeemable. Each Preference Shares will be entitled to a minimum preferential quarterly dividend payment of $1 per share but will be entitled to an aggregate dividend of 100 times the dividend declared per Class A Common Share. In the event of liquidation, the holders of the Preference Shares will be entitled to a minimum preferential liquidation payment of $100 per share but will be entitled to an aggregate payment of 100 times the payment made per Class A Common Share. Each Preference Share will have 100 votes, voting together with the Class A Common Shares, except as otherwise required by law. Finally, in the event of any merger, consolidation or other transaction in which Class A Common Shares are exchanged, each Preference Share will be entitled to receive 100 times the amount received per Class A Common Share. These rights are protected by customary antidilution provisions. The dividend, liquidation and voting rights, and the non-redemptive feature of the Preference Shares are designed so that the value of the one one-hundredth interest in a Preference Share purchasable upon exercise of each Right should approximate the value of one Class A Common Share. B-2 17 In the event that, after a person or group has become an Acquiring Person, the Company is acquired in a Merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provision will be made so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right. The Rights Agreement also provides that, in the event that any person or group of affiliated or associated persons becomes an Acquiring Person, proper provision shall be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise that number of Class A Common Shares having a market value of two times the exercise price of the Right. At any time after any person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding Class A Common Shares, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which will have become void), in whole or in part, at an exchange ratio of one Class A Common Share, or one one-hundredth of a Preference Share (or of a share of a class or series of the Company's preferred stock having equivalent rights, preferences and privileges) per Right (subject to adjustment). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in the Purchase Price. No fractional Preference Shares will be issued (other than fractions which are integral multiples of one one-hundredth of a Preference Share, which may, at the election of the Company, be evidenced by depositary receipts) and in lieu thereof, an adjustment in cash will be made based on the market price of the Preference Shares on the last trading day prior to the date of exercise. At any time prior to the time an Acquiring Person becomes such, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.001, per Right (the "Redemption Price"). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors of the Company in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The terms of the Rights may be amended by the Board of Directors of the Company without the consent of the holders of the Rights, including an amendment to lower certain thresholds described above to not less than the greater of (i) the sum of .001% and the largest percentage of the outstanding Class A Common Shares then known to the Company to be beneficially owned by any person or group of affiliated or associated persons (other than (a) the Company, (b) any subsidiary of the Company, (c) any employee benefit plan of the Company or any subsidiary of the Company, or (d) any entity holding Class A Common Shares for or pursuant to the terms of any such plan) and (ii) 10%, except that from and after such time as any B-3 18 person or group of affiliated or associated person becomes an Acquiring Person no such amendment may adversely affect the interests of the holders of the Rights. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. A copy of the Rights Agreement has been filed with the U.S. Securities and Exchange Commission as an exhibit to a Registration Statement on Form 8-A, dated August 17, 1995. A copy of Amendment No. 1 to Rights Agreement has been filed with the U.S. Securities and Exchange Commission as an exhibit to the Company's Form 10-Q for the period ended June 30, 1996. A copy of Amendment No. 2 to Rights Agreement has been filed with the U.S. Securities and Exchange Commission as an exhibit to the Company's Form 10-Q for the period ended March 31, 1997. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. B-4 EX-10.79 3 ASSET PURCHASE AGRMNT BTWN COMPANY AND SYNTEX INT. 1 EXHIBIT 10.79 ASSET PURCHASE AGREEMENT BETWEEN SYNTEX PHARMACEUTICALS INTERNATIONAL LIMITED and MEDICIS PHARMACEUTICAL CORPORATION 2 TABLE OF CONTENTS 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. ASSETS BEING SOLD . . . . . . . . . . . . . . . . . . . . . . 4 2.1 Trademarks . . . . . . . . . . . . . . . . . . . . . 4 2.2 Registrations . . . . . . . . . . . . . . . . . . . . 4 2.3 Manufacturing Technology and Know-How . . . . . . . . 4 2.4 Trademark Agreements . . . . . . . . . . . . . . . . 4 2.5 Manufacturing Information . . . . . . . . . . . . . . 5 2.6 Data Bank Documents . . . . . . . . . . . . . . . . . 5 2.7 Worldwide Safety Reports . . . . . . . . . . . . . . 5 2.8 Assumption of Liabilities . . . . . . . . . . . . . . 5 3. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . 5 4. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . 5 4.1 Organization . . . . . . . . . . . . . . . . . . . . 5 4.2 Authority . . . . . . . . . . . . . . . . . . . . . . 5 4.3 Title to Assets . . . . . . . . . . . . . . . . . . . 6 4.4 No Violation or Conflict . . . . . . . . . . . . . . 6 4.5 Registrations . . . . . . . . . . . . . . . . . . . . 6 4.6 Patents . . . . . . . . . . . . . . . . . . . . . . . 7 4.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 7 4.8 Financial Information . . . . . . . . . . . . . . . . 7 4.9 Absence of Certain Changes . . . . . . . . . . . . . 7 4.10 Violations of Law . . . . . . . . . . . . . . . . . . 7 4.11 No Government Restrictions . . . . . . . . . . . . . 7 4.12 Litigation . . . . . . . . . . . . . . . . . . . . . 8 4.13 Limitation of Warranty . . . . . . . . . . . . . . . 8 4.14 Trademarks . . . . . . . . . . . . . . . . . . . . . 8 4.15 Additional Representations . . . . . . . . . . . . . 8 5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . 8 5.1 Organization . . . . . . . . . . . . . . . . . . . . 8 5.2 Authority . . . . . . . . . . . . . . . . . . . . . . 8 5.3 No Violation or Conflict . . . . . . . . . . . . . . 8 5.4 No Government Restrictions . . . . . . . . . . . . . 9 5.5 Litigation . . . . . . . . . . . . . . . . . . . . . 9 5.6 Financing . . . . . . . . . . . . . . . . . . . . . . 9 6. SELLER'S COVENANTS . . . . . . . . . . . . . . . . . . . . . 9 6.1 Conduct of Business . . . . . . . . . . . . . . . . . 9 6.2 Compliance with Laws . . . . . . . . . . . . . . . . 10 6.3 Disclosure Supplements . . . . . . . . . . . . . . . 10 6.4 Access; Investigation . . . . . . . . . . . . . . . . 10 6.5 Further Assurances . . . . . . . . . . . . . . . . . 10 7. BUYER'S COVENANTS . . . . . . . . . . . . . . . . . . . . . . 11 7.1 Transfer of Products . . . . . . . . . . . . . . . . 11 7.2 Labeling . . . . . . . . . . . . . . . . . . . . . . 11 7.3 Further Assurances . . . . . . . . . . . . . . . . . 11
3 8. COVENANTS BY BUYER AND SELLER . . . . . . . . . . . . . . . . 11 8.1 Stability Studies . . . . . . . . . . . . . . . . . . 11 8.2 Supply Agreement . . . . . . . . . . . . . . . . . . 11 8.3 Labeling . . . . . . . . . . . . . . . . . . . . . . 11 8.4 Use of Seller Trademarks . . . . . . . . . . . . . . 11 8.5 Assignment of Trademarks . . . . . . . . . . . . . . 12 8.6 Assignment of Registrations . . . . . . . . . . . . . 12 8.7 Access to Information . . . . . . . . . . . . . . . . 12 8.8 Confidentiality Agreement . . . . . . . . . . . . . . 12 8.9 Press Releases . . . . . . . . . . . . . . . . . . . 12 8.10 Government Filings . . . . . . . . . . . . . . . . . 13 9. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . 13 9.1 Conditions to Obligation of Buyer . . . . . . . . . . 13 9.1.1 Representations and Warranties . . . . . . . 13 9.1.2 Performance . . . . . . . . . . . . . . . . . 13 9.1.3 HSR Act Approvals . . . . . . . . . . . . . . 14 9.1.4 No Adverse Change . . . . . . . . . . . . . . 14 9.1.5 Officer's Certificate . . . . . . . . . . . . 14 9.1.6 Litigation . . . . . . . . . . . . . . . . . 14 9.1.7 Authorization . . . . . . . . . . . . . . . . 14 9.1.8 Proceedings and Instruments Satisfactory . . 14 9.2 Conditions to Obligations of Seller . . . . . . . . . 14 9.2.1 Representations and Warranties . . . . . . . 14 9.2.2 Performance . . . . . . . . . . . . . . . . . 14 9.2.3 HSR Act Approvals . . . . . . . . . . . . . . 15 9.2.4 Officer's Certificate . . . . . . . . . . . . 15 9.2.5 Litigation . . . . . . . . . . . . . . . . . 15 9.2.6 Authorization . . . . . . . . . . . . . . . . 15 9.2.7 Proceedings and Instruments Satisfactory . . 15 10. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.1 The Closing . . . . . . . . . . . . . . . . . . . . . 15 10.2 Deliveries by Seller . . . . . . . . . . . . . . . . 15 10.3 Deliveries by Buyer . . . . . . . . . . . . . . . . . 16 11. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 16 11.1 Termination . . . . . . . . . . . . . . . . . . . . . 16 11.2 Effect of Termination . . . . . . . . . . . . . . . . 17 12. SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . 17 12.1 Survival of Representations; Remedy for Breach . . . 17 12.2 Indemnification by Seller . . . . . . . . . . . . . . 17 12.3 Indemnification by Buyer . . . . . . . . . . . . . . 18 12.4 Limitations . . . . . . . . . . . . . . . . . . . . . 18 12.5 Notice . . . . . . . . . . . . . . . . . . . . . . . 18 12.6 Participation in Defense . . . . . . . . . . . . . . 18 12.7 Settlements . . . . . . . . . . . . . . . . . . . . . 19 12.8 Set-Off . . . . . . . . . . . . . . . . . . . . . . . 19 13. NON-COMPETITION AND CONFIDENTIALITY . . . . . . . . . . . . . 19 13.1 Non-Compete . . . . . . . . . . . . . . . . . . . . . 19 13.2 Confidentiality . . . . . . . . . . . . . . . . . . . 20 14. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 15. SYNACORT . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4 16. ARBITRATION AND GOVERNING LAW . . . . . . . . . . . . . . . . 21 16.1 Generally . . . . . . . . . . . . . . . . . . . . . . 21 16.2 Defenses and Bankruptcy . . . . . . . . . . . . . . . 21 16.3 Commencement of Arbitration . . . . . . . . . . . . . 22 16.4 Governing Law and Place of Arbitration . . . . . . . 22 16.5 Discovery and Other Matters . . . . . . . . . . . . . 22 16.6 Hearing . . . . . . . . . . . . . . . . . . . . . . . 22 16.7 Arbitrators Fees . . . . . . . . . . . . . . . . . . 23 17. ADDITIONAL TERMS . . . . . . . . . . . . . . . . . . . . . . 23 17.1 Brokers . . . . . . . . . . . . . . . . . . . . . . . 23 17.2 Injunctive Relief . . . . . . . . . . . . . . . . . . 23 17.3 Expenses . . . . . . . . . . . . . . . . . . . . . . 23 17.4 Attorneys' Fees . . . . . . . . . . . . . . . . . . . 23 17.5 Successors and Assigns . . . . . . . . . . . . . . . 23 17.6 Entire Agreement . . . . . . . . . . . . . . . . . . 24 17.7 Amendments; No Waiver . . . . . . . . . . . . . . . . 24 17.8 Counterparts . . . . . . . . . . . . . . . . . . . . 24 17.9 Severability . . . . . . . . . . . . . . . . . . . . 24 17.10 Captions . . . . . . . . . . . . . . . . . . . . . . 24
5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into on January 21, 1997 (the "Effective Date") by and between Syntex Pharmaceuticals International Limited, a Bermuda corporation ("Seller") and Medicis Pharmaceutical Corporation, a Delaware corporation ("Buyer"). This Agreement sets forth the terms and conditions upon which Buyer is purchasing from Seller and Seller is selling to Buyer the Assets (as hereinafter defined). NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Active Ingredients" mean the pharmaceutical compounds fluocinolone acetonide, fluocinonide, and hydrocortisone, and all salts and esters thereof. 1.2 "Additional Trademarks" means the trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith. 1.3 "Affiliate" of a party shall mean any individual, corporation or other business entity (e.g. limited or general partnership, trust or estate, joint venture or association) controlling, controlled by or under common control with such party. "Control" (including "controlling", "controlled by" and "under common control with") shall mean the direct or indirect ownership of more than fifty percent (50%) of the voting or income interest in such party, corporation or other business entity respectively. Notwithstanding the foregoing, Genentech, Inc. ("Genentech") shall not be considered an Affiliate of Seller for the purpose of this Agreement for so long as there are material restrictions on the ability of Seller and its Affiliates to control Genentech. 1.4 "ANDS" means an Abbreviated New Drug Submission, as such term is defined by the Food and Drug Regulations issued pursuant to the Food and Drugs Act and as interpreted by the HPB. 1.5 "Assets" has the meaning ascribed to such term in Section 0. 1.6 "Broker" has the meaning ascribed to such term in Section 16.1. 1.7 "Business" means the business as currently conducted by Seller with respect to manufacture and sale of the Products in the Territory. 1.8 "Buyer Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, used by Buyer and bearing Buyer's name for each Product. 1.9 "cGMP's" means the then-current Good Manufacturing Practices applicable to the manufacture of pharmaceutical products for human use in Canada in accordance with the Food and Drug Regulations under the Food and Drugs Act. 1.10 "Closing" has the meaning ascribed to such term in Section 0. 6 1.11 "Closing Date" has the meaning ascribed to such term in Section 0. 1.12 "Closing Time" means 12:01 a.m. on the date of Closing. 1.13 "Confidentiality Agreement" has the meaning ascribed to such term in Section 0. 1.14 "Damages" has the meaning ascribed to such term in Section 0. 1.15 "Data Bank Documents" has the meaning ascribed to such term in Section 0. 1.16 "Disclosure Schedule" means the disclosure schedule delivered prior to the Effective Date to Buyer by Seller in connection with this Agreement. The sections of the Disclosure Schedule correspond to the sections of this Agreement. 1.17 "DIN" means the drug identification number. 1.18 "DOJ" means the United States Department of Justice. 1.19 "Effective Date" means January 21, 1997. 1.20 "FTC" means the United States Federal Trade Commission. 1.21 "HPB" means the applicable federal Canadian authorities and agencies including the Health Protection Branch of Health Canada. 1.22 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder. 1.23 "Indemnifiable Claims" has the meaning ascribed to such term in Section 0. 1.24 "Indemnified Party" has the meaning ascribed to such term in Section 0. 1.25 "Indemnifying Party" has the meaning ascribed to such term in Section 0. 1.26 "Know-How" has the meaning ascribed to such term in Section 0. 1.27 "Law" means any federal, state, province, foreign, local or other law, ordinance, rule, regulation, or governmental requirement or restriction of any kind, and any rules, regulations, and orders promulgated thereunder. 1.28 "Material Adverse Effect" means an event that has a material adverse effect on the Assets, taken as a whole. 1.29 "NDS" means a New Drug Submission, as such term is defined by the Food and Drug Regulations issued pursuant to the Food and Drugs Act and as interpreted by the HPB. 1.30 "Net Sales" means the gross invoice amount of Products sold to third parties, less (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short- 7 shipments and price adjustments; and (d) contract chargebacks and rebates, government rebates, and returns (e.g., spoiled, damaged or outdated Products). 1.31 "Patheon Agreement" means the agreement between Hoffmann-La Roche Limited, a Canadian corporation, and Patheon to be entered into on January 31, 1997. 1.32 "Patents" means any patent or patent application and any and all divisions, continuations, continuations-in-part, reexaminations, reissues, extensions, pending or granted supplementary protection, certificates, substitutions, confirmations, registrations, revalidations, revisions, additions and the like, of or to said patent and patent application. 1.33 "PFC Agreement" means the Supply Agreement between Seller and Pharmaceutical Fine Chemicals S.A. dated February 13, 1996. 1.34 "Products" means each presentation of those finished pharmaceutical products set forth in the Registrations. 1.35 "Purchase Price" has the meaning ascribed to such term in Article 0. 1.36 "Registrations" has the meaning ascribed to such term in Section 0. 1.37 "Schedule" means a schedule to the Disclosure Schedule. 1.38 "Supply Agreement" means the agreement referred to in Section 0. 1.39 "Synacort Assets" means the Synacort License, the Synacort Trademarks, and the Synacort Trademark Agreements. 1.40 "Synacort License" has the meaning ascribed to such term in Section 0. 1.41 "Synacort NDSs" means the NDSs that are set forth on Schedule 0 and the regulatory records relating exclusively thereto. 1.42 "Synacort Trademark" means the trademark registrations that are set forth on Schedule 0 together with all records associated therewith. 1.43 "Synacort Trademark Agreements" means those agreements set forth on Schedule 0 to the extent such agreements relate to the Synacort Trademark. 1.44 "Syntex Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, currently used by Syntex for each Product. 1.45 "Territory" means Canada. 1.46 "Trademark Agreements" has the meaning ascribed to such term in Section 0. 1.47 "Trademarks" has the meaning ascribed to such term in Section 0. 2. ASSETS BEING SOLD Subject to the terms and conditions of this Agreement, at Closing, Seller shall sell, transfer, assign, convey and deliver to Buyer, its successors 8 and assigns forever, to the extent contemplated herein, all of the right, title, and interest of Seller in the assets listed below in the Territory (collectively, the "Assets"), the Synacort Assets, and the Additional Trademarks, and Buyer shall assume all rights, title, and interest of Seller in the Assets, the Synacort Assets, and the Additional Trademarks. 2.1 Trademarks. The trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith (the "Trademarks"). 2.2 Registrations. The NDSs and the ANDS that are set forth on Schedule 0 (the "Registrations") and the regulatory records relating exclusively thereto. 2.3 Manufacturing Technology and Know-How. The manufacturing technology and know-how that is exclusively used in manufacturing any Product ("Know-How") and any documents which relate specifically and exclusively to such Know-How. In addition, Seller shall grant Buyer a non-exclusive, perpetual, paid-up, irrevocable, royalty-free, world-wide license, with right to sub-license, to use any manufacturing technology and know-how that are necessary or used in manufacturing any Product (but not exclusively used thereto) with such license or sublicense being restricted to use for the Products, unless Buyer can demonstrate by written records that such know-how was known prior to any disclosure of such know-how by Seller or its Affiliates to Buyer or is now public knowledge or becomes public knowledge in the future other than by breach of any agreement between Buyer and its Affiliates and Seller and its Affiliates. 2.4 Trademark Agreements. Seller shall assign and Buyer shall assume all rights and obligations under those agreements set forth on Schedule 0 to the extent such agreements relate to the Trademarks (the "Trademark Agreements"). 2.5 Manufacturing Information. Accurate and complete copies of the current Manufacturing Worksheets and copies of the Manufacturing Quality Assurance Notebooks with respect to the Products currently available, including batch records, development reports (if existing), and other documents and records embodying manufacturing information. 2.6 Data Bank Documents. Right to obtain copies of and reference the animal toxicology, animal mutagenicity, human clinical study and final reports, and drug monograph/investigator brochures, a list of which is set forth on Schedule 0 (the "Data Bank Documents"). 2.7 Worldwide Safety Reports. A hard copy of the Worldwide Safety Reports with respect to Products. 2.8 Assumption of Liabilities. The parties expressly acknowledge and agree that (i) Buyer is not assuming or undertaking any liabilities relating to or arising from the conduct of the Business, the sale or marketing of the Products and/or the ownership or use of the Assets prior to the Closing; (ii) Seller retains all such liabilities; and (iii) Buyer shall have no obligation to Seller or any of its Affiliates or to any third party for any such liabilities. 3. PURCHASE PRICE Subject to the terms and conditions of this Agreement, in reliance on the representations, warranties, covenants and agreements of the Seller contained herein, and in consideration of the sale, conveyance, assignment, 9 transfer and delivery of the Assets provided for in Article 0 hereof, Buyer shall deliver to Seller, in full payment for the aforesaid sale, conveyance, assignment, transfer and delivery, the Purchase Price, consisting of: (i) two million six hundred thousand United States dollars (US $2,600,000.00) payable to Seller at Closing by bank wire transfer to Seller at such banking institution, designated not less than five (5) days prior to Closing by Seller. Additional payments of one hundred thousand United States dollars (US $100,000.00) shall be delivered by Buyer to Seller at each of the first, second and third anniversary of the Closing for a total of three (3) such additional payments ("Additional Payments"). Each Additional Payment shall be reduced by fifty percent (50%) if Net Sales in the Territory have decreased by more than twenty percent (20%) during the twelve (12) months immediately preceding the corresponding anniversary. 4. REPRESENTATIONS AND WARRANTIES OF SELLER 4.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of Bermuda, with full corporate power and authority to consummate the transactions contemplated hereby. Seller has all requisite power and authority to own and operate the Assets being conveyed by Seller pursuant to this Agreement and to carry on the activities constituting the business. 4.2 Authority. The execution and delivery of this Agreement by Seller and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and other proceedings, and this Agreement has been duly authorized, executed, and delivered by Seller and, assuming the enforceability against Buyer, constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. The Supply Agreement, and all other documents executed by Seller or its Affiliates and delivered at the Closing, including those delivered pursuant to Section 0, constitute a valid and binding obligation of Seller or the respective Affiliate of Seller executing such documents enforceable in accordance with their respective terms. 4.3 Title to Assets. Except as set forth in Schedule 0, Seller has good and marketable title to all the Assets and will convey good and marketable title at Closing, free and clear of any and all liens, encumbrances, claims, mortgages, leases, security interests, charges or restrictions. Notwithstanding the foregoing, Seller retains the right to use and to transfer to other buyers of the products containing any Active Ingredient outside the Territory information that is similar or identical to that contained in the Registrations and the Know-How; provided, however, that no such buyer has been expressly granted by Seller or any Affiliate of Seller the right to sell, transfer or distribute any of the products containing any Active Ingredient into the Territory based on such Registrations and Know-How and neither Seller nor any Affiliate shall expressly grant any buyer such right. Buyer acknowledges that Seller cannot prevent such a buyer from using such information, including registrations and know-how that is substantially similar to the Registrations and Know-How, to sell, transfer or distribute such products in the Territory. In addition, trademarks that are the same as or similar to the Trademarks may be registered in other countries and may be either retained by Seller for its use or sold to other buyers in either case, for use solely outside the Territory. 10 4.4 No Violation or Conflict. Seller's execution and delivery of this Agreement and the other related documents delivered by Seller in connection with transactions contemplated herein and the performance of this Agreement by Seller (and the transactions contemplated herein) (a) do not and will not conflict with, violate or constitute or result in a default or an event creating rights of acceleration, termination, or cancellation, or a loss of right under any Law, judgment, order, decree, the articles of incorporation or bylaws of Seller or any mortgage, contract or agreement to which Seller is a party or by which Seller is bound or (b) will not result in the creation or imposition of any lien, charge, mortgage, claim, pledge, security interest, restriction or encumbrance of any kind on, or liability with respect to, the Assets or the Business except as otherwise provided herein or otherwise disclosed on the Disclosure Schedule. None of the Trademark Agreements require the consent of any third party to the assignment of such Trademark Agreement from Seller to Buyer; provided, however, that with respect to the Patheon Agreement, Seller must give prior written notice of any assignment to Patheon and Buyer must covenant in writing with Patheon to be bound by the terms of the Patheon Agreement. 4.5 Registrations. The Registrations are the only registrations required by the HPB to sell and market the Products in the Territory. All Products in Schedule 2.2 are registered and eligible for immediate sale without regulatory limitations. 4.6 Patents. There are no Patents with respect to the Active Ingredients or Products in the Territory. 4.7 Taxes. There are no liens for taxes upon the Assets except for liens for current taxes not yet due and payable which shall remain the sole obligation of the Seller. 4.8 Financial Information. Seller and its Affiliates have no material liabilities, contingent, absolute, accrued or otherwise, relating to the Assets, other than as set forth in Schedule 0. 4.9 Absence of Certain Changes. 4.9.1 Except as set forth in Schedule 0 or as otherwise set forth in this Agreement, since December 16, 1996, there has not been any (i) Material Adverse Effect or material adverse change in the financial condition or results of operation of the Business, (ii) damage, destruction or loss which has or may reasonably be expected to have a Material Adverse Effect, or (iii) transaction or commitment outside the ordinary course of business with respect to the Assets or the Business. 4.9.2 As of the date hereof and as of the Closing Date and except as otherwise disclosed on Schedule 0, Seller is not aware of any facts, circumstances, or proposed or contemplated events that could reasonably be expected to have a Material Adverse Effect after Closing. 4.9.3 No default under any lease, agreement, contract or other material arrangement relating to the Business, including but not limited to the Patheon Agreement, the Paco Agreements, and the Trademark Agreements has been declared and is continuing and, to Seller's knowledge, no condition exists which, with notice or lapse of time or both, would constitute a default under any such agreement. All of the such agreements are valid and subsisting and are in full force and effect and, to Seller's knowledge, no claim exists or has been asserted with respect to such agreements that would adversely effect the Business. Seller has not received notice that any party to any such agreements 11 intends to cancel or terminate such agreements or to exercise or not exercise any options or rights under such agreements, or to resist any effort by Seller or its successors to exercise or not exercise such options or rights. 4.10 Violations of Law. Except as set forth in Schedule 0, neither the operation of the Business nor the Assets (i) violates or conflicts with any Registrations, any Law, governmental specification, authorization, or requirement, or any decree, judgment, order, or similar restriction in any material respect, or (ii) to the best of Seller's knowledge, has been the subject of an investigation or inquiry by any governmental agency or authority regarding violations or alleged violations, or found by any such agency or authority to be in violation, of any Law. 4.11 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller or the consummation by it of the transactions contemplated hereby to be consummated by it. 4.12 Litigation. Except as set forth in Schedule 0 attached hereto or as set forth on Schedules 0 and 0, neither the Business nor the Assets is the subject of (i) any outstanding judgment, order, writ, injunction or decree of, or settlement agreement with, any person, corporation, business entity, court, arbitrator or administrative or governmental authority or agency, limiting, restricting or affecting the Business, the Assets, or the Products in a way that would have a Material Adverse Effect, (ii) any pending or, to the best of Seller's knowledge, threatened claim (excluding the adverse drug reports set forth in the Registrations), suit, proceeding, charge, inquiry, investigation or action of any kind, and (iii) any court suits filed with respect to the Assets since January 1, 1990. 4.13 Limitation of Warranty. Seller will not warrant that buyers of products outside the Territory that are substantially similar to or identical with the Products will not attempt to register such products in the Territory. 4.14 Trademarks. Each of the Trademarks being conveyed by this Agreement is being conveyed free and clear of any liens, security interests and other encumbrances and is freely assignable by Seller. Seller is not required, and Buyer will not be required, to pay any royalty to any person with respect to use of any of the Trademarks. Except as set forth in the Trademark Agreements, the Trademarks do not infringe upon or conflict with the trademarks or other rights of any third party in the Territory. 4.15 Additional Representations. Seller owns no inventory of finished Products, it does not sell Products to customers, and it has no agreements other than the Trademark Agreements and the PFC Agreement that are material to the Business. 5. REPRESENTATIONS AND WARRANTIES OF BUYER 5.1 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to consummate the transactions contemplated hereby. 5.2 Authority. The execution and delivery of this Agreement by Buyer, and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and 12 other proceedings, and this Agreement has been duly authorized, executed, and delivered by Buyer and, assuming the enforceability against Seller, constitutes the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. 5.3 No Violation or Conflict. The execution and delivery of this Agreement by Buyer and the performance of this Agreement (and the transactions contemplated herein) by Buyer do not and will not conflict with, violate or constitute or result in a default under any Law, judgment, order, decree, the articles of incorporation or bylaws of Buyer, or any contract or agreement to which Buyer is a party or by which Buyer is bound. 5.4 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer or the consummation by it of the transactions contemplated hereby to be consummated by it, except with respect to the filing of a pre-merger notification report under the HSR Act. 5.5 Litigation. To the best knowledge of Buyer, there are no claims, actions, suits, proceedings or investigations pending or threatened by or against Buyer with respect to the transactions contemplated hereby, at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, agency, instrumentality or authority. 5.6 Financing. Buyer will have funds sufficient to pay the Purchase Price on the Closing Date. 6. SELLER'S COVENANTS 6.1 Conduct of Business. Seller agrees that from the date hereof until the Closing Date that, except as specifically disclosed in Schedule 0 or unless otherwise consented to by Buyer in writing, Seller shall 6.1.1 maintain the Assets in good status and condition and not sell or dispose of any Assets except sales of Products in the ordinary course of business; 6.1.2 cause the Business to be conducted in the ordinary course consistent with the practice over the past six (6) months and make all reasonable efforts consistent with practices over the past six (6) months to preserve the Assets and the reputation of the Business and the Products and to preserve for Buyer the goodwill of suppliers, customers, distributors, and others having relations with the Business. 6.1.3 not enter into any new, or amend any existing, contract, commitment, or agreement relating to the Business, the Products or the Assets or extend any credit or incur any obligation with respect to the conduct of the Business or the Assets except (i) for the Patheon Agreement, (ii) or in the ordinary course of business and consistent with past business practices; 6.1.4 not engage in any special pricing, rebate, allowance, promotional or marketing programs inconsistent with past practices or for the purpose of maintaining customer inventory levels of Product in excess of those levels maintained in the past; 13 6.1.5 promptly inform Buyer of any change in the Business or Assets that could reasonably be expected to have a Material Adverse Effect; 6.1.6 not subject any of the Assets or any part thereof to any mortgage, pledge, security interest, encumbrance, lien or restriction of use or suffer such to be imposed or license or grant to any other party the right to use any of the Trademarks or any of the Know-How except for use outside the Territory; 6.1.7 perform in all material respects all of its obligations under any agreement with any third party relating to the Business, the Products, or the Assets unless such third party is in default under such agreement; and 6.1.8 maintain its books of accounts and records relating to the Business, the Products or the Assets in the usual, regular and ordinary manner including, but not limited to, the maintenance of any and all documents required by any federal or state regulatory agency or governmental body. 6.2 Compliance with Laws. Seller shall comply in all material respects with all Laws and in all respects with all orders of any court or federal, state, local or other governmental entity applicable to the Business or the Assets. 6.3 Disclosure Supplements. From time to time following execution of this Agreement but prior to the Closing Date, Seller will promptly inform Buyer, in writing, of any matter that may arise hereafter and that, if existing or occurring prior to the execution of this Agreement, would have been required to be set forth or described herein or in the Disclosure Schedule. 6.4 Access; Investigation. From and after the date hereof and up to Closing, Buyer and its authorized agents, officers, and representatives shall have reasonable access to the Business and the Assets and all records and information related thereto (except for information that Seller is contractually obligated not to disclose), during normal business hours upon reasonable prior notice and at a time and manner mutually agreed upon between Buyer and Seller in order to conduct such examination and investigation of the Assets and the Business as Buyer shall reasonably deem necessary, provided that such examinations shall not unreasonably interfere with Seller's operations and activities. 6.5 Further Assurances. Seller shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Seller, at the request of Buyer, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Buyer such deeds, assignments, bills of sale, consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably deem necessary or desirable to implement any provision of this Agreement. 7. BUYER'S COVENANTS 7.1 Transfer of Products. Following Closing, Buyer shall use all reasonable efforts and, except as otherwise set forth herein, at its own expense to obtain as expeditiously as possible such governmental approvals and registrations from the HPB, or similar regulatory authorities, as may be necessary with respect to the manufacture and sale of the Products by Buyer or its designee. 14 7.2 Labeling. Following Closing, Buyer shall at its own expense and as expeditiously as possible use all reasonable efforts to obtain such HPB approvals necessary for the Buyer Labeling for each Product. 7.3 Further Assurances. Buyer shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Buyer, at the request of Seller, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Seller such consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Seller, as Seller may reasonably deem necessary or desirable to implement any provision of this Agreement. 8. COVENANTS BY BUYER AND SELLER 8.1 Stability Studies. As soon as possible following Closing, Buyer shall qualify a site as a testing site for stability studies or request Patheon to continue to conduct such stability studies at Buyer's expense, for Products not manufactured by Patheon. Seller shall have no responsibility for on-going stability studies for the Products following Closing. 8.2 Supply Agreement. Buyer and Seller, or their Affiliates, at Closing shall enter into the Supply Agreement, attached as Exhibit A. 8.3 Labeling. In accordance with Section 7.2, Buyer is responsible for having the Buyer Labeling approved by the HPB as soon as possible. Buyer may use the Syntex Labeling on the Inventory until such Inventory is exhausted; provided, however, that Seller may, at its option, buy-back from Buyer all inventory labeled with Seller's NDC number upon Buyer having sufficient inventory, to be determined by Buyer in its sole discretion to be exercised in good faith, of the applicable Product labeled with Buyer's NDC number. In addition, Buyer may use the Syntex Labeling on each Product manufactured by Seller or its Affiliates for Buyer until the earlier of the date (i) the HPB approves the Buyer Labeling for use on such Product and Buyer, using all reasonable efforts, has obtained sufficient supplies of materials with Buyer Labeling for use on such Products, or (ii) twelve (12) months following Closing, provided, however, if at the end of such twelve (12) month period the HPB has not yet approved the Buyer Labeling, then such twelve (12) month period shall be extended for a period of time to be mutually agreed by the parties (such agreement not to be unreasonably withheld) reasonably required to obtain such approval. 8.4 Use of Seller Trademarks. Other than the use of the Syntex Labeling as set forth in Section 0, any use by Buyer of the trademarks, tradenames, or logos of Seller, other than the use of the Trademarks, the Synacort Trademarks, and the Additional Trademarks, as provided herein, must be approved by Seller prior to such use. 8.5 Assignment of Trademarks. By or before Closing, Buyer and Seller shall prepare in good faith an assignment pursuant to which Seller agrees the Trademarks, the Synacort Trademarks, and the Additional Trademarks shall be assigned to Buyer. Following Closing, Buyer shall prepare and Seller shall execute such documents as Buyer may reasonably request in order to record the assignment of the Trademarks, the Synacort Trademarks, and the Additional Trademarks. The responsibility and expense of preparing and filing such documents and any actions required ancillary thereto, shall be borne solely by Buyer. 8.6 Assignment of Registrations. At or following Closing, Buyer shall prepare and Seller shall execute such documents as Buyer may reasonably 15 request in order to record the assignment of the Registrations. Buyer shall pay any user fees associated with any Product that accrues after Closing but prior to transfer of such Registration. 8.7 Access to Information. Buyer and Seller will, upon reasonable prior notice, make available to the other, to the extent reasonably required for the purpose of assisting Seller or Buyer in obtaining governmental approvals and preparation of tax returns or financial statements required by the Securities and Exchange Commission (to the extent information is available) relating to the Assets, and prosecuting or defending or preparing for the prosecution or defense of any action, suit, claim, complaint, proceeding or investigation at any time brought by or pending against Seller or Buyer relating to the Assets, other than in the case of litigation between the parties hereto, such information or records (or copies thereof) in their possession after Closing. Buyer shall also provide Seller with any adverse drug events simultaneously with notification of the HPB for so long as Buyer markets the Products for serious or life-threatening adverse event and for three years following Closing for all other adverse drug events. 8.8 Confidentiality Agreement. The parties agree that certain letter agreement dated October 15, 1996 between an Affiliate of Seller and Buyer (the "Confidentiality Agreement"), shall survive either termination of this Agreement or Closing as an independent agreement; provided, however, that upon Closing, the restrictions on use and the confidentiality obligations of the Confidentiality Agreement shall no longer be in effect with respect to Evaluation Materials (as defined therein) relating to the transferred Assets. 8.9 Press Releases. Neither the Seller nor the Buyer, nor any Affiliate thereof, will issue or cause publication of any press release or other announcement or public communication with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other party, which consent will not be unreasonably withheld or delayed. Neither party shall use the name of the other party in any public statement, prospectus, annual report, or press release without the prior written approval of the other party, which may not be unreasonably withheld or delayed, provided, however, that both parties shall give the other party a minimum of five business days to review such press release, prospectus, annual report, or other public statement. Notwithstanding the foregoing, Buyer may make any disclosure which Buyer, in the opinion of its counsel, is obligated to make pursuant to applicable law, in which case, Buyer shall still endeavor to give Seller an opportunity to review such disclosure but shall not be obligated to do so if such disclosure must, in the opinion of its counsel, be made without time for review. The failure of Buyer to draft such disclosure in a timely fashion shall not be deemed a reason to avoid submitting such disclosure to Seller. 8.10 Government Filings. 8.10.1 Within three (3) business days after the date hereof, Buyer will, or will cause the ultimate parent entities of Buyer to, and Seller will cause the ultimate parent entities of Seller to, make such filings, together with a request for early termination, as may be required by the HSR Act with respect to the consummation of the transactions contemplated by this Agreement. Thereafter, Buyer will or will cause the ultimate parent entities of Buyer to, and Seller will cause the ultimate parent entities of Seller to, each file or cause to be filed as promptly as practicable with the FTC and the DOJ any supplemental information that may be requested pursuant to the HSR Act. All such filings will comply in all material respects with the requirements of the respective laws pursuant to which they are filed. 16 8.10.2 Each of the parties will use its respective reasonable good faith efforts to obtain, and to cooperate with the others in obtaining, all authorizations, consents, orders and approvals of any governmental agencies, and cooperate with making any filings that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement prior to or after Closing, and to take all reasonable actions to avoid the entry of any order or decree by any governmental agency prohibiting the consummation of the transactions contemplated hereby. 9. CONDITIONS PRECEDENT TO CLOSING 9.1 Conditions to Obligation of Buyer. The obligation of Buyer to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Buyer): 9.1.1 Representations and Warranties. The representations and warranties made by Seller in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.1.2 Performance. Seller shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.1.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.1.4 No Adverse Change. During the period from the date of this Agreement to the Closing Date there shall not have occurred or been discovered, and there shall not exist on the Closing Date except for that which has been otherwise disclosed elsewhere in this Agreement or in the Disclosure Schedule at the time of execution of this Agreement, any condition or fact that could reasonably be expected to have a Material Adverse Effect. 9.1.5 Officer's Certificate. Seller shall have delivered to Buyer a certificate, dated the Closing Date and executed by an officer of Seller, certifying to the fulfillment of all conditions set forth in this Article 0. 9.1.6 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 9.1.7 Authorization. Seller shall have furnished to Buyer all documents Buyer may reasonably request relating to the existence of Seller, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Buyer. 17 9.1.8 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Buyer and Buyer's counsel, and Seller shall have made available to Buyer for examination the originals or true and correct copies of all documents which Buyer may reasonably request in connection with the transactions contemplated by this Agreement. 9.2 Conditions to Obligations of Seller. The obligations of Seller to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Seller): 9.2.1 Representations and Warranties. The representations and warranties made by Buyer in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.2.2 Performance. Buyer shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.2.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.2.4 Officer's Certificate. Buyer shall have delivered to Seller a certificate, dated the date of Closing and executed by an officer of Buyer, certifying to the fulfillment of all conditions specified in this Article 0. 9.2.5 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 9.2.6 Authorization. Buyer shall have furnished to Seller all documents Seller may reasonably request relating to the existence of Buyer, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Seller. 9.2.7 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Seller and Seller's counsel, and Buyer shall have made available to Seller for examination the originals or true and correct copies of all documents which Seller may reasonably request in connection with the transactions contemplated by this Agreement. 10. THE CLOSING 18 10.1 The Closing. Subject to the satisfaction of all of the conditions to each party's obligations set forth in Article 0 hereof (or, with respect to any condition not satisfied, the waiver in writing thereof by the party or parties for whose benefit the condition exists), the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 9:00 a.m. (local time) on the first Monday following the day in which all required waiting periods under the HSR Act have expired or been terminated (the "Closing Date") or at such other time, date (but in no event later than March 31, 1997) and place as the parties hereto may agree in writing. The transfer of the Assets shall be deemed to have occurred as of the Closing Time. 10.2 Deliveries by Seller. Unless otherwise specified in this Section 0, at Closing, Seller or its Affiliate, as appropriate, shall deliver to Buyer in form reasonably satisfactory to Buyer, each properly executed and dated as of the Closing Date, where appropriate: 10.2.1 except as otherwise provided herein, such deeds, bills of sale, endorsements, assignments, assignment agreements, and other good and sufficient instruments of conveyance and transfer as shall be effective to vest in Buyer free and clear title to the Assets as contemplated by this Agreement 10.2.2 Secretary's Certificate certifying that the Board of Directors of Seller has authorized this Agreement; 10.2.3 the Supply Agreement; 10.2.4 a receipt for the Purchase Price; and 10.2.5 originals of those Trademark Agreements exclusively related to the Products. 10.3 Deliveries by Buyer. At Closing, Buyer or its Affiliate, as appropriate, shall deliver or cause to be delivered to Seller: 10.3.1 The Purchase Price payable in accordance with Article 0; 10.3.2 Secretary's Certificate certifying that the Board of Directors of Buyer has authorized this Agreement; and 10.3.3 the Supply Agreement. 11. TERMINATION 11.1 Termination. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing Date: 11.1.1 By the mutual written consent of Seller and Buyer; 11.1.2 By either Seller or Buyer if Closing shall not have occurred on or before March 1, 1997, unless such date has been extended by mutual agreement in writing (the "Termination Date"); 11.1.3 By either Seller or Buyer if consummation of the transactions contemplated hereby shall violate any final order, decree or judgment of any court or governmental body having competent jurisdiction. 11.1.4 By Buyer if there has been a material misrepresentation by Seller or a material breach by Seller of any of the warranties or covenants 19 of Seller set forth herein that Seller has not cured within fourteen (14) days after receipt of notice from Buyer requesting such to be cured (but in no event later than the Termination Date) or that Buyer has not waived in writing; or 11.1.5 By Seller if there has been a material misrepresentation by Buyer or a material breach by Buyer of any of the warranties or covenants of Buyer set forth herein that Buyer has not cured within fourteen (14) days after receipt of notice from Seller requesting such to be cured (but in no event later than the Termination Date) or that Seller has not waived in writing. 11.2 Effect of Termination. If this Agreement is terminated pursuant to Section 0, all further obligations of Seller and Buyer under this Agreement shall terminate without further liability of Seller or Buyer except (a) for the obligations of Buyer and Seller under Sections 0, 0, 0, and 0; and (b) that such termination shall not constitute a waiver by any party of any claim it may have for damages caused by reason of a breach by the other party of a representation, warranty, covenant or agreement. 12. SURVIVAL; INDEMNIFICATION 12.1 Survival of Representations; Remedy for Breach. The representations, warranties and covenants made by Buyer and Seller under this Agreement shall survive the Closing for a period of eighteen (18) months. Any Indemnifiable Claims (as hereinafter defined) or claim for tax reimbursement that a party may have arising out of the other party's breach of its representations, warranties, or covenants contained in this Agreement shall be made by notice to the other party no later than eighteen (18) months following the Closing Date ("Claim Period") and there shall be no recovery for indemnification for breach of a representation, warranty, or covenant under this Agreement for any Indemnifiable Claim or claim for tax reimbursement first asserted after that date. Seller and Buyer agree to use reasonable efforts to mitigate any loss or damage for which they may seek indemnification under this Article 12 or for which they may seek recovery under law or equity. 12.2 Indemnification by Seller. Subject to the limitations set forth in Section 0, and in addition to any other rights Buyer may have under law or at equity, Seller shall indemnify and hold harmless Buyer and its Affiliates, officers, directors, and agents and employees from any and all damages, losses, liabilities, third party claims, lawsuits, obligations and expenses (including reasonable attorneys fees and costs) (collectively, "Damages") that Buyer shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Seller in this Agreement or in any of the agreements, instruments or documents executed or delivered by Seller pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the Business by the Seller, the sale, distribution or marketing of the Products, or the use or ownership of the Assets prior to the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.2 (a) and (b), collectively "Buyer's Indemnifiable Claims"); and (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets prior to the Closing Date; or (d) taxes imposed with respect to the transfer of the Assets to the Buyer pursuant to this Agreement, including any assessments against Seller as a member of a consolidated reporting group with any other entity except for payment of GST tax which shall be paid by Buyer (Section 12.2 (c) and (d), collectively "Buyer's Tax Claims"). 12.3 Indemnification by Buyer. Subject to the limitations set forth in Section 0, and in addition to any other rights it may have under law or at 20 equity, Buyer shall indemnify and hold harmless Seller and its Affiliates, officers, directors, and agents and employees from any and all Damages that Seller shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Buyer in this Agreement or in any of the agreements, instruments or documents executed or delivered by Buyer pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the Business by the Buyer, the sale, distribution or marketing of the Products, or the use or ownership of the Assets following the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.3 (a) and (b), collectively "Seller's Indemnifiable Claims") (Buyer's Indemnifiable Claims and Seller's Indemnifiable Claims are hereby collectively referred to as "Indemnifiable Claims"); or (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets following the Closing Date; or (d) payment of GST tax (Section 12.3 (c) and (d), collectively "Seller's Tax Claims"). 12.4 Limitations. Notwithstanding anything to the contrary herein, neither Buyer and its Affiliates nor Seller shall be entitled to seek indemnification or any recovery under law or at equity with respect to any Indemnifiable Claim until the aggregate amount of such claims exceeds Two Hundred Thousand United States Dollars ($200,000) (the "Basket Limitation"); provided, however, that (i) if either party is responsible to the other for any amount in excess of the Basket Limitation, then the Basket Limitation shall not be deemed applicable and such party shall be responsible to fully indemnify the other party for all Damages; (ii) in no event shall either party be required to indemnify the other for breaches of the representations, warranties, and covenants made in this Agreement for an amount in excess of the Purchase Price; and (iii) neither the Basket Limitation nor the limitation in the immediately preceding clause shall be applicable to (x) third party claims or (y) Buyer's Tax Claims or Seller's Tax Claims; provided, that Damages shall be limited to one-third (1/3) of the Purchase Price with respect to the representations and warranties under Sections 0, 0, 0, and 0; and provided further, that Damages shall be limited to one-half (1/2) of the Purchase Price with respect to the representations and warranties under Sections 0 and 0. 12.5 Notice. A party seeking indemnification pursuant to Section 0 or 0 (an "Indemnified Party") shall give prompt notice to the party from whom such indemnification is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity is or may be sought hereunder (whether or not the limits set forth in Section 0 have been exceeded) and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but no failure to give such notice shall relieve the Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual prejudice thereby). 12.6 Participation in Defense. The Indemnifying Party may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party. In such case the Indemnified Party shall have the right (but not the duty) to participate in the defense thereof, and to employ counsel, at its own expense, separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof. The Indemnifying Party shall be liable for the fees and expenses of one firm as counsel (and appropriate local counsel) employed by the Indemnified Party if the Indemnifying Party has not assumed the defense thereof. Whether or not the Indemnifying Party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend 21 such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 12.7 Settlements. The Indemnifying Party shall not be liable under this Article for any settlement effected without its consent of any claim, litigation or proceedings in respect of which indemnity may be sought hereunder, unless the Indemnifying Party refuses to acknowledge liability for indemnification under this Article 0 and/or declines to defend the Indemnified Party in such claim, litigation or proceeding. 12.8 Set-Off. In addition to any other remedies that Buyer may have against Seller for indemnification under the provisions of this Agreement or under law or at equity, Buyer may set off against any amount otherwise due and yet unpaid to Seller as part of the Purchase Price or otherwise, any amount owed by Seller or its Affiliates to Buyer under any provision of this Agreement, any instrument or agreement delivered pursuant thereto, or otherwise. 13. NON-COMPETITION AND CONFIDENTIALITY 13.1 Non-Compete. Seller acknowledges that in order to assure Buyer that Buyer will retain the value of the Assets, Buyer wishes assurances that Seller and its Affiliates shall not utilize their special knowledge of the Business and their relationship with customers, suppliers, and others to compete with the Buyer with respect to the Business. For a period of five (5) years beginning on the Closing Date, neither Seller nor its Affiliates shall engage in any business that manufactures, packages, distributes or sells finished products in the Territory whose sole or major active ingredients consist of the Active Ingredients for topical use in dermatology except for (i) the transactions involving Buyer, e.g. the sale to Buyer of Active Ingredient pursuant to the Supply Agreement contemplated herein, (ii) as part of a product whose primary indication is the treatment of vulvovaginal mycotic infections; provided that, nothing in this Article shall in any way restrict or preclude the Seller or any of its Affiliates from acquiring another company, business or line of products (including by license thereof or through investment therein), in which less than a twenty percent (20%) of the revenues and/or assets is derived from or represents finished products whose sole or major active ingredients consist of the Active Ingredients for topical use in dermatology and to continue to operate such business following such acquisition. In promoting any such acquired product or in promoting any other dermatology product that Seller may develop, manufacture of market in compliance with this Section 13.1, Seller shall not make use of the history, heritage or brand equity of the Products as part of any such promotional plan or activity. 13.2 Confidentiality. Seller acknowledges that the Assets and all other confidential or proprietary information with respect to the Business are valuable, special and unique. Neither Seller nor any of its Affiliates shall, at any time after the Closing Date, disclose, directly or indirectly, to any third party, or use or purport to authorize any third party to use any confidential or proprietary information with respect to the Business, whether or not for Seller's or an Affiliate's own benefit, without the prior written consent of Buyer, including without limitation, information as to the financial condition, results of operations, customers, suppliers, products, inventions, sources, leads or methods of obtaining new supplies, marketing strategies or any other information relating to the Business or Products which could reasonably be regarded as confidential, but not including information which (i) does not relate directly and exclusively to the Business or the Products, provided that Seller and its Affiliates shall not disclose such information to the direct detriment of the Business; or (ii) is or shall become generally available to the public other than as a result of an unauthorized disclosure by 22 Seller or an Affiliate or third party to whom Seller or an Affiliate has provided such information; or (iii) as may be necessary for Seller or any of its Affiliates to perform its obligations under this Asset Purchase Agreement or the transactions or agreements contemplated herein; or (iv) that is required by Law to be disclosed by Seller or any of its Affiliates. 14. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to Seller or Buyer at the respective addresses and facsimile numbers set forth below or at such other address and facsimile number as either party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. if to Buyer, to: Medicis Pharmaceutical Corporation 4383 East Camelback Road Phoenix, Arizona 85018 Attn: Jonah Shacknai with a copy to: Brown & Bain 2901 North Central Avenue Phoenix, Arizona 85012-2788 Attn: Frank M. Placenti if to Seller, to: Syntex Pharmaceuticals International Limited Ave. Samuel Lewis Torre Hongkong Bank, Piso No. 18/P.O. Box 7386 Panama 5, Republic of Panama Attn: General Manager with a copy to: F. Hoffmann-La Roche Ltd. CH-4070 Basel, Switzerland Attn: Corporate Law Department and a copy to: Hoffmann-La Roche Limited 2455 Meadowpine Boulevard Mississauga, Ontario L5N 6L7 Attention: General Counsel 15. SYNACORT At Closing, Seller shall grant Buyer an exclusive, fully paid-up license, with right to sub-license, to manufacture, market and sell products in the Territory using the Synacort NDSs; provided, however, that Buyer may not manufacture, market or sell any product for the treatment of vulvovaginal mycotic infections products using the Synacort NDSs. At Closing, Seller shall transfer to Buyer and Buyer shall assume all regulatory responsibility for the Synacort NDSs. In addition, Seller hereby assigns and Buyer shall assume all rights and obligations under the Synacort Trademarks and the Synacort Trademark 23 Agreements effective as of Closing. 16. ARBITRATION AND GOVERNING LAW 16.1 Generally. Except for the right of either party to apply to a court of competent jurisdiction for a Temporary Restraining Order to preserve the status quo or prevent irreparable harm pending the selection and confirmation of a panel of arbitrators in accordance herewith, any dispute, controversy or claim arising out of or relating to this Agreement, to a breach or termination thereof, or to the rights of any party for indemnification thereunder ("Claim") shall be settled by final and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the day the arbitration is commenced in accordance with this Agreement ("Rules"). In the event of any inconsistency between such Rules and the terms of this Agreement, this Agreement shall supersede the Rules. Any judgment on any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final,. binding, non-appealable, and conclusive. The AAA shall have jurisdiction over all parties to this Agreement for purposes of the arbitration. 16.2 Defenses and Bankruptcy. Any statute of limitations or other equitable or legal doctrine which would otherwise be applicable to any action brought by any of the parties shall be applicable in the Arbitration. In the event any party to this Agreement files a petition under the bankruptcy laws of the United States or has a petition filed against it which results in an order for relief or other indicia that a bankruptcy case has commenced, it is the express intention of the parties to this Agreement that this Agreement shall control and be enforced in accordance with is terms and conditions that any Claim shall remain subject to arbitration to the maximum extent permitted by law. 16.3 Commencement of Arbitration. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by certified mail, return receipt requested, in accordance with Agreement, with a copy of the same delivered by certified mail, return receipt requested, to the AAA regional office in which Palo Alto California is then located. The AAA shall administer the arbitration. The arbitration panel shall consist of three members, one being appointed by each party and the third, who shall be the chairman of the panel, being appointed by mutual agreement of the two party-appointed arbitrators. In the event of failure of said two arbitrators to agree within sixty (60) days after the commencement of the arbitration proceeding upon the appointment of the third arbitrator, the third arbitrator shall be appointed by the AAA in accordance with the Rules. In the event that either party shall fail to appoint an arbitrator within thirty (30) days after the commencement of the arbitration proceeding, such arbitrator and the third arbitrator shall be appointed by the AAA in accordance with the Rules. The arbitration award shall be rendered by a majority of the members of the Board of Arbitration. Except as expressly provided in this Agreement in Section 17.9, the panel shall not be entitled to modify this Agreement or the transactions contemplated herein. 16.4 Governing Law and Place of Arbitration. The arbitrators shall apply the laws of the State of New York (regardless of its or any other jurisdiction's choice of law principles). The place of arbitration shall be Phoenix, Arizona. 16.5 Discovery and Other Matters. There shall be no rights of discovery in connection with the arbitration except as follows: 24 16.5.1 Each party shall have the right to request the arbitrators to issue subpoenas for documents in accordance with the rules; 16.5.2 Each party shall have the right to initiate one (1) deposition of one representative of each party to the arbitration; and each party shall have the right to initiate one (1) additional oral deposition pursuant to a subpoena issued by the arbitrators or any court of competent jurisdiction. 16.5.3 At any time following the tenth day after the commencement of the arbitration in accordance with this Agreement, a written notice served upon all parties shall be sufficient to compel the attendance of any party at a deposition upon not less than sixty (60) days notice and no subpoena shall be required for that purpose. If a person fails or refuses to testify at a deposition, that person shall not be permitted to testify at the hearing, except for good cause shown. The number of depositions that may be initiated by either party may be varied by agreement of all parties to the arbitration but not by any action, order or request of the arbitrators or any court. 16.6 Hearing. Not less than thirty (30) days prior to the scheduled arbitration proceeding, the arbitrator shall conduct a preliminary hearing in accordance with the AAA guidelines. Not less than five (5) days prior to the preliminary hearing, all parties to the arbitrations shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used at the arbitration hearing. Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than as set forth on such list. the arbitrators shall receive evidence at a single hearing. The arbitrators shall award reasonable attorneys' fees and costs in favor of the prevailing party or parties. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrators shall have the power to hear and decide, by documents only or with a hearing (at the arbitrators sole discretion) any prehearing motions in the nature of a pre-trial motion to dismiss or for summary judgment. 16.7 Arbitrators Fees. The arbitrators shall be entitled to receive reasonable compensation at an hourly rate to be established between the arbitrators and he AAA. If required by the arbitrators, Buyer, on the one hand, and Seller, on the other, will deposit with the AAA an equal share of the total anticipated fee of the arbitrators in an amount to be estimated by the AAA. The non-prevailing party(s) in the proceedings shall be ordered to pay, and shall have the ultimate responsibility for, all arbitrators fees and the fees of the AAA and such fees shall be included in the judgment to be entered against the non-prevailing party or parties. 17. ADDITIONAL TERMS 17.1 Brokers. Buyer represents to Seller that it has not employed any investment banker, broker, finder or intermediary (a "Broker") in connection with the transactions contemplated hereby who might be entitled to a fee or any commission from Seller upon consummation of the transactions contemplated hereby. Seller represents to Buyer that it has not employed any Broker in such connection who might be entitled to a fee or any commission from Buyer upon consummation of the transactions contemplated hereby. 17.2 Injunctive Relief. It is possible that remedies at law may be inadequate and, therefore, the parties hereto shall be entitled to seek equitable relief including, without limitation, injunctive relief, specific performance or other equitable remedies in addition to all other remedies 25 provided hereunder or available to the parties hereto at law or in equity. 17.3 Expenses. Except as otherwise expressly provided in this Agreement, all legal, accounting and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the party incurring such expenses. 17.4 Attorneys' Fees. If there is any litigation or arbitration with respect to this Agreement, the prevailing party shall be entitled to receive from the non-prevailing party and the non-prevailing party shall pay upon demand all reasonable fees and expenses of counsel for the prevailing party. 17.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by any party without the written consent of the other party. 17.6 Entire Agreement. This Agreement, the exhibits hereto, the Disclosure Schedule and the Confidentiality Agreement embody the entire agreement of the parties hereto with respect to the subject matter hereof and supersede and replace all previous negotiations, understandings, representations, writings, and contract provisions and rights relating to the subject matter hereof. 17.7 Amendments; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each party. No failure or delay on the part of either party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder. 17.8 Counterparts. This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument and shall become effective when a counterpart has been signed by Buyer and delivered to Seller and a counterpart has been signed by Seller and delivered to Buyer. 17.9 Severability. The parties agree that (a) the provisions of this Agreement shall be severable and (b) in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (i) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions that are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (ii) the remaining provisions shall remain enforceable to the fullest extent permitted by law, provided that the rights and interests of the parties hereto shall not be materially affected. 17.10 Captions. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless the context requires otherwise, all references herein to Articles and Sections are to the articles and sections of this Agreement. IN WITNESS WHEREOF, this Agreement has been signed by duly authorized representatives of each of the parties hereto as of the Effective Date. 26 SYNTEX PHARMACEUTICALS MEDICIS PHARMACEUTICAL INTERNATIONAL LIMITED CORPORATION By /s/ John R. Talbot By /s/ Jonah Shacknai ------------------------------- ------------------------------------ Name John R. Talbot Name Jonah Shacknai ----------------------------- ---------------------------------- Title: President Title: Chairman and Chief Executive --------------------------- Officer -------------------------------- EX-10.80 4 ASSET PURCHASE AGRMNT BTWN COMPANY AND SYNTEX USA 1 EXHIBIT 10.80 ASSET PURCHASE AGREEMENT BETWEEN SYNTEX (U.S.A.) INC. and MEDICIS PHARMACEUTICAL CORPORATION 2 TABLE OF CONTENTS 1. DEFINITIONS...........................................................1 2. ASSETS BEING SOLD.....................................................5 2.1 Trademarks...................................................5 2.2 Registrations................................................5 2.3 Manufacturing Technology and Know-How........................5 2.4 Inventory....................................................6 2.5 Assumed Agreements...........................................6 2.5.1 Patheon Agreement...................................6 2.5.2 Paco Agreements.....................................6 2.5.3 Trademark Agreements................................6 2.6 Manufacturing Information....................................6 2.7 Data Bank Documents..........................................6 2.8 Worldwide Safety Reports.....................................6 2.9 Assumption of Liabilities....................................6 2.10 Customer Lists...............................................6 2.11 Books and Records............................................6 3. PURCHASE PRICE........................................................7 4. REPRESENTATIONS AND WARRANTIES OF SELLER..............................7 4.1 Organization.................................................7 4.2 Authority....................................................7 4.3 Title to Assets..............................................7 4.4 No Violation or Conflict.....................................8 4.5 Registrations................................................8 4.6 Patents......................................................8 4.7 Inventory....................................................8 4.8 Taxes........................................................8 4.9 Financial Information........................................8 4.10 Absence of Certain Changes...................................9 4.11 Violations of Law............................................9 4.12 No Government Restrictions..................................10 4.13 Litigation..................................................10 4.14 Limitation of Warranty......................................10 4.15 Validation of Products......................................10 4.16 Trademarks..................................................10 4.17 Return Policy...............................................10 4.18 Warranties..................................................10 5. REPRESENTATIONS AND WARRANTIES OF BUYER..............................11 5.1 Organization................................................11 5.2 Authority...................................................11 5.3 No Violation or Conflict....................................11 5.4 No Government Restrictions..................................11 5.5 Litigation..................................................11 5.6 Financing...................................................11 6. SELLER'S COVENANTS...................................................11 6.1 Conduct of Business.........................................11 6.2 Compliance with Laws........................................12 6.3 Disclosure Supplements......................................12 6.4 Access; Investigation.......................................13 6.5 Further Assurances..........................................13 3 7. BUYER'S COVENANTS....................................................13 7.1 Transfer of Products........................................13 7.2 Labeling....................................................13 7.3 Further Assurances..........................................13 8. COVENANTS BY BUYER AND SELLER........................................13 8.1 Stability Studies...........................................13 8.2 Transition Services Agreement...............................13 8.3 Labeling....................................................14 8.4 Use of Seller Trademarks....................................14 8.5 Assignment of Trademarks....................................14 8.6 Assignment of Registrations.................................14 8.7 Access to Information.......................................14 8.8 Confidentiality Agreement...................................15 8.9 Press Releases..............................................15 8.10 Government Filings..........................................15 8.11 Rebates.....................................................16 8.11.1 Seller's Responsibility............................16 8.11.2 Reimbursement by Buyer.............................16 8.11.3 Rebate Protection..................................16 8.11.4 HCFA Filings.......................................16 8.12 Contract Chargebacks........................................17 8.13 Returns.....................................................17 8.14 Customers...................................................17 8.15 Backorder...................................................18 9. CONDITIONS PRECEDENT TO CLOSING......................................18 9.1 Conditions to Obligation of Buyer...........................18 9.1.1 Representations and Warranties.....................19 9.1.2 Performance........................................19 9.1.3 HSR Act Approvals..................................19 9.1.4 No Adverse Change..................................19 9.1.5 Officer's Certificate..............................19 9.1.6 Litigation.........................................19 9.1.7 Authorization......................................19 9.1.8 Proceedings and Instruments Satisfactory...........19 9.2 Conditions to Obligations of Seller.........................20 9.2.1 Representations and Warranties.....................20 9.2.2 Performance........................................20 9.2.3 HSR Act Approvals..................................20 9.2.4 Officer's Certificate..............................20 9.2.5 Litigation.........................................20 9.2.6 Authorization......................................20 9.2.7 Proceedings and Instruments Satisfactory...........20 10. THE CLOSING..........................................................20 10.1 The Closing.................................................20 10.2 Deliveries by Seller........................................21 10.3 Deliveries by Buyer.........................................21 11. TERMINATION..........................................................22 11.1 Termination.................................................22 11.2 Effect of Termination.......................................22 11.3 Payment of Costs............................................22 4 12. SURVIVAL; INDEMNIFICATION............................................23 12.1 Survival of Representations; Remedy for Breach..............23 12.2 Indemnification by Seller...................................23 12.3 Indemnification by Buyer....................................23 12.4 Limitations.................................................24 12.5 Notice......................................................24 12.6 Participation in Defense....................................24 12.7 Settlements.................................................25 12.8 Set-Off.....................................................25 13. NON-COMPETITION AND CONFIDENTIALITY..................................25 13.1 Non-Compete.................................................25 13.2 Confidentiality.............................................25 14. NOTICES..............................................................26 15. BULK SALES LAW.......................................................27 16. SYNACORT.............................................................27 17. ARBITRATION AND GOVERNING LAW........................................27 18. ADDITIONAL TERMS.....................................................29 18.1 Brokers.....................................................29 18.2 Injunctive Relief...........................................29 18.3 Expenses....................................................30 18.4 Attorneys' Fees.............................................30 18.5 Successors and Assigns......................................30 18.6 Entire Agreement............................................30 18.7 Amendments; No Waiver.......................................30 18.8 Counterparts................................................30 18.9 Severability................................................30 18.10 Captions....................................................30 5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into on January 21, 1997 (the "Effective Date") by and between Syntex (U.S.A.) Inc., a Delaware corporation ("Seller") and Medicis Pharmaceutical Corporation, a Delaware corporation ("Buyer"). This Agreement sets forth the terms and conditions upon which Buyer is purchasing from Seller and Seller is selling to Buyer the Assets (as hereinafter defined). NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Active Ingredients" mean the pharmaceutical compounds fluocinolone acetonide, fluocinonide, and hydrocortisone, and all salts and esters thereof. 1.2 "Additional Trademarks" means the trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith. 1.3 "Affiliate" of a party shall mean any individual, corporation or other business entity (e.g. limited or general partnership, trust or estate, joint venture or association) controlling, controlled by or under common control with such party. "Control" (including "controlling", "controlled by" and "under common control with") shall mean the direct or indirect ownership of more than fifty percent (50%) of the voting or income interest in such party, corporation or other business entity respectively. Notwithstanding the foregoing, Genentech, Inc. ("Genentech") shall not be considered an Affiliate of Seller for the purpose of this Agreement for so long as there are material restrictions on the ability of Seller and its Affiliates to control Genentech. 1.4 "ANDA" means an Abbreviated New Drug Application, as such term is defined by the FDA. 1.5 "Assets" has the meaning ascribed to such term in Section 0. 1.6 "Assumed Agreements" means the Patheon Agreement, Paco Agreements and the Trademark Agreements. 1.7 "Broker" has the meaning ascribed to such term in Section 16.1. 1.8 "Business" means the business as currently conducted by Seller with respect to manufacture and sale of the Products in the Territory. 1.9 "Buyer Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, used by Buyer and bearing Buyer's name for each Product. 1.10 "Canadian Facility" means the manufacturing facility located at 2100 Syntex Court, Mississauga, Ontario, Canada. 1.11 "cGMP's" means the then-current Good Manufacturing Practices applicable to the manufacture of pharmaceutical products for human use in the United States in accordance with FDA regulations. 6 1.12 "Closing" has the meaning ascribed to such term in Section 0. 1.13 "Closing Date" has the meaning ascribed to such term in Section 0. 1.14 "Closing Time" means 12:01 a.m. on the date of Closing. 1.15 "Confidentiality Agreement" has the meaning ascribed to such term in Section 0. 1.16 "Damages" has the meaning ascribed to such term in Section 0. 1.17 "Data Bank Documents" has the meaning ascribed to such term in Section 0. 1.18 "Disclosure Schedule" means the disclosure schedule delivered prior to the Effective Date to Buyer by Seller in connection with this Agreement. The sections of the Disclosure Schedule correspond to the sections of this Agreement. 1.19 "DOJ" means the United States Department of Justice. 1.20 "Effective Date" means January 21, 1997. 1.21 "FDA" means the United States Food and Drug Administration. 1.22 "FTC" means the United States Federal Trade Commission. 1.23 "HCFA" means the Health Care Financing Administration. 1.24 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder. 1.25 "Indemnifiable Claims" has the meaning ascribed to such term in Section 0. 1.26 "Indemnified Party" has the meaning ascribed to such term in Section 0. 1.27 "Indemnifying Party" has the meaning ascribed to such term in Section 0. 1.28 "Inventory" has the meaning ascribed to such term in Section 0. 1.29 "Know-How" has the meaning ascribed to such term in Section 0. 1.30 "Law" means any federal, state, foreign, local or other law, ordinance, rule, regulation, or governmental requirement or restriction of any kind, and any rules, regulations, and orders promulgated thereunder. 1.31 "Material Adverse Effect" means an event that has a material adverse effect on the Assets, taken as a whole. 1.32 "NADA" means a New Animal Drug Application, as such term is defined by the FDA. 1.33 "NDA" means a New Drug Application, as such term is defined by the FDA. 7 1.34 "NDC number" means a national drug code number. 1.35 "Net Sales" means the gross invoice amount of Products sold to third parties, less (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short-shipments and price adjustments; and (d) contract chargebacks and rebates, government rebates, and returns (e.g., spoiled, damaged or outdated Products). 1.36 "Paco Agreements" means the Indemnification and Confidentiality Agreement dated April 26, 1985 between PACO Packaging, Inc. and Seller and the Confidentiality Agreement dated May 1, 1991 between PACO Packaging, Inc. and Seller. 1.37 "Patents" means any patent or patent application and any and all divisions, continuations, continuations-in-part, reexaminations, reissues, extensions, pending or granted supplementary protection, certificates, substitutions, confirmations, registrations, revalidations, revisions, additions and the like, of or to said patent and patent application. 1.38 "Patheon Agreement" means the agreement between Hoffmann-La Roche Inc., a Delaware corporation, and Patheon to be entered into on January 31, 1997. 1.39 "Products" means each presentation of those finished pharmaceutical products set forth in the Registrations. 1.40 "Purchase Price" has the meaning ascribed to such term in Article 0. 1.41 "Rebate Protection" has the meaning ascribed to such term in Section 0. 1.42 "Registrations" has the meaning ascribed to such term in Section 0. 1.43 "Roche Financial Statement" means the statement of Roche Net Sales by Product in the Territory in U.S. dollars, on a monthly basis for each month beginning January 1995 until the end of the month in which Closing occurs as attached on Schedule 0. 1.44 "Roche Net Sales" means the gross invoice amount of Products sold to third parties in the Territory, less (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short-shipments and price adjustments; and (d) contract chargebacks and rebates, government rebates, and returns (e.g., spoiled, damaged or outdated Products) as attached on Schedule 0. 1.45 "Schedule" means a schedule to the Disclosure Schedule. 1.46 "Synacort Assets" means the Synacort License, the Synacort Trademarks, and the Synacort Trademark Agreements. 1.47 "Synacort License" has the meaning ascribed to such term in Section 0. 1.48 "Synacort NDAs" means the NDAs that are set forth on Schedule 0 and the regulatory records relating exclusively thereto. 8 1.49 "Synacort Trademark" means the trademark registrations that are set forth on Schedule 0 together with all records associated therewith. 1.50 "Synacort Trademark Agreements" means those agreements set forth on Schedule 0 to the extent such agreements relate to the Synacort Trademark. 1.51 "Syntex Financial Statements" mean the statements of Syntex Net Sales and gross margins for the Territory on a corporate cost basis for the Product group for the fiscal years ended July 31, 1993 and 1994, and for the five month period ended December 31, 1994, attached as Schedule 0. 1.52 "Syntex Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, currently used by Syntex for each Product. 1.53 "Syntex NADAs" means the NADAs set forth on Schedule 0 and the regulatory records relating exclusively thereto. 1.54 "Syntex Net Sales" means all trade shipments to customers less all credits issued to customers during the period reported. Such credits include wholesaler chargebacks, returned goods, price adjustments, and product lost in transit. Net sales have also been reduced by the amount of rebates paid to contract and other customers during the period reported. Net sales do not include cash discounts given to customers or any accrual adjustments made during the period reported. 1.55 "Syntex Sales Statement" means the unaudited consolidated statements of Syntex Net Sales for the Territory on a per Product basis by units and U.S. dollars for the fiscal years ended July 31, 1993 and 1994 and the five month period ended December 31, 1994, attached as Schedule 0. 1.56 "Territory" means the United States of America and its possessions, including the Commonwealth of Puerto Rico. 1.57 "Trademark Agreements" has the meaning ascribed to such term in Section 0. 1.58 "Trademarks" has the meaning ascribed to such term in Section 0. 1.59 "Transition Services Agreement" means the agreement referred to in Section 0. 1.60 "Validation Batches" has the meaning ascribed to such term in Section 0. 2. ASSETS BEING SOLD Subject to the terms and conditions of this Agreement, at Closing, Seller shall sell, transfer, assign, convey and deliver to Buyer, its successors and assigns forever, to the extent contemplated herein, all of the right, title, and interest of Seller in the assets listed below in the Territory (collectively, the "Assets"), the Syntex NADAs, the Synacort Assets, and the Additional Trademarks, and Buyer shall assume all rights, title, and interest of Seller in the Assets, the Syntex NADAs, the Synacort Assets, and the Additional Trademarks. 2.1 Trademarks. The trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith (the "Trademarks"). 9 2.2 Registrations. The NDAs and the ANDA that are set forth on Schedule 0 (the "Registrations") and the regulatory records relating exclusively thereto. 2.3 Manufacturing Technology and Know-How. The manufacturing technology and know-how that is exclusively used in manufacturing any Product or is exclusively used in manufacturing any finished product set forth in the Syntex NADAs ("Know-How") and any documents which relate specifically and exclusively to such Know-How. In addition, Seller shall grant Buyer a non-exclusive, perpetual, paid-up, irrevocable, royalty-free, world-wide license, with right to sub-license, to use any manufacturing technology and know-how that are necessary or used in manufacturing any Product or finished product set forth in the Syntex NADAs (but not exclusively used thereto) with such license or sublicense being restricted to use for the Products, unless Buyer can demonstrate by written records that such know-how was known prior to any disclosure of such know-how by Seller or its Affiliates to Buyer or is now public knowledge or becomes public knowledge in the future other than by breach of any agreement between Buyer and its Affiliates and Seller and its Affiliates. 2.4 Inventory. The inventory consisting of the Products that are owned by Seller and that have been approved by Seller as meeting specifications and otherwise saleable in the ordinary and normal course of business as of Closing (the "Inventory"), the quantity and the location of which shall be set forth in a document delivered by Seller at Closing. Products that have been shipped from the plant or a warehouse directly to distributors, wholesalers, or customers are not Inventory. Subject to the terms of the Transition Services Agreement, Inventory shall be shipped FOB Seller's location. 2.5 Assumed Agreements. 2.5.1 Patheon Agreement. Seller shall assign and Buyer shall assume all rights and obligations under the Patheon Agreement. 2.5.2 Paco Agreements. Seller shall assign and Buyer shall assume all rights and obligations under the Paco Agreements, provided, however, that Seller shall retain all rights of indemnification for the Products manufactured prior to Closing. 2.5.3 Trademark Agreements. Seller shall assign and Buyer shall assume all rights and obligations under those agreements set forth on Schedule 0 to the extent such agreements relate to the Trademarks (the "Trademark Agreements"). 2.6 Manufacturing Information. Accurate and complete copies of the current Manufacturing Worksheets and copies of the Manufacturing Quality Assurance Notebooks with respect to the Products currently available, including batch records, development reports (if existing), and other documents and records embodying manufacturing information. 2.7 Data Bank Documents. Right to obtain copies of and reference the animal toxicology, animal mutagenicity, human clinical study and final reports, and drug monograph/investigator brochures, a list of which is set forth on Schedule 0 (the "Data Bank Documents"). 2.8 Worldwide Safety Reports. A hard copy of the Worldwide Safety Reports with respect to Products. 2.9 Assumption of Liabilities. The parties expressly acknowledge and agree that (i) Buyer is not assuming or undertaking any liabilities relating 10 to or arising from the conduct of the Business, the sale or marketing of the Products and/or the ownership or use of the Assets prior to the Closing; (ii) Seller retains all such liabilities; and (iii) Buyer shall have no obligation to Seller or any of its Affiliates or to any third party for any such liabilities. 2.10 Customer Lists. The list of customers who have purchased the Products since January 1, 1996, which list will delivered to Buyer at Closing. 2.11 Books and Records. Copies of the Product Annual Reviews and Annual Product Reviews relating to the Products for the last two years, and marketing and advertising materials relating exclusively to the Products, to the extent available. 3. PURCHASE PRICE Subject to the terms and conditions of this Agreement, in reliance on the representations, warranties, covenants and agreements of the Seller contained herein, and in consideration of the sale, conveyance, assignment, transfer and delivery of the Assets and the Syntex NADAs provided for in Article 0 hereof, Buyer shall deliver to Seller, in full payment for the aforesaid sale, conveyance, assignment, transfer and delivery, the Purchase Price, consisting of: (i) seventeen million four hundred thousand United States dollars (US $17,400,000.00) payable to Seller at Closing by bank wire transfer to Seller at such banking institution, designated not less than five (5) days prior to Closing by Seller. Additional payments of six hundred thousand United States dollars (US $600,000.00) shall be delivered by Buyer to Seller at each of the first, second and third anniversary of the Closing for a total of three (3) such additional payments ("Additional Payments"). Each Additional Payment shall be reduced by fifty percent (50%) if Net Sales in the Territory have decreased by more than twenty percent (20%) during the twelve (12) months immediately preceding the corresponding anniversary. 4. REPRESENTATIONS AND WARRANTIES OF SELLER 4.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of Delaware, with full corporate power and authority to consummate the transactions contemplated hereby. Seller has all requisite power and authority to own and operate the Assets being conveyed by Seller pursuant to this Agreement and to carry on the activities constituting the business. 4.2 Authority. The execution and delivery of this Agreement by Seller and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and other proceedings, and this Agreement has been duly authorized, executed, and delivered by Seller and, assuming the enforceability against Buyer, constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. The Transition Services Agreement, and all other documents executed by Seller or its Affiliates and delivered at the Closing, including those delivered pursuant to Section 0, constitute a valid and binding obligation of Seller or the respective Affiliate of Seller executing such documents enforceable in accordance with their respective terms. 11 4.3 Title to Assets. Except as set forth in Schedule 0, Seller has good and marketable title to all the Assets and will convey good and marketable title at Closing, free and clear of any and all liens, encumbrances, claims, mortgages, leases, security interests, charges or restrictions. Notwithstanding the foregoing, Seller retains the right to use and to transfer to other buyers of the products containing any Active Ingredient outside the Territory information that is similar or identical to that contained in the Registrations and the Know-How; provided, however, that no such buyer has been expressly granted by Seller or any Affiliate of Seller the right to sell, transfer or distribute any of the products containing any Active Ingredient into the Territory based on such Registrations and Know-How and neither Seller nor any Affiliate shall expressly grant any buyer such right. Buyer acknowledges that Seller cannot prevent such a buyer from using such information, including registrations and know-how that is substantially similar to the Registrations and Know-How, to sell, transfer or distribute such products in the Territory. In addition, trademarks that are the same as or similar to the Trademarks may be registered in other countries and may be either retained by Seller for its use or sold to other buyers in either case, for use solely outside the Territory. 4.4 No Violation or Conflict. Seller's execution and delivery of this Agreement and the other related documents delivered by Seller in connection with transactions contemplated herein and the performance of this Agreement by Seller (and the transactions contemplated herein) (a) do not and will not conflict with, violate or constitute or result in a default or an event creating rights of acceleration, termination, or cancellation, or a loss of right under any Law, judgment, order, decree, the articles of incorporation or bylaws of Seller or any mortgage, contract or agreement to which Seller is a party or by which Seller is bound or (b) will not result in the creation or imposition of any lien, charge, mortgage, claim, pledge, security interest, restriction or encumbrance of any kind on, or liability with respect to, the Assets or the Business except as otherwise provided herein or otherwise disclosed on the Disclosure Schedule. None of the Assumed Agreements require the consent of any third party to the assignment of such Assumed Agreement from Seller to Buyer; provided, however, that with respect to the Patheon Agreement, Affiliates of Seller must give prior written notice of any assignment to Patheon and Buyer must covenant in writing with Patheon to be bound by the terms of the Patheon Agreement. 4.5 Registrations. The Registrations are the only registrations required by the FDA to sell and market the Products in the Territory. All Products in Schedule 2.2 are registered and eligible for immediate sale without regulatory limitations. 4.6 Patents. There are no Patents with respect to the Active Ingredients or Products in the Territory. 4.7 Inventory. As of Closing, each Product in the Inventory shall meet the specifications therefor as set forth in the manufacturing documentation and Registrations for such Product. The Inventory will be in good condition, properly stored and in compliance with applicable Laws, usable and salable in the ordinary course of business and shall have, except as set forth in Schedule 0, a minimum remaining shelf life at Closing of not less than thirteen (13) months. 4.8 Taxes. There are no liens for taxes upon the Assets except for liens for current taxes not yet due and payable which shall remain the sole obligation of the Seller. 12 4.9 Financial Information. 4.9.1 The Syntex Financial Statements and the Syntex Sales Statements are accurate and complete in all material respects, reflect only actual bona fide transactions, are consistent with the accounting records of Seller, and were prepared in accordance with United States generally accepted accounting principles (GAAP) consistently applied. 4.9.2 The Roche Financial Statements and the Roche Net Sales are accurate and complete in all material respects, reflect only actual bona fide transactions, are consistent with the accounting records of Seller and were prepared in accordance with International Accounting Standards ("IAS") consistently applied with prior periods. 4.9.3 Seller and its Affiliates have no material liabilities, contingent, absolute, accrued or otherwise, relating to the Assets, other than as set forth in Schedule 0. 4.10 Absence of Certain Changes. 4.10.1 Except as set forth in Schedule 0 or as otherwise set forth in this Agreement, since December 16, 1996, there has not been any (i) Material Adverse Effect or material adverse change in the financial condition or results of operation of the Business, (ii) damage, destruction or loss which has or may reasonably be expected to have a Material Adverse Effect, or (iii) transaction or commitment outside the ordinary course of business with respect to the Assets or the Business. 4.10.2 As of the date hereof and as of the Closing Date and except as otherwise disclosed on Schedule 0, Seller is not aware of any facts, circumstances, or proposed or contemplated events that could reasonably be expected to have a Material Adverse Effect after Closing. 4.10.3 No default under any lease, agreement, contract or other material arrangement relating to the Business, including but not limited to the Patheon Agreement, the Paco Agreements, and the Trademark Agreements has been declared and is continuing and, to Seller's knowledge, no condition exists which, with notice or lapse of time or both, would constitute a default under any such agreement. All of the such agreements are valid and subsisting and are in full force and effect and, to Seller's knowledge, no claim exists or has been asserted with respect to such agreements that would adversely effect the Business. Seller has not received notice that any party to any such agreements intends to cancel or terminate such agreements or to exercise or not exercise any options or rights under such agreements, or to resist any effort by Seller or its successors to exercise or not exercise such options or rights. 4.11 Violations of Law. Except as set forth in Schedule 0, neither the operation of the Business nor the Assets (i) violates or conflicts with any Registrations, any Law, governmental specification, authorization, or requirement, or any decree, judgment, order, or similar restriction in any material respect, or (ii) to the best of Seller's knowledge, has been the subject of an investigation or inquiry by any governmental agency or authority regarding violations or alleged violations, or found by any such agency or authority to be in violation, of any Law. 4.12 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Seller in connection with the execution and 13 delivery of this Agreement by Seller or the consummation by it of the transactions contemplated hereby to be consummated by it, except with respect to the filing of a pre-merger notification report under the HSR Act. 4.13 Litigation. Except as set forth in Schedule 0 attached hereto or as set forth on Schedules 0 and 0, neither the Business nor the Assets is the subject of (i) any outstanding judgment, order, writ, injunction or decree of, or settlement agreement with, any person, corporation, business entity, court, arbitrator or administrative or governmental authority or agency, limiting, restricting or affecting the Business, the Assets, or the Products in a way that would have a Material Adverse Effect, (ii) any pending or, to the best of Seller's knowledge, threatened claim (excluding the adverse drug reports set forth in the Registrations), suit, proceeding, charge, inquiry, investigation or action of any kind, and (iii) any court suits filed with respect to the Assets since January 1, 1990. 4.14 Limitation of Warranty. Seller will not warrant that buyers of products outside the Territory that are substantially similar to or identical with the Products will not attempt to register such products in the Territory. 4.15 Validation of Products. Those Products set forth on Schedule 0 have been validated in the Canadian Facility to U.S. standards. 4.16 Trademarks. Each of the Trademarks being conveyed by this Agreement is being conveyed free and clear of any liens, security interests and other encumbrances and is freely assignable by Seller. Seller is not required, and Buyer will not be required, to pay any royalty to any person with respect to use of any of the Trademarks. Except as set forth in the Trademark Agreements, the Trademarks do not infringe upon or conflict with the trademarks or other rights of any third party in the Territory. 4.17 Return Policy. Schedule 4.17 sets forth a complete copy and/or description of Seller's current return policies with respect to the Products. Except as noted in Schedule 4.17, Seller has not made or authorized any other return arrangements with respect to the Products during the three years immediately preceding the date hereof which would obligate Seller or its successors to accept Product returns on terms which are materially different from those set forth in such Schedule 4.17. Except as set forth in Schedule 4.18, Seller has, in general, administered the return policies set forth in Schedule 4.17 consistently, except for non-material deviations therefrom in the ordinary course of business. 4.18 Warranties. The FDA approved package insert for each applicable Product, sets forth a complete copy and/or description of Seller's current warranties with respect to the Products. Except for implied warranties arising by operation of law, Seller has not made or authorized any other product warranty with respect to the Products since January 1, 1995 which would obligate Seller or its successors on terms which are materially different from those set forth in the applicable package insert. Seller has, in general, administered its warranty policies consistently, except for non-material deviations therefrom in the ordinary course of business since January 1, 1995. 5. REPRESENTATIONS AND WARRANTIES OF BUYER 5.1 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to consummate the transactions contemplated hereby. 14 5.2 Authority. The execution and delivery of this Agreement by Buyer, and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and other proceedings, and this Agreement has been duly authorized, executed, and delivered by Buyer and, assuming the enforceability against Seller, constitutes the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. 5.3 No Violation or Conflict. The execution and delivery of this Agreement by Buyer and the performance of this Agreement (and the transactions contemplated herein) by Buyer do not and will not conflict with, violate or constitute or result in a default under any Law, judgment, order, decree, the articles of incorporation or bylaws of Buyer, or any contract or agreement to which Buyer is a party or by which Buyer is bound. 5.4 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer or the consummation by it of the transactions contemplated hereby to be consummated by it, except with respect to the filing of a pre-merger notification report under the HSR Act. 5.5 Litigation. To the best knowledge of Buyer, there are no claims, actions, suits, proceedings or investigations pending or threatened by or against Buyer with respect to the transactions contemplated hereby, at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, agency, instrumentality or authority. 5.6 Financing. Buyer will have funds sufficient to pay the Purchase Price on the Closing Date. 6. SELLER'S COVENANTS 6.1 Conduct of Business. Seller agrees that from the date hereof until the Closing Date that, except as specifically disclosed in Schedule 0 or unless otherwise consented to by Buyer in writing, Seller shall 6.1.1 maintain the Assets in good status and condition and not sell or dispose of any Assets except sales of Products in the ordinary course of business; 6.1.2 cause the Business to be conducted in the ordinary course consistent with the practice over the past six (6) months and make all reasonable efforts consistent with practices over the past six (6) months to preserve the Assets and the reputation of the Business and the Products and to preserve for Buyer the goodwill of suppliers, customers, distributors, and others having relations with the Business. 6.1.3 not enter into any new, or amend any existing, contract, commitment, or agreement relating to the Business, the Products or the Assets or extend any credit or incur any obligation with respect to the conduct of the Business or the Assets except (i) for the Patheon Agreement, (ii) or in the ordinary course of business and consistent with past business practices; 15 6.1.4 not engage in any special pricing, rebate, allowance, promotional or marketing programs inconsistent with past practices or for the purpose of maintaining customer inventory levels of Product in excess of those levels maintained in the past; 6.1.5 promptly inform Buyer of any change in the Business or Assets that could reasonably be expected to have a Material Adverse Effect; 6.1.6 not subject any of the Assets or any part thereof to any mortgage, pledge, security interest, encumbrance, lien or restriction of use or suffer such to be imposed or license or grant to any other party the right to use any of the Trademarks or any of the Know-How except for use outside the Territory; 6.1.7 perform in all material respects all of its obligations under any agreement with any third party relating to the Business, the Products, or the Assets unless such third party is in default under such agreement; and 6.1.8 maintain its books of accounts and records relating to the Business, the Products or the Assets in the usual, regular and ordinary manner including, but not limited to, the maintenance of any and all documents required by any federal or state regulatory agency or governmental body. 6.2 Compliance with Laws. Seller shall comply in all material respects with all Laws and in all respects with all orders of any court or federal, state, local or other governmental entity applicable to the Business or the Assets. 6.3 Disclosure Supplements. From time to time following execution of this Agreement but prior to the Closing Date, Seller will promptly inform Buyer, in writing, of any matter that may arise hereafter and that, if existing or occurring prior to the execution of this Agreement, would have been required to be set forth or described herein or in the Disclosure Schedule. Seller shall prepare and deliver to Buyer the Roche Financial Statements for a particular month within fifteen (15) business days following the end of each such month. 6.4 Access; Investigation. From and after the date hereof and up to Closing, Buyer and its authorized agents, officers, and representatives shall have reasonable access to the Business and the Assets and all records and information related thereto (except for information that Seller is contractually obligated not to disclose), during normal business hours upon reasonable prior notice and at a time and manner mutually agreed upon between Buyer and Seller in order to conduct such examination and investigation of the Assets and the Business as Buyer shall reasonably deem necessary, provided that such examinations shall not unreasonably interfere with Seller's operations and activities. 6.5 Further Assurances. Seller shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Seller, at the request of Buyer, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Buyer such deeds, assignments, bills of sale, consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably deem necessary or desirable to implement any provision of this Agreement. 7. BUYER'S COVENANTS 16 7.1 Transfer of Products. Following Closing, Buyer shall use all reasonable efforts and, except as otherwise set forth herein, at its own expense to obtain as expeditiously as possible such governmental approvals and registrations from the FDA, or similar regulatory authorities, as may be necessary with respect to the manufacture and sale of the Products by Buyer or its designee. 7.2 Labeling. Following Closing, Buyer shall at its own expense and as expeditiously as possible use all reasonable efforts to obtain such FDA approvals necessary for the Buyer Labeling for each Product. 7.3 Further Assurances. Buyer shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Buyer, at the request of Seller, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Seller such consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Seller, as Seller may reasonably deem necessary or desirable to implement any provision of this Agreement. 8. COVENANTS BY BUYER AND SELLER 8.1 Stability Studies. As soon as possible following Closing, Buyer shall qualify a site as a testing site for stability studies or request Patheon to continue to conduct such stability studies at Buyer's expense, for Products not manufactured by Patheon. Seller shall have no responsibility for on-going stability studies for the Products following Closing. 8.2 Transition Services Agreement. Buyer and Seller, or their Affiliates shall at Closing enter into a Transition Services Agreement, attached as Exhibit A. 8.3 Labeling. In accordance with Section 7.2, Buyer is responsible for having the Buyer Labeling approved by the FDA as soon as possible. Buyer may use the Syntex Labeling on the Inventory until such Inventory is exhausted; provided, however, that Seller may, at its option, buy-back from Buyer all inventory labeled with Seller's NDC number upon Buyer having sufficient inventory, to be determined by Buyer in its sole discretion to be exercised in good faith, of the applicable Product labeled with Buyer's NDC number. In addition, Buyer may use the Syntex Labeling on each Product manufactured by Seller or its Affiliates for Buyer until the earlier of the date (i) the FDA approves the Buyer Labeling for use on such Product and Buyer, using all reasonable efforts, has obtained sufficient supplies of materials with Buyer Labeling for use on such Products, or (ii) twelve (12) months following Closing, provided, however, if at the end of such twelve (12) month period the FDA has not yet approved the Buyer Labeling, then such twelve (12) month period shall be extended for a period of time to be mutually agreed by the parties (such agreement not to be unreasonably withheld) reasonably required to obtain such approval. 8.4 Use of Seller Trademarks. Other than the use of the Syntex Labeling as set forth in Section 0, any use by Buyer of the trademarks, tradenames, or logos of Seller, other than the use of the Trademarks, the Synacort Trademarks, and the Additional Trademarks, as provided herein, must be approved by Seller prior to such use. 8.5 Assignment of Trademarks. By or before Closing, Buyer and Seller shall prepare in good faith an assignment pursuant to which Seller agrees the Trademarks, the Synacort Trademarks, and the Additional Trademarks shall be assigned to Buyer. Following Closing, Buyer shall prepare and Seller shall 17 execute such documents as Buyer may reasonably request in order to record the assignment of the Trademarks, the Synacort Trademarks, and the Additional Trademarks. The responsibility and expense of preparing and filing such documents and any actions required ancillary thereto, shall be borne solely by Buyer. 8.6 Assignment of Registrations. At or following Closing, Buyer shall prepare and Seller shall execute such documents as Buyer may reasonably request in order to record the assignment of the Registrations and the Syntex NADAs. Buyer shall pay any user fees associated with any Product that accrues after Closing but prior to transfer of such Registration and the Syntex NADAs. Seller shall be responsible for preparing and submitting to Buyer all reports and updates with respect to each of the NDAs for all of the Products, including but not limited to NDA Annual Reports, in the form required to be filed with FDA through April 30, 1997. If the next annual filing with respect to any of such NDAs is scheduled to occur after April 30, 1997 but before April 30, 1998, Seller shall prepare and submit to Buyer the data necessary for such annual filing summary report through April 30, 1997 for any such NDA. In addition, Seller shall make available a regulatory person to answer questions regarding such data at the time of filing such Annual Report. 8.7 Access to Information. Buyer and Seller will, upon reasonable prior notice, make available to the other, to the extent reasonably required for the purpose of assisting Seller or Buyer in obtaining governmental approvals and preparation of tax returns or financial statements required by the Securities and Exchange Commission (to the extent information is available) relating to the Assets, and prosecuting or defending or preparing for the prosecution or defense of any action, suit, claim, complaint, proceeding or investigation at any time brought by or pending against Seller or Buyer relating to the Assets, other than in the case of litigation between the parties hereto, such information or records (or copies thereof) in their possession after Closing. Buyer shall also provide Seller with any adverse drug events simultaneously with notification of the FDA for so long as Buyer markets the Products for serious or life-threatening adverse event and for three years following Closing for all other adverse drug events. 8.8 Confidentiality Agreement. The parties agree that certain letter agreement dated October 15, 1996 between an Affiliate of Seller and Buyer (the "Confidentiality Agreement"), shall survive either termination of this Agreement or Closing as an independent agreement; provided, however, that upon Closing, the restrictions on use and the confidentiality obligations of the Confidentiality Agreement shall no longer be in effect with respect to Evaluation Materials (as defined therein) relating to the transferred Assets. 8.9 Press Releases. Neither the Seller nor the Buyer, nor any Affiliate thereof, will issue or cause publication of any press release or other announcement or public communication with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other party, which consent will not be unreasonably withheld or delayed. Neither party shall use the name of the other party in any public statement, prospectus, annual report, or press release without the prior written approval of the other party, which may not be unreasonably withheld or delayed, provided, however, that both parties shall give the other party a minimum of five business days to review such press release, prospectus, annual report, or other public statement. Notwithstanding the foregoing, Buyer may make any disclosure which Buyer, in the opinion of its counsel, is obligated to make pursuant to applicable law, in which case, Buyer shall still endeavor to give Seller an opportunity to review such disclosure but shall not be obligated to do so if such disclosure must, in the opinion of its counsel, be made without time for 18 review. The failure of Buyer to draft such disclosure in a timely fashion shall not be deemed a reason to avoid submitting such disclosure to Seller. 8.10 Government Filings. 8.10.1 Within three (3) business days after the date hereof, Buyer will, or will cause the ultimate parent entities of Buyer to, and Seller will cause the ultimate parent entities of Seller to, make such filings, together with a request for early termination, as may be required by the HSR Act with respect to the consummation of the transactions contemplated by this Agreement. Thereafter, Buyer will or will cause the ultimate parent entities of Buyer to, and Seller will cause the ultimate parent entities of Seller to, each file or cause to be filed as promptly as practicable with the FTC and the DOJ any supplemental information that may be requested pursuant to the HSR Act. All such filings will comply in all material respects with the requirements of the respective laws pursuant to which they are filed. 8.10.2 Each of the parties will use its respective reasonable good faith efforts to obtain, and to cooperate with the others in obtaining, all authorizations, consents, orders and approvals of any governmental agencies, and cooperate with making any filings that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement prior to or after Closing, and to take all reasonable actions to avoid the entry of any order or decree by any governmental agency prohibiting the consummation of the transactions contemplated hereby. 8.11 Rebates. 8.11.1 Seller's Responsibility. Seller shall be responsible for any rebate payments mandated by the government with respect to the Products, for all rebate claims dated on or before six (6) weeks after the Closing Date (the "Rebate Date") and Buyer shall be responsible for any rebate payments with respect to the Products, for all rebate claims dated on or after the Rebate Date. With respect to rebate claims during the calendar quarter in which the Rebate Date occurs, the amount of suc payments shall be prorated between Buyer and Seller based on the number of days remaining in said quarter through and following the Rebate Date. 8.11.2 Reimbursement by Buyer. If Seller or an Affiliate makes payment of rebates in its own name due to governmental requirements (e.g. Medicaid) pertaining to rebate claims for which Buyer is responsible, Buyer will reimburse Seller or its Affiliate such amount within thirty (30) days following the date Seller or its Affiliate notifies Buyer that Seller or its Affiliate has made such payments and provides written evidence of such payments to Buyer. 8.11.3 Rebate Protection. Following the Rebate Date, Seller shall be responsible for payment to Buyer of the Rebate Protection Amount for sales of the Products made under both Seller's NDC numbers and Buyer's NDC numbers subject to the following terms and conditions. Rebate Protection Amount means the amount which is the difference between: (a) the Medicaid rebate based on Buyer's pricing and (b) the Medicaid rebate based on Seller's best price. Seller shall pay the Rebate Protectio Amount only up to the current rate of Medicaid sales by Seller (i.e., if Buyer increases its Medicaid sales, Seller is not liable for Rebate Protection Amount on the increased sales). Buyer shall use its best efforts to limit the Rebate Protection Amount liability, including but not limited to (x) ensuring that inventory with the Buyer's new NDC numbers is available as quickly as possible (and that the largest Medicaid volume SKUs are produced first providing that if such prioritization conflicts with the provisions of Section 0, the provisions of Section 0 shall control) and (y) 19 giving Seller the option to buy back inventory with Seller's NDC numbers at cost when sufficient inventory, to be determined by Buyer in its sole discretion to be exercised in good faith, of the applicable Product labeled with Buyer's NDC number is available. Buyer shall supply Seller with the best price reports filed with HCFA for any quarter in which there is a claim under this Section 8.13.3. 8.11.4 HCFA Filings. Buyer shall supply Seller and its Affiliates with all sales transaction data necessary to file best price reports with HCFA for sales of Products labeled with Seller's NDC numbers for the second quarter of 1997. 8.12 Contract Chargebacks. Seller shall be responsible for all costs and expenses with respect to claims under contract chargebacks with respect to transactions dated on or before three (3) weeks following the Closing Date, up to a maximum of seven hundred thousand United States dollars (US $700,000). Buyer shall be responsible for all costs and expenses with respect to claims under contract chargebacks with respect to transactions dated after three weeks following the Closing Date. 8.13 Returns. From and after the Closing Date, Buyer and Seller shall track lot numbers of products distributed, for the purpose of identifying when Products were sold. Seller shall furnish Buyer with a list of the lot numbers of lots of the Products distributed in the last three years and Buyer agrees to furnish to Seller the lot numbers of any lots of the Products distributed following the Closing Date until the Buyer and Seller mutually agree to discontinue tracking returns, which shall be no later than four (4) years following the Closing Date. Seller is responsible for claims pertaining to all Products sold prior to the Closing Date, provided, however, that Seller is not responsible for claims which would not have been accepted in accordance with the Roche Return Goods Policy attached hereto as Schedule 0. In addition, Buyer shall not engage in any special pricing, rebate allowance, promotional or marketing program or activities, special returns policy or special restocking program that would impact the normal course or level of expected returns with respect to Products sold prior to Closing. Buyer is responsible for all claims pertaining to all Products sold on or after the Closing Date. For those lots for which both Buyer and Seller have sold Products, returns shall be pro-rated between Buyer and Seller based upon the quantity of such lot sold by each party, as determined by count of finished goods inventory for such lot number at Closing. Buyer shall not distribute inventory with the Medicis NDC number until the earlier of (i) May 31, 1997 or (ii) stocking out of Products labeled with Seller's NDC numbers. 8.14 Customers. 8.14.1 Buyer recognizes that Seller has certain agreements which Seller will not assign to Buyer at Closing because these contracts are multi-product contracts. Under these contracts, which are set forth on Schedule 0, Seller must give customers (the "Contract Customers") a certain amount of notice prior to withdrawing Products from such agreements (the "Withdrawal Notice"). The parties have agreed that Closing should take place as expeditiously as possible, which may prevent Seller from giving the Contract Customers notice that will be effective prior to Closing. Seller represents that in view of and in reliance upon the transaction contemplated herein, Seller shall give the Withdrawal Notice to the Contract Customers no later than Closing. If Seller gives the Withdrawal Notice to such Contract Customers no later than Closing, Seller may continue to supply the Contract Customers after Closing using Inventory (to be supplied to Seller by Buyer at no cost) until the earlier of (i) Buyer entering into an agreement with such Contract Customer or 20 (ii) expiration of the notice period for such Contract Customer (such period of time to be called the "Interim Contract Period"). Sales to such Contract Customers during the Interim Contract Period shall be for the account and benefit of Buyer. Seller shall use reasonable efforts to avoid backorders to all customers, including but not limited to extending the term of any Contract Customer's contract for an additional thirty (30) day period, where possible, and Buyer shall not object to such extension. 8.14.2 Seller acknowledges that Buyer has not had an opportunity to review any contracts with the Contract Customers. Seller represents and warrants that the aggregate contractual discount percentage from the list price paid by such Contract Customers pursuant to such contracts during the Interim Contract Period (the "Interim Discount Percentage") shall not exceed the aggregate discount percentage from the list price currently paid by such Contract Customers of 82.6% by more than two ( percentage points. In addition to any payment required by Section 0, if the Interim Discount Percentage exceeds 84.6% during the Interim Contract Period, Seller shall indemnify and hold Buyer harmless for the full amount of the difference between 84.6% and the Interim Discount Percentage. 8.14.3 Nothing contained herein shall be deemed to make Buyer a party to any such Contract Customer contract nor create any contractual right by any such Contract Customer against Buyer. Seller indemnifies and holds Buyer harmless from any liability to any Contract Customer or third party under any such agreements, except for liability based upon Buyer's failure to perform Buyer's obligations to Seller under this Agreement. 8.15 Backorder. If between Closing and April 30, 1997, any Product set forth on Schedule 0 (the "Protected Products") goes on backorder with a wholesaler (other than a wholesaler order on behalf of a Contract Customer) for longer than five (5) business days, then Seller shall pay Buyer an amount equal to the gross margin less two percent (2%) cash discount for each unit of such Protected Product not shipped. For the purpose of this Section, gross margin for the period ending March 31, 1997 shall be calculated using the historic rate of gross profit margins based on Net Sales in the last quarter of 1996; for the period between March 31, 1997 and April 30, 1997, the gross margin shall be calculated using the actual experience for such period, based on Net Sales. Buyer shall prioritize production of the Protected Products in order to avoid backorders. Should Buyer elect to prioritize production of other Products and a backorder occurs with respect to a Protected Product or if Buyer does not permit Seller to distribute Products after Closing in accordance with Seller's normal business practices with respect to Product expiration dating, the payment provisions of this Section 0 shall not apply. Buyer shall inform Seller on a regular basis of its production schedule for the Products to facilitate Seller's managing the inventory of the Products. Certain Products have been manufactured by Seller's Affiliate, Hoffmann-La Roche Inc., as part of the validation of its manufacturing facility in Nutley, New Jersey (the "Validation Batches"). If Seller believes it necessary to avoid a backorder, Seller shall re-label the Validation Batches with Seller's NDC labeling at Seller's cost and make such Validation Batches available to Buyer. The decision to re-label the Validation Batches shall be made by Seller in its sole discretion after consultation with Buyer. 9. CONDITIONS PRECEDENT TO CLOSING 9.1 Conditions to Obligation of Buyer. The obligation of Buyer to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Buyer): 21 9.1.1 Representations and Warranties. The representations and warranties made by Seller in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.1.2 Performance. Seller shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.1.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.1.4 No Adverse Change. During the period from the date of this Agreement to the Closing Date there shall not have occurred or been discovered, and there shall not exist on the Closing Date except for that which has been otherwise disclosed elsewhere in this Agreement or in the Disclosure Schedule at the time of execution of this Agreement, any condition or fact that could reasonably be expected to have a Material Adverse Effect. 9.1.5 Officer's Certificate. Seller shall have delivered to Buyer a certificate, dated the Closing Date and executed by an officer of Seller, certifying to the fulfillment of all conditions set forth in this Article 0. 9.1.6 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 9.1.7 Authorization. Seller shall have furnished to Buyer all documents Buyer may reasonably request relating to the existence of Seller, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Buyer. 9.1.8 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Buyer and Buyer's counsel, and Seller shall have made available to Buyer for examination the originals or true and correct copies of all documents which Buyer may reasonably request in connection with the transactions contemplated this Agreement. 9.2 Conditions to Obligations of Seller. The obligations of Seller to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Seller): 9.2.1 Representations and Warranties. The representations and warranties made by Buyer in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except 22 for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.2.2 Performance. Buyer shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.2.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.2.4 Officer's Certificate. Buyer shall have delivered to Seller a certificate, dated the date of Closing and executed by an officer of Buyer, certifying to the fulfillment of all conditions specified in this Article 0. 9.2.5 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 9.2.6 Authorization. Buyer shall have furnished to Seller all documents Seller may reasonably request relating to the existence of Buyer, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Seller. 9.2.7 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Seller and Seller's counsel, and Buyer shall have made available to Seller for examination the originals or true and correct copies of all documents which Seller may reasonably request in connection with the transactions contemplated by this Agreement. 10. THE CLOSING 10.1 The Closing. Subject to the satisfaction of all of the conditions to each party's obligations set forth in Article 0 hereof (or, with respect to any condition not satisfied, the waiver in writing thereof by the party or parties for whose benefit the condition exists), the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 9:00 a.m. (local time) on the first Monday following the day in which all required waiting periods under the HSR Act have expired or been terminated (the "Closing Date") or at such other time, date (but in no event later than March 31, 1997) and place as the parties hereto may agree in writing. The transfer of the Assets shall be deemed to have occurred as of the Closing Time. 10.2 Deliveries by Seller. Unless otherwise specified in this Section 0, at Closing, Seller or its Affiliate, as appropriate, shall deliver to Buyer in form reasonably satisfactory to Buyer, each properly executed and dated as of the Closing Date, where appropriate: 10.2.1 except as otherwise provided herein, such deeds, bills of sale, endorsements, assignments, assignment agreements, and other good and 23 sufficient instruments of conveyance and transfer as shall be effective to vest in Buyer free and clear title to the Assets as contemplated by this Agreement 10.2.2 Secretary's Certificate certifying that the Board of Directors of Seller has authorized this Agreement; 10.2.3 within five (5) business days following the Closing, the statement of the quantity and location of inventory described in Section 0; 10.2.4 the Transition Services Agreement; 10.2.5 a receipt for the Purchase Price; 10.2.6 originals of those Assumed Agreements exclusively related to the Products; and 10.2.7 a letter giving written notice to Patheon of the assignment of the Patheon Agreement to Buyer. 10.3 Deliveries by Buyer. At Closing, Buyer or its Affiliate, as appropriate, shall deliver or cause to be delivered to Seller: 10.3.1 The Purchase Price payable in accordance with Article 0; 10.3.2 Secretary's Certificate certifying that the Board of Directors of Buyer has authorized this Agreement. 10.3.3 the Transition Services Agreement; and 10.3.4 a letter to Patheon covenanting that Buyer agrees to be bound by the terms of the Patheon Agreement. 11. TERMINATION 11.1 Termination. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing Date: 11.1.1 By the mutual written consent of Seller and Buyer; 11.1.2 By either Seller or Buyer if Closing shall not have occurred on or before March 1, 1997, unless such date has been extended by mutual agreement in writing (the "Termination Date"); 11.1.3 By either Seller or Buyer if consummation of the transactions contemplated hereby shall violate any final order, decree or judgment of any court or governmental body having competent jurisdiction. 11.1.4 By Buyer if there has been a material misrepresentation by Seller or a material breach by Seller of any of the warranties or covenants of Seller set forth herein that Seller has not cured within fourteen (14) days after receipt of notice from Buyer requesting such to be cured (but in no event later than the Termination Date) or that Buyer has not waived in writing; or 11.1.5 By Seller if there has been a material misrepresentation by Buyer or a material breach by Buyer of any of the warranties or covenants of Buyer set forth herein that Buyer has not cured within fourteen (14) days after receipt of notice from Seller requesting such to be cured (but in no event later than the Termination Date) or that Seller has not waived in writing. 24 11.2 Effect of Termination. If this Agreement is terminated pursuant to Section 0, all further obligations of Seller and Buyer under this Agreement shall terminate without further liability of Seller or Buyer except (a) for the obligations of Buyer and Seller under Sections 0, 0, 0, and 0; and (b) that such termination shall not constitute a waiver by any party of any claim it may have for damages caused by reason of a breach by the other party of a representation, warranty, covenant or agreement. 11.3 Payment of Costs. If this Agreement is terminated by Buyer due to a material misrepresentation of Seller that Seller has failed to cure within the time limits and in accordance with Section 11.1.4, Buyer shall be entitled to recover from Seller all reasonable attorneys' costs and fees incurred by Buyer in obtaining the appropriate HSR Act approvals described in Section 9.1.3. In no event, however, will Seller's obligations under this Section exceed one hundred thousand United States dollars ($100,000). 11.4 Liquidated Damages. Pursuant to Section 0, Seller may, at its option, withdraw the Products from the contracts with the Contract Customers upon notice to Buyer. Buyer acknowledges that if Seller withdraws such Products and Closing fails to occur, Seller may suffer irreparable damage to its relationships with these customers and may not be able to re-establish these customers as customers for the Products. For that reason, Seller and Buyer acknowledge that it would be difficult to measure the actual, incidental, special, and consequential damages that would accrue were Closing not to occur due to a breach of this Agreement by Buyer. For that reason, if Closing fails to occur due to a breach of this Agreement by Buyer, Buyer shall pay Seller liquidated damages in a lump sum payment equal to five million United States dollars (US $5,000,000). In exchange, Seller agrees not to make any claims against Buyer for any additional actual, incidental, special, or consequential damages incurred by Seller. Buyer acknowledges that these liquidated damages are not a penalty, but an attempt to limit Buyer's liability should Closing not occur due to a breach of this Agreement by Buyer. Should Closing not occur due to failure to obtain the government approvals required under Section 9.1.3, Buyer shall have no liability to Seller. 12. SURVIVAL; INDEMNIFICATION 12.1 Survival of Representations; Remedy for Breach. The representations, warranties and covenants made by Buyer and Seller under this Agreement shall survive the Closing for a period of eighteen (18) months. Any Indemnifiable Claims (as hereinafter defined) or claim for tax reimbursement that a party may have arising out of the other party's breach of its representations, warranties, or covenants contained in this Agreement shall be made by notice to the other party no later than eighteen (18) months following the Closing Date ("Claim Period") and there shall be no recovery for indemnification for breach of a representation, warranty, or covenant under this Agreement for any Indemnifiable Claim or claim for tax reimbursement first asserted after that date. Seller and Buyer agree to use reasonable efforts to mitigate any loss or damage for which they may seek indemnification under this Article 12 or for which they may seek recovery under law or equity. 12.2 Indemnification by Seller. Subject to the limitations set forth in Section 0, and in addition to any other rights Buyer may have under law or at equity, Seller shall indemnify and hold harmless Buyer and its Affiliates, officers, directors, and agents and employees from any and all damages, losses, liabilities, third party claims, lawsuits, obligations and expenses (including reasonable attorneys fees and costs) (collectively, "Damages") that Buyer shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Seller in this Agreement or in any of the agreements, instruments or 25 documents executed or delivered by Seller pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the Business by the Seller, the sale, distribution or marketing of the Products, or the use or ownership of the Assets prior to the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.2 (a) and (b), collectively "Buyer's Indemnifiable Claims"); and (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets prior to the Closing Date; or (d) taxes imposed with respect to the transfer of the Assets to the Buyer pursuant to this Agreement, including any assessments against Seller as a member of a consolidated reporting group with any other entity (Section 12.2 (c) and (d), collectively "Buyer's Tax Claims"). 12.3 Indemnification by Buyer. Subject to the limitations set forth in Section 0, and in addition to any other rights it may have under law or at equity, Buyer shall indemnify and hold harmless Seller and its Affiliates, officers, directors, and agents and employees from any and all Damages that Seller shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Buyer in this Agreement or in any of the agreements, instruments or documents executed or delivered by Buyer pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the Business by the Buyer, the sale, distribution or marketing of the Products, or the use or ownership of the Assets following the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.3 (a) and (b), collectively "Seller's Indemnifiable Claims") (Buyer's Indemnifiable Claims and Seller's Indemnifiable Claims are hereby collectively referred to as "Indemnifiable Claims"); or (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets following the Closing Date ("Seller's Tax Claims"). 12.4 Limitations. Notwithstanding anything to the contrary herein, neither Buyer and its Affiliates nor Seller shall be entitled to seek indemnification or any recovery under law or at equity with respect to any Indemnifiable Claim until the aggregate amount of such claims exceeds Two Hundred Thousand United States Dollars ($200,000) (the "Basket Limitation"); provided, however, that (i) if either party is responsible to the other for any amount in excess of the Basket Limitation, then the Basket Limitation shall not be deemed applicable and such party shall be responsible to fully indemnify the other party for all Damages; (ii) in no event shall either party be required to indemnify the other for breaches of the representations, warranties, and covenants made in this Agreement for an amount in excess of the Purchase Price; and (iii) neither the Basket Limitation nor the limitation in the immediately preceding clause shall be applicable to (x) third party claims, (y) Buyer's Tax Claims or Seller's Tax Claims, or (z) Rebate Protection Amount; provided, that Damages shall be limited to one-third (1/3) of the Purchase Price with respect to the representations and warranties under Sections 4.6, 4.7, 4.8, 4.14, 4.17, and 4.18; and provided further, that Damages shall be limited to one-half (1/2) of the Purchase Price with respect to the representations and warranties under Sections 4.9, 4.10 and 4.15. 12.5 Notice. A party seeking indemnification pursuant to Section 0 or 0 (an "Indemnified Party") shall give prompt notice to the party from whom such indemnification is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity is or may be sought hereunder (whether or not the limits set forth in Section 0 have been exceeded) and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably 26 request, but no failure to give such notice shall relieve the Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual prejudice thereby). 12.6 Participation in Defense. The Indemnifying Party may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party. In such case the Indemnified Party shall have the right (but not the duty) to participate in the defense thereof, and to employ counsel, at its own expense, separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof. The Indemnifying Party shall be liable for the fees and expenses of one firm as counsel (and appropriate local counsel) employed by the Indemnified Party if the Indemnifying Party has not assumed the defense thereof. Whether or not the Indemnifying Party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 12.7 Settlements. The Indemnifying Party shall not be liable under this Article for any settlement effected without its consent of any claim, litigation or proceedings in respect of which indemnity may be sought hereunder, unless the Indemnifying Party refuses to acknowledge liability for indemnification under this Article 0 and/or declines to defend the Indemnified Party in such claim, litigation or proceeding. 12.8 Set-Off. In addition to any other remedies that Buyer may have against Seller for indemnification under the provisions of this Agreement or under law or at equity, Buyer may set off against any amount otherwise due and yet unpaid to Seller as part of the Purchase Price or otherwise, any amount owed by Seller or its Affiliates to Buyer under any provision of this Agreement, any instrument or agreement delivered pursuant thereto, or otherwise. 13. NON-COMPETITION AND CONFIDENTIALITY 13.1 Non-Compete. Seller acknowledges that in order to assure Buyer that Buyer will retain the value of the Assets, Buyer wishes assurances that Seller and its Affiliates shall not utilize their special knowledge of the Business and their relationship with customers, suppliers, and others to compete with the Buyer with respect to the Business. For a period of five (5) years beginning on the Closing Date, neither Seller nor its Affiliates shall engage in any business that manufactures, packages, distributes or sells finished products in the Territory whose sole or major active ingredients consist of the Active Ingredients for topical use in dermatology except for (i) the transactions involving Buyer, (ii) as provided in Section 0 hereof or (iii) as part of a product whose primary indication is the treatment of vulvovaginal mycotic infections; provided that, nothing in this Article shall in any way restrict or preclude the Seller or any of its Affiliates from acquiring another company, business or line of products (including by license thereof or through investment therein), in which less than a twenty percent (20%) of the revenues and/or assets is derived from or represents finished products whose sole or major active ingredients consist of the Active Ingredients for topical use in dermatology and to continue to operate such business following such acquisition. In promoting any such acquired product or in promoting any other dermatology product that Seller may develop, manufacture of market in compliance with this Section 13.1, Seller shall not make use of the history, heritage or brand equity of the Products as part of any such promotional plan or activity. 27 13.2 Confidentiality. Seller acknowledges that the Assets and all other confidential or proprietary information with respect to the Business are valuable, special and unique. Neither Seller nor any of its Affiliates shall, at any time after the Closing Date, disclose, directly or indirectly, to any third party, or use or purport to authorize any third party to use any confidential or proprietary information with respect to the Business, whether or not for Seller's or an Affiliate's own benefit, without the prior written consent of Buyer, including without limitation, information as to the financial condition, results of operations, customers, suppliers, products, inventions, sources, leads or methods of obtaining new supplies, marketing strategies or any other information relating to the Business or Products which could reasonably be regarded as confidential, but not including information which (i) does not relate directly and exclusively to the Business or the Products, provided that Seller and its Affiliates shall not disclose such information to the direct detriment of the Business; or (ii) is or shall become generally available to the public other than as a result of an unauthorized disclosure by Seller or an Affiliate or third party to whom Seller or an Affiliate has provided such information; or (iii) as may be necessary for Seller or any of its Affiliates to perform its obligations under this Asset Purchase Agreement or the transactions or agreements contemplated herein; or (iv) that is required by Law to be disclosed by Seller or any of its Affiliates. 14. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to Seller or Buyer at the respective addresses and facsimile numbers set forth below or at such other address and facsimile number as either party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. if to Buyer, to: Medicis Pharmaceutical Corporation 4383 East Camelback Road Phoenix, Arizona 85018 Attn: Jonah Shacknai Fax Number: 602-808-3875 with a copy to: Brown & Bain 2901 North Central Avenue Phoenix, Arizona 85012-2788 Attn: Frank M. Placenti Fax Number: 1-602-351-8516 if to Seller, to: 28 Syntex (U.S.A.) Inc. 3401 Hillview Avenue Palo Alto, California 94304 USA Attn: President Fax Number: 1-415-354-2595 with a copy to: Syntex (U.S.A.) Inc. 3401 Hillview Avenue Palo Alto, California 94304 Attn: General Counsel Fax Number: 415-852-1338 15. BULK SALES LAW The parties hereto each waive compliance by the others with the provisions of any statute or any state or jurisdiction regulating bulk sales or transfers which may be applicable to the sale of the Assets. Seller hereby jointly and severally agrees to indemnify and hold Buyer and its officers, directors, employees, agents, representatives, successors and assigns harmless from and against any and all losses, claims, damages, expenses and liabilities (including legal fees and expenses) to which Buyer may become subject pursuant to the bulk transfer provisions of the Uniform Commercial Code or any applicable state or any other applicable bulk transfer or sale statute with regard to the sale of the Assets contemplated by this Agreement. 16. SYNACORT At Closing, Seller shall grant Buyer an exclusive, fully paid-up license, with right to sub-license, to manufacture, market and sell products in the Territory using the Synacort NDAs; provided, however, that Buyer may not manufacture, market or sell any product for the treatment of vulvovaginal mycotic infections products using the Synacort NDAs. At Closing, Seller shall transfer to Buyer and Buyer shall assume all regulatory responsibility for the Synacort NDAs. In addition, (i) Seller hereby conveys all common law rights Seller has in the Territory in the trademark "Synacort", if any, to Buyer, and (ii) Seller shall not oppose the registration in the Territory by Buyer of the trademark "Synacort." 17. ARBITRATION AND GOVERNING LAW 17.1 Generally. Except for the right of either party to apply to a court of competent jurisdiction for a Temporary Restraining Order to preserve the status quo or prevent irreparable harm pending the selection and confirmation of a panel of arbitrators in accordance herewith, any dispute, controversy or claim arising out of or relating to this Agreement, to a breach or termination thereof, or to the rights of any party for indemnification thereunder ("Claim") shall be settled by final and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the day the arbitration is commenced in accordance with this Agreement ("Rules"). In the event of any inconsistency between such Rules and the terms of this Agreement, this Agreement shall supersede the Rules. Any judgment on any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final,. binding, non-appealable, and conclusive. The AAA shall have jurisdiction over all parties to this Agreement for purposes of the arbitration. 29 17.2 Defenses and Bankruptcy. Any statute of limitations or other equitable or legal doctrine which would otherwise be applicable to any action brought by any of the parties shall be applicable in the Arbitration. In the event any party to this Agreement files a petition under the bankruptcy laws of the United States or has a petition filed against it which results in an order for relief or other indicia that a bankruptcy case has commenced, it is the express intention of the parties to this Agreement that this Agreement shall control and be enforced in accordance with is terms and conditions that any Claim shall remain subject to arbitration to the maximum extent permitted by law. 17.3 Commencement of Arbitration. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by certified mail, return receipt requested, in accordance with Agreement, with a copy of the same delivered by certified mail, return receipt requested, to the AAA regional office in which Palo Alto California is then located. The AAA shall administer the arbitration. The arbitration panel shall consist of three members, one being appointed by each party and the third, who shall be the chairman of the panel, being appointed by mutual agreement of the two party-appointed arbitrators. In the event of failure of said two arbitrators to agree within sixty (60) days after the commencement of the arbitration proceeding upon the appointment of the third arbitrator, the third arbitrator shall be appointed by the AAA in accordance with the Rules. In the event that either party shall fail to appoint an arbitrator within thirty (30) days after the commencement of the arbitration proceeding, such arbitrator and the third arbitrator shall be appointed by the AAA in accordance with the Rules. The arbitration award shall be rendered by a majority of the members of the Board of Arbitration. Except as expressly provided in this Agreement in Section 17.9, the panel shall not be entitled to modify this Agreement or the transactions contemplated herein. 17.4 Governing Law and Place of Arbitration. The arbitrators shall apply the laws of the State of New York (regardless of its or any other jurisdiction's choice of law principles). The place of arbitration shall be Phoenix, Arizona. 17.5 Discovery and Other Matters. There shall be no rights of discovery in connection with the arbitration except as follows: 17.5.1 Each party shall have the right to request the arbitrators to issue subpoenas for documents in accordance with the rules; 17.5.2 Each party shall have the right to initiate one (1) deposition of one representative of each party to the arbitration; and each party shall have the right to initiate one (1) additional oral deposition pursuant to a subpoena issued by the arbitrators or any court of competent jurisdiction. 17.5.3 At any time following the tenth day after the commencement of the arbitration in accordance with this Agreement, a written notice served upon all parties shall be sufficient to compel the attendance of any party at a deposition upon not less than sixty (60) days notice and no subpoena shall be required for that purpose. If a person fails or refuses to testify at a deposition, that person shall not be permitted to testify at the hearing, except for good cause shown. The number of depositions that may be initiated by either party may be varied by agreement of all parties to the arbitration but not by any action, order or request of the arbitrators or any court. 30 17.6 Hearing. Not less than thirty (30) days prior to the scheduled arbitration proceeding, the arbitrator shall conduct a preliminary hearing in accordance with the AAA guidelines. Not less than five (5) days prior to the preliminary hearing, all parties to the arbitrations shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used at the arbitration hearing. Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than as set forth on such list. the arbitrators shall receive evidence at a single hearing. The arbitrators shall award reasonable attorneys' fees and costs in favor of the prevailing party or parties. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrators shall have the power to hear and decide, by documents only or with a hearing (at the arbitrators sole discretion) any prehearing motions in the nature of a pre-trial motion to dismiss or for summary judgment. 17.7 Arbitrators Fees. The arbitrators shall be entitled to receive reasonable compensation at an hourly rate to be established between the arbitrators and he AAA. If required by the arbitrators, Buyer, on the one hand, and Seller, on the other, will deposit with the AAA an equal share of the total anticipated fee of the arbitrators in an amount to be estimated by the AAA. The non-prevailing party(s) in the proceedings shall be ordered to pay, and shall have the ultimate responsibility for, all arbitrators fees and the fees of the AAA and such fees shall be included in the judgment to be entered against the non-prevailing party or parties. 18. ADDITIONAL TERMS 18.1 Brokers. Buyer represents to Seller that it has not employed any investment banker, broker, finder or intermediary (a "Broker") in connection with the transactions contemplated hereby who might be entitled to a fee or any commission from Seller upon consummation of the transactions contemplated hereby. Seller represents to Buyer that it has not employed any Broker in such connection who might be entitled to a fee or any commission from Buyer upon consummation of the transactions contemplated hereby. 18.2 Injunctive Relief. It is possible that remedies at law may be inadequate and, therefore, the parties hereto shall be entitled to seek equitable relief including, without limitation, injunctive relief, specific performance or other equitable remedies in addition to all other remedies provided hereunder or available to the parties hereto at law or in equity. 18.3 Expenses. Except as otherwise expressly provided in this Agreement, all legal, accounting and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the party incurring such expenses. 18.4 Attorneys' Fees. If there is any litigation or arbitration with respect to this Agreement, the prevailing party shall be entitled to receive from the non-prevailing party and the non-prevailing party shall pay upon demand all reasonable fees and expenses of counsel for the prevailing party. 18.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by any party without the written consent of the other party. 18.6 Entire Agreement. This Agreement, the exhibits hereto, the Disclosure Schedule and the Confidentiality Agreement embody the entire agreement of the parties hereto with respect to the subject matter hereof and 31 supersede and replace all previous negotiations, understandings, representations, writings, and contract provisions and rights relating to the subject matter hereof. 18.7 Amendments; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each party. No failure or delay on the part of either party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder. 18.8 Counterparts. This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument and shall become effective when a counterpart has been signed by Buyer and delivered to Seller and a counterpart has been signed by Seller and delivered to Buyer. 18.9 Severability. The parties agree that (a) the provisions of this Agreement shall be severable and (b) in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (i) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions that are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (ii) the remaining provisions shall remain enforceable to the fullest extent permitted by law, provided that the rights and interests of the parties hereto shall not be materially affected. 18.10 Captions. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless the context requires otherwise, all references herein to Articles and Sections are to the articles and sections of this Agreement. IN WITNESS WHEREOF, this Agreement has been signed by duly authorized representatives of each of the parties hereto as of the Effective Date. SYNTEX (U.S.A.) INC. MEDICIS PHARMACEUTICAL CORPORATION By /s/ Carole L. Nuechterlein By /s/ Jonah Shacknai -------------------------------- -------------------------------- Name Carole L. Nuechterlein Name Jonah Shacknai ------------------------------ ------------------------------ Title: Title: Chairman and Chief Assistant Secretary Executive Officer ---------------------------- ---------------------------- EX-10.81 5 ASSET PURCHASE AGRMNT BTWN COMPANY AND HOFFMAN 1 EXHIBIT 10.81 ASSET PURCHASE AGREEMENT BETWEEN HOFFMANN-LA ROCHE LIMITED and MEDICIS PHARMACEUTICAL CORPORATION 2 TABLE OF CONTENTS 1. DEFINITIONS ....................................................... 1 2. ASSETS BEING SOLD ........................................... 5 2.1 Trademarks ......................................... 5 2.2 Registrations ...................................... 5 2.3 Manufacturing Technology and Know-How .............. 5 2.4 Inventory .......................................... 5 2.5 Assumed Agreements ................................. 5 2.5.1 Patheon Agreement ......................... 5 2.5.2 Trademark Agreements ...................... 5 2.6 Manufacturing Information .......................... 5 2.7 Data Bank Documents ................................ 6 2.8 Worldwide Safety Reports ........................... 6 2.9 Assumption of Liabilities .......................... 6 2.10 Customer Lists ..................................... 6 2.11 Books and Records .................................. 6 3. PURCHASE PRICE .............................................. 6 4. REPRESENTATIONS AND WARRANTIES OF SELLER .................... 6 4.1 Organization ....................................... 6 4.2 Authority .......................................... 7 4.3 Title to Assets .................................... 7 4.4 No Violation or Conflict ........................... 7 4.5 Registrations ...................................... 8 4.6 Patents ............................................ 8 4.7 Inventory .......................................... 8 4.8 Taxes .............................................. 8 4.9 Financial Information .............................. 8 4.10 Absence of Certain Changes ......................... 8 4.11 Violations of Law .................................. 9 4.12 No Government Restrictions ......................... 9 4.13 Litigation ......................................... 9 4.14 Limitation of Warranty. ............................ 9 4.15 Trademarks ......................................... 9 4.16 Return Policy ......................................10 4.17 Warranties .........................................10 4.18 Customer Contracts .................................10 5. REPRESENTATIONS AND WARRANTIES OF BUYER .....................10 5.1 Organization .......................................10 5.2 Authority ..........................................10 5.3 No Violation or Conflict ...........................10 5.4 No Government Restrictions .........................11 5.5 Litigation .........................................11 5.6 Financing ..........................................11 6. SELLER'S COVENANTS ..........................................11 6.1 Conduct of Business ................................11 6.2 Compliance with Laws ...............................12 6.3 Disclosure Supplements .............................12 6.4 Access; Investigation ..............................12 6.5 Further Assurances .................................12 7. BUYER'S COVENANTS ...........................................12 7.1 Transfer of Products ...............................12 7.2 Labeling ...........................................13 7.3 Further Assurances .................................13 3 8. COVENANTS BY BUYER AND SELLER ...............................13 8.1 Stability Studies ..................................13 8.2 Transition Services Agreement ......................13 8.3 Labeling ...........................................13 8.4 Use of Seller Trademarks ...........................13 8.5 Assignment of Trademarks ...........................14 8.6 Assignment of Registrations. .......................14 8.7 Access to Information ..............................14 8.8 Confidentiality Agreement ..........................14 8.9 Press Releases .....................................14 8.10 Government Filings .................................15 8.11 Returns ............................................15 8.12 Backorder ..........................................15 9. CONDITIONS PRECEDENT TO CLOSING .............................16 9.1 Conditions to Obligation of Buyer ..................16 9.1.1 Representations and Warranties ............16 9.1.2 Performance ...............................16 9.1.3 HSR Act Approvals .........................16 9.1.4 No Adverse Change .........................16 9.1.5 Officer's Certificate .....................16 9.1.6 Litigation ................................16 9.1.7 Authorization .............................17 9.1.8 Proceedings and Instruments Satisfactory ..17 9.2 Conditions to Obligations of Seller ................17 9.2.1 Representations and Warranties ............17 9.2.2 Performance ...............................17 9.2.3 HSR Act Approvals .........................17 9.2.4 Officer's Certificate .....................17 9.2.5 Litigation ................................17 9.2.6 Authorization .............................17 9.2.7 Proceedings and Instruments Satisfactory ..18 10. THE CLOSING .................................................18 10.1 The Closing ........................................18 10.2 Deliveries by Seller ...............................18 10.3 Deliveries by Buyer ................................18 11. TERMINATION .................................................19 11.1 Termination ........................................19 11.2 Effect of Termination ..............................19 12. SURVIVAL; INDEMNIFICATION ...................................19 12.1 Survival of Representations; Remedy for Breach .....19 12.2 Indemnification by Seller ..........................20 12.3 Indemnification by Buyer ...........................20 12.4 Limitations ........................................21 12.5 Notice .............................................21 12.6 Participation in Defense ...........................21 12.7 Settlements ........................................21 12.8 Set-Off ............................................22 13. NON-COMPETITION AND CONFIDENTIALITY .........................22 13.1 Non-Compete ........................................22 13.2 Confidentiality ....................................22 14. NOTICES .....................................................23 15. BULK SALES LAW ..............................................23 4 16. SYNACORT ....................................................24 17. ARBITRATION AND GOVERNING LAW ...............................24 17.1 Generally ..........................................24 17.2 Defenses and Bankruptcy ............................24 17.3 Commencement of Arbitration ........................24 17.4 Governing Law and Place of Arbitration .............25 17.5 Discovery and Other Matters ........................25 17.6 Hearing ............................................25 17.7 Arbitrators Fees ...................................26 18. ADDITIONAL TERMS ............................................26 18.1 Brokers ............................................26 18.2 Injunctive Relief. .................................26 18.3 Expenses ...........................................26 18.4 Attorneys' Fees. ...................................26 18.5 Successors and Assigns .............................26 18.6 Entire Agreement ...................................26 18.7 Amendments; No Waiver ..............................27 18.8 Counterparts .......................................27 18.9 Severability .......................................27 18.10 Captions ...........................................27 5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into on January 21, 1997 (the "Effective Date") by and between Hoffmann-La Roche Limited, a Canadian corporation ("Seller") and Medicis Pharmaceutical Corporation, a Delaware corporation ("Buyer"). This Agreement sets forth the terms and conditions upon which Buyer is purchasing from Seller and Seller is selling to Buyer the Assets (as hereinafter defined). NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Active Ingredients" mean the pharmaceutical compounds fluocinolone acetonide, fluocinonide, and hydrocortisone, and all salts and esters thereof. 1.2 "Additional Trademarks" means the trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith. 1.3 "Affiliate" of a party shall mean any individual, corporation or other business entity (e.g. limited or general partnership, trust or estate, joint venture or association) controlling, controlled by or under common control with such party. "Control" (including "controlling", "controlled by" and "under common control with") shall mean the direct or indirect ownership of more than fifty percent (50%) of the voting or income interest in such party, corporation or other business entity respectively. Notwithstanding the foregoing, Genentech, Inc. ("Genentech") shall not be considered an Affiliate of Seller for the purpose of this Agreement for so long as there are material restrictions on the ability of Seller and its Affiliates to control Genentech. 1.4 "ANDS" means an Abbreviated New Drug Submission, as such term is defined by the Food and Drug Regulations issued pursuant to the Food and Drugs Act and as interpretated by the HPB. 1.5 "Assets" has the meaning ascribed to such term in Section 0. 1.6 "Assumed Agreements" means the Patheon Agreement and the Trademark Agreements. 1.7 "Broker" has the meaning ascribed to such term in Section 16.1. 1.8 "Business" means the business as currently conducted by Seller with respect to manufacture and sale of the Products in the Territory. 1.9 "Buyer Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, used by Buyer and bearing Buyer's name for each Product. 1.10 "cGMP's" means the then-current Good Manufacturing Practices applicable to the manufacture of pharmaceutical products for human use in Canada in accordance with the Food and Drug Regulations under the Food and Drugs Act. 1.11 "Closing" has the meaning ascribed to such term in Section 0. 6 1.12 "Closing Date" has the meaning ascribed to such term in Section 0. 1.13 "Closing Time" means 12:01 a.m. on the date of Closing. 1.14 "Confidentiality Agreement" has the meaning ascribed to such term in Section 0. 1.15 "Damages" has the meaning ascribed to such term in Section 0. 1.16 "Data Bank Documents" has the meaning ascribed to such term in Section 0. 1.17 "Disclosure Schedule" means the disclosure schedule delivered prior to the Effective Date to Buyer by Seller in connection with this Agreement. The sections of the Disclosure Schedule correspond to the sections of this Agreement. 1.18 "DIN" means the drug identification number. 1.19 "DOJ" means the United States Department of Justice. 1.20 "Effective Date" means January 21, 1997. 1.21 "FTC" means the United States Federal Trade Commission. 1.22 "HPB" means the applicable federal Canadian authorities and agencies including the Health Protection Branch of Health Canada. 1.23 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder. 1.24 "Indemnifiable Claims" has the meaning ascribed to such term in Section 0. 1.25 "Indemnified Party" has the meaning ascribed to such term in Section 0. 1.26 "Indemnifying Party" has the meaning ascribed to such term in Section 0. 1.27 "Inventory" has the meaning ascribed to such term in Section 0. 1.28 "Know-How" has the meaning ascribed to such term in Section 0. 1.29 "Law" means any federal, state, province, foreign, local or other law, ordinance, rule, regulation, or governmental requirement or restriction of any kind, and any rules, regulations, and orders promulgated thereunder. 1.30 "Material Adverse Effect" means an event that has a material adverse effect on the Assets, taken as a whole. 1.31 "NDS" means a New Drug Submission, as such term is defined by the Food and Drug Regulations issued pursuant to the Food and Drugs Act and as interpretated by the HPB. 7 1.32 "Net Sales" means the gross invoice amount of Products sold to third parties, less (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short-shipments and price adjustments; and (d) contract chargebacks and rebates, government rebates, and returns (e.g., spoiled, damaged or outdated Products). 1.33 "Patheon Agreement" means the agreement between Seller and Patheon to be entered into on January 31, 1997. 1.34 "Patents" means any patent or patent application and any and all divisions, continuations, continuations-in-part, reexaminations, reissues, extensions, pending or granted supplementary protection, certificates, substitutions, confirmations, registrations, revalidations, revisions, additions and the like, of or to said patent and patent application. 1.35 "Products" means each presentation of those finished pharmaceutical products set forth in the Registrations. 1.36 "Purchase Price" has the meaning ascribed to such term in Article 0. 1.37 "Registrations" has the meaning ascribed to such term in Section 0. 1.38 "Roche Financial Statement" means the statement of Roche Net Sales by Product in the Territory in Canadian dollars, on a monthly basis for each month beginning January 1995 until the end of the month in which Closing occurs as attached on Schedule 0. 1.39 "Roche Net Sales" means the gross invoice amount of Products sold to third parties in the Territory, less (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short-shipments and price adjustments; and (d) contract chargebacks and rebates, government rebates, and returns (e.g., spoiled, damaged or outdated Products). 1.40 "Schedule" means a schedule to the Disclosure Schedule. 1.41 "Seller Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, currently used by Seller for each Product. 1.42 "Synacort Assets" means the Synacort License, the Synacort Trademarks, and the Synacort Trademark Agreements. 1.43 "Synacort License" has the meaning ascribed to such term in Section 0. 1.44 "Synacort NDSs" means the NDSs that are set forth on Schedule 0 and the regulatory records relating exclusively thereto. 1.45 "Synacort Trademark" means the trademark registrations that are set forth on Schedule 0 together with all records associated therewith. 1.46 "Synacort Trademark Agreements" means those agreements set forth on Schedule 0 to the extent such agreements relate to the Synacort Trademark. 8 1.47 "Syntex Financial Statements" mean the statements of Syntex Net Sales and gross margins for the Territory on a corporate cost basis for the Product group for the fiscal years ended July 31, 1993 and 1994, and for the five month period ended December 31, 1994, attached as Schedule 0. 1.48 "Syntex Net Sales" means all trade shipments to customers less all credits issued to customers during the period reported. Such credits include wholesaler chargebacks, returned goods, price adjustments, and product lost in transit. Net sales have also been reduced by the amount of rebates paid to contract and other customers during the period reported. Net sales do not include cash discounts given to customers or any accrual adjustments made during the period reported. 1.49 "Syntex Sales Statement" means the unaudited consolidated statements of Syntex Net Sales for the Territory on a per Product basis by units and Canadian dollars for the fiscal years ended July 31, 1993 and 1994 and the five month period ended December 31, 1994, attached as Schedule 0. 1.50 "Territory" means Canada. 1.51 "Trademark Agreements" has the meaning ascribed to such term in Section 0. 1.52 "Trademarks" has the meaning ascribed to such term in Section 0. 1.53 "Transition Services Agreement" means the agreement referred to in Section 0. 2. ASSETS BEING SOLD Subject to the terms and conditions of this Agreement, at Closing, Seller shall sell, transfer, assign, convey and deliver to Buyer, its successors and assigns forever, to the extent contemplated herein, all of the right, title, and interest of Seller in the assets listed below in the Territory (collectively, the "Assets"), the Synacort Assets, and the Additional Trademarks, and Buyer shall assume all rights, title, and interest of Seller in the Assets, the Synacort Assets, and the Additional Trademarks. 2.1 Trademarks. The trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith (the "Trademarks"). 2.2 Registrations. The NDSs and the ANDS that are set forth on Schedule 0 (the "Registrations") and the regulatory records relating exclusively thereto. 2.3 Manufacturing Technology and Know-How. The manufacturing technology and know-how that is exclusively used in manufacturing any Product ("Know-How") and any documents which relate specifically and exclusively to such Know-How. In addition, Seller shall grant Buyer a non-exclusive, perpetual, paid-up, irrevocable, royalty-free, world-wide license, with right to sub-license, to use any manufacturing technology and know-how that are necessary or used in manufacturing any Product (but not exclusively used thereto) with such license or sublicense being restricted to use for the Products, unless Buyer can demonstrate by written records that such know-how was known prior to any disclosure of such know-how by Seller or its Affiliates to Buyer or is now public knowledge or becomes public knowledge in the future other than by breach of any agreement between Buyer and its Affiliates and Seller and its Affiliates. 9 2.4 Inventory. The inventory consisting of the Products that are owned by Seller and that have been approved by Seller as meeting specifications and otherwise saleable in the ordinary and normal course of business as of Closing (the "Inventory"), the quantity and the location of which shall be set forth in a document delivered by Seller at Closing. Products that have been shipped from the plant or a warehouse directly to distributors, wholesalers, or customers are not Inventory. Subject to the terms of the Transition Services Agreement, Inventory shall be shipped FOB Seller's location. 2.5 Assumed Agreements. 2.5.1 Patheon Agreement. Seller shall assign and Buyer shall assume all rights and obligations under the Patheon Agreement. 2.5.2 Trademark Agreements. Seller shall assign and Buyer shall assume all rights and obligations under those agreements set forth on Schedule 0 to the extent such agreements relate to the Trademarks (the "Trademark Agreements"). 2.6 Manufacturing Information. Accurate and complete copies of the current Manufacturing Worksheets and copies of the Manufacturing Quality Assurance Notebooks with respect to the Products currently available, including batch records, development reports (if existing), and other documents and records embodying manufacturing information. 2.7 Data Bank Documents. Right to obtain copies of and reference the animal toxicology, animal mutagenicity, human clinical study and final reports, and drug monograph/investigator brochures, a list of which is set forth on Schedule 0 (the "Data Bank Documents"). 2.8 Worldwide Safety Reports. A hard copy of the Worldwide Safety Reports with respect to Products. 2.9 Assumption of Liabilities. The parties expressly acknowledge and agree that (i) Buyer is not assuming or undertaking any liabilities relating to or arising from the conduct of the Business, the sale or marketing of the Products and/or the ownership or use of the Assets prior to the Closing; (ii) Seller retains all such liabilities; and (iii) Buyer shall have no obligation to Seller or any of its Affiliates or to any third party for any such liabilities. 2.10 Customer Lists. The list of customers who have purchased the Products since January 1, 1996, which list will be delivered to Buyer at Closing. 2.11 Books and Records. Copies of the Product Annual Reviews and Annual Product Reviews relating to the Products for the last five (5) years, and marketing and advertising materials relating exclusively to the Products, all of which shall be to the extent available. 3. PURCHASE PRICE Subject to the terms and conditions of this Agreement, in reliance on the representations, warranties, covenants and agreements of the Seller contained herein, and in consideration of the sale, conveyance, assignment, transfer and delivery of the Assets, Buyer shall deliver to Seller, in full payment for the aforesaid sale, conveyance, assignment, transfer and delivery, the Purchase Price, consisting of: (i) six hundred thousand United States dollars (US $600,000.00) payable to Seller at Closing by bank wire transfer 10 to Seller at such banking institution, designated not less than five (5) days prior to Closing by Seller. Additional payments of thirty-three thousand, three hundred thirty-three United States dollars (US $33,333.00) shall be delivered by Buyer to Seller at each of the first, second and third anniversary of the Closing for a total of three (3) such additional payments ("Additional Payments"). Each Additional Payment shall be reduced by fifty percent (50%) if Net Sales in the Territory have decreased by more than twenty percent (20%) during the twelve (12) months immediately preceding the corresponding anniversary. 4. REPRESENTATIONS AND WARRANTIES OF SELLER 4.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of Canada, with full corporate power and authority to consummate the transactions contemplated hereby. Seller has all requisite power and authority to own and operate the Assets being conveyed by Seller pursuant to this Agreement and to carry on the activities constituting the business. 4.2 Authority. The execution and delivery of this Agreement by Seller and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and other proceedings, and this Agreement has been duly authorized, executed, and delivered by Seller and, assuming the enforceability against Buyer, constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. The Transition Services Agreement, and all other documents executed by Seller or its Affiliates and delivered at the Closing, including those delivered pursuant to Section 0, constitute a valid and binding obligation of Seller or the respective Affiliate of Seller executing such documents enforceable in accordance with their respective terms. 4.3 Title to Assets. Except as set forth in Schedule 0, Seller has good and marketable title to all the Assets and will convey good and marketable title at Closing, free and clear of any and all liens, encumbrances, claims, mortgages, leases, security interests, charges or restrictions. Notwithstanding the foregoing, Seller retains the right to use and to transfer to other buyers of the products containing any Active Ingredient outside the Territory information that is similar or identical to that contained in the Registrations and the Know-How; provided, however, that no such buyer has been expressly granted by Seller or any Affiliate of Seller the right to sell, transfer or distribute any of the products containing any Active Ingredient into the Territory based on such Registrations and Know-How and neither Seller nor any Affiliate shall expressly grant any buyer such right. Buyer acknowledges that Seller cannot prevent such a buyer from using such information, including registrations and know-how that is substantially similar to the Registrations and Know-How, to sell, transfer or distribute such products in the Territory. In addition, trademarks that are the same as or similar to the Trademarks may be registered in other countries and may be either retained by Seller for its use or sold to other buyers in either case, for use solely outside the Territory. 4.4 No Violation or Conflict. Seller's execution and delivery of this Agreement and the other related documents delivered by Seller in connection with transactions contemplated herein and the performance of this Agreement by Seller (and the transactions contemplated herein) (a) do not and will not 11 conflict with, violate or constitute or result in a default or an event creating rights of acceleration, termination, or cancellation, or a loss of right under any Law, judgment, order, decree, the articles of incorporation or bylaws of Seller or any mortgage, contract or agreement to which Seller is a party or by which Seller is bound or (b) will not result in the creation or imposition of any lien, charge, mortgage, claim, pledge, security interest, restriction or encumbrance of any kind on, or liability with respect to, the Assets or the Business except as otherwise provided herein or otherwise disclosed on the Disclosure Schedule. None of the Assumed Agreements require the consent of any third party to the assignment of such Assumed Agreement from Seller to Buyer; provided, however, that with respect to the Patheon Agreement, Seller must give prior written notice of any assignment to Patheon and Buyer must covenant in writing with Patheon to be bound by the terms of the Patheon Agreement. 4.5 Registrations. The Registrations are the only registrations required by the HPB to sell and market the Products in the Territory. All Products in Schedule 2.2 are registered and eligible for immediate sale without regulatory limitations. 4.6 Patents. There are no Patents with respect to the Active Ingredients or Products in the Territory. 4.7 Inventory. As of Closing, each Product in the Inventory shall meet the specifications therefor as set forth in the manufacturing documentation and Registrations for such Product. The Inventory will be in good condition, properly stored and in compliance with applicable Laws, usable and salable in the ordinary course of business and shall have, except as set forth in Schedule 0, a minimum remaining shelf life at Closing of not less than thirteen (13) months. 4.8 Taxes. There are no liens for taxes upon the Assets except for liens for current taxes not yet due and payable which shall remain the sole obligation of the Seller. 4.9 Financial Information. 4.9.1 The Syntex Financial Statements and the Syntex Sales Statements are accurate and complete in all material respects, reflect only actual bona fide transactions, are consistent with the accounting records of Seller, and were prepared in accordance with Canadian generally accepted accounting principles (GAAP) consistently applied. 4.9.2 The Roche Financial Statements are accurate and complete in all material respects, reflect only actual bona fide transactions, are consistent with the accounting records of Seller and were prepared in accordance with International Accounting Standards ("IAS") consistently applied with prior periods. 4.9.3 Seller and its Affiliates have no material liabilities, contingent, absolute, accrued or otherwise, relating to the Assets, other than as set forth in Schedule 0. 4.10 Absence of Certain Changes. 4.10.1 Except as set forth in Schedule 0 or as otherwise set forth in this Agreement, since December 16, 1996, there has not been any (i) Material Adverse Effect or material adverse change in the financial condition or results of operation of the Business, (ii) damage, destruction or loss which has or may reasonably be expected to have a Material Adverse 12 Effect, or (iii) transaction or commitment outside the ordinary course of business with respect to the Assets or the Business. 4.10.2 As of the date hereof and as of the Closing Date and except as otherwise disclosed on Schedule 0, Seller is not aware of any facts, circumstances, or proposed or contemplated events that could reasonably be expected to have a Material Adverse Effect after Closing. 4.10.3 No default under any lease, agreement, contract or other material arrangement relating to the Business, including but not limited to the Patheon Agreement and the Trademark Agreements has been declared and is continuing and, to Seller's knowledge, no condition exists which, with notice or lapse of time or both, would constitute a default under any such agreement. All of the such agreements are valid and subsisting and are in full force and effect and, to Seller's knowledge, no claim exists or has been asserted with respect to such agreements that would adversely effect the Business. Seller has not received notice that any party to any such agreements intends to cancel or terminate such agreements or to exercise or not exercise any options or rights under such agreements, or to resist any effort by Seller or its successors to exercise or not exercise such options or rights. 4.11 Violations of Law. Except as set forth in Schedule 0, neither the operation of the Business nor the Assets (i) violates or conflicts with any Registrations, any Law, governmental specification, authorization, or requirement, or any decree, judgment, order, or similar restriction in any material respect, or (ii) to the best of Seller's knowledge, has been the subject of an investigation or inquiry by any governmental agency or authority regarding violations or alleged violations, or found by any such agency or authority to be in violation, of any Law. 4.12 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller or the consummation by it of the transactions contemplated hereby to be consummated by it. 4.13 Litigation. Except as set forth in Schedule 0 attached hereto or as set forth on Schedules 0 and 0, neither the Business nor the Assets is the subject of (i) any outstanding judgment, order, writ, injunction or decree of, or settlement agreement with, any person, corporation, business entity, court, arbitrator or administrative or governmental authority or agency, limiting, restricting or affecting the Business, the Assets, or the Products in a way that would have a Material Adverse Effect, (ii) any pending or, to the best of Seller's knowledge, threatened claim (excluding the adverse drug reports set forth in the Registrations), suit, proceeding, charge, inquiry, investigation or action of any kind, and (iii) any court suits filed with respect to the Assets since January 1, 1990. 4.14 Limitation of Warranty. Seller will not warrant that buyers of products outside the Territory that are substantially similar to or identical with the Products will not attempt to register such products in the Territory. 4.15 Trademarks. Each of the Trademarks being conveyed by this Agreement is being conveyed free and clear of any liens, security interests and other encumbrances and is freely assignable by Seller. Seller is not required, and Buyer will not be required, to pay any royalty to any person with respect to use of any of the Trademarks. Except as set forth in the Trademark 13 Agreements, the Trademarks do not infringe upon or conflict with the trademarks or other rights of any third party in the Territory. 4.16 Return Policy. Schedule 0 sets forth a complete copy and/or description of Seller's current return policies with respect to the Products. Except as noted in Schedule 0, Seller has not made or authorized any other return arrangements with respect to the Products during the three years immediately preceding the date hereof which would obligate Seller or its successors to accept Product returns on terms which are materially different from those set forth in such Schedule 0. Except as set forth in Schedule 0, Seller has, in general, administered the return policies set forth in Schedule 0 consistently, except for non-material deviations therefrom in the ordinary course of business. 4.17 Warranties. The HPB approved package insert for each applicable Product, sets forth a complete copy and/or description of Seller's current warranties with respect to the Products. Except for implied warranties arising by operation of law, Seller has not made or authorized any other product warranty with respect to the Products since January 1, 1995 which would obligate Seller or its successors on terms which are materially different from those set forth in the applicable package insert. Seller has, in general, administered its warranty policies consistently, except for non-material deviations therefrom in the ordinary course of business since January 1, 1995. 4.18 Customer Contracts. Seller has no contracts with customers for Products that provide for rebates, chargebacks, or other discounts, other than cash discounts based on payment terms. 5. REPRESENTATIONS AND WARRANTIES OF BUYER 5.1 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to consummate the transactions contemplated hereby. 5.2 Authority. The execution and delivery of this Agreement by Buyer, and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and other proceedings, and this Agreement has been duly authorized, executed, and delivered by Buyer and, assuming the enforceability against Seller, constitutes the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. 5.3 No Violation or Conflict. The execution and delivery of this Agreement by Buyer and the performance of this Agreement (and the transactions contemplated herein) by Buyer do not and will not conflict with, violate or constitute or result in a default under any Law, judgment, order, decree, the articles of incorporation or bylaws of Buyer, or any contract or agreement to which Buyer is a party or by which Buyer is bound. 5.4 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer or the consummation by it of the 14 transactions contemplated hereby to be consummated by it, except with respect to the filing of a pre-merger notification report under the HSR Act. 5.5 Litigation. To the best knowledge of Buyer, there are no claims, actions, suits, proceedings or investigations pending or threatened by or against Buyer with respect to the transactions contemplated hereby, at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, agency, instrumentality or authority. 5.6 Financing. Buyer will have funds sufficient to pay the Purchase Price on the Closing Date. 6. SELLER'S COVENANTS 6.1 Conduct of Business. Seller agrees that from the date hereof until the Closing Date that, except as specifically disclosed in Schedule 0 or unless otherwise consented to by Buyer in writing, Seller shall 6.1.1 maintain the Assets in good status and condition and not sell or dispose of any Assets except sales of Products in the ordinary course of business; 6.1.2 cause the Business to be conducted in the ordinary course consistent with the practice over the past six (6) months and make all reasonable efforts consistent with practices over the past six (6) months to preserve the Assets and the reputation of the Business and the Products and to preserve for Buyer the goodwill of suppliers, customers, distributors, and others having relations with the Business. 6.1.3 not enter into any new, or amend any existing, contract, commitment, or agreement relating to the Business, the Products or the Assets or extend any credit or incur any obligation with respect to the conduct of the Business or the Assets except (i) for the Patheon Agreement, (ii) or in the ordinary course of business and consistent with past business practices; 6.1.4 not engage in any special pricing, rebate, allowance, promotional or marketing programs inconsistent with past practices or for the purpose of maintaining customer inventory levels of Product in excess of those levels maintained in the past; 6.1.5 promptly inform Buyer of any change in the Business or Assets that could reasonably be expected to have a Material Adverse Effect; 6.1.6 not subject any of the Assets or any part thereof to any mortgage, pledge, security interest, encumbrance, lien or restriction of use or suffer such to be imposed or license or grant to any other party the right to use any of the Trademarks or any of the Know-How except for use outside the Territory; 6.1.7 perform in all material respects all of its obligations under any agreement with any third party relating to the Business, the Products, or the Assets unless such third party is in default under such agreement; and 6.1.8 maintain its books of accounts and records relating to the Business, the Products or the Assets in the usual, regular and ordinary manner including, but not limited to, the maintenance of any and all documents required by any federal or state regulatory agency or governmental body. 15 6.2 Compliance with Laws. Seller shall comply in all material respects with all Laws and in all respects with all orders of any court or federal, state, local or other governmental entity applicable to the Business or the Assets. 6.3 Disclosure Supplements. From time to time following execution of this Agreement but prior to the Closing Date, Seller will promptly inform Buyer, in writing, of any matter that may arise hereafter and that, if existing or occurring prior to the execution of this Agreement, would have been required to be set forth or described herein or in the Disclosure Schedule. Seller shall prepare and deliver to Buyer the Roche Financial Statements for a particular month within fifteen (15) business days following the end of each such month. 6.4 Access; Investigation. From and after the date hereof and up to Closing, Buyer and its authorized agents, officers, and representatives shall have reasonable access to the Business and the Assets and all records and information related thereto (except for information that Seller is contractually obligated not to disclose), during normal business hours upon reasonable prior notice and at a time and manner mutually agreed upon between Buyer and Seller in order to conduct such examination and investigation of the Assets and the Business as Buyer shall reasonably deem necessary, provided that such examinations shall not unreasonably interfere with Seller's operations and activities. 6.5 Further Assurances. Seller shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Seller, at the request of Buyer, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Buyer such deeds, assignments, bills of sale, consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably deem necessary or desirable to implement any provision of this Agreement. 7. BUYER'S COVENANTS 7.1 Transfer of Products. Following Closing, Buyer shall use all reasonable efforts and, except as otherwise set forth herein, at its own expense to obtain as expeditiously as possible such governmental approvals and registrations from the HPB, or similar regulatory authorities, as may be necessary with respect to the manufacture and sale of the Products by Buyer or its designee. 7.2 Labeling. Following Closing, Buyer shall at its own expense and as expeditiously as possible use all reasonable efforts to obtain such HPB approvals necessary for the Buyer Labeling for each Product. 7.3 Further Assurances. Buyer shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Buyer, at the request of Seller, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Seller such consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Seller, as Seller may reasonably deem necessary or desirable to implement any provision of this Agreement. 8. COVENANTS BY BUYER AND SELLER 16 8.1 Stability Studies. As soon as possible following Closing, Buyer shall qualify a site as a testing site for stability studies or request Patheon to continue to conduct such stability studies at Buyer's expense, for Products not manufactured by Patheon. Seller shall have no responsibility for on-going stability studies for the Products following Closing. 8.2 Transition Services Agreement. Buyer and Seller, or their Affiliates shall at Closing enter into a Transition Services Agreement, attached as Exhibit A. 8.3 Labeling. In accordance with Section 7.2, Buyer is responsible for having the Buyer Labeling approved by the HPB as soon as possible. Buyer may use the Seller Labeling on the Inventory until such Inventory is exhausted; provided, however, that Seller may, at its option, buy-back from Buyer all inventory labeled with Seller's DIN number upon Buyer having sufficient inventory, to be determined by Buyer in its sole discretion to be exercised in good faith, of the applicable Product labeled with Buyer's DIN number. In addition, Buyer may use the Seller Labeling on each Product manufactured by Seller or its Affiliates for Buyer until the earlier of the date (i) the HPB approves the Buyer Labeling for use on such Product and Buyer, using all reasonable efforts, has obtained sufficient supplies of materials with Buyer Labeling for use on such Products, or (ii) twelve (12) months following Closing, provided, however, if at the end of such twelve (12) month period the HPB has not yet approved the Buyer Labeling, then such twelve (12) month period shall be extended for a period of time to be mutually agreed by the parties (such agreement not to be unreasonably withheld) reasonably required to obtain such approval. 8.4 Use of Seller Trademarks. Other than the use of the Seller Labeling as set forth in Section 0, any use by Buyer of the trademarks, tradenames, or logos of Seller, other than the use of the Trademarks, the Synacort Trademarks, and the Additional Trademarks, as provided herein, must be approved by Seller prior to such use. 8.5 Assignment of Trademarks. By or before Closing, Buyer and Seller shall prepare in good faith an assignment pursuant to which Seller agrees the Trademarks, the Synacort Trademarks, and the Additional Trademarks shall be assigned to Buyer. Following Closing, Buyer shall prepare and Seller shall execute such documents as Buyer may reasonably request in order to record the assignment of the Trademarks, the Synacort Trademarks, and the Additional Trademarks. The responsibility and expense of preparing and filing such documents and any actions required ancillary thereto, shall be borne solely by Buyer. 8.6 Assignment of Registrations. At or following Closing, Buyer shall prepare and Seller shall execute such documents as Buyer may reasonably request in order to record the assignment of the Registrations. Buyer shall pay any user fees associated with any Product that accrues after Closing but prior to transfer of such Registration. Seller shall be responsible for preparing and submitting to Buyer all reports and updates with respect to each of the NDSs for all of the Products, including but not limited to NDS Annual Reports, in the form required to be filed with HPB through April 30, 1997. If the next annual filing with respect to any of such NDSs is scheduled to occur after April 30, 1997 but before April 30, 1998, Seller shall prepare and submit to Buyer the data necessary for such annual filing summary report through April 30, 1997 for any such NDS. In addition, Seller shall make available a regulatory person to answer questions regarding such data at the time of filing such Annual Report. 17 8.7 Access to Information. Buyer and Seller will, upon reasonable prior notice, make available to the other, to the extent reasonably required for the purpose of assisting Seller or Buyer in obtaining governmental approvals and preparation of tax returns or financial statements required by the Securities and Exchange Commission (to the extent information is available) relating to the Assets, and prosecuting or defending or preparing for the prosecution or defense of any action, suit, claim, complaint, proceeding or investigation at any time brought by or pending against Seller or Buyer relating to the Assets, other than in the case of litigation between the parties hereto, such information or records (or copies thereof) in their possession after Closing. Buyer shall also provide Seller with any adverse drug events simultaneously with notification of the HPB for so long as Buyer markets the Products for serious or life-threatening adverse event and for three years following Closing for all other adverse drug events. 8.8 Confidentiality Agreement. The parties agree that certain letter agreement dated October 15, 1996 between an Affiliate of Seller and Buyer (the "Confidentiality Agreement"), shall survive either termination of this Agreement or Closing as an independent agreement; provided, however, that upon Closing, the restrictions on use and the confidentiality obligations of the Confidentiality Agreement shall no longer be in effect with respect to Evaluation Materials (as defined therein) relating to the transferred Assets. 8.9 Press Releases. Neither the Seller nor the Buyer, nor any Affiliate thereof, will issue or cause publication of any press release or other announcement or public communication with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other party, which consent will not be unreasonably withheld or delayed. Neither party shall use the name of the other party in any public statement, prospectus, annual report, or press release without the prior written approval of the other party, which may not be unreasonably withheld or delayed, provided, however, that both parties shall give the other party a minimum of five business days to review such press release, prospectus, annual report, or other public statement. Notwithstanding the foregoing, Buyer may make any disclosure which Buyer, in the opinion of its counsel, is obligated to make pursuant to applicable law, in which case, Buyer shall still endeavor to give Seller an opportunity to review such disclosure but shall not be obligated to do so if such disclosure must, in the opinion of its counsel, be made without time for review. The failure of Buyer to draft such disclosure in a timely fashion shall not be deemed a reason to avoid submitting such disclosure to Seller. 8.10 Government Filings. Each of the parties will use its respective reasonable good faith efforts to obtain, and to cooperate with the others in obtaining, all authorizations, consents, orders and approvals of any governmental agencies, and cooperate with making any filings that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement prior to or after Closing, and to take all reasonable actions to avoid the entry of any order or decree by any governmental agency prohibiting the consummation of the transactions contemplated hereby. 8.11 Returns. From and after the Closing Date, Buyer and Seller shall track lot numbers of products distributed, for the purpose of identifying when Products were sold. Seller shall furnish Buyer with a list of the lot numbers of lots of the Products distributed in the last three years and Buyer agrees to furnish to Seller the lot numbers of any lots of the Products distributed following the Closing Date until the Buyer and Seller mutually agree to discontinue tracking returns, which shall be no later than four (4) years following the Closing Date. Seller is responsible for claims pertaining to all Products sold prior to the Closing Date, provided, however, that Seller is not 18 responsible for claims which would not have been accepted in accordance with the Roche Return Goods Policy attached hereto as Schedule 0. In addition, Buyer shall not engage in any special pricing, rebate allowance, promotional or marketing program or activities, special returns policy or special restocking program that would impact the normal course or level of expected returns with respect to Products sold prior to Closing. Buyer is responsible for all claims pertaining to all Products sold on or after the Closing Date. For those lots for which both Buyer and Seller have sold Products, returns shall be pro-rated between Buyer and Seller based upon the quantity of such lot sold by each party, as determined by count of finished goods inventory for such lot number at Closing. 8.12 Backorder. If between Closing and April 30, 1997, any Product set forth on Schedule 8.12 (the "Protected Products") goes on backorder with a customer for longer than five (5) business days, then Seller shall pay Buyer an amount equal to the gross margin less two percent (2%) cash discount for each unit of such Protected Product not shipped. For the purpose of this Section, gross margin for the period ending March 31, 1997 shall be calculated using the historic rate of gross profit margins based on Net Sales in the last quarter of 1996; for the period between March 31, 1997 and April 30, 1997, the gross margin shall be calculated using the actual experience for such period, based on Net Sales. Buyer shall prioritize production of the Protected Products in order to avoid backorders. Should Buyer elect to prioritize production of other Products and a backorder occurs with respect to a Protected Product or if Buyer does not permit Seller to distribute Products after Closing in accordance with Seller's normal business practices with respect to Product expiration dating, the payment provisions of this Section 8.12 shall not apply. Buyer shall inform Seller on a regular basis of its production schedule for the Products to facilitate Seller's managing the inventory of the Products. 9. CONDITIONS PRECEDENT TO CLOSING 9.1 Conditions to Obligation of Buyer. The obligation of Buyer to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Buyer): 9.1.1 Representations and Warranties. The representations and warranties made by Seller in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.1.2 Performance. Seller shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.1.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.1.4 No Adverse Change. During the period from the date of this Agreement to the Closing Date there shall not have occurred or been discovered, and there shall not exist on the Closing Date except for that which 19 has been otherwise disclosed elsewhere in this Agreement or in the Disclosure Schedule at the time of execution of this Agreement, any condition or fact that could reasonably be expected to have a Material Adverse Effect. 9.1.5 Officer's Certificate. Seller shall have delivered to Buyer a certificate, dated the Closing Date and executed by an officer of Seller, certifying to the fulfillment of all conditions set forth in this Article 0. 9.1.6 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 9.1.7 Authorization. Seller shall have furnished to Buyer all documents Buyer may reasonably request relating to the existence of Seller, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Buyer. 9.1.8 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Buyer and Buyer's counsel, and Seller shall have made available to Buyer for examination the originals or true and correct copies of all documents which Buyer may reasonably request in connection with the transactions contemplated by this Agreement. 9.2 Conditions to Obligations of Seller. The obligations of Seller to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Seller): 9.2.1 Representations and Warranties. The representations and warranties made by Buyer in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.2.2 Performance. Buyer shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.2.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.2.4 Officer's Certificate. Buyer shall have delivered to Seller a certificate, dated the date of Closing and executed by an officer of Buyer, certifying to the fulfillment of all conditions specified in this Article 0. 20 9.2.5 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 9.2.6 Authorization. Buyer shall have furnished to Seller all documents Seller may reasonably request relating to the existence of Buyer, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Seller. 9.2.7 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Seller and Seller's counsel, and Buyer shall have made available to Seller for examination the originals or true and correct copies of all documents which Seller may reasonably request in connection with the transactions contemplated by this Agreement. 10. THE CLOSING 10.1 The Closing. Subject to the satisfaction of all of the conditions to each party's obligations set forth in Article 0 hereof (or, with respect to any condition not satisfied, the waiver in writing thereof by the party or parties for whose benefit the condition exists), the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 9:00 a.m. (local time) on the first Monday following the day in which all required waiting periods under the HSR Act have expired or been terminated (the "Closing Date") or at such other time, date (but in no event later than March 1, 1997) and place as the parties hereto may agree in writing. The transfer of the Assets shall be deemed to have occurred as of the Closing Time. 10.2 Deliveries by Seller. Unless otherwise specified in this Section 0, at Closing, Seller or its Affiliate, as appropriate, shall deliver to Buyer in form reasonably satisfactory to Buyer, each properly executed and dated as of the Closing Date, where appropriate: 10.2.1 except as otherwise provided herein, such deeds, bills of sale, endorsements, assignments, assignment agreements, and other good and sufficient instruments of conveyance and transfer as shall be effective to vest in Buyer free and clear title to the Assets as contemplated by this Agreement 10.2.2 within five (5) business days following the Closing, the statement of the quantity and location of inventory described in Section 0; 10.2.3 the Transition Services Agreement; 10.2.4 a receipt for the Purchase Price; 10.2.5 originals of those Assumed Agreements exclusively related to the Products; and 10.2.6 a letter giving written notice to Patheon of the assignment of the Patheon Agreement to Buyer. 10.3 Deliveries by Buyer. At Closing, Buyer or its Affiliate, as appropriate, shall deliver or cause to be delivered to Seller: 10.3.1 The Purchase Price payable in accordance with Article 0; 21 10.3.2 Secretary's Certificate certifying that the Board of Directors of Buyer has authorized this Agreement. 10.3.3 the Transition Services Agreement; and 10.3.4 a letter to Patheon covenanting that Buyer agrees to be bound by the terms of the Patheon Agreement. 11. TERMINATION 11.1 Termination. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing Date: 11.1.1 By the mutual written consent of Seller and Buyer; 11.1.2 By either Seller or Buyer if Closing shall not have occurred on or before March 1, 1997, unless such date has been extended by mutual agreement in writing (the "Termination Date"); 11.1.3 By either Seller or Buyer if consummation of the transactions contemplated hereby shall violate any final order, decree or judgment of any court or governmental body having competent jurisdiction. 11.1.4 By Buyer if there has been a material misrepresentation by Seller or a material breach by Seller of any of the warranties or covenants of Seller set forth herein that Seller has not cured within fourteen (14) days after receipt of notice from Buyer requesting such to be cured (but in no event later than the Termination Date) or that Buyer has not waived in writing; or 11.1.5 By Seller if there has been a material misrepresentation by Buyer or a material breach by Buyer of any of the warranties or covenants of Buyer set forth herein that Buyer has not cured within fourteen (14) days after receipt of notice from Seller requesting such to be cured (but in no event later than the Termination Date) or that Seller has not waived in writing. 11.2 Effect of Termination. If this Agreement is terminated pursuant to Section 0, all further obligations of Seller and Buyer under this Agreement shall terminate without further liability of Seller or Buyer except (a) for the obligations of Buyer and Seller under Sections 0, 0, 0, and 0; and (b) that such termination shall not constitute a waiver by any party of any claim it may have for damages caused by reason of a breach by the other party of a representation, warranty, covenant or agreement. 12. SURVIVAL; INDEMNIFICATION 12.1 Survival of Representations; Remedy for Breach. The representations, warranties and covenants made by Buyer and Seller under this Agreement shall survive the Closing for a period of eighteen (18) months. Any Indemnifiable Claims (as hereinafter defined) or claim for tax reimbursement that a party may have arising out of the other party's breach of its representations, warranties, or covenants contained in this Agreement shall be made by notice to the other party no later than eighteen (18) months following the Closing Date ("Claim Period") and there shall be no recovery for indemnification for breach of a representation, warranty, or covenant under this Agreement for any Indemnifiable Claim or claim for tax reimbursement first asserted after that date. Seller and Buyer agree to use reasonable efforts to mitigate any loss or damage for which they may seek indemnification under this Article 12 or for which they may seek recovery under law or equity. 22 12.2 Indemnification by Seller. Subject to the limitations set forth in Section 0, and in addition to any other rights Buyer may have under law or at equity, Seller shall indemnify and hold harmless Buyer and its Affiliates, officers, directors, and agents and employees from any and all damages, losses, liabilities, third party claims, lawsuits, obligations and expenses (including reasonable attorneys fees and costs) (collectively, "Damages") that Buyer shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Seller in this Agreement or in any of the agreements, instruments or documents executed or delivered by Seller pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the Business by the Seller, the sale, distribution or marketing of the Products, or the use or ownership of the Assets prior to the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.2 (a) and (b), collectively "Buyer's Indemnifiable Claims"); and (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets prior to the Closing Date; or (d) taxes imposed with respect to the transfer of the Assets to the Buyer pursuant to this Agreement, including any assessments against Seller as a member of a consolidated reporting group with any other entity except for payment of GST tax which shall be paid by Buyer (Section 12.2 (c) and (d), collectively "Buyer's Tax Claims"). 12.3 Indemnification by Buyer. Subject to the limitations set forth in Section 0, and in addition to any other rights it may have under law or at equity, Buyer shall indemnify and hold harmless Seller and its Affiliates, officers, directors, and agents and employees from any and all Damages that Seller shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Buyer in this Agreement or in any of the agreements, instruments or documents executed or delivered by Buyer pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the Business by the Buyer, the sale, distribution or marketing of the Products, or the use or ownership of the Assets following the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.3 (a) and (b), collectively "Seller's Indemnifiable Claims") (Buyer's Indemnifiable Claims and Seller's Indemnifiable Claims are hereby collectively referred to as "Indemnifiable Claims"); or (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets following the Closing Date; or (d) payment of GST tax (Section 12.3 (c) and (d), collectively "Seller's Tax Claims"). 12.4 Limitations. Notwithstanding anything to the contrary herein, neither Buyer and its Affiliates nor Seller shall be entitled to seek indemnification or any recovery under law or at equity with respect to any Indemnifiable Claim until the aggregate amount of such claims exceeds Two Hundred Thousand United States Dollars ($200,000) (the "Basket Limitation"); provided, however, that (i) if either party is responsible to the other for any amount in excess of the Basket Limitation, then the Basket Limitation shall not be deemed applicable and such party shall be responsible to fully indemnify the other party for all Damages; (ii) in no event shall either party be required to indemnify the other for breaches of the representations, warranties, and covenants made in this Agreement for an amount in excess of the Purchase Price; and (iii) neither the Basket Limitation nor the limitation in the immediately preceding clause shall be applicable to (x) third party claims, (y) Buyer's Tax Claims or Seller's Tax Claims; provided, that Damages shall be limited to one-third (1/3) of the Purchase Price with respect to the representations and warranties under Sections 0, 0, 0, 0, 0, 0, and 0; and provided further, that 23 Damages shall be limited to one-half (1/2) of the Purchase Price with respect to the representations and warranties under Sections 0 and 0. 12.5 Notice. A party seeking indemnification pursuant to Section 0 or 0 (an "Indemnified Party") shall give prompt notice to the party from whom such indemnification is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity is or may be sought hereunder (whether or not the limits set forth in Section 0 have been exceeded) and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but no failure to give such notice shall relieve the Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual prejudice thereby). 12.6 Participation in Defense. The Indemnifying Party may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party. In such case the Indemnified Party shall have the right (but not the duty) to participate in the defense thereof, and to employ counsel, at its own expense, separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof. The Indemnifying Party shall be liable for the fees and expenses of one firm as counsel (and appropriate local counsel) employed by the Indemnified Party if the Indemnifying Party has not assumed the defense thereof. Whether or not the Indemnifying Party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 12.7 Settlements. The Indemnifying Party shall not be liable under this Article for any settlement effected without its consent of any claim, litigation or proceedings in respect of which indemnity may be sought hereunder, unless the Indemnifying Party refuses to acknowledge liability for indemnification under this Article 0 and/or declines to defend the Indemnified Party in such claim, litigation or proceeding. 12.8 Set-Off. In addition to any other remedies that Buyer may have against Seller for indemnification under the provisions of this Agreement or under law or at equity, Buyer may set off against any amount otherwise due and yet unpaid to Seller as part of the Purchase Price or otherwise, any amount owed by Seller or its Affiliates to Buyer under any provision of this Agreement, any instrument or agreement delivered pursuant thereto, or otherwise. 13. NON-COMPETITION AND CONFIDENTIALITY 13.1 Non-Compete. Seller acknowledges that in order to assure Buyer that Buyer will retain the value of the Assets, Buyer wishes assurances that Seller and its Affiliates shall not utilize their special knowledge of the Business and their relationship with customers, suppliers, and others to compete with the Buyer with respect to the Business. For a period of five (5) years beginning on the Closing Date, neither Seller nor its Affiliates shall engage in any business that manufactures, packages, distributes or sells finished products in the Territory whose sole or major active ingredients consist of the Active Ingredients for topical use in dermatology except for (i) the transactions involving Buyer, (ii) as part of a product whose primary indication is the treatment of vulvovaginal mycotic infections; provided that, nothing in this Article shall in any way restrict or preclude the Seller or any of its Affiliates from acquiring another company, business or line of products (including by license thereof or through investment therein), in which less than 24 a twenty percent (20%) of the revenues and/or assets is derived from or represents finished products whose sole or major active ingredients consist of the Active xIngredients for topical use in dermatology and to continue to operate such business following such acquisition. In promoting any such acquired product or in promoting any other dermatology product that Seller may develop, manufacture of market in compliance with this Section 13.1, Seller shall not make use of the history, heritage or brand equity of the Products as part of any such promotional plan or activity. 13.2 Confidentiality. Seller acknowledges that the Assets and all other confidential or proprietary information with respect to the Business are valuable, special and unique. Neither Seller nor any of its Affiliates shall, at any time after the Closing Date, disclose, directly or indirectly, to any third party, or use or purport to authorize any third party to use any confidential or proprietary information with respect to the Business, whether or not for Seller's or an Affiliate's own benefit, without the prior written consent of Buyer, including without limitation, information as to the financial condition, results of operations, customers, suppliers, products, inventions, sources, leads or methods of obtaining new supplies, marketing strategies or any other information relating to the Business or Products which could reasonably be regarded as confidential, but not including information which (i) does not relate directly and exclusively to the Business or the Products, provided that Seller and its Affiliates shall not disclose such information to the direct detriment of the Business; or (ii) is or shall become generally available to the public other than as a result of an unauthorized disclosure by Seller or an Affiliate or third party to whom Seller or an Affiliate has provided such information; or (iii) as may be necessary for Seller or any of its Affiliates to perform its obligations under this Asset Purchase Agreement or the transactions or agreements contemplated herein; or (iv) that is required by Law to be disclosed by Seller or any of its Affiliates. 14. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to Seller or Buyer at the respective addresses and facsimile numbers set forth below or at such other address and facsimile number as either party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. if to Buyer, to: Medicis Pharmaceutical Corporation 4383 East Camelback Road Phoenix, Arizona 85018 Attn: Jonah Shacknai with a copy to: Brown & Bain 2901 North Central Avenue Phoenix, Arizona 85012-2788 Attn: Frank M. Placenti 25 if to Seller, to: Hoffmann-La Roche Limited 2455 Meadowpine Boulevard Mississauga, Ontario L5N 6L7 Attention: General Manager with a copy to: Hoffmann-La Roche Limited 2455 Meadowpine Boulevard Mississauga, Ontario L5N 6L7 Attention: General Counsel 15. BULK SALES LAW The parties hereto each waive compliance by the others with the provisions of any statute or any state or jurisdiction regulating bulk sales or transfers which may be applicable to the sale of the Assets. Seller hereby jointly and severally agrees to indemnify and hold Buyer and its officers, directors, employees, agents, representatives, successors and assigns harmless from and against any and all losses, claims, damages, expenses and liabilities (including legal fees and expenses) to which Buyer may become subject pursuant to the bulk transfer provisions of the Uniform Commercial Code or any applicable state or any other applicable bulk transfer or sale statute with regard to the sale of the Assets contemplated by this Agreement. 16. SYNACORT At Closing, Seller shall grant Buyer an exclusive, fully paid-up license, with right to sub-license, to manufacture, market and sell products in the Territory using the Synacort NDSs; provided, however, that Buyer may not manufacture, market or sell any product for the treatment of vulvovaginal mycotic infections products using the Synacort NDSs. At Closing, Seller shall transfer to Buyer and Buyer shall assume all regulatory responsibility for the Synacort NDSs. In addition, Seller shall assign and Buyer shall assume all rights and obligations under the Synacort Trademarks and the Synacort Trademark Agreements effective as of Closing. 17. ARBITRATION AND GOVERNING LAW 17.1 Generally. Except for the right of either party to apply to a court of competent jurisdiction for a Temporary Restraining Order to preserve the status quo or prevent irreparable harm pending the selection and confirmation of a panel of arbitrators in accordance herewith, any dispute, controversy or claim arising out of or relating to this Agreement, to a breach or termination thereof, or to the rights of any party for indemnification thereunder ("Claim") shall be settled by final and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the day the arbitration is commenced in accordance with this Agreement ("Rules"). In the event of any inconsistency between such Rules and the terms of this Agreement, this Agreement shall supersede the Rules. Any judgment on any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final, binding, non-appealable, and conclusive. The AAA shall have jurisdiction over all parties to this Agreement for purposes of the arbitration. 26 17.2 Defenses and Bankruptcy. Any statute of limitations or other equitable or legal doctrine which would otherwise be applicable to any action brought by any of the parties shall be applicable in the Arbitration. In the event any party to this Agreement files a petition under the bankruptcy laws of the United States or has a petition filed against it which results in an order for relief or other indicia that a bankruptcy case has commenced, it is the express intention of the parties to this Agreement that this Agreement shall control and be enforced in accordance with is terms and conditions that any Claim shall remain subject to arbitration to the maximum extent permitted by law. 17.3 Commencement of Arbitration. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by certified mail, return receipt requested, in accordance with Agreement, with a copy of the same delivered by certified mail, return receipt requested, to the AAA regional office in which Palo Alto California is then located. The AAA shall administer the arbitration. The arbitration panel shall consist of three members, one being appointed by each party and the third, who shall be the chairman of the panel, being appointed by mutual agreement of the two party-appointed arbitrators. In the event of failure of said two arbitrators to agree within sixty (60) days after the commencement of the arbitration proceeding upon the appointment of the third arbitrator, the third arbitrator shall be appointed by the AAA in accordance with the Rules. In the event that either party shall fail to appoint an arbitrator within thirty (30) days after the commencement of the arbitration proceeding, such arbitrator and the third arbitrator shall be appointed by the AAA in accordance with the Rules. The arbitration award shall be rendered by a majority of the members of the Board of Arbitration. Except as expressly provided in this Agreement in Section 17.9, the panel shall not be entitled to modify this Agreement or the transactions contemplated herein. 17.4 Governing Law and Place of Arbitration. The arbitrators shall apply the laws of the State of New York (regardless of its or any other jurisdiction's choice of law principles). The place of arbitration shall be Phoenix, Arizona. 17.5 Discovery and Other Matters. There shall be no rights of discovery in connection with the arbitration except as follows: 17.5.1 Each party shall have the right to request the arbitrators to issue subpoenas for documents in accordance with the rules; 17.5.2 Each party shall have the right to initiate one (1) deposition of one representative of each party to the arbitration; and each party shall have the right to initiate one (1) additional oral deposition pursuant to a subpoena issued by the arbitrators or any court of competent jurisdiction. 17.5.3 At any time following the tenth day after the commencement of the arbitration in accordance with this Agreement, a written notice served upon all parties shall be sufficient to compel the attendance of any party at a deposition upon not less than sixty (60) days notice and no subpoena shall be required for that purpose. If a person fails or refuses to testify at a deposition, that person shall not be permitted to testify at the hearing, except for good cause shown. The number of depositions that may be initiated by either party may be varied by agreement of all parties to the arbitration but not by any action, order or request of the arbitrators or any court. 27 17.6 Hearing. Not less than thirty (30) days prior to the scheduled arbitration proceeding, the arbitrator shall conduct a preliminary hearing in accordance with the AAA guidelines. Not less than five (5) days prior to the preliminary hearing, all parties to the arbitrations shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used at the arbitration hearing. Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than as set forth on such list. the arbitrators shall receive evidence at a single hearing. The arbitrators shall award reasonable attorneys' fees and costs in favor of the prevailing party or parties. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrators shall have the power to hear and decide, by documents only or with a hearing (at the arbitrators sole discretion) any prehearing motions in the nature of a pre-trial motion to dismiss or for summary judgment. 17.7 Arbitrators Fees. The arbitrators shall be entitled to receive reasonable compensation at an hourly rate to be established between the arbitrators and the AAA. If required by the arbitrators, Buyer, on the one hand, and Seller, on the other, will deposit with the AAA an equal share of the total anticipated fee of the arbitrators in an amount to be estimated by the AAA. The non-prevailing party(s) in the proceedings shall be ordered to pay, and shall have the ultimate responsibility for, all arbitrators fees and the fees of the AAA and such fees shall be included in the judgment to be entered against the non-prevailing party or parties. 18. ADDITIONAL TERMS 18.1 Brokers. Buyer represents to Seller that it has not employed any investment banker, broker, finder or intermediary (a "Broker") in connection with the transactions contemplated hereby who might be entitled to a fee or any commission from Seller upon consummation of the transactions contemplated hereby. Seller represents to Buyer that it has not employed any Broker in such connection who might be entitled to a fee or any commission from Buyer upon consummation of the transactions contemplated hereby. 18.2 Injunctive Relief. It is possible that remedies at law may be inadequate and, therefore, the parties hereto shall be entitled to seek equitable relief including, without limitation, injunctive relief, specific performance or other equitable remedies in addition to all other remedies provided hereunder or available to the parties hereto at law or in equity. 18.3 Expenses. Except as otherwise expressly provided in this Agreement, all legal, accounting and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the party incurring such expenses. 18.4 Attorneys' Fees. If there is any litigation or arbitration with respect to this Agreement, the prevailing party shall be entitled to receive from the non-prevailing party and the non-prevailing party shall pay upon demand all reasonable fees and expenses of counsel for the prevailing party. 18.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by any party without the written consent of the other party. 28 18.6 Entire Agreement. This Agreement, the exhibits hereto, the Disclosure Schedule and the Confidentiality Agreement embody the entire agreement of the parties hereto with respect to the subject matter hereof and supersede and replace all previous negotiations, understandings, representations, writings, and contract provisions and rights relating to the subject matter hereof. 18.7 Amendments; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each party. No failure or delay on the part of either party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder. 18.8 Counterparts. This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument and shall become effective when a counterpart has been signed by Buyer and delivered to Seller and a counterpart has been signed by Seller and delivered to Buyer. 18.9 Severability. The parties agree that (a) the provisions of this Agreement shall be severable and (b) in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (i) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions that are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (ii) the remaining provisions shall remain enforceable to the fullest extent permitted by law, provided that the rights and interests of the parties hereto shall not be materially affected. 18.10 Captions. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless the context requires otherwise, all references herein to Articles and Sections are to the articles and sections of this Agreement. IN WITNESS WHEREOF, this Agreement has been signed by duly authorized representatives of each of the parties hereto as of the Effective Date. HOFFMANN-LA ROCHE LIMITED MEDICIS PHARMACEUTICAL CORPORATION By /s/ Susan Griswold By /s/ Jonah Shacknai ----------------------- ---------------------------- Name Susan Griswold Name Jonah Shacknai --------------------- -------------------------- Title: Title: Chairman and Chief Attorney in Fact Executive Officer ------------------- ------------------------ EX-10.82 6 ASSET PURCHASE AGRMNT BTWN COMPANY AND SYNTEX PIL 1 EXHIBIT 10.82 ASSET PURCHASE AGREEMENT BETWEEN SYNTEX PHARMACEUTICALS INTERNATIONAL LIMITED and MEDICIS PHARMACEUTICAL CORPORATION 2 TABLE OF CONTENTS 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1 2. ASSETS BEING SOLD . . . . . . . . . . . . . . . . . . . . . 4 2.1 Trademarks . . . . . . . . . . . . . . . . . . . . . 4 2.2 Registrations . . . . . . . . . . . . . . . . . . . 4 2.3 Manufacturing Technology and Know-How . . . . . . . 4 2.4 Trademark Agreements . . . . . . . . . . . . . . . . 5 2.5 Manufacturing Information . . . . . . . . . . . . . 5 2.6 Data Bank Documents . . . . . . . . . . . . . . . . 5 2.7 Worldwide Safety Reports . . . . . . . . . . . . . . 5 2.8 Assumption of Liabilities . . . . . . . . . . . . . 5 3. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . 5 4. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . 5 4.1 Organization . . . . . . . . . . . . . . . . . . . . 5 4.2 Authority . . . . . . . . . . . . . . . . . . . . . 6 4.3 Title to Assets . . . . . . . . . . . . . . . . . . 6 4.4 No Violation or Conflict . . . . . . . . . . . . . . 6 4.5 Registrations . . . . . . . . . . . . . . . . . . . 7 4.6 Patents . . . . . . . . . . . . . . . . . . . . . . 7 4.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . 7 4.8 Financial Information . . . . . . . . . . . . . . . 7 4.9 Absence of Certain Changes . . . . . . . . . . . . . 7 4.10 Violations of Law . . . . . . . . . . . . . . . . . 7 4.11 No Government Restrictions . . . . . . . . . . . . . 8 4.12 Litigation . . . . . . . . . . . . . . . . . . . . . 8 4.13 Limitation of Warranty . . . . . . . . . . . . . . . 8 4.14 Trademarks . . . . . . . . . . . . . . . . . . . . . 8 4.15 Additional Representations . . . . . . . . . . . . . 8 5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . 8 5.1 Organization . . . . . . . . . . . . . . . . . . . . 8 5.2 Authority . . . . . . . . . . . . . . . . . . . . . 8 5.3 No Violation or Conflict . . . . . . . . . . . . . . 9 5.4 No Government Restrictions . . . . . . . . . . . . . 9 5.5 Litigation . . . . . . . . . . . . . . . . . . . . . 9 5.6 Financing . . . . . . . . . . . . . . . . . . . . . 9 6. SELLER'S COVENANTS . . . . . . . . . . . . . . . . . . . . . 9 6.1 Conduct of Business . . . . . . . . . . . . . . . . 9 6.2 Compliance with Laws . . . . . . . . . . . . . . . . 10 6.3 Disclosure Supplements . . . . . . . . . . . . . . . 10 6.4 Access; Investigation . . . . . . . . . . . . . . . 10 6.5 Further Assurances . . . . . . . . . . . . . . . . . 10 7. BUYER'S COVENANTS . . . . . . . . . . . . . . . . . . . . . 11 7.1 Transfer of Products . . . . . . . . . . . . . . . . 11 7.2 Labeling . . . . . . . . . . . . . . . . . . . . . . 11 7.3 Further Assurances . . . . . . . . . . . . . . . . . 11 3 8. COVENANTS BY BUYER AND SELLER . . . . . . . . . . . . . . . 11 8.1 Stability Studies . . . . . . . . . . . . . . . . . 11 8.2 Supply Agreement . . . . . . . . . . . . . . . . . . 11 8.3 Labeling . . . . . . . . . . . . . . . . . . . . . . 11 8.4 Use of Seller Trademarks . . . . . . . . . . . . . . 11 8.5 Assignment of Trademarks . . . . . . . . . . . . . . 12 8.6 Assignment of Registrations . . . . . . . . . . . . 12 8.7 Access to Information . . . . . . . . . . . . . . . 12 8.8 Confidentiality Agreement . . . . . . . . . . . . . 12 8.9 Press Releases . . . . . . . . . . . . . . . . . . . 12 8.10 Government Filings . . . . . . . . . . . . . . . . . 13 9. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . 13 9.1 Conditions to Obligation of Buyer . . . . . . . . . 13 9.1.1 Representations and Warranties . . . . . . . 13 9.1.2 Performance . . . . . . . . . . . . . . . . 13 9.1.3 HSR Act Approvals . . . . . . . . . . . . . 14 9.1.4 No Adverse Change . . . . . . . . . . . . . 14 9.1.5 Officer's Certificate . . . . . . . . . . . 14 9.1.6 Litigation . . . . . . . . . . . . . . . . . 14 9.1.7 Authorization . . . . . . . . . . . . . . . 14 9.1.8 Proceedings and Instruments Satisfactory . . 14 9.2 Conditions to Obligations of Seller . . . . . . . . 14 9.2.1 Representations and Warranties . . . . . . . 14 9.2.2 Performance . . . . . . . . . . . . . . . . 14 9.2.3 HSR Act Approvals . . . . . . . . . . . . . 15 9.2.4 Officer's Certificate . . . . . . . . . . . 15 9.2.5 Litigation . . . . . . . . . . . . . . . . . 15 9.2.6 Authorization . . . . . . . . . . . . . . . 15 9.2.7 Proceedings and Instruments Satisfactory . . 15 10. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 15 10.1 The Closing . . . . . . . . . . . . . . . . . . . . 15 10.2 Deliveries by Seller . . . . . . . . . . . . . . . . 15 10.3 Deliveries by Buyer . . . . . . . . . . . . . . . . 16 11. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 16 11.1 Termination . . . . . . . . . . . . . . . . . . . . 16 11.2 Effect of Termination . . . . . . . . . . . . . . . 17 12. SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . 17 12.1 Survival of Representations; Remedy for Breach . . . 17 12.2 Indemnification by Seller . . . . . . . . . . . . . 17 12.3 Indemnification by Buyer . . . . . . . . . . . . . . 18 12.4 Limitations . . . . . . . . . . . . . . . . . . . . 18 12.5 Notice . . . . . . . . . . . . . . . . . . . . . . . 18 12.6 Participation in Defense . . . . . . . . . . . . . . 18 12.7 Settlements . . . . . . . . . . . . . . . . . . . . 19 12.8 Set-Off . . . . . . . . . . . . . . . . . . . . . . 19 13. NON-COMPETITION AND CONFIDENTIALITY . . . . . . . . . . . . 19 13.1 Non-Compete . . . . . . . . . . . . . . . . . . . . 19 13.2 Confidentiality . . . . . . . . . . . . . . . . . . 19 14. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 20 15. SYNACORT . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4 16. ARBITRATION AND GOVERNING LAW . . . . . . . . . . . . . . . 21 16.1 Generally . . . . . . . . . . . . . . . . . . . . . 21 16.2 Defenses and Bankruptcy . . . . . . . . . . . . . . 21 16.3 Commencement of Arbitration . . . . . . . . . . . . 22 16.4 Governing Law and Place of Arbitration . . . . . . . 22 16.5 Discovery and Other Matters . . . . . . . . . . . . 22 16.6 Hearing . . . . . . . . . . . . . . . . . . . . . . 22 16.7 Arbitrators Fees . . . . . . . . . . . . . . . . . . 23 17. ADDITIONAL TERMS . . . . . . . . . . . . . . . . . . . . . . 23 17.1 Brokers . . . . . . . . . . . . . . . . . . . . . . 23 17.2 Injunctive Relief . . . . . . . . . . . . . . . . . 23 17.3 Expenses . . . . . . . . . . . . . . . . . . . . . . 23 17.4 Attorneys' Fees . . . . . . . . . . . . . . . . . . 23 17.5 Successors and Assigns . . . . . . . . . . . . . . . 23 17.6 Entire Agreement . . . . . . . . . . . . . . . . . . 24 17.7 Amendments; No Waiver . . . . . . . . . . . . . . . 24 17.8 Counterparts . . . . . . . . . . . . . . . . . . . . 24 17.9 Severability . . . . . . . . . . . . . . . . . . . . 24 17.10 Captions . . . . . . . . . . . . . . . . . . . . . . 24 5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into on January 21, 1997 (the "Effective Date") by and between Syntex Pharmaceuticals International Limited, a Bermuda corporation ("Seller") and Medicis Pharmaceutical Corporation, a Delaware corporation ("Buyer"). This Agreement sets forth the terms and conditions upon which Buyer is purchasing from Seller and Seller is selling to Buyer the Assets (as hereinafter defined). NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Active Ingredients" mean the pharmaceutical compounds fluocinolone acetonide, fluocinonide, and hydrocortisone, and all salts and esters thereof. 1.2 "Additional Trademarks" means the trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith. 1.3 "Affiliate" of a party shall mean any individual, corporation or other business entity (e.g. limited or general partnership, trust or estate, joint venture or association) controlling, controlled by or under common control with such party. "Control" (including "controlling", "controlled by" and "under common control with") shall mean the direct or indirect ownership of more than fifty percent (50%) of the voting or income interest in such party, corporation or other business entity respectively. Notwithstanding the foregoing, Genentech, Inc. ("Genentech") shall not be considered an Affiliate of Seller for the purpose of this Agreement for so long as there are material restrictions on the ability of Seller and its Affiliates to control Genentech. 1.4 "ANDA" means an Abbreviated New Drug Application, as such term is defined by the FDA. 1.5 "Assets" has the meaning ascribed to such term in Section 0. 1.6 "Broker" has the meaning ascribed to such term in Section 16.1. 1.7 "Business" means the business as currently conducted by Seller with respect to manufacture and sale of the Products in the Territory. 1.8 "Buyer Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, used by Buyer and bearing Buyer's name for each Product. 1.9 "cGMP's" means the then-current Good Manufacturing Practices applicable to the manufacture of pharmaceutical products for human use in the United States in accordance with FDA regulations. 1.10 "Closing" has the meaning ascribed to such term in Section 0. 1.11 "Closing Date" has the meaning ascribed to such term in Section 0. 6 1.12 "Closing Time" means 12:01 a.m. on the date of Closing. 1.13 "Confidentiality Agreement" has the meaning ascribed to such term in Section 0. 1.14 "Damages" has the meaning ascribed to such term in Section 0. 1.15 "Data Bank Documents" has the meaning ascribed to such term in Section 0. 1.16 "Disclosure Schedule" means the disclosure schedule delivered prior to the Effective Date to Buyer by Seller in connection with this Agreement. The sections of the Disclosure Schedule correspond to the sections of this Agreement. 1.17 "DOJ" means the United States Department of Justice. 1.18 "Effective Date" means January 21, 1997. 1.19 "FDA" means the United States Food and Drug Administration. 1.20 "FTC" means the United States Federal Trade Commission. 1.21 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder. 1.22 "Indemnifiable Claims" has the meaning ascribed to such term in Section 0. 1.23 "Indemnified Party" has the meaning ascribed to such term in Section 0. 1.24 "Indemnifying Party" has the meaning ascribed to such term in Section 0. 1.25 "Know-How" has the meaning ascribed to such term in Section 0. 1.26 "Law" means any federal, state, foreign, local or other law, ordinance, rule, regulation, or governmental requirement or restriction of any kind, and any rules, regulations, and orders promulgated thereunder. 1.27 "Material Adverse Effect" means an event that has a material adverse effect on the Assets, taken as a whole. 1.28 "NADA" means a New Animal Drug Application, as such term is defined by the FDA. 1.29 "NDA" means a New Drug Application, as such term is defined by the FDA. 1.30 "Net Sales" means the gross invoice amount of Products sold to third parties, less (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short-shipments and price adjustments; and (d) contract chargebacks and rebates, government rebates, and returns (e.g., spoiled, damaged or outdated Products). 7 1.31 "Patents" means any patent or patent application and any and all divisions, continuations, continuations-in-part, reexaminations, reissues, extensions, pending or granted supplementary protection, certificates, substitutions, confirmations, registrations, revalidations, revisions, additions and the like, of or to said patent and patent application. 1.32 "Patheon Agreement" means the agreement between Hoffmann- LaRoche Inc., a Delaware corporation, and Patheon to be entered into on January 31, 1997. 1.33 "PFC Agreement" means the Supply Agreement between Seller and Pharmaceutical Fine Chemicals S.A. dated February 13, 1996. 1.34 "Products" means each presentation of those finished pharmaceutical products set forth in the Registrations. 1.35 "Purchase Price" has the meaning ascribed to such term in Article 0. 1.36 "Registrations" has the meaning ascribed to such term in Section 0. 1.37 "Schedule" means a schedule to the Disclosure Schedule. 1.38 "Supply Agreement" means the agreement referred to in Section 0. 1.39 "Synacort Assets" means the Synacort License, the Synacort Trademarks, and the Synacort Trademark Agreements. 1.40 "Synacort License" has the meaning ascribed to such term in Section 0. 1.41 "Synacort NDAs" means the NDAs that are set forth on Schedule 0 and the regulatory records relating exclusively thereto. 1.42 "Synacort Trademark" means the trademark registrations that are set forth on Schedule 0 together with all records associated therewith. 1.43 "Synacort Trademark Agreements" means those agreements set forth on Schedule 0 to the extent such agreements relate to the Synacort Trademark. 1.44 "Syntex Labeling" means the printed labels, labeling and packaging materials, including printed carton, container label and package inserts, currently used by Syntex for each Product. 1.45 "Syntex NADAs" means the NADAs set forth on Schedule 0 and the regulatory records relating exclusively thereto. 1.46 "Territory" means the United States of America and its possessions, including the Commonwealth of Puerto Rico. 1.47 "Trademark Agreements" has the meaning ascribed to such term in Section 0. 1.48 "Trademarks" has the meaning ascribed to such term in Section 0. 8 2. ASSETS BEING SOLD Subject to the terms and conditions of this Agreement, at Closing, Seller shall sell, transfer, assign, convey and deliver to Buyer, its successors and assigns forever, to the extent contemplated herein, all of the right, title, and interest of Seller in the assets listed below in the Territory (collectively, the "Assets"), the Syntex NADAs, the Synacort Assets, and the Additional Trademarks, and Buyer shall assume all rights, title, and interest of Seller in the Assets, the Syntex NADAs, the Synacort Assets, and the Additional Trademarks. 2.1 Trademarks. The trademark/service mark registrations and applications that are set forth on Schedule 0 together with all records associated therewith (the "Trademarks"). 2.2 Registrations. The NDAs and the ANDA that are set forth on Schedule 0 (the "Registrations") and the regulatory records relating exclusively thereto. 2.3 Manufacturing Technology and Know-How. The manufacturing technology and know-how that is exclusively used in manufacturing any Product or is exclusively used in manufacturing any finished product set forth in the Syntex NADAs ("Know-How") and any documents which relate specifically and exclusively to such Know-How. In addition, Seller shall grant Buyer a non-exclusive, perpetual, paid-up, irrevocable, royalty-free, world-wide license, with right to sub-license, to use any manufacturing technology and know-how that are necessary or used in manufacturing any Product or finished product set forth in the Syntex NADAs (but not exclusively used thereto) with such license or sublicense being restricted to use for the Products, unless Buyer can demonstrate by written records that such know-how was known prior to any disclosure of such know-how by Seller or its Affiliates to Buyer or is now public knowledge or becomes public knowledge in the future other than by breach of any agreement between Buyer and its Affiliates and Seller and its Affiliates. 2.4 Trademark Agreements. Seller shall assign and Buyer shall assume all rights and obligations under those agreements set forth on Schedule 0 to the extent such agreements relate to the Trademarks (the "Trademark Agreements"). 2.5 Manufacturing Information. Accurate and complete copies of the current Manufacturing Worksheets and copies of the Manufacturing Quality Assurance Notebooks with respect to the Products currently available, including batch records, development reports (if existing), and other documents and records embodying manufacturing information. 2.6 Data Bank Documents. Right to obtain copies of and reference the animal toxicology, animal mutagenicity, human clinical study and final reports, and drug monograph/investigator brochures, a list of which is set forth on Schedule 0 (the "Data Bank Documents"). 2.7 Worldwide Safety Reports. A hard copy of the Worldwide Safety Reports with respect to Products. 9 2.8 Assumption of Liabilities. The parties expressly acknowledge and agree that (i) Buyer is not assuming or undertaking any liabilities relating to or arising from the conduct of the Business, the sale or marketing of the Products and/or the ownership or use of the Assets prior to the Closing; (ii) Seller retains all such liabilities; and (iii) Buyer shall have no obligation to Seller or any of its Affiliates or to any third party for any such liabilities. 3. PURCHASE PRICE Subject to the terms and conditions of this Agreement, in reliance on the representations, warranties, covenants and agreements of the Seller contained herein, and in consideration of the sale, conveyance, assignment, transfer and delivery of the Assets and the Syntex NADAs provided for in Article 0 hereof, Buyer shall deliver to Seller, in full payment for the aforesaid sale, conveyance, assignment, transfer and delivery, the Purchase Price, consisting of: (i) seven million four hundred thousand United States dollars (US $7,400,000.00) payable to Seller at Closing by bank wire transfer to Seller at such banking institution, designated not less than five (5) days prior to Closing by Seller. Additional payments of two hundred sixty-six thousand, six hundred sixty-seven United States dollars (US $266,667.00) shall be delivered by Buyer to Seller at each of the first, second and third anniversary of the Closing for a total of three (3) such additional payments ("Additional Payments"). Each Additional Payment shall be reduced by fifty percent (50%) if Net Sales in the Territory have decreased by more than twenty percent (20%) during the twelve (12) months immediately preceding the corresponding anniversary. 4. REPRESENTATIONS AND WARRANTIES OF SELLER 4.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of Bermuda, with full corporate power and authority to consummate the transactions contemplated hereby. Seller has all requisite power and authority to own and operate the Assets being conveyed by Seller pursuant to this Agreement and to carry on the activities constituting the business. 4.2 Authority. The execution and delivery of this Agreement by Seller and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and other proceedings, and this Agreement has been duly authorized, executed, and delivered by Seller and, assuming the enforceability against Buyer, constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. The Supply Agreement, and all other documents executed by Seller or its Affiliates and delivered at the Closing, including those delivered pursuant to Section 0, constitute a valid and binding obligation of Seller or the respective Affiliate of Seller executing such documents enforceable in accordance with their respective terms. 4.3 Title to Assets. Except as set forth in Schedule 0, Seller has good and marketable title to all the Assets and will convey good and marketable title at Closing, free and clear of any and all liens, encumbrances, claims, mortgages, leases, security interests, charges or restrictions. Notwithstanding the foregoing, Seller retains the right to use and to transfer to other buyers of the products containing any Active Ingredient outside the Territory 10 information that is similar or identical to that contained in the Registrations and the Know-How; provided, however, that no such buyer has been expressly granted by Seller or any Affiliate of Seller the right to sell, transfer or distribute any of the products containing any Active Ingredient into the Territory based on such Registrations and Know-How and neither Seller nor any Affiliate shall expressly grant any buyer such right. Buyer acknowledges that Seller cannot prevent such a buyer from using such information, including registrations and know-how that is substantially similar to the Registrations and Know-How, to sell, transfer or distribute such products in the Territory. In addition, trademarks that are the same as or similar to the Trademarks may be registered in other countries and may be either retained by Seller for its use or sold to other buyers in either case, for use solely outside the Territory. 4.4 No Violation or Conflict. Seller's execution and delivery of this Agreement and the other related documents delivered by Seller in connection with transactions contemplated herein and the performance of this Agreement by Seller (and the transactions contemplated herein) (a) do not and will not conflict with, violate or constitute or result in a default or an event creating rights of acceleration, termination, or cancellation, or a loss of right under any Law, judgment, order, decree, the articles of incorporation or bylaws of Seller or any mortgage, contract or agreement to which Seller is a party or by which Seller is bound or (b) will not result in the creation or imposition of any lien, charge, mortgage, claim, pledge, security interest, restriction or encumbrance of any kind on, or liability with respect to, the Assets or the Business except as otherwise provided herein or otherwise disclosed on the Disclosure Schedule. None of the Trademark Agreements require the consent of any third party to the assignment of such Trademark Agreement from Seller to Buyer. 4.5 Registrations. The Registrations are the only registrations required by the FDA to sell and market the Products in the Territory. All Products in Schedule 2.2 are registered and eligible for immediate sale without regulatory limitations. 4.6 Patents. There are no Patents with respect to the Active Ingredients or Products in the Territory. 4.7 Taxes. There are no liens for taxes upon the Assets except for liens for current taxes not yet due and payable which shall remain the sole obligation of the Seller. 4.8 Financial Information. Seller and its Affiliates have no material liabilities, contingent, absolute, accrued or otherwise, relating to the Assets, other than as set forth in Schedule 0. 4.9 Absence of Certain Changes. 4.9.1 Except as set forth in Schedule 0 or as otherwise set forth in this Agreement, since December 16, 1996, there has not been any (i) Material Adverse Effect or material adverse change in the financial condition or results of operation of the Business, (ii) damage, destruction or loss which has or may reasonably be expected to have a Material Adverse Effect, or (iii) transaction or commitment outside the ordinary course of business with respect to the Assets or the Business. 11 4.9.2 As of the date hereof and as of the Closing Date and except as otherwise disclosed on Schedule 0, Seller is not aware of any facts, circumstances, or proposed or contemplated events that could reasonably be expected to have a Material Adverse Effect after Closing. 4.9.3 No default under any lease, agreement, contract or other material arrangement relating to the Business, including but not limited to the Trademark Agreements has been declared and is continuing and, to Seller's knowledge, no condition exists which, with notice or lapse of time or both, would constitute a default under any such agreement. All of the such agreements are valid and subsisting and are in full force and effect and, to Seller's knowledge, no claim exists or has been asserted with respect to such agreements that would adversely effect the Business. Seller has not received notice that any party to any such agreements intends to cancel or terminate such agreements or to exercise or not exercise any options or rights under such agreements, or to resist any effort by Seller or its successors to exercise or not exercise such options or rights. 4.10 Violations of Law. Except as set forth in Schedule 0, neither the operation of the Business nor the Assets (i) violates or conflicts with any Registrations, any Law, governmental specification, authorization, or requirement, or any decree, judgment, order, or similar restriction in any material respect, or (ii) to the best of Seller's knowledge, has been the subject of an investigation or inquiry by any governmental agency or authority regarding violations or alleged violations, or found by any such agency or authority to be in violation, of any Law. 4.11 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller or the consummation by it of the transactions contemplated hereby to be consummated by it, except with respect to the filing of a pre-merger notification report under the HSR Act. 4.12 Litigation. Except as set forth in Schedule 0 attached hereto or as set forth on Schedules 0 and 0, neither the Business nor the Assets is the subject of (i) any outstanding judgment, order, writ, injunction or decree of, or settlement agreement with, any person, corporation, business entity, court, arbitrator or administrative or governmental authority or agency, limiting, restricting or affecting the Business, the Assets, or the Products in a way that would have a Material Adverse Effect, (ii) any pending or, to the best of Seller's knowledge, threatened claim (excluding the adverse drug reports set forth in the Registrations), suit, proceeding, charge, inquiry, investigation or action of any kind, and (iii) any court suits filed with respect to the Assets since January 1, 1990. 4.13 Limitation of Warranty. Seller will not warrant that buyers of products outside the Territory that are substantially similar to or identical with the Products will not attempt to register such products in the Territory. 4.14 Trademarks. Each of the Trademarks being conveyed by this Agreement is being conveyed free and clear of any liens, security interests and other encumbrances and is freely assignable by Seller. Seller is not required, and Buyer will not be required, to pay any royalty to any person with respect to use of any of the Trademarks. Except as set forth in the Trademark Agreements, the Trademarks do not infringe upon or conflict with the trademarks or other rights of any third party in the Territory. 12 4.15 Additional Representations. Seller owns no inventory of finished Products, it does not sell Products to customers, and it has no agreements other than the Trademark Agreements and the PFC Agreement that are material to the Business. 5. REPRESENTATIONS AND WARRANTIES OF BUYER 5.1 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to consummate the transactions contemplated hereby. 5.2 Authority. The execution and delivery of this Agreement by Buyer, and the consummation and performance of the transactions contemplated hereby, have been duly and validly authorized by all necessary corporate and other proceedings, and this Agreement has been duly authorized, executed, and delivered by Buyer and, assuming the enforceability against Seller, constitutes the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms except (i) if such enforcement would be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws effecting the rights of creditors generally; and (ii) as specific performance and other equitable remedies are subject to the general discretion of the court. 5.3 No Violation or Conflict. The execution and delivery of this Agreement by Buyer and the performance of this Agreement (and the transactions contemplated herein) by Buyer do not and will not conflict with, violate or constitute or result in a default under any Law, judgment, order, decree, the articles of incorporation or bylaws of Buyer, or any contract or agreement to which Buyer is a party or by which Buyer is bound. 5.4 No Government Restrictions. Except as listed or described on Schedule 0, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental agency is required to be obtained or made by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer or the consummation by it of the transactions contemplated hereby to be consummated by it, except with respect to the filing of a pre-merger notification report under the HSR Act. 5.5 Litigation. To the best knowledge of Buyer, there are no claims, actions, suits, proceedings or investigations pending or threatened by or against Buyer with respect to the transactions contemplated hereby, at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, agency, instrumentality or authority. 5.6 Financing. Buyer will have funds sufficient to pay the Purchase Price on the Closing Date. 6. SELLER'S COVENANTS 6.1 Conduct of Business. Seller agrees that from the date hereof until the Closing Date that, except as specifically disclosed in Schedule 0 or unless otherwise consented to by Buyer in writing, Seller shall 6.1.1 maintain the Assets in good status and condition and not sell or dispose of any Assets except sales of Products in the ordinary course of business; 13 6.1.2 cause the Business to be conducted in the ordinary course consistent with the practice over the past six (6) months and make all reasonable efforts consistent with practices over the past six (6) months to preserve the Assets and the reputation of the Business and the Products and to preserve for Buyer the goodwill of suppliers, customers, distributors, and others having relations with the Business. 6.1.3 not enter into any new, or amend any existing, contract, commitment, or agreement relating to the Business, the Products or the Assets or extend any credit or incur any obligation with respect to the conduct of the Business or the Assets except in the ordinary course of business and consistent with past business practices; 6.1.4 not engage in any special pricing, rebate, allowance, promotional or marketing programs inconsistent with past practices or for the purpose of maintaining customer inventory levels of Product in excess of those levels maintained in the past; 6.1.5 promptly inform Buyer of any change in the Business or Assets that could reasonably be expected to have a Material Adverse Effect; 6.1.6 not subject any of the Assets or any part thereof to any mortgage, pledge, security interest, encumbrance, lien or restriction of use or suffer such to be imposed or license or grant to any other party the right to use any of the Trademarks or any of the Know-How except for use outside the Territory; 6.1.7 perform in all material respects all of its obligations under any agreement with any third party relating to the Business, the Products, or the Assets unless such third party is in default under such agreement; and 6.1.8 maintain its books of accounts and records relating to the Business, the Products or the Assets in the usual, regular and ordinary manner including, but not limited to, the maintenance of any and all documents required by any federal or state regulatory agency or governmental body. 6.2 Compliance with Laws. Seller shall comply in all material respects with all Laws and in all respects with all orders of any court or federal, state, local or other governmental entity applicable to the Business or the Assets. 6.3 Disclosure Supplements. From time to time following execution of this Agreement but prior to the Closing Date, Seller will promptly inform Buyer, in writing, of any matter that may arise hereafter and that, if existing or occurring prior to the execution of this Agreement, would have been required to be set forth or described herein or in the Disclosure Schedule. 6.4 Access; Investigation. From and after the date hereof and up to Closing, Buyer and its authorized agents, officers, and representatives shall have reasonable access to the Business and the Assets and all records and information related thereto (except for information that Seller is contractually obligated not to disclose), during normal business hours upon reasonable prior notice and at a time and manner mutually agreed upon between Buyer and Seller in order to conduct such examination and investigation of the Assets and the Business as Buyer shall reasonably deem necessary, provided that such examinations shall not unreasonably interfere with Seller's operations and activities. 14 6.5 Further Assurances. Seller shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Seller, at the request of Buyer, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Buyer such deeds, assignments, bills of sale, consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably deem necessary or desirable to implement any provision of this Agreement. 7. BUYER'S COVENANTS 7.1 Transfer of Products. Following Closing, Buyer shall use all reasonable efforts and, except as otherwise set forth herein, at its own expense to obtain as expeditiously as possible such governmental approvals and registrations from the FDA, or similar regulatory authorities, as may be necessary with respect to the manufacture and sale of the Products by Buyer or its designee. 7.2 Labeling. Following Closing, Buyer shall at its own expense and as expeditiously as possible use all reasonable efforts to obtain such FDA approvals necessary for the Buyer Labeling for each Product. 7.3 Further Assurances. Buyer shall use all reasonable efforts to implement the provisions of this Agreement, and for such purpose Buyer, at the request of Seller, at or after Closing, will, without further consideration, execute and deliver, or cause to be executed and delivered, to Seller such consents and other instruments in addition to those required by this Agreement, in form and substance satisfactory to Seller, as Seller may reasonably deem necessary or desirable to implement any provision of this Agreement. 8. COVENANTS BY BUYER AND SELLER 8.1 Stability Studies. As soon as possible following Closing, Buyer shall qualify a site as a testing site for stability studies or request Patheon to continue to conduct such stability studies at Buyer's expense, for Products not manufactured by Patheon. Seller shall have no responsibility for on-going stability studies for the Products following Closing. 8.2 Supply Agreement. Buyer and Seller, or their Affiliates, at Closing shall enter into the Supply Agreement, attached as Exhibit A. 8.3 Labeling. In accordance with Section 7.2, Buyer is responsible for having the Buyer Labeling approved by the FDA as soon as possible. Buyer may use the Syntex Labeling on the Inventory until such Inventory is exhausted; provided, however, that Seller may, at its option, buy-back from Buyer all inventory labeled with Seller's NDC number upon Buyer having sufficient inventory, to be determined by Buyer in its sole discretion to be exercised in good faith, of the applicable Product labeled with Buyer's NDC number. In addition, Buyer may use the Syntex Labeling on each Product manufactured by Seller or its Affiliates for Buyer until the earlier of the date (i) the FDA approves the Buyer Labeling for use on such Product and Buyer, using all reasonable efforts, has obtained sufficient supplies of materials with Buyer Labeling for use on such Products, or (ii) twelve (12) months following Closing, provided, however, if at the end of such twelve (12) month period the FDA has not yet approved the Buyer Labeling, then such twelve (12) month period shall be extended for a period of time to be mutually agreed by the parties (such agreement not to be unreasonably withheld) reasonably required to obtain such approval. 15 8.4 Use of Seller Trademarks. Other than the use of the Syntex Labeling as set forth in Section 0, any use by Buyer of the trademarks, tradenames, or logos of Seller, other than the use of the Trademarks, the Synacort Trademarks, and the Additional Trademarks, as provided herein, must be approved by Seller prior to such use. 8.5 Assignment of Trademarks. By or before Closing, Buyer and Seller shall prepare in good faith an assignment pursuant to which Seller agrees the Trademarks, the Synacort Trademarks, and the Additional Trademarks shall be assigned to Buyer. Following Closing, Buyer shall prepare and Seller shall execute such documents as Buyer may reasonably request in order to record the assignment of the Trademarks, the Synacort Trademarks, and the Additional Trademarks. The responsibility and expense of preparing and filing such documents and any actions required ancillary thereto, shall be borne solely by Buyer. 8.6 Assignment of Registrations. At or following Closing, Buyer shall prepare and Seller shall execute such documents as Buyer may reasonably request in order to record the assignment of the Registrations and the Syntex NADAs. Buyer shall pay any user fees associated with any Product that accrues after Closing but prior to transfer of such Registration and the Syntex NADAs. 8.7 Access to Information. Buyer and Seller will, upon reasonable prior notice, make available to the other, to the extent reasonably required for the purpose of assisting Seller or Buyer in obtaining governmental approvals and preparation of tax returns or financial statements required by the Securities and Exchange Commission (to the extent information is available) relating to the Assets, and prosecuting or defending or preparing for the prosecution or defense of any action, suit, claim, complaint, proceeding or investigation at any time brought by or pending against Seller or Buyer relating to the Assets, other than in the case of litigation between the parties hereto, such information or records (or copies thereof) in their possession after Closing. Buyer shall also provide Seller with any adverse drug events simultaneously with notification of the FDA for so long as Buyer markets the Products for serious or life-threatening adverse event and for three years following Closing for all other adverse drug events. 8.8 Confidentiality Agreement. The parties agree that certain letter agreement dated October 15, 1996 between an Affiliate of Seller and Buyer (the "Confidentiality Agreement"), shall survive either termination of this Agreement or Closing as an independent agreement; provided, however, that upon Closing, the restrictions on use and the confidentiality obligations of the Confidentiality Agreement shall no longer be in effect with respect to Evaluation Materials (as defined therein) relating to the transferred Assets. 8.9 Press Releases. Neither the Seller nor the Buyer, nor any Affiliate thereof, will issue or cause publication of any press release or other announcement or public communication with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other party, which consent will not be unreasonably withheld or delayed. Neither party shall use the name of the other party in any public statement, prospectus, annual report, or press release without the prior written approval of the other party, which may not be unreasonably withheld or delayed, provided, however, that both parties shall give the other party a minimum of five business days to review such press release, prospectus, annual report, or other public statement. Notwithstanding the foregoing, Buyer may make any disclosure which Buyer, in the opinion of its counsel, is obligated to make pursuant to applicable law, in which case, Buyer shall still endeavor to give Seller an opportunity to review such disclosure but shall not be obligated to do so if such disclosure must, in 16 the opinion of its counsel, be made without time for review. The failure of Buyer to draft such disclosure in a timely fashion shall not be deemed a reason to avoid submitting such disclosure to Seller. 8.10 Government Filings. 8.10.1 Within three (3) business days after the date hereof, Buyer will, or will cause the ultimate parent entities of Buyer to, and Seller will cause the ultimate parent entities of Seller to, make such filings, together with a request for early termination, as may be required by the HSR Act with respect to the consummation of the transactions contemplated by this Agreement. Thereafter, Buyer will or will cause the ultimate parent entities of Buyer to, and Seller will cause the ultimate parent entities of Seller to, each file or cause to be filed as promptly as practicable with the FTC and the DOJ any supplemental information that may be requested pursuant to the HSR Act. All such filings will comply in all material respects with the requirements of the respective laws pursuant to which they are filed. 8.10.2 Each of the parties will use its respective reasonable good faith efforts to obtain, and to cooperate with the others in obtaining, all authorizations, consents, orders and approvals of any governmental agencies, and cooperate with making any filings that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement prior to or after Closing, and to take all reasonable actions to avoid the entry of any order or decree by any governmental agency prohibiting the consummation of the transactions contemplated hereby. 9. CONDITIONS PRECEDENT TO CLOSING 9.1 Conditions to Obligation of Buyer. The obligation of Buyer to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Buyer): 9.1.1 Representations and Warranties. The representations and warranties made by Seller in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.1.2 Performance. Seller shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.1.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.1.4 No Adverse Change. During the period from the date of this Agreement to the Closing Date there shall not have occurred or been discovered, and there shall not exist on the Closing Date except for that which has been otherwise disclosed elsewhere in this Agreement or in the Disclosure Schedule at the time of execution of this Agreement, any condition or fact that could reasonably be expected to have a Material Adverse Effect. 17 9.1.5 Officer's Certificate. Seller shall have delivered to Buyer a certificate, dated the Closing Date and executed by an officer of Seller, certifying to the fulfillment of all conditions set forth in this Article 0. 9.1.6 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 9.1.7 Authorization. Seller shall have furnished to Buyer all documents Buyer may reasonably request relating to the existence of Seller, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Buyer. 9.1.8 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Buyer and Buyer's counsel, and Seller shall have made available to Buyer for examination the originals or true and correct copies of all documents which Buyer may reasonably request in connection with the transactions contemplated by this Agreement. 9.2 Conditions to Obligations of Seller. The obligations of Seller to complete the transactions contemplated hereby is subject to the satisfaction on or prior to the Closing Date of the following conditions (all or any of which may be waived in whole or in part by Seller): 9.2.1 Representations and Warranties. The representations and warranties made by Buyer in this Agreement shall have been true and correct in all respects as of the Closing Date with the same force and effect as though said representations and warranties had been made on the Closing Date (except for representations and warranties made as of a specified date, which will be true and correct in all respects as of the specified date). 9.2.2 Performance. Buyer shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be so performed or complied with by it prior to or at Closing, including the delivery of documents set forth in Section 0. 9.2.3 HSR Act Approvals. All filings required to be made in connection with the transactions contemplated by this Agreement under the HSR Act shall have been made, the waiting period under the HSR Act shall have expired or been terminated, and no conditions to the transactions contemplated by this Agreement shall have been imposed or proposed by any governmental agency as part of obtaining such HSR Act approval. 9.2.4 Officer's Certificate. Buyer shall have delivered to Seller a certificate, dated the date of Closing and executed by an officer of Buyer, certifying to the fulfillment of all conditions specified in this Article 0. 9.2.5 Litigation. No investigation, suit, action, or other proceeding shall be threatened or pending before any court or governmental agency that seeks the restraint, prohibition, damages, or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement. 18 9.2.6 Authorization. Buyer shall have furnished to Seller all documents Seller may reasonably request relating to the existence of Buyer, the corporate authority for and the validity of this Agreement, all in form and substance satisfactory to Seller. 9.2.7 Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Seller and Seller's counsel, and Buyer shall have made available to Seller for examination the originals or true and correct copies of all documents which Seller may reasonably request in connection with the transactions contemplated by this Agreement. 10. THE CLOSING 10.1 The Closing. Subject to the satisfaction of all of the conditions to each party's obligations set forth in Article 0 hereof (or, with respect to any condition not satisfied, the waiver in writing thereof by the party or parties for whose benefit the condition exists), the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at 9:00 a.m. (local time) on the first Monday following the day in which all required waiting periods under the HSR Act have expired or been terminated (the "Closing Date") or at such other time, date (but in no event later than March 1, 1997) and place as the parties hereto may agree in writing. The transfer of the Assets shall be deemed to have occurred as of the Closing Time. 10.2 Deliveries by Seller. Unless otherwise specified in this Section 0, at Closing, Seller or its Affiliate, as appropriate, shall deliver to Buyer in form reasonably satisfactory to Buyer, each properly executed and dated as of the Closing Date, where appropriate: 10.2.1 except as otherwise provided herein, such deeds, bills of sale, endorsements, assignments, assignment agreements, and other good and sufficient instruments of conveyance and transfer as shall be effective to vest in Buyer free and clear title to the Assets as contemplated by this Agreement 10.2.2 Secretary's Certificate certifying that the Board of Directors of Seller has authorized this Agreement; 10.2.3 the Supply Agreement; 10.2.4 a receipt for the Purchase Price; and 10.2.5 originals of those Trademark Agreements exclusively related to the Products. 10.3 Deliveries by Buyer. At Closing, Buyer or its Affiliate, as appropriate, shall deliver or cause to be delivered to Seller: 10.3.1 The Purchase Price payable in accordance with Article 0; 10.3.2 Secretary's Certificate certifying that the Board of Directors of Buyer has authorized this Agreement. 10.3.3 the Supply Agreement. 11. TERMINATION 19 11.1 Termination. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing Date: 11.1.1 By the mutual written consent of Seller and Buyer; 11.1.2 By either Seller or Buyer if Closing shall not have occurred on or before March 1, 1997, unless such date has been extended by mutual agreement in writing (the "Termination Date"); 11.1.3 By either Seller or Buyer if consummation of the transactions contemplated hereby shall violate any final order, decree or judgment of any court or governmental body having competent jurisdiction. 11.1.4 By Buyer if there has been a material misrepresentation by Seller or a material breach by Seller of any of the warranties or covenants of Seller set forth herein that Seller has not cured within fourteen (14) days after receipt of notice from Buyer requesting such to be cured (but in no event later than the Termination Date) or that Buyer has not waived in writing; or 11.1.5 By Seller if there has been a material misrepresentation by Buyer or a material breach by Buyer of any of the warranties or covenants of Buyer set forth herein that Buyer has not cured within fourteen (14) days after receipt of notice from Seller requesting such to be cured (but in no event later than the Termination Date) or that Seller has not waived in writing. 11.2 Effect of Termination. If this Agreement is terminated pursuant to Section 0, all further obligations of Seller and Buyer under this Agreement shall terminate without further liability of Seller or Buyer except (a) for the obligations of Buyer and Seller under Sections 0, 0, 0, and 0; and (b) that such termination shall not constitute a waiver by any party of any claim it may have for damages caused by reason of a breach by the other party of a representation, warranty, covenant or agreement. 12. SURVIVAL; INDEMNIFICATION 12.1 Survival of Representations; Remedy for Breach. The representations, warranties and covenants made by Buyer and Seller under this Agreement shall survive the Closing for a period of eighteen (18) months. Any Indemnifiable Claims (as hereinafter defined) or claim for tax reimbursement that a party may have arising out of the other party's breach of its representations, warranties, or covenants contained in this Agreement shall be made by notice to the other party no later than eighteen (18) months following the Closing Date ("Claim Period") and there shall be no recovery for indemnification for breach of a representation, warranty, or covenant under this Agreement for any Indemnifiable Claim or claim for tax reimbursement first asserted after that date. Seller and Buyer agree to use reasonable efforts to mitigate any loss or damage for which they may seek indemnification under this Article 12 or for which they may seek recovery under law or equity. 12.2 Indemnification by Seller. Subject to the limitations set forth in Section 0, and in addition to any other rights Buyer may have under law or at equity, Seller shall indemnify and hold harmless Buyer and its Affiliates, officers, directors, and agents and employees from any and all damages, losses, liabilities, third party claims, lawsuits, obligations and expenses (including reasonable attorneys fees and costs) (collectively, "Damages") that Buyer shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Seller in this Agreement or in any of the agreements, instruments or documents executed or delivered by Seller pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the 20 Business by the Seller, the sale, distribution or marketing of the Products, or the use or ownership of the Assets prior to the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.2 (a) and (b), collectively "Buyer's Indemnifiable Claims"); and (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets prior to the Closing Date; or (d) taxes imposed with respect to the transfer of the Assets to the Buyer pursuant to this Agreement, including any assessments against Seller as a member of a consolidated reporting group with any other entity (Section 12.2 (c) and (d), collectively "Buyer's Tax Claims"). 12.3 Indemnification by Buyer. Subject to the limitations set forth in Section 0, and in addition to any other rights it may have under law or at equity, Buyer shall indemnify and hold harmless Seller and its Affiliates, officers, directors, and agents and employees from any and all Damages that Seller shall incur or suffer from (a) any breach of a representation, warranty, or covenant of Buyer in this Agreement or in any of the agreements, instruments or documents executed or delivered by Buyer pursuant to this Agreement; (b) any liabilities or obligations arising from, or relating to, the conduct of the Business by the Buyer, the sale, distribution or marketing of the Products, or the use or ownership of the Assets following the Closing (including without limitation, claims by third parties for product liability or personal injury or for violation of employment law or other duties) (Section 12.3 (a) and (b), collectively "Seller's Indemnifiable Claims") (Buyer's Indemnifiable Claims and Seller's Indemnifiable Claims are hereby collectively referred to as "Indemnifiable Claims"); or (c) any taxes associated with, imposed upon or in respect of the conduct of the Business, the sale of the Products, or the use or ownership of the Assets following the Closing Date ("Seller's Tax Claims"). 12.4 Limitations. Notwithstanding anything to the contrary herein, neither Buyer and its Affiliates nor Seller shall be entitled to seek indemnification or any recovery under law or at equity with respect to any Indemnifiable Claim until the aggregate amount of such claims exceeds Two Hundred Thousand United States Dollars ($200,000) (the "Basket Limitation"); provided, however, that (i) if either party is responsible to the other for any amount in excess of the Basket Limitation, then the Basket Limitation shall not be deemed applicable and such party shall be responsible to fully indemnify the other party for all Damages; (ii) in no event shall either party be required to indemnify the other for breaches of the representations, warranties, and covenants made in this Agreement for an amount in excess of the Purchase Price; and (iii) neither the Basket Limitation nor the limitation in the immediately preceding clause shall be applicable to (x) third party claims, or (y) Buyer's Tax Claims or Seller's Tax Claims; provided, that Damages shall be limited to one-third (1/3) of the Purchase Price with respect to the representations and warranties under Sections 0, 0, 0, and 0; and provided further, that Damages shall be limited to one-half (1/2) of the Purchase Price with respect to the representations and warranties under Sections 0 and 0. 12.5 Notice. A party seeking indemnification pursuant to Section 0 or 0 (an "Indemnified Party") shall give prompt notice to the party from whom such indemnification is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity is or may be sought hereunder (whether or not the limits set forth in Section 0 have been exceeded) and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but no failure to give such notice shall relieve the Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual prejudice thereby). 21 12.6 Participation in Defense. The Indemnifying Party may, at its expense, participate in or assume the defense of any such action, suit or proceeding involving a third party. In such case the Indemnified Party shall have the right (but not the duty) to participate in the defense thereof, and to employ counsel, at its own expense, separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof. The Indemnifying Party shall be liable for the fees and expenses of one firm as counsel (and appropriate local counsel) employed by the Indemnified Party if the Indemnifying Party has not assumed the defense thereof. Whether or not the Indemnifying Party chooses to defend or prosecute any claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. 12.7 Settlements. The Indemnifying Party shall not be liable under this Article for any settlement effected without its consent of any claim, litigation or proceedings in respect of which indemnity may be sought hereunder, unless the Indemnifying Party refuses to acknowledge liability for indemnification under this Article 0 and/or declines to defend the Indemnified Party in such claim, litigation or proceeding. 12.8 Set-Off. In addition to any other remedies that Buyer may have against Seller for indemnification under the provisions of this Agreement or under law or at equity, Buyer may set off against any amount otherwise due and yet unpaid to Seller as part of the Purchase Price or otherwise, any amount owed by Seller or its Affiliates to Buyer under any provision of this Agreement, any instrument or agreement delivered pursuant thereto, or otherwise. 13. NON-COMPETITION AND CONFIDENTIALITY 13.1 Non-Compete. Seller acknowledges that in order to assure Buyer that Buyer will retain the value of the Assets, Buyer wishes assurances that Seller and its Affiliates shall not utilize their special knowledge of the Business and their relationship with customers, suppliers, and others to compete with the Buyer with respect to the Business. For a period of five (5) years beginning on the Closing Date, neither Seller nor its Affiliates shall engage in any business that manufactures, packages, distributes or sells finished products in the Territory whose sole or major active ingredients consist of the Active Ingredients for topical use in dermatology except for (i) the transactions involving Buyer, e.g. the sale to Buyer of Active Ingredient pursuant to the Supply Agreement contemplated herein, (ii) as part of a product whose primary indication is the treatment of vulvovaginal mycotic infections; provided that, nothing in this Article shall in any way restrict or preclude the Seller or any of its Affiliates from acquiring another company, business or line of products (including by license thereof or through investment therein), in which less than a twenty percent (20%) of the revenues and/or assets is derived from or represents finished products whose sole or major active ingredients consist of the Active Ingredients for topical use in dermatology and to continue to operate such business following such acquisition. In promoting any such acquired product or in promoting any other dermatology product that Seller may develop, manufacture of market in compliance with this Section 13.1, Seller shall not make use of the history, heritage or brand equity of the Products as part of any such promotional plan or activity. 13.2 Confidentiality. Seller acknowledges that the Assets and all other confidential or proprietary information with respect to the Business are valuable, special and unique. Neither Seller nor any of its Affiliates shall, at any time after the Closing Date, disclose, directly or indirectly, to any 22 third party, or use or purport to authorize any third party to use any confidential or proprietary information with respect to the Business, whether or not for Seller's or an Affiliate's own benefit, without the prior written consent of Buyer, including without limitation, information as to the financial condition, results of operations, customers, suppliers, products, inventions, sources, leads or methods of obtaining new supplies, marketing strategies or any other information relating to the Business or Products which could reasonably be regarded as confidential, but not including information which (i) does not relate directly and exclusively to the Business or the Products, provided that Seller and its Affiliates shall not disclose such information to the direct detriment of the Business; or (ii) is or shall become generally available to the public other than as a result of an unauthorized disclosure by Seller or an Affiliate or third party to whom Seller or an Affiliate has provided such information; or (iii) as may be necessary for Seller or any of its Affiliates to perform its obligations under this Asset Purchase Agreement or the transactions or agreements contemplated herein; or (iv) that is required by Law to be disclosed by Seller or any of its Affiliates. 14. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to Seller or Buyer at the respective addresses and facsimile numbers set forth below or at such other address and facsimile number as either party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. if to Buyer, to: Medicis Pharmaceutical Corporation 4383 East Camelback Road Phoenix, Arizona 85018 Attn: Jonah Shacknai with a copy to: Brown & Bain 2901 North Central Avenue Phoenix, Arizona 85012-2788 Attn: Frank M. Placenti if to Seller, to: Syntex Pharmaceuticals International Limited Ave. Samuel Lewis Torre Hongkong Bank, Piso No. 18/P.O. Box 7386 Panama 5, Republic of Panama Attn: General Manager with a copy to: F. Hoffmann-La Roche Ltd. CH-4070 Basel, Switzerland Attn: Corporate Law Department and a copy to: Syntex (U.S.A.) Inc. 3401 Hillview Avenue Palo Alto, California 94304 23 Attn: General Counsel 15. SYNACORT At Closing, Seller shall grant Buyer an exclusive, fully paid-up license, with right to sub-license, to manufacture, market and sell products in the Territory using the Synacort NDAs; provided, however, that Buyer may not manufacture, market or sell any product for the treatment of vulvovaginal mycotic infections products using the Synacort NDAs. At Closing, Seller shall transfer to Buyer and Buyer shall assume all regulatory responsibility for the Synacort NDAs. In addition, (i) Seller hereby conveys all common law rights Seller has in the Territory in the trademark "Synacort", if any, to Buyer, and (ii) Seller shall not oppose the registration in the Territory by Buyer of the trademark "Synacort." 16. ARBITRATION AND GOVERNING LAW 16.1 Generally. Except for the right of either party to apply to a court of competent jurisdiction for a Temporary Restraining Order to preserve the status quo or prevent irreparable harm pending the selection and confirmation of a panel of arbitrators in accordance herewith, any dispute, controversy or claim arising out of or relating to this Agreement, to a breach or termination thereof, or to the rights of any party for indemnification thereunder ("Claim") shall be settled by final and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the day the arbitration is commenced in accordance with this Agreement ("Rules"). In the event of any inconsistency between such Rules and the terms of this Agreement, this Agreement shall supersede the Rules. Any judgment on any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final, binding, non-appealable, and conclusive. The AAA shall have jurisdiction over all parties to this Agreement for purposes of the arbitration. 16.2 Defenses and Bankruptcy. Any statute of limitations or other equitable or legal doctrine which would otherwise be applicable to any action brought by any of the parties shall be applicable in the Arbitration. In the event any party to this Agreement files a petition under the bankruptcy laws of the United States or has a petition filed against it which results in an order for relief or other indicia that a bankruptcy case has commenced, it is the express intention of the parties to this Agreement that this Agreement shall control and be enforced in accordance with is terms and conditions that any Claim shall remain subject to arbitration to the maximum extent permitted by law. 16.3 Commencement of Arbitration. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by certified mail, return receipt requested, in accordance with Agreement, with a copy of the same delivered by certified mail, return receipt requested, to the AAA regional office in which Palo Alto California is then located. The AAA shall administer the arbitration. The arbitration panel shall consist of three members, one being appointed by each party and the third, who shall be the chairman of the panel, being appointed by mutual agreement of the two party-appointed arbitrators. In the event of failure of said two arbitrators to agree within sixty (60) days after the commencement of the arbitration proceeding upon the appointment of the third arbitrator, the third arbitrator shall be appointed by the AAA in accordance with the Rules. In the event that either party shall fail to appoint an arbitrator within thirty (30) days after the commencement of the arbitration proceeding, such arbitrator and the third arbitrator shall be appointed by the AAA in accordance with the Rules. The 24 arbitration award shall be rendered by a majority of the members of the Board of Arbitration. Except as expressly provided in this Agreement in Section 17.9, the panel shall not be entitled to modify this Agreement or the transactions contemplated herein. 16.4 Governing Law and Place of Arbitration. The arbitrators shall apply the laws of the State of New York (regardless of its or any other jurisdiction's choice of law principles). The place of arbitration shall be Phoenix, Arizona. 16.5 Discovery and Other Matters. There shall be no rights of discovery in connection with the arbitration except as follows: 16.5.1 Each party shall have the right to request the arbitrators to issue subpoenas for documents in accordance with the rules; 16.5.2 Each party shall have the right to initiate one (1) deposition of one representative of each party to the arbitration; and each party shall have the right to initiate one (1) additional oral deposition pursuant to a subpoena issued by the arbitrators or any court of competent jurisdiction. 16.5.3 At any time following the tenth day after the commencement of the arbitration in accordance with this Agreement, a written notice served upon all parties shall be sufficient to compel the attendance of any party at a deposition upon not less than sixty (60) days notice and no subpoena shall be required for that purpose. If a person fails or refuses to testify at a deposition, that person shall not be permitted to testify at the hearing, except for good cause shown. The number of depositions that may be initiated by either party may be varied by agreement of all parties to the arbitration but not by any action, order or request of the arbitrators or any court. 16.6 Hearing. Not less than thirty (30) days prior to the scheduled arbitration proceeding, the arbitrator shall conduct a preliminary hearing in accordance with the AAA guidelines. Not less than five (5) days prior to the preliminary hearing, all parties to the arbitrations shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used at the arbitration hearing. Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than as set forth on such list. the arbitrators shall receive evidence at a single hearing. The arbitrators shall award reasonable attorneys' fees and costs in favor of the prevailing party or parties. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrators shall have the power to hear and decide, by documents only or with a hearing (at the arbitrators sole discretion) any prehearing motions in the nature of a pre-trial motion to dismiss or for summary judgment. 16.7 Arbitrators Fees. The arbitrators shall be entitled to receive reasonable compensation at an hourly rate to be established between the arbitrators and he AAA. If required by the arbitrators, Buyer, on the one hand, and Seller, on the other, will deposit with the AAA an equal share of the total anticipated fee of the arbitrators in an amount to be estimated by the AAA. The non-prevailing party(s) in the proceedings shall be ordered to pay, and shall have the ultimate responsibility for, all arbitrators fees and the fees of the AAA and such fees shall be included in the judgment to be entered against the non-prevailing party or parties. 17. ADDITIONAL TERMS 25 17.1 Brokers. Buyer represents to Seller that it has not employed any investment banker, broker, finder or intermediary (a "Broker") in connection with the transactions contemplated hereby who might be entitled to a fee or any commission from Seller upon consummation of the transactions contemplated hereby. Seller represents to Buyer that it has not employed any Broker in such connection who might be entitled to a fee or any commission from Buyer upon consummation of the transactions contemplated hereby. 17.2 Injunctive Relief. It is possible that remedies at law may be inadequate and, therefore, the parties hereto shall be entitled to seek equitable relief including, without limitation, injunctive relief, specific performance or other equitable remedies in addition to all other remedies provided hereunder or available to the parties hereto at law or in equity. 17.3 Expenses. Except as otherwise expressly provided in this Agreement, all legal, accounting and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the party incurring such expenses. 17.4 Attorneys' Fees. If there is any litigation or arbitration with respect to this Agreement, the prevailing party shall be entitled to receive from the non-prevailing party and the non-prevailing party shall pay upon demand all reasonable fees and expenses of counsel for the prevailing party. 17.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by any party without the written consent of the other party. 17.6 Entire Agreement. This Agreement, the exhibits hereto, the Disclosure Schedule and the Confidentiality Agreement embody the entire agreement of the parties hereto with respect to the subject matter hereof and supersede and replace all previous negotiations, understandings, representations, writings, and contract provisions and rights relating to the subject matter hereof. 17.7 Amendments; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each party. No failure or delay on the part of either party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder. 17.8 Counterparts. This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument and shall become effective when a counterpart has been signed by Buyer and delivered to Seller and a counterpart has been signed by Seller and delivered to Buyer. 17.9 Severability. The parties agree that (a) the provisions of this Agreement shall be severable and (b) in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (i) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions that are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (ii) the remaining provisions shall remain enforceable to the fullest extent permitted by law, provided that the rights and interests of the parties hereto shall not be materially affected. 26 17.10 Captions. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless the context requires otherwise, all references herein to Articles and Sections are to the articles and sections of this Agreement. IN WITNESS WHEREOF, this Agreement has been signed by duly authorized representatives of each of the parties hereto as of the Effective Date. SYNTEX PHARMACEUTICALS MEDICIS PHARMACEUTICAL INTERNATIONAL LIMITED CORPORATION By /s/ John R. Talbot By /s/ Jonah Shacknai ------------------------- ------------------------- Name John R. Talbot Name Jonah Shacknai ----------------------- ----------------------- Title: President Title: Chairman and Chief --------------------- Executive --------------------- EX-10.83 7 TRANSITION SERVICES AGRMNT BTWN COMPANY & HOFFMAN 1 EXHIBIT 10.83 TRANSITION SERVICES AGREEMENT THIS TRANSITION SERVICES AGREEMENT (the "Agreement") is entered into as of February 24, 1997 by Hoffmann-La Roche Inc., a corporation organized and existing under the laws of New Jersey, Roche Laboratories Inc., a corporation organized and existing under the laws of Delaware (both collectively referred to herein as "Roche") and Medicis Pharmaceuticals, Inc. a Delaware corporation ("Buyer"). WHEREAS, pursuant to an Asset Purchase Agreement dated January 21, 1997 between Roche's Affiliate, Syntex (U.S.A.) Inc. ("Syntex"), and Buyer (the "Asset Purchase Agreement"), Buyer has purchased from Syntex certain assets relating to certain dermatology products; and WHEREAS, Buyer desires to retain Roche, and Roche is willing to be retained by Buyer, to provide certain sales, finance and distribution services during the period of transition of the Products from Syntex to Buyer. NOW, THEREFORE, in consideration of the above and of the mutual covenants contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows: 1. DEFINITIONS 1.1 "Net Sales" means the gross invoice amount of Products sold to third parties in the Territory from and after the Closing Date, less: (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short-shipments and price adjustments; and (d) those contract chargebacks, government rebates, and returns (e.g., of spoiled, damaged or outdated Products) which are the responsibility of Buyer under the Asset Purchase Agreement. 1.2 "Fully Loaded Costs" means all direct expenses and, with respect to time spent on a project by employees, an hourly rate which equals salary plus benefits plus fifty percent (50%) allocated overhead. 1.3 "Sales" means the gross invoice amount of Products sold to third parties in the Territory on behalf of Buyer from and after the Closing Date. 1.4 "Services" means any and all services with respect to the Products provided by Roche to Buyer pursuant to this Agreement. 1.5 "Territory" means the United States of America and its possessions, including the Commonwealth of Puerto Rico. 1.6 The term "Products" as well as other capitalized terms used herein and not defined above shall have the respective meanings assigned to such terms in the Asset Purchase Agreement. 2. RESPONSIBILITIES OF PARTIES 2.1 Provision of Services. Subject to the terms hereof, Roche shall (a) cooperate with Buyer and assist in the orderly transition of the Products to Buyer, and (b) provide the Services described herein that are requested by Buyer. 2 2.2 Cooperation and Assistance. Roche and Buyer shall make available the individuals identified on Exhibit A, or their qualified designees, for consultation with the other party's representatives via telephone, correspondence or in person at Roche's facilities for the purpose of conveying and transferring information relating to the operation of the Products. Such consultation shall occur for reasonable periods of time, upon reasonable notice during normal business hours. Either party may appoint substitutes for the individuals listed on Exhibit A. Notwithstanding any other provision of this Agreement, the individuals listed on Exhibit A (or their substitutes) shall be available for minimal consultation for a period of six (6) months following Closing. 2.3 Distribution Agency Services. With respect to the Products, Roche, or subcontractors used by Roche in the ordinary course of conducting its business, shall provide all services (including storing, delivering and distributing Products and filling orders) requested by Buyer and customarily performed by a distribution agent in connection with the sale of ethical pharmaceutical products in the Territory, including the following: (a) accepting orders and invoicing purchasers on behalf of Buyer; (b) processing all Products returned by customers in accordance with Article 3 of this Agreement; (c) order entry and billing services; (d) recording sales and collecting amounts due; (e) making appropriate payments for chargebacks and rebates subject to the Asset Purchase Agreement; and (f) customer complaint and inquiry services. Roche further covenants and represents to Buyer that it shall comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the distribution or sale of the Products under this Agreement, provided, however, that it shall not be deemed a breach of this Section 2.3 if Roche can demonstrate that such non-compliance was directly caused by following the written instructions of Buyer. Roche shall charge customers and pay Buyer for Products sold only on the basis of list prices for each unit of the Product. The current list prices for Products are set forth on Exhibit B. Buyer may change the list prices from time to time by written notice to Roche, which price changes shall be effective within seven (7) days of receipt of such notice. 2.4 Marketing Support Services. In order to inform customers of the sale of the Products to Buyer, and otherwise transition the Products, the parties shall: (a) notify all contracted customers, trade customers, and wholesalers of the transfer of the Products to Buyer by a method and at a time mutually agreed to by the parties in the form substantially as set forth on Exhibit C, and (b) provide notice to wholesalers at mutually agreed to times which allows adequate transition time for the wholesalers. In providing marketing support services hereunder, Roche shall provide Buyer with necessary pricing information concerning the Products, but shall not be required to disclose copies of customer contracts. The parties hereto acknowledge and agree that Roche shall not be responsible for providing the Buyer with any sales or promotional support. 2.5 Reports. Roche shall submit in writing to Buyer (a) within seven (7) business days after the end of each calendar month a report setting forth total Net Sales by SKU for the period ending the last Sunday in the preceding calendar month, (b) within seven (7) business days after the end of each calendar month a report setting forth inventory on-hand by SKU as of the last Sunday in the preceding calendar month, and (c) within fifteen (15) days after the end of each calendar month a report as set forth on Schedule I and such other information as Buyer shall reasonably request that is agreed to by Roche. Roche shall also submit in writing to Buyer weekly reports setting forth gross invoice sales in units and dollars by SKU. Roche shall also provide to Buyer, no later than April 5, 1997, (i) the report referred to in Section 2.5(a) above 3 for the period ended March 30, 1997; and (ii) a report indicating gross invoice sales in units and dollars for March 31, 1997. 2.6 NDC Numbers. Immediately following the Closing, Buyer shall take any and all action necessary to change the National Drug Code number for the Products, which change shall be implemented pursuant to the terms of the Asset Purchase Agreement with Syntex. 2.7 Payment of Net Sales. On the twentieth calendar day of each calendar month, Roche will wire transfer to Buyer the amount equal to total Net Sales for the prior month, less (i) a one-half percent (.50%) reserve for uncollected Sales based on Net Sales; (ii) a two percent (2%) deduction from Sales for cash discount based on payment terms of two percent (2%) thirty net thirty-one (31) days; and (iii) the amount of the fee, if any, calculated for such prior month under Section 4.1. 2.8 Government Contracts. The parties shall mutually agree on the timing and method of notifying applicable federal agency customers and the Health Care Financing Administration ("HCFA") of the sale of the Products to Buyer, and shall take whatever action is necessary to simultaneously add the Products to Buyer's federal supply schedule and Medicaid rebate agreement, if applicable, and delete the Products from the federal supply schedule and Medicaid rebate agreement of Roche or Syntex as applicable. 2.9 Orders Following Termination or Expiration. For a period of two (2) weeks following the termination or expiration of this Agreement, Roche shall forward to Buyer as soon as practicable via facsimile any orders for Products received by Roche. For a period of six (6) weeks following the end of the two (2) week period in the preceding sentence, Roche shall forward to Buyer via facsimile at least every three (3) days any orders for Products received by Roche. At the end of such six (6) week period, Roche shall reject all orders for Products received by Roche, but shall notify any such orderer that future orders should be placed directly with Buyer. 3. PRODUCT RETURNS Roche shall process and pay all claims received by it for returns of Products in accordance with the provision of the return goods policy attached hereto as Exhibit D. Buyer shall not engage in any special pricing, rebate allowance, promotional or marketing program or activities, special returns policy or special restocking program that would impact the normal course or level of expected returns with respect to Products sold prior to Closing. Returned goods will be destroyed in accordance with the provisions of the disposition of returned goods policy of Roche, a copy of which is attached hereto as Exhibit E. 4. PAYMENTS 4.1 Fees. In consideration of Roche's Services under this Agreement, Buyer shall pay to Roche a fee equal to six per cent (6%) of Buyer's Net Sales of Products for any month during which Roche provides Services to Buyer. In addition, Roche shall be reimbursed its Fully Loaded Costs for any special services or expenses, provided that Buyer has given its prior written approval for such special services or expenses, including without limitation the cost of destruction of returned goods other than pursuant to on-going, normal business operations, the participation of Roche in any recall of Products, "scrap" charges incurred due to labeling or packaging changes requested by Buyer, and any components with Syntex's or Roche's NDC number ordered on or after January 21, 1997 with the prior written approval of Buyer, 4 transportation costs associated with the delivery of inventory and records upon termination of this Agreement, and any other expenses incurred by Roche specifically as a result of this Agreement. Buyer will reimburse Roche with respect to the foregoing costs, if any, within thirty (30) days of receipt of Roche's statement. 4.2 Records: Audit. Roche shall keep records relating to the calculation of Net Sales and the fees under Section 4.1 in accordance with generally accepted accounting principles in the United States and provide copies of such records to Buyer within ninety (90) days of termination of this Agreement. During and at any time within six (6) months following termination of this Agreement, Buyer, at its expense, shall have the right to conduct one examination or audit of said records of Roche which relate solely to the services provided hereunder and costs and expenses incurred hereunder, for the sole purpose of verifying information provided by Roche and payments made to Roche hereunder. Roche shall cooperate fully with the auditor and provide all reasonable access to records and employees necessary to promptly complete this audit. During and at any time within six (6) months following termination of this Agreement, Buyer, at its expense, shall have the right to appoint an independent certified public accounting firm reasonably acceptable to Roche who will be bound by confidentiality terms reasonable to Roche, to conduct one audit of customer invoices for the Products for the sole purpose of verifying the information provided by Roche and payments made to Roche hereunder. Such auditor shall not disclose any information to Medicis relating to Roche's products or business other than information which pertains directly to the purpose of the audit. If any such examination or audit discloses an underpayment or overpayment hereunder, written notice of such fact, specifying the amount and basis of the underpayment or overpayment shall promptly be furnished to Roche. Subject to Roche's right to dispute the amount of any overpayment or underpayment, the amount of any overpayment upon resolution of such dispute, if any, shall be credited against future amounts owed to Roche hereunder, or if there will be no such future amounts, Roche shall refund the overpayment to Buyer within thirty (30) days of such notice; and the amount of any underpayment shall be paid to Roche within thirty (30) days after such disclosure. If the audit determines that Roche has overcharged Buyer by five percent (5%) or more for the fee under Section 5.1 for the period audited, Roche shall promptly reimburse Buyer for all reasonable expenses incurred in conducting said audit. 5. STANDARD FOR SERVICES Roche shall meet the standards of the applicable profession in performing Services hereunder; provided that except as otherwise set forth herein, neither Roche nor its employees shall have any liability to Buyer in connection with such performance absent bad faith, gross negligence or willful misconduct. In performing its duties hereunder, the quality and quantity of Services provided hereunder by Roche to Buyer (including without limitation the substance, timeliness and diligence thereof) shall be substantially the same as the quality and quantity of services rendered in relation to Roche's other products by Roche personnel. Nothing contained in this Agreement shall require Roche to alter its operations, policies, procedures, method of doing business, reporting mechanisms or formats or information technology systems in order to provide Services hereunder or otherwise engage in any extraordinary activities, except as set forth in this Agreement. If Buyer suffers any loss or damage caused by Roche's bad faith, gross negligence or willful misconduct, Roche shall pay all direct costs incurred as a result thereof. Under no circumstances shall Roche have any liability to Buyer for consequential or incidental damages. 5 6. TERM AND TERMINATION 6.1 Term. This Agreement shall commence as of the Closing Date and shall continue in effect for a period of three (3) months. 6.2 Termination. Either party may terminate this Agreement upon immediate written notice if the other party is in material breach or default with respect to any term or provision hereof and fails to cure the same within twenty-one (21) days of receipt of notice of said breach or default. Buyer may terminate this Agreement at any time upon not less than thirty days written notice, provided any transition issues that will require cooperation after termination are mutually agreed to by the parties; provided further that Buyer may not terminate this Agreement prior to April 30, 1997. 6.3 Rights and Duties of Parties Upon Termination. Upon expiration or other termination of this Agreement in accordance with the terms hereof, the parties shall cooperate in the orderly termination of the Services hereunder, including without limitation the transfer of Products to Buyer; and the transfer of other information relating solely to the Products, including customer information. 7. CONFIDENTIALITY 7.1 Roche acknowledges that confidential and proprietary information with respect to the Business is valuable, special and unique. Neither Roche nor any of its Affiliates shall at any time after the Closing Date disclose, directly or indirectly, to any third party, or use or purport to authorize any third party to use any confidential or proprietary information with respect to the Business, whether or not for Roche's or an Affiliate's own benefit, without the prior written consent of Buyer, including without limitation, information as to the financial condition, results of operations, customers, suppliers, products, inventions, sources, leads or methods of obtaining new supplies, marketing strategies or any other information relating to the Business or Products which could reasonably be regarded as confidential, but not including information which (i) does not relate directly and exclusively to the Business or the Products, provided that Roche and its Affiliates shall not disclose such information to the direct detriment of the Business; or (ii) is or shall become generally available to the public other than as a result of an unauthorized disclosure by Roche or an Affiliate or third party to whom Roche or an Affiliate has provided such information; or (iii) as may be necessary for Roche or any of its Affiliates to perform its obligations under this Transition Services Agreement or the Asset Purchase Agreement or the transactions or agreements contemplated therein; or (iv) that is required by Law to be disclosed by Roche or any of its Affiliates. Should Roche provide Buyer with any confidential information relating to Roche's products or business, other than information which pertains to the Products, Buyer shall be subject to the confidentiality provisions of the Confidentiality Agreement dated October 15, 1996 between F. Hoffmann-La Roche A.G. and Buyer. 8. INDEPENDENT CONTRACTOR Each party shall act solely as an independent contractor and nothing in this Agreement shall be construed to give either the power or authority to enter into or incur, any commitments, expenses or liabilities whatsoever on behalf of the other party. Nothing herein shall be construed to create the relationship of a partnership, principal and agent, or joint venture between Buyer and Roche, other than as expressly set forth herein and Roche shall not represent itself to be an agent of Buyer or incur any obligations for or on behalf of Buyer other than is expressly contemplated by this Agreement. 6 9. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to Buyer or Roche at the respective addresses and facsimile numbers set forth below or at such other address and facsimile number as either party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. All correspondence to Roche shall be addressed as follows: Hoffmann-La Roche, Inc. 340 Kingsland Street Nutley, New Jersey 07110 Attention: President Fax Number: 201-235-8855 With a copy to: General Counsel Fax Number: 201-235-3500 and with copy to: F. Hoffmann-La Roche Ltd. Grenzacherstrasse 124 CH-4002 Basel Switzerland Attention: Dr. Andreas Knierzinger Fax Number: 011-41-61-688-4169 All correspondence to Buyer shall be addressed as follows: Medicis Pharmaceuticals Inc. 4383 East Camelback Road Phoenix, Arizona 85018 Attn: Jonah Shacknai with a copy to: Brown & Bain 2901 North Central Avenue Phoenix, Arizona 85012-2788 Attn: Frank M. Placenti 10. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by any party without the written consent of the other party. 11. SURVIVAL OF TERMS The provisions of Sections 2.2, 2.5, 2.6, 2.7 (to the extent payments due remain outstanding thereunder), 2.9, 6.3 and 12.1 and Articles 4, 5, 7, and 8 shall survive the termination or expiration of this Agreement. 7 12. ADDITIONAL TERMS 12.1 Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement shall be settled by final and binding arbitration in accordance with the arbitration provisions of the Asset Purchase Agreement. 12.2 Entire Agreement. This Agreement and the exhibits hereto embody the entire agreement of the parties hereto with respect to the subject matter hereof and supersede and replace all previous negotiations, understandings, representations, writings, and contract provisions and rights relating to the subject matter hereof. If there is any conflict between this Agreement and the terms and conditions contained on any purchase order or invoice, the terms and conditions of this Agreement shall prevail. 12.3 Amendments; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each party. No failure or delay on the part of either party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder. 12.4 Counterparts. This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument and shall become effective when a counterpart has been signed by Buyer and delivered to Roche and a counterpart has been signed by Roche and delivered to Buyer. 12.5 Severability. The parties agree that (a) the provisions of this Agreement shall be severable and (b) in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (i) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions that are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (ii) the remaining provisions shall remain enforceable to the fullest extent permitted by law, provided that the rights and interests of the parties hereto shall not be materially affected. 12.6 Captions. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless the context requires otherwise, all references herein to Articles and Sections are to the articles and sections of this Agreement. 12.7 Injunctive Relief. It is possible that remedies at law may be inadequate and, therefore, the parties hereto shall be entitled to seek equitable relief including, without limitation, injunctive relief, specific performance or other equitable remedies in addition to all other remedies provided hereunder or available to the parties hereto at law or in equity. 12.8 Expenses. Except as otherwise expressly provided in this Agreement, all legal, accounting and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the party incurring such expenses. 12.9 Attorneys' Fees. If there is any litigation or arbitration with respect to this Agreement, the prevailing party shall be entitled to receive from the non-prevailing party and the non-prevailing party shall pay upon demand all reasonable fees and expenses of counsel for the prevailing party. 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first hereinabove written. ROCHE BUYER By /s/ Stephen Sudovar By /s/ Mark A. Prygocki Sr. ------------------------------ ------------------------------ Name Stephen Sudovar Name Mark A. Prygocki Sr. ---------------------------- ---------------------------- Title Vice President Title Secretary --------------------------- --------------------------- 9 EXHIBIT A: ROCHE CONTACTS Linda Seyffarth, General Operations, Accounting and Finance Lorraine Giermanski, Contracts/Medicaid Allen Perry, Inventory Pat Cofone, Distribution Tony Corrado, Regulatory MEDICIS CONTACTS Mark Prygocki, Sr., Finance and Accounting Joe Cooper, Manufacturing, Distribution, and Regulatory 10 EXHIBIT B: CURRENT LIST PRICES FOR PRODUCTS To be attached at or prior to Closing 11 EXHIBIT C: FORM OF NOTICE LETTER TO CUSTOMERS To be attached at or prior to Closing 12 EXHIBIT D: ROCHE RETURNED GOODS POLICY 13 EXHIBIT E: ROCHE DISPOSITION OF RETURNED GOODS POLICY To be provided at Closing 14 SCHEDULE I: FORM OF MONTHLY REPORT EX-10.84 8 TRANSITION SERVICES AGRMNT BTWN COMPANY & HOFFMAN 1 EXHIBIT 10.84 TRANSITION SERVICES AGREEMENT THIS TRANSITION SERVICES AGREEMENT (the "Agreement") is entered into as of February 24, 1997 by Hoffmann-La Roche Limited, a corporation organized and existing under the laws of Canada ("Roche") and Medicis Pharmaceuticals, Inc. a Delaware corporation ("Buyer"). WHEREAS, pursuant to an Asset Purchase Agreement dated January 21, 1997 between Roche's Affiliate, Syntex (U.S.A.) Inc. ("Syntex"), and Buyer (the "Asset Purchase Agreement"), Buyer has purchased from Syntex certain assets relating to certain dermatology products; and WHEREAS, Buyer desires to retain Roche, and Roche is willing to be retained by Buyer, to provide certain warehousing of inventory, order taking, distribution, billing and collection, and processing of returns services during the period of transition of the Products from Syntex to Buyer. NOW, THEREFORE, in consideration of the above and of the mutual covenants contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows: 1. DEFINITIONS 1.1 "Net Sales" means the gross invoice amount of Products sold to third parties in the Territory from and after the Closing Date, less: (a) promotional and trade discounts; (b) sales and excise taxes, value added and other taxes and insurance premiums and duties which are billed to customers as separate items on invoices; (c) allowances for short-shipments and price adjustments; and (d) those contract chargebacks, government rebates, and returns (e.g., of spoiled, damaged or outdated Products) which are the responsibility of Buyer under the Asset Purchase Agreement. 1.2 "Fully Loaded Costs" means all direct expenses and, with respect to time spent on a project by employees, an hourly rate which equals salary plus benefits plus fifty percent (50%) allocated overhead. 1.3 "Sales" means the gross invoice amount of Products sold to third parties in the Territory on behalf of Buyer from and after the Closing Date. 1.4 "Services" means any and all services with respect to the Products provided by Roche to Buyer pursuant to this Agreement. 1.5 "Territory" means Canada. 1.6 The term "Products" as well as other capitalized terms used herein and not defined above shall have the respective meanings assigned to such terms in the Asset Purchase Agreement. 2. RESPONSIBILITIES OF PARTIES 2.1 Provision of Services. Subject to the terms hereof, Roche shall (a) cooperate with Buyer and assist in the orderly transition of the Products to Buyer, and (b) provide the Services described herein that are requested by Buyer. 2.2 Cooperation and Assistance. Roche and Buyer shall make available the individuals identified on Exhibit A, or their qualified designees, for consultation with the other party's representatives via telephone, 2 correspondence or in person at Roche's facilities for the purpose of conveying and transferring information relating to the operation of the Products. Such consultation shall occur for reasonable periods of time, upon reasonable notice during normal business hours. Either party may appoint substitutes for the individuals listed on Exhibit A. Notwithstanding any other provision of this Agreement, the individuals listed on Exhibit A (or their substitutes) shall be available for minimal consultation for a period of six (6) months following Closing. 2.3 Distribution Agency Services. With respect to the Products, Roche, or subcontractors used by Roche in the ordinary course of conducting its business, shall provide all services (including storing, delivering and distributing Products and filling orders) requested by Buyer and customarily performed by a distribution agent in connection with the sale of ethical pharmaceutical products in the Territory, including the following: (a) accepting orders and invoicing purchasers on behalf of Buyer; (b) processing all Products returned by customers in accordance with Article 3 of this Agreement; (c) order entry and billing services; (d) recording sales and collecting amounts due; (e) making appropriate payments for chargebacks and rebates subject to the Asset Purchase Agreement; and (f) customer complaint and inquiry services. Roche further covenants and represents to Buyer that it shall comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the distribution or sale of the Products under this Agreement, provided, however, that it shall not be deemed a breach of this Section 2.3 if Roche can demonstrate that such non-compliance was directly caused by following the written instructions of Buyer. Roche shall charge customers and pay Buyer for Products sold only on the basis of list prices for each unit of the Product. The current list prices for Products are set forth on Exhibit B. Buyer may change the list prices from time to time by written notice to Roche, which price changes shall be effective within seven (7) days of receipt of such notice. 2.4 Marketing Support Services. In order to inform customers of the sale of the Products to Buyer, and otherwise transition the Products, the parties shall: (a) notify all contracted customers, trade customers, and wholesalers of the transfer of the Products to Buyer by a method and at a time mutually agreed to by the parties in the form substantially as set forth on Exhibit C, and (b) provide notice to wholesalers at mutually agreed to times which allows adequate transition time for the wholesalers. In providing marketing support services hereunder, Roche shall provide Buyer with necessary pricing information concerning the Products, but shall not be required to disclose copies of customer contracts. The parties hereto acknowledge and agree that Roche shall not be responsible for providing the Buyer with any sales or promotional support. 2.5 Reports. Roche shall submit in writing to Buyer: (a) within seven (7) business days after the end of each calendar month a report as set forth on Schedule 1; (b) within seven (7) business days after the end of each calendar month a report setting forth inventory on-hand by SKU as of the end of the preceding calendar month; and (c) such other information as Buyer shall reasonably request that is agreed to by Roche. Roche shall also submit to Buyer weekly reports setting forth Net Sales in dollars by Product family. 2.6 DIN Numbers. Immediately following the Closing, Buyer shall take any and all action necessary to change the Drug Identification Number for the Products, which change shall be implemented pursuant to the terms of the Asset Purchase Agreement with Syntex. 2.7 Payment of Net Sales. On the twentieth calendar day of each calendar month, Roche will wire transfer to Buyer the amount equal to total Net 3 Sales for the prior month, less (i) a one-half percent (.50%) reserve for uncollected Sales based on Net Sales; (ii) a two percent (2%) deduction from Sales for cash discount based on payment terms of two percent (2%) thirty net thirty-one (31) days; and (iii) the amount of the fee, if any, calculated for such prior month under Section 4.1. 2.8 Orders Following Termination or Expiration. For a period of two (2) weeks following the termination or expiration of this Agreement, Roche shall forward to Buyer as soon as practicable via facsimile any orders for Products received by Roche. For a period of six (6) weeks following the end of the two (2) week period in the preceding sentence, Roche shall forward to Buyer via facsimile at least every three (3) days any orders for Products received by Roche. At the end of such six (6) week period, Roche shall reject all orders for Products received by Roche, but shall notify any such orderer that future orders should be placed directly with Buyer. 3. PRODUCT RETURNS Roche shall process and pay all claims received by it for returns of Products in accordance with the provision of the return goods policy attached hereto as Exhibit D. Buyer shall not engage in any special pricing, rebate allowance, promotional or marketing program or activities, special returns policy or special restocking program that would impact the normal course or level of expected returns with respect to Products sold prior to Closing. Returned goods will be destroyed in accordance with the provisions of the disposition of returned goods policy of Roche, a copy of which is attached hereto as Exhibit E. 4. PAYMENTS 4.1 Fees. In consideration of Roche's Services under this Agreement, Buyer shall pay to Roche a fee equal to six per cent (6%) of Buyer's Net Sales of Products for any month during which Roche provides Services to Buyer. In addition, Roche shall be reimbursed its Fully Loaded Costs for any special services or expenses, provided that Buyer has given its prior written approval for such special services or expenses, including without limitation the cost of destruction of returned goods other than pursuant to on-going, normal business operations, the participation of Roche in any recall of Products, "scrap" charges incurred due to labeling or packaging changes requested by Buyer, and any components with Syntex's or Roche's DIN number ordered on or after January 21, 1997 with the prior written approval of Buyer, transportation costs associated with the delivery of inventory and records upon termination of this Agreement, and any other expenses incurred by Roche specifically as a result of this Agreement. Buyer will reimburse Roche with respect to the foregoing costs, if any, within thirty (30) days of receipt of Roche's statement. 4.2 Records: Audit. Roche shall keep records relating to the calculation of Net Sales and the fees under Section 4.1 in accordance with generally accepted accounting principles in Canada and provide copies of such records to Buyer within ninety (90) days of termination of this Agreement. During and at any time within six (6) months following termination of this Agreement, Buyer, at its expense, shall have the right to conduct one examination or audit of said records of Roche which relate solely to the services provided hereunder and costs and expenses incurred hereunder, for the sole purpose of verifying information provided by Roche and payments made to Roche hereunder. Roche shall cooperate fully with the auditor and provide all reasonable access to records and employees necessary to promptly complete this audit. During and at any time within six (6) months following termination of 4 this Agreement, Buyer, at its expense, shall have the right to appoint an independent certified public accounting firm reasonably acceptable to Roche who will be bound by confidentiality terms reasonable to Roche, to conduct one audit of customer invoices for the Products for the sole purpose of verifying the information provided by Roche and payments made to Roche hereunder. Such auditor shall not disclose any information to Medicis relating to Roche's products or business other than information which pertains directly to the purpose of the audit. If any such examination or audit discloses an underpayment or overpayment hereunder, written notice of such fact, specifying the amount and basis of the underpayment or overpayment shall promptly be furnished to Roche. Subject to Roche's right to dispute the amount of any overpayment or underpayment, the amount of any overpayment upon resolution of such dispute, if any, shall be credited against future amounts owed to Roche hereunder, or if there will be no such future amounts, Roche shall refund the overpayment to Buyer within thirty (30) days of such notice; and the amount of any underpayment shall be paid to Roche within thirty (30) days after such disclosure. If the audit determines that Roche has overcharged Buyer by five percent (5%) or more for the fee under Section 5.1 for the period audited, Roche shall promptly reimburse Buyer for all reasonable expenses incurred in conducting said audit. 5. STANDARD FOR SERVICES Roche shall meet the standards of the applicable profession in performing Services hereunder; provided that except as otherwise set forth herein, neither Roche nor its employees shall have any liability to Buyer in connection with such performance absent bad faith, gross negligence or willful misconduct. In performing its duties hereunder, the quality and quantity of Services provided hereunder by Roche to Buyer (including without limitation the substance, timeliness and diligence thereof) shall be substantially the same as the quality and quantity of services rendered in relation to Roche's other products by Roche personnel. Nothing contained in this Agreement shall require Roche to alter its operations, policies, procedures, method of doing business, reporting mechanisms or formats or information technology systems in order to provide Services hereunder or otherwise engage in any extraordinary activities, except as set forth in this Agreement. If Buyer suffers any loss or damage caused by Roche's bad faith, gross negligence or willful misconduct, Roche shall pay all direct costs incurred as a result thereof. Under no circumstances shall Roche have any liability to Buyer for consequential or incidental damages. 6. TERM AND TERMINATION 6.1 Term. This Agreement shall commence as of the Closing Date and shall continue in effect for a period of one (1) year. 6.2 Termination. Either party may terminate this Agreement upon immediate written notice if the other party is in material breach or default with respect to any term or provision hereof and fails to cure the same within twenty-one (21) days of receipt of notice of said breach or default. Buyer may terminate this Agreement at any time upon not less than thirty days written notice, provided any transition issues that will require cooperation after termination are mutually agreed to by the parties; provided further that Buyer may not terminate this Agreement prior to April 30, 1997. 6.3 Rights and Duties of Parties Upon Termination. Upon expiration or other termination of this Agreement in accordance with the terms hereof, the parties shall cooperate in the orderly termination of the Services hereunder, including without limitation the transfer of Products to Buyer; and the transfer of other information relating solely to the Products, including customer information. 5 7. CONFIDENTIALITY 7.1 Roche acknowledges that confidential and proprietary information with respect to the Business is valuable, special and unique. Neither Roche nor any of its Affiliates shall at any time after the Closing Date disclose, directly or indirectly, to any third party, or use or purport to authorize any third party to use any confidential or proprietary information with respect to the Business, whether or not for Roche's or an Affiliate's own benefit, without the prior written consent of Buyer, including without limitation, information as to the financial condition, results of operations, customers, suppliers, products, inventions, sources, leads or methods of obtaining new supplies, marketing strategies or any other information relating to the Business or Products which could reasonably be regarded as confidential, but not including information which (i) does not relate directly and exclusively to the Business or the Products, provided that Roche and its Affiliates shall not disclose such information to the direct detriment of the Business; or (ii) is or shall become generally available to the public other than as a result of an unauthorized disclosure by Roche or an Affiliate or third party to whom Roche or an Affiliate has provided such information; or (iii) as may be necessary for Roche or any of its Affiliates to perform its obligations under this Transition Services Agreement or the Asset Purchase Agreement or the transactions or agreements contemplated therein; or (iv) that is required by Law to be disclosed by Roche or any of its Affiliates. Should Roche provide Buyer with any confidential information relating to Roche's products or business, other than information which pertains to the Products, Buyer shall be subject to the confidentiality provisions of the Confidentiality Agreement dated October 15, 1996 between F. Hoffmann-La Roche A.G. and Buyer. 8. INDEPENDENT CONTRACTOR Each party shall act solely as an independent contractor and nothing in this Agreement shall be construed to give either the power or authority to enter into or incur, any commitments, expenses or liabilities whatsoever on behalf of the other party. Nothing herein shall be construed to create the relationship of a partnership, principal and agent, or joint venture between Buyer and Roche, other than as expressly set forth herein and Roche shall not represent itself to be an agent of Buyer or incur any obligations for or on behalf of Buyer other than is expressly contemplated by this Agreement. 9. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to Buyer or Roche at the respective addresses and facsimile numbers set forth below or at such other address and facsimile number as either party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. All correspondence to Roche shall be addressed as follows: Hoffmann-La Roche Limited 2455 Meadowpine Blvd. Mississauga Ontario L5N67L Attention: President 6 Fax Number: 905-542-5507 With a copy to: General Counsel Fax Number: 905-542-5689 and with copy to: F. Hoffmann-La Roche Ltd. Grenzacherstrasse 124 CH-4002 Basel Switzerland Attention: Dr. Andreas Knierzinger Fax Number: 011-41-61-688-4169 All correspondence to Buyer shall be addressed as follows: Medicis Pharmaceuticals Inc. 4383 East Camelback Road Phoenix, Arizona 85018 Attn: Jonah Shacknai with a copy to: Brown & Bain 2901 North Central Avenue Phoenix, Arizona 85012-2788 Attn: Frank M. Placenti 10. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by any party without the written consent of the other party. 11. SURVIVAL OF TERMS The provisions of Sections 2.2, 2.5, 2.6, 2.7 (to the extent payments due remain outstanding thereunder), 2.8, 6.3 and 12.1 and Articles 4, 5, 7, and 8 shall survive the termination or expiration of this Agreement. 12. ADDITIONAL TERMS 12.1 Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement shall be settled by final and binding arbitration in accordance with the arbitration provisions of the Asset Purchase Agreement. 12.2 Entire Agreement. This Agreement and the exhibits hereto embody the entire agreement of the parties hereto with respect to the subject matter hereof and supersede and replace all previous negotiations, understandings, representations, writings, and contract provisions and rights relating to the subject matter hereof. If there is any conflict between this Agreement and the terms and conditions contained on any purchase order or invoice, the terms and conditions of this Agreement shall prevail. 12.3 Amendments; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each party. No failure or delay on the part of either party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude 7 any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder. 12.4 Counterparts. This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument and shall become effective when a counterpart has been signed by Buyer and delivered to Roche and a counterpart has been signed by Roche and delivered to Buyer. 12.5 Severability. The parties agree that (a) the provisions of this Agreement shall be severable and (b) in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (i) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions that are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (ii) the remaining provisions shall remain enforceable to the fullest extent permitted by law, provided that the rights and interests of the parties hereto shall not be materially affected. 12.6 Captions. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless the context requires otherwise, all references herein to Articles and Sections are to the articles and sections of this Agreement. 12.7 Injunctive Relief. It is possible that remedies at law may be inadequate and, therefore, the parties hereto shall be entitled to seek equitable relief including, without limitation, injunctive relief, specific performance or other equitable remedies in addition to all other remedies provided hereunder or available to the parties hereto at law or in equity. 12.8 Expenses. Except as otherwise expressly provided in this Agreement, all legal, accounting and other costs and expenses incurred in connection herewith and the transactions contemplated hereby shall be paid by the party incurring such expenses. 12.9 Attorneys' Fees. If there is any litigation or arbitration with respect to this Agreement, the prevailing party shall be entitled to receive from the non-prevailing party and the non-prevailing party shall pay upon demand all reasonable fees and expenses of counsel for the prevailing party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first hereinabove written. HOFFMANN-LA ROCHE LIMITED MEDICIS PHARMACEUTICALS, INC. By /s/ Susan Griswold By /s/ Mark A. Prygocki Sr. ------------------------------ ------------------------------ Name Susan Griswold Name Mark A. Prygocki Sr. ---------------------------- ---------------------------- Title Power of Attorney Title Secretary --------------------------- --------------------------- I have authority to bind the I have authority to bind the corporation. corporation. 8 EXHIBIT A: ROCHE CONTACTS Bill Hammond, Director of Logistics and Distribution Ralph Wallace, Regulatory Affairs Peter Schaafsma, QA/QC Anthony Maricotti, Finance Dr. Andreas Knierzinger MEDICIS CONTACTS Mark Prygocki, Sr., Finance and Accounting Joe Cooper, Manufacturing, Distribution, and Regulatory 9 EXHIBIT B: CURRENT LIST PRICES FOR PRODUCTS To be attached at or prior to Closing 10 EXHIBIT C: FORM OF NOTICE LETTER TO CUSTOMERS To be attached at or prior to Closing 11 EXHIBIT D: ROCHE RETURNED GOODS POLICY 12 EXHIBIT E: ROCHE DISPOSITION OF RETURNED GOODS POLICY 13 SCHEDULE I: FORM OF MONTHLY REPORT EX-10.85 9 SUPPLY AGRMNT BTWN COMPANY AND SYNTEX PIL 1 EX-10.85 SUPPLY AGREEMENT (Fluocinolone Acetonide and Fluocinonide) THIS AGREEMENT is made and entered into by and between Medicis Pharmaceutical Corporation, a Delaware corporation ("Buyer"), and Syntex Pharmaceuticals International Limited, a Bermuda corporation ("Seller"). WHEREAS, Pharmaceutical Fine Chemicals S.A. ("PFC"), a Luxembourg corporation, acquired from Seller certain assets relating to Seller's chemical manufacturing plant at West Sunrise Highway, Freeport, Grand Bahama Island, The Bahamas (the "PFC Plant"); and WHEREAS, PFC manufactures and supplies to Seller the Active Ingredients (as defined herein) upon the terms and conditions set forth in a Supply Agreement effective February 13, 1996 between Seller and PFC (the "PFC Agreement"); and WHEREAS, pursuant to Asset Purchase Agreements dated January 21, 1997 between Buyer and its Affiliates and Seller or its Affiliates (the "Asset Purchase Agreements"), Buyer and its Affiliates have purchased from Seller and its Affiliates certain assets relating to the Syntex Dermatological Business; and WHEREAS, Buyer wishes to purchase Active Ingredients from Seller that Manufacturer will be manufacturing for Seller. NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: 1. DEFINITIONS 1.1 "Active Ingredient" shall mean the compounds known by the following generic names fluocinolone acetonide and fluocinonide, in each and all of the forms set forth on Schedule A attached hereto and incorporated herein. 1.2 "Affiliate" of a party shall mean any individual, corporation or other business entity (e.g. limited or general partnership, trust or estate, joint venture or association) controlling, controlled by or under common control with such party. "Control" (including "controlling", "controlled by" and "under common control with") shall mean the direct or indirect ownership of more than fifty percent (50%) of the voting or income interest in such party, corporation or other business entity respectively. Notwithstanding the foregoing, Genentech, Inc. ("Genentech") shall not be considered an Affiliate of Seller for the purpose of this Agreement for so long as there are material restrictions on the ability of Seller and its Affiliates to control Genentech. 1.3 "Contract Year" shall mean the twelve (12) month period commencing on the Effective Date and ending on the first anniversary of the Effective Date and each consecutive twelve (12) month period thereafter during the term hereof commencing on an anniversary of the Effective Date; provided, however, that the third Contract Year shall terminate February 13, 1999. 1.4 "DMFs", shall mean the Type 2 Drug Master File filed by Seller or an Affiliate of Seller with the FDA. 1.5 "Effective Date" shall mean the Closing Date as defined in the Asset Purchase Agreements. 2 1.6 "FDA" shall mean the United States Food and Drug Administration. 1.7 "Manufacturer" shall mean PFC, or any other manufacturer designated pursuant to the terms of Article 10. 1.8 "NADA" shall mean New Animal Drug Application. 1.9 "NDA" shall mean New Drug Application. 1.10 "Plant" shall mean the PFC Plant, or, if applicable, the plant of any other Manufacturer. 1.11 "Quarter" shall mean each of the three (3)-month periods commencing with the first, fourth, seventh and tenth months of a calendar year. 1.12 "Requirements" means all quantities of the Active Ingredient required by Buyer and its Affiliates for their own use in manufacturing the Products or having the Products manufactured by a third party for sale in the Territory. 1.13 "Safety Stock" shall have the meaning set forth in Section 5.4. 1.14 "Territory" means the United States, Canada and Puerto Rico. 2. SUPPLY AND PURCHASE Subject to the terms and conditions of this Agreement, during the term of this Agreement, Manufacturer shall manufacture and Seller shall supply the Active Ingredient to Buyer in bulk form and Buyer (or an Affiliate of Buyer) shall purchase Buyer's Requirements of the Active Ingredient exclusively from Seller; provided that Buyer's obligation to purchase its Requirements from Seller shall terminate on February 13, 1999. Seller shall use all reasonable efforts to induce PFC to enter into an agreement with Buyer to manufacture and sell to Buyer the Active Ingredients following February 13, 1999, on terms not substantially less favorable than those currently being provided by PFC to Seller (giving due regard to the volume of Buyer's purchases). Notwithstanding Buyer's obligations to purchase its requirements of Active Ingredients exclusively from the Seller, Buyer may purchase the Active Ingredient from third parties during any time period in which Seller (i) is in material breach of this agreement and such breach results in Seller's failure to supply Active Ingredients to Buyer or (ii) contends that its performance is excused pursuant to the provisions of Section 15.1. Nothing in this Agreement shall prohibit Buyer from taking such actions as Buyer in its sole and exclusive discretion, deems necessary and appropriate to qualify with the FDA or other regulatory agencies one or more additional facilities to manufacture the Active Ingredients. 3. GOVERNMENTAL AUTHORIZATIONS Seller shall manufacture or shall cause to be manufactured the Active Ingredient in accordance with the detailed processes and procedures described in all currently approved product license applications for the Active Ingredient in the Territory (including without limitation, as applicable, the DMFs, NDAs and NADAs pertaining thereto). No changes will be made to the manufacturing process(es), testing procedures, or packaging and labeling and storage conditions used to manufacture and store such Active Ingredient, and/or prepare such Active Ingredient for shipment, that are outside the scope of, and thus not permitted by, such currently approved product license applications without the prior written notice to and consent of Buyer, which consent may not be 3 unreasonably withheld or delayed. 4. ACCESS TO FACILITIES AND RECORDS 4.1 Plant. Seller shall exercise all rights it has under the PFC Agreement to procure the same access rights for Buyer to the Plant. On a periodic basis, but no more frequently than twice per calendar year, Seller shall endeavor in good faith to procure access, on reasonable notice during regular business hours, for representatives of Buyer to have access to the facilities at the Plant utilized in the manufacture, analysis, packaging, and storage of the Active Ingredients (and any raw materials and intermediates pertaining thereto). Seller also shall endeavor in good faith to procure access on such visits to the written records relating to the manufacture, analysis, packaging, storage, and stability and regulatory compliance procedures for the Active Ingredients (and any raw materials and intermediates pertaining thereto). Notwithstanding the foregoing, if additional visits are required because of a particular problem or concern, Seller shall endeavor to arrange such additional visits on reasonable notice during regular business hours. Without limiting the foregoing, Seller shall provide Buyer with copies of, or oral notification of if not in writing, any notice, communication or other information received by Seller pursuant to Article 4 of the PFC Agreement and any comparable notice, communication or other information received by Seller from a Manufacturer other than PFC. Seller shall endeavor in good faith to have an individual at PFC appointed with whom Buyer may directly communicate concerning the Active Ingredient and will inform Buyer in writing upon such appointment. 4.2 Records. Seller will supply to Buyer copies of any documents (e.g., batch records, stability data) received from Manufacturer relating to the Good Manufacturing Practice ("GMP") compliance of the Plant and the manufacture of the Active Ingredients and will, upon the reasonable request of Buyer, request such documents and information from Manufacturer and forward them to Buyer. Seller will promptly notify Buyer of any significant changes in manufacturing, including changes in the manufacturing process, synthesis, packaging, and test methods (unless compendial) and will provide Buyer with the necessary DMF and NDA authorization documents. Additionally, Seller will promptly notify Buyer of and provide Buyer with copies of any correspondence relating to regulatory actions concerning the DMFs for the Active Ingredients and any regulatory activities concerning the Plant which materially affect the Active Ingredients. 5. ORDERING PROCEDURES 5.1 Orders and Forecasts. Buyer shall place orders for the Active Ingredients in a manner as to allow for the efficient scheduling of production and, subject to the provisions hereof, Seller shall fill such orders received in writing from Buyer. At least ninety (90) days prior to the start of each Quarter, Buyer shall provide Seller in writing with (a) its firm order of the total amount of the Active Ingredients to be ordered for shipment during such Quarter and (b) its non-binding estimate of the total amount of the Active Ingredients that may be ordered for shipment during each of the next three (3) Quarters (each such estimate after the first estimate containing an updating of the estimates for the last two (2) Quarters of the preceding estimate and adding an estimate for the next succeeding Quarter). The first such estimate shall be made by Buyer concurrently with the execution and delivery of this Agreement and shall cover the period from the Effective Date through June 30, 1997. In any event, Buyer shall submit its firm orders for the Active Ingredients at least ninety (90) days prior to the desired shipment date and Seller shall endeavor to ship such Active Ingredients in the quantity listed in such firm order by the specified shipment date. To the extent Buyer's total orders for shipment 4 during a Quarter exceed one hundred twenty-five percent (125%) of Buyer's last estimate for such Quarter, Seller may extend the shipment date for such excess by such reasonable period as is required for the manufacture thereof. 5.2 Minimum Order Size. During the term hereof, individual orders for Active Ingredient shall be not less than one (1) kilogram for fluocinolone acetonide (milled or micronized), one hundred fifty (150) grams for fluocinolone acetonide dihydrate (micronized), and five hundred (500) grams for fluocinonide (milled or micronized). 5.3 Shipping. Title and risk of loss to each quantity of each Active Ingredient supplied by Seller to Buyer hereunder shall pass to Buyer upon delivery by Seller or its agent to Buyer's designated receiving site. The costs of freight and insurance for each such shipment shall be borne by Seller. 5.4 Safety Stock. Buyer wishes to maintain quantities of Active Ingredient equal to one year's supply of the Active Ingredients, in their various forms, based upon the most recent four (4) quarters of orders and forecasts provided to Seller pursuant to Section 5.1 of this Agreement ("Safety Stock"). Seller shall endeavor in good faith to provide the Safety Stock to Buyer within six (6) months of the Effective Date. The amount of Safety Stock to be ordered and the timing of delivery of such Safety Stock shall be determined by the Buyer in accordance with the ordering provisions of this Article 5. 6. PRICING OF THE ACTIVE INGREDIENTS 6.1 Price. Buyer shall purchase the Active Ingredients from Seller at the same prices as Seller or its Affiliate is purchasing such Active Ingredients from PFC (including any discounts taken by Seller under the PFC Agreement). Seller shall pay for all costs, insurance and freight charges for the shipment of the Active Ingredients from Seller's point of origin to Buyer's designated receiving site. Buyer shall be responsible and pay for any and all customs duties, value added, excise and other taxes (excluding those paid by PFC with respect to the Products), clearances and/or levies of any type whatsoever with regard to the supply of the Active Ingredients from Seller hereunder. The current prices are set forth on Schedule A. The prices for each Active Ingredient may be changed by Seller at such time as Seller's acquisition cost is changed pursuant to Article 6.2 of the PFC Agreement; provided that Seller shall, upon Buyer's request, provide evidence reasonably acceptable to Buyer of any such change. 6.2 Payment. All prices set forth herein are in United States Dollars. Each payment due Seller for the Active Ingredients supplied hereunder shall be made by Buyer to a bank account designated by Seller in United States Dollars by bank transfer no later than thirty (30) days after the date of Seller's invoice, unless such Buyer specifically designates a portion of any shipment as Safety Stock, in which case payment due Seller for such Safety Stock shall be made by Buyer to a bank account designated by Seller in United States Dollars by bank transfer no later than one-hundred eighty (180) days after the date of Seller's invoice. Seller shall invoice Buyer for the Active Ingredients upon shipment of the Active Ingredients. 7. SPECIFICATIONS, WARRANTIES AND REMEDIES 7.1 Methods and Analysis. The analytical methods to be used in testing for compliance with the applicable Specifications are attached hereto as Schedule C ("Methods of Analysis"), as the same may be amended from time to time by Seller upon the prior written notice to and consent of Buyer, which 5 consent may not be unreasonably withheld or delayed. 7.2 Specifications. The specifications for each Active Ingredient are attached hereto as Schedule B (the "Specifications"), as the same may be amended from time to time by Seller upon the prior written notice to and consent of Buyer, which consent may not be unreasonably withheld or delayed. 7.3 Reference Standards. Buyer shall receive from Seller reasonable amounts of reference standards for the Active Ingredients as well as for certain known degradation products and foreign related substances. Buyer shall also receive from Seller as soon as possible after the Effective Date the safety data sheets for the Active Ingredients. If Seller changes the Specifications or the Methods of Analysis pursuant to Article 7.1 above, Seller shall immediately furnish the changed Specifications or Methods of Analysis to Buyer, so as to enable Buyer to comply with any regulatory requirements as a result of such change. 7.4 Warranty. 7.4.1 PFC Agreement Warranties. Seller warrants that the PFC Agreement is valid and in force as of the Effective Date. Seller shall use all reasonable efforts to maintain the PFC Agreement valid and in force through February 13, 1999. 7.4.2 Warranty with respect to Active Ingredient. Seller warrants (i) that all quantities of each Active Ingredient supplied hereunder shall meet the applicable Specifications at the time such Active Ingredient is delivered to the manufacturing facility referred to in Section 5.3, or, failing to meet such Specifications pursuant to Sections 7.5, 7.6, and 7.7 within the time period set forth in Section 0, shall be replaced by Seller at Seller's sole expense, and (ii) that such Active Ingredient will be manufactured in accordance with the applicable DMF (and the process and equipment referred to therein), the applicable GMPs and the governmental authorization(s) referred to in Section 3 and shall not be adulterated as that term is defined by the United States Food, Drug and Cosmetic Act and the regulations promulgated pursuant thereto. No change in the manufacturing process and/or equipment used with respect thereto shall be made or authorized to be made by Seller unless and until approved by Buyer in writing, which approval shall not be unreasonably withheld or delayed, if such change would result in such Active Ingredient not being manufactured by Seller in accordance with the applicable Drug Master File (and the process and equipment referred to therein), the applicable GMPs and the governmental authorization(s) referred to in Section 0. 7.5 Certificate of Analysis. For each shipment of Active Ingredient supplied hereunder, either Seller or Manufacturer shall forward from Manufacturer a Certificate of Analysis specifying, inter alia, the results of each of the determinations required to show conformance of such shipment of Active Ingredient with the applicable Specifications. The figures set forth in such Certificate of Analysis shall be accepted as accurate for the purposes of this Agreement unless Buyer within thirty (30) days after the first receipt of the Active Ingredient (at Buyer's facility where the Active Ingredient will be analyzed for compliance with the applicable Specifications) notifies Seller in writing (facsimile notification will be satisfactory if a confirmation of such notification is provided by the facsimile machine) that it has analyzed representative samples from such shipment in accordance with the applicable Methods of Analysis and has determined that such samples do not conform to such Specifications. 6 7.6 Independent Analysis. If there is a difference of opinion concerning the conformance of any shipment of an Active Ingredient with the Specifications for such Active Ingredient, Buyer and Seller agree to consult with each other in order to explain and resolve the discrepancy between each other's determinations. If, after good faith attempt by the parties to do so, such consultation does not resolve the discrepancy, Buyer and Seller agree to nominate an independent, reputable laboratory, acceptable to both parties, that shall repeat the applicable Methods of Analysis on representative samples from such shipment provided by both Buyer and Seller, and the resulting determinations shall be binding on Buyer and Seller for the purposes hereof. 7.7 Replacement Shipment. Any shipment of Active Ingredient alleged by Buyer not to meet such applicable Specifications therefor shall be held without use thereof by Buyer pending the outcome of the analysis referred to in Section 0. If so requested by Buyer in writing, Seller shall endeavor to promptly send a new shipment of Active Ingredient (of similar quantity as to the amount of such Active Ingredient being analyzed pursuant to Section 0) to Buyer (at the selling price and on such other terms and conditions as set forth herein) so as to enable Buyer to continue to manufacture the Products. 7.8 Expenses. The costs of the independent laboratory referred to in Section 0 shall be borne by (i) Buyer if the Active Ingredient is determined to conform to applicable Specifications, or (ii) Seller if the Active Ingredient is determined not to conform to the applicable Specifications. Buyer shall not be obligated to pay for any Active Ingredient that does not conform to the applicable Specifications (and is returned to Seller after determined to be non-conforming), but shall be obligated to pay for any new shipment of Active Ingredient that is sent pursuant to Section 0. 8. OPERATING PROCEDURES 8.1 Seller shall report to Buyer any information or any findings associated with the use of the Active Ingredients received from Manufacturer that may suggest significant or unexpected hazards, adverse reactions, contraindications, side effects or precautions pertinent to the safety of the Active Ingredients, as soon as any such information is received or findings are made. If either party learns of any serious adverse event that suggests a hazard, adverse reaction, contraindication, side effect or precaution attributable to, or associated with, any Active Ingredient supplied hereunder, such party shall inform the other immediately. Other information about less serious events shall be reported promptly by Seller to Buyer upon receipt of such information from Manufacturer. 8.2 If either party reports any significant or unexpected hazard concerning any Active Ingredient that has met the applicable Active Ingredient Specifications, the parties shall meet in good faith to discuss if there have been any changes in the manufacturing process and/or storage conditions therefor that could have led to any such hazard and immediately act to take all necessary remedial measures. 9. RECALL 9.1 Buyer may, in its sole discretion, effect a recall of products containing any Active Ingredient supplied by Seller hereunder (whether such recall is voluntarily or governmentally imposed), and, to the extent necessary or needed, Seller shall cooperate and will use all reasonable efforts to require Manufacturer to cooperate with Buyer in carrying out any such recall. Upon either party's request, the other party shall procure for the requesting party or its representatives access to any information in the non-requesting party's, 7 possession or control relating to any Active Ingredient supplied hereunder and contained in the products recalled as is reasonably necessary to effect such recall and/or to correct any problems that may be associated with the manufacture of such Active Ingredient being recalled, and shall allow the requesting party or its representatives to make copies thereof. If, pursuant to the preceding sentence, Buyer is the non-requesting party, Seller shall use all reasonable efforts to procure for Buyer or its representatives access to any information in the Manufacturer's, possession or control relating to any Active Ingredient supplied hereunder and contained in the products recalled as is reasonably necessary to effect such recall and/or to correct any problems that may be associated with the manufacture of such Active Ingredient being recalled, and shall allow the requesting party or its representatives to make copies thereof. 9.2 If a recall is caused as a result of, directly or indirectly, any act or omission of Buyer, Buyer shall reimburse Seller for the out-of-pocket costs incurred by Seller as a result of such recall, including without limitation any costs reasonably expended by Seller at Buyer's request in assisting with such recall, and shall make any payments required hereby for any Active Ingredient that has been manufactured or supplied by Seller in conformance herewith, but cannot be sold due to such recall, and any affected work-in-process. 9.3 If a recall is caused as a result of, directly or indirectly, any act or omission of Seller or Manufacturer, Seller shall reimburse Buyer for the out-of-pocket costs incurred by Buyer as a result of such recall, including without limitation any out-of-pocket costs reasonably expended by Buyer to effect the recall and any payment made by Buyer for Active Ingredient previously purchased from Seller that is subject to the recall and cannot be sold. 10. ALTERNATIVE MANUFACTURING SITE Buyer and Seller understand that Buyer wishes to purchase Active Ingredients from Seller that PFC will be manufacturing for Seller. Buyer and Seller also understand that it may become necessary for a Manufacturer other than PFC to manufacture the Active Ingredients. In the event that Seller wishes to designate a Manufacturer other than PFC, Seller shall notify Buyer immediately and shall appoint with Buyer's consent, not to be unreasonably withheld, a Manufacturer other than PFC to manufacture all or a portion of the Active Ingredients. Seller hereby warrants than any Manufacturer other than PFC selected in accordance with this Article 10, shall be capable of manufacturing the Active Ingredients in accordance with the provisions of Section 7.4.2. 11. TERM OF AGREEMENT AND TERMINATION 11.1 Term. The term of this Agreement shall commence on the Effective Date and terminate February 13, 1999. 11.2 Termination for Breach. Either party shall have the right to terminate this Agreement by written notice to the other in the event that the other shall commit any material breach of its obligations hereunder and shall fail to cure such material breach within ninety (90) days after being called upon in writing to do so, such termination to be effective only upon the non-breaching party giving written notice of termination to the breaching party after failure of the breaching party to cure such material breach within such ninety (90)-day period. 11.3 Termination Due to Insolvency. Either party shall have the right to terminate this Agreement effective upon written notice to the other 8 party in the event: (a) the non-notifying party becomes insolvent or makes an assignment for the benefit of creditors, (b) a receiver is appointed for the non-notifying party, or (c) bankruptcy proceedings are instituted against the non-notifying party or on the non-notifying party's behalf. 11.4 Results of Termination. The proper use by either party hereto of a termination right provided for under this Agreement shall not give rise to the payment of damages or any other form of compensation or relief to the other party with respect thereto. Subject to the foregoing, termination of this Agreement shall not preclude either party from claiming any other damages, compensation or relief that it may be entitled to upon such termination. Termination of this Agreement in whole or in part shall not relieve Buyer of any amounts owed Seller, nor shall it relieve the parties of their obligations with respect to the Active Ingredients supplied prior to such termination by Seller hereunder. 12. INDEMNIFICATION 12.1 Buyer agrees to defend, indemnify and hold Seller and its Affiliates and their respective directors, officers, agents and employees harmless from and against any and all losses, damages, liabilities, costs and expenses (including without limitation reasonable attorneys' fees and other litigation costs, regardless of outcome) arising out of any and all governmental or private actions (or their insurers under rights of subrogation or otherwise) that are related in any way to: (a) the storage, formulation, use, transfer or sale by Buyer and its Affiliates of the Active Ingredients supplied by Seller to Buyer hereunder; (b) any claim of failure by Buyer and its Affiliates to comply with any governmental authorizations relating to the use of such Active Ingredients by Buyer and its Affiliates; (c) Buyer's negligence (or the negligence of Buyer's Affiliates) or any acts by Buyer (or its Affiliates) in violation of this Agreement. 12.2 Seller agrees to defend, indemnify and hold Buyer and its Affiliates and their respective directors, officers, agents and employees harmless from and against any and all losses, damages, liabilities, costs and expenses (including without limitation reasonable attorneys' fees and other litigation costs, regardless of outcome) arising out of any and all governmental or private actions (or their insurers under rights of subrogation or otherwise) that are related in any way to: (a) the manufacture, transfer and handling (including the quality control testing, packaging and storage) of any Active Ingredient supplied by Seller to Buyer hereunder; (b) any claim of failure by Seller to comply with governmental authorizations relating to the manufacture or handling of such Active Ingredient, including, without limitation, Seller's obligations under Section 0; (c) any claim of failure to comply with governmental laws or regulations pertaining to the manufacture or handling of such Active Ingredient,including, without limitation, any laws or regulations pertaining to the disposal of waste materials resulting from such manufacture (including any non-conforming material); or (d) Seller's negligence (or the negligence of Seller's Affiliates) or any acts by Seller (or its Affiliates) in violation of this Agreement. 12.3 All claims under this Section 11 shall be asserted and resolved as follows: 12.3.1 In the event that a third party asserts a claim or demand for which a party (the "First Party") believes the other party (the "Second Party") is liable hereunder, the First Party shall promptly notify the Second Party of the nature and extent of such claim or demand in writing. 9 12.3.2 The Second Party shall have the right (but not the obligation) to defend any claim or demand by appropriate proceedings. The First Party will cooperate with the Second Party at the Second Party's request in the defense against such claim or demand. The First Party may participate in, but not control, any such defense or settlement, but only at its sole cost and expense. 13. DISCLAIMER EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATIONS TO BUYER, DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO THE ACTIVE INGREDIENTS SUPPLIED BY SELLER TO BUYER HEREUNDER, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE, AND SELLER ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO THE FORMULATION, USE, SALE OR OTHER DISPOSITION BY BUYER OR ITS AFFILIATES, CUSTOMERS OR OTHER TRANSFEREES OF ANY ACTIVE INGREDIENT SUPPLIED BY SELLER HEREUNDER. 14. INDEPENDENT PARTIES Each party shall act solely as an independent contractor and nothing in this Agreement shall be construed to give either party the power or authority to act for, bind or commit the other party in any way. Nothing herein shall be construed to create the relationship of partnership, principal and agent or joint venture between the parties. Accordingly, neither party shall use or refer to the name or logo of the other party or its Affiliates (or use any name or logo confusingly similar thereto) in any public statements, whether oral or written, including but not limited to, shareholder reports, communications with stock market analysts, press releases or other communications with the media, or prospectuses, without the prior written consent of the other party. 15. FORCE MAJEURE 15.1 Each party shall be excused from the performance of its obligations hereunder in the event such performance is prevented by force majeure, and such excuse shall continue as long as the condition constituting such force majeure continues plus thirty (30) days after the termination of such condition. For the purposes of this Agreement, force majeure is defined as follows: causes beyond the reasonable control of Buyer or Seller (as the case may be), including without limitation, acts of God, acts, regulations, orders, decrees or laws of any government or agency thereof, war, civil commotion, damage to or destruction of production facilities or materials, labor disturbances (whether or not any such labor disturbance is within the power of the affected party to settle), epidemic, and failure of suppliers (excluding the inability of Manufacturer to supply to Seller for any reason other than force majeure), public utilities or common carriers. 15.2 In the event of force majeure lasting more than three (3) months (or which the parties acknowledge will last more than three (3) months), the parties agree to meet and discuss how this Agreement can be justly and fairly implemented under the circumstances provided that, with respect to force majeure on the part of Buyer, Seller shall not be obligated to supply any Active Ingredient hereunder if Buyer cannot make prompt payment therefor (consistent with the terms and conditions hereof) to Seller. 16. GOVERNING LAW AND ARBITRATION 16.1 This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York U.S.A. (regardless of the choice of law principles of the State of New York or any other jurisdiction). 10 16.2 Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by final and binding arbitration in New York, New York in accordance with the Commercial Rules of the American Arbitration Association in effect on the Effective Date (hereinafter referred to as the "Rules"), and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 16.3 In any arbitration pursuant to this Article 17 the award shall be rendered by a majority of three arbitrators, one (1) of whom shall be appointed by each party and the third of whom shall be appointed by mutual agreement of the two (2) party-appointed arbitrators. In the event of failure of a party to appoint an arbitrator within thirty (30) days after commencement of the arbitration proceeding or in the event of failure of the two (2) party- appointed arbitrators to agree upon the appointment of the third arbitrator within sixty (60) days after commencement of the arbitration proceeding, such arbitrator shall be appointed by the American Arbitration Association in accordance with the Rules. The arbitrators shall apply the governing law set forth in Section 16.1. In no event shall either party be entitled to an award of punitive damages pursuant to any arbitration hereunder. 16.4 At Buyer's request, Seller shall join PFC and shall use all reasonable efforts to require any Manufacturer other than PFC to join any proceeding under this Article 16. If Seller desires to join Manufacturer in any proceeding under this Article 16, Buyer shall not object to or in any way attempt to preclude Seller from joining PFC or any Manufacturer in such proceeding. 17. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns; provided that this Agreement may not be assigned by any party without the written consent of the other party; provided, further, either party may assign this Agreement to one of its Affiliates, whether such Affiliate currently exists or is formed in the future, without such written consent. 18. NOTICES Any notice required or permitted to be given hereunder shall be deemed sufficient if sent by facsimile letter or overnight courier, or delivered by hand to Seller or Buyer at the respective addresses and facsimile numbers set forth below or at such other address and facsimile number as either party hereto may designate. If sent by facsimile letter, notice shall be deemed given when the transmission is completed if the sender has a confirmed transmission report. If a confirmed transmission report does not exist, then the notice will be deemed given when the notice is actually received by the person to whom it is sent. If delivered by overnight courier, notice shall be deemed given when it has been signed for. If delivered by hand, notice shall be deemed given when received. if to Buyer, to: Medicis Pharmaceutical Corporation 4383 East Camelback Road Phoenix, Arizona 85018 Attn: Jonah Shacknai 11 with a copy to: Brown & Bain 2901 North Central Avenue Phoenix, Arizona 85012-2788 Attn: Frank M. Placenti if to Seller, to: Syntex Pharmaceuticals International Limited Ave. Samuel Lewis Torre Hongkong Bank, Piso No. 18/P.O. Box 7386 Panama 5, Republic of Panama Attn: General Manager with a copy to: F. Hoffmann-La Roche Ltd. CH-4070 Basel, Switzerland Attn: Corporate Law Department and a copy to Syntex (U.S.A.) Inc. 3401 Hillview Avenue Palo Alto, California 94304 Attn: Corporate Law Department 19. SURVIVAL Section 7.4 and 10.4 and Articles 2, 9, 11, 12, 13 and 15 shall be in force during the term of this Agreement and shall survive expiration or termination, as the case may be, of this Agreement. 20. ADDITIONAL TERMS 20.1 Entire Agreement. This Agreement and the exhibits hereto embody the entire agreement of the parties hereto with respect to the subject matter hereof and supersede and replace all previous negotiations, understandings, representations, writings, and contract provisions and rights relating to the subject matter hereof. 20.2 Amendments; No Waiver. No provision of this Agreement may be amended, revoked or waived except by a writing signed and delivered by an authorized officer of each party. No failure or delay on the part of either party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder. 20.3 Counterparts. This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument and shall become effective when a counterpart has been signed by Buyer and delivered to Seller and a counterpart has been signed by Seller and delivered to Buyer. 12 20.4 Severability. The parties agree that (a) the provisions of this Agreement shall be severable and (b) in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, (i) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions that are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (ii) the remaining provisions shall remain enforceable to the fullest extent permitted by law, provided that the rights and interests of the parties hereto shall not be materially affected. 20.5 Captions. Captions herein are inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless the context requires otherwise, all references herein to Articles and Sections are to the articles and sections of this Agreement. IN WITNESS HEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives to be effective as of the Effective Date. SYNTEX PHARMACEUTICALS MEDICIS PHARMACEUTICAL INTERNATIONAL LIMITED CORPORATION By /s/ John R. Talbot By /s/ Mark A. Prygocki Sr. ------------------------- ------------------------- Name John R. Talbot Name Mark A. Prygocki Sr. ----------------------- ----------------------- Title: President Title: Secretary --------------------- --------------------- 13 SCHEDULE A CURRENT PRICES PER KILOGRAM IN UNITED STATES DOLLARS Fluocinolone acetonide milled $12,495.21 Fluocinolone acetonide micronized $14,110.92 Fluocinonide milled $12,433.70 Fluocinonide micronized $14,183.03 Fluocinolone Acetonide dihydrate micronized $15,580.00 All prices CIF, Buyer's Designated Manufacturing Facility 14 SCHEDULE B ACTIVE INGREDIENT SPECIFICATIONS To be supplied three days prior to Closing 15 SCHEDULE C METHODS OF ANALYSIS FOR THE ACTIVE INGREDIENT To be supplied three days prior to Closing EX-10.86 10 LICENSE AGRMNT COMPANY AND PLATIUM SOFTWARE CORP. 1 EXHIBIT 10.86 PLATINUM(R) SOFTWARE CORPORATION LICENSE AGREEMENT This License Agreement (the "Agreement") is made between Platinum Software Corporation, a corporation formed under the laws of the State of Delaware, with its principal place of business at 195 Technology Drive, Irvine, California 92718 ("Licensor") and the Licensee whose name appears on the signature page of this Agreement, ("Licensee"). Licensor and Licensee agree that the provisions of the Agreement apply to the license of the Licensed Software under this Agreement and any Order placed under this Agreement. 1. Definitions. "Affiliate": An affiliate of, or person "affiliated" with a specified person, is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified person. Control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise. "Application Software": All modules of the Licensed Software, excluding the Customization Workbench. "Authorized User(s)": Any employee of Licensee or its Affiliates, together with authorized agents or subcontractors of Licensee who shall require access to or use of the Licensed Software solely in connection with the business of Licensee. "Concurrent User": Concurrent users are the number of users logged on to the system manager module or any other module of the Licensed Software. "Customization Workbench": A series of software tools developed by Licensor utilized in the design and development of the Licensed Software which enable Licensee to obtain custom forms, reports and documents. "Documentation": The user guides, manuals and associated documentation supplied by Licensor in connection with the Licensed Software. "Licensed Software": That certain series of computer software programs which is described on the Order. "Order": Licensor's standard form for ordering licenses of the Licensed Software, a copy of which is attached hereto. "Subsidiaries": A corporation at least a majority of the voting capital stock of which is owned directly or indirectly by Licensee. 2. License. (a) Subject to the terms and conditions of this Agreement, Licensor grants to Licensee, a non-exclusive and non-transferable license with respect to the Application Software to: (i) install, the server portion of the Application Software on a single computer acting as a network server ("Server") at its facilities in support of its internal business activities; (ii) install the client portion of the Application Software, which includes client interface libraries and client utilities on workstations or computers which are operating on a single network and are connected to one Server; (iii) use the Documentation only in conjunction with the installation and use of the Application Software. The License granted to Licensee hereunder shall be a license to use the machine-readable object code only, excluding any source code. As part of this license, only the number of Concurrent Users specified on the Order may access the network and use the services of the Application Software on the Server. In order to authorize additional Concurrent Users the Licensee must purchase additional user blocks. The license granted in this Section 2 is a license to use the Application Software on one Server. In addition, the Application Software may be used on an additional non-production server at no additional charge, subject to the concurrent user limitation for the purpose of testing and for training Licensee's employees on the use of the Application Software, provided that if the Application Software is loaded on another server for training, the Application Software is removed from the second Server once the training session 2 is completed. The magnetic media, disk or CD-ROM on which the Licensed Software is recorded may contain modules or applications for which Licensee does not have a fully paid license to use. Licensee agrees to use only those applications or modules of the Licensed Software for which it has a fully paid license. (b) [Customization Workbench License] If Licensee licensed the Customization Workbench, Licensor grants Licensee as an individual, a personal, non-exclusive license to use one copy of the Customization Workbench on a single computer for modification and enhancement of the Application Software. If Licensee is an entity, Licensor grants to Licensee the right to designate one individual within Licensee's organization to have the right to use the Customization Workbench. The Customization Workbench may also be used by a third party consultant to modify or enhance the Application Software, provided the Customization Workbench is loaded on Licensee's computer. Licensee may not modify the Application Software or have a third party modify the Application Software unless Licensee has a valid license for the Customization Workbench. The Customization Workbench may also be used to design, develop or test software products which operate with the Application Software. (c) In addition to the rights granted in Section 2(b), Licensor grants to Licensee the right to use and modify the source code version of those portions of the Customization Workbench designated as "Sample Code" or "Templates" ("Sample Code") for the sole purposes of designing, developing and testing Licensee's software product(s), and to reproduce and distribute the Sample Code, along with any modifications thereof, only in object code form provided that Licensee complies with Section 2(d) below. (d) In addition to the rights granted above, Licensor grants Licensee a nonexclusive royalty-free right to reproduce and distribute the object code version of any portion of the Customization Workbench listed in the following Customization Workbench files: Object Data Definition Files (*.odd), Platinum Publisher Report Files (*.rpt) and Platinum Basic P-code Files (*.SBX) ("Redistributable Software"), provided you comply with the following. If Licensee redistributes the Sample Code or Redistributable Software (collectively, "Redistributables") Licensee agrees to (i) distribute the Redistributables in object code only in conjunction with and as a part of a software application product developed by Licensee which adds significant and primary functionality to the Application Software and which is developed to operate with the Application Software; (ii) not use Licensor's name, logo, or trademarks to market your software application product; (iii) include a valid copyright notice on Licensee's software product; (iv) indemnify, hold harmless and defend Licensor from and against any claims or lawsuits, including attorney's fees that arise or result from the use or distribution of Licensee's software application product; (v) not permit further distribution of the Redistributables by Licensee's end user. 3. Delivery. Within thirty (30) days after the date of this Agreement or such other date as specified on the Order, Licensor will deliver to Licensee the Licensed Software and all Documentation. Licensee shall be solely responsible for acquiring and installing computer hardware and the appropriate environment for the network. The Licensed Software shall be deemed to have been accepted by Licensee following delivery. 4. License Fees, Shipping Charges and Payment. Licensee agrees to pay Licensor the license fees specified on the Order in installments as specified on the Order plus all shipping and freight charges in connection with the delivery of the Licensed Software. 5. Ownership; Copies. (a) All right, title and interest in and to the Licensed Software, Documentation, enhancements or updates developed by Licensor and furnished to 3 Licensee and the media on which the same are furnished to Licensee, and all copyrights, patents, trademarks, service marks or other intellectual property or proprietary rights relating thereto, are and shall remain with Licensor. Licensee acknowledges that no such right, title or interest in these items is granted under this Agreement, and that no such assertion shall be made by Licensee. Licensee is granted only a limited right of use as set forth herein, which right of use is subject to termination in accordance with Section 11 of this Agreement. (b) Except as provided in Section 13(f) below, Licensee is prohibited from distributing, transferring possession of, or otherwise making available the Licensed Software, Documentation, enhancements or updates to any person other than Authorized Users under the terms of this Agreement and from installing the Licensed Software, enhancements or updates for use on any workstation or computer not within the property owned or leased by Licensee. Licensee shall advise all Authorized Users that they are prohibited from reproducing, distributing, transferring possession of or otherwise making available copies of the Licensed Software, Documentation, enhancements or updates and from using or installing the Licensed Software, enhancements or updates on any computer at any other location. (c) Licensee shall not make any copies of any of the Documentation. Should Licensee require any additional copies of the Documentation, it shall obtain such copies from Licensor pursuant to the then current terms and conditions of Licensor relating thereto. Licensee shall not make any additional copies of the Licensed Software, enhancements or updates; provided, however, that Licensee may make up to two (2) additional copies of the Licensed Software for back-up or archival purposes and a reasonable number of copies for training purposes in accordance with Section 2 of this Agreement. All authorized copies of the Licensed Software shall contain all copyright notices or proprietary legends specified by Licensor. 6. Confidentiality. (a) Because of this Agreement, the parties may have access to information that is confidential to one another ("Confidential Information"). Confidential Information shall include the Licensed Software and updates, including all source and object code and Documentation related to such software and the terms and pricing under this Agreement. Confidential Information also includes information relating to the disclosing party's business or financial affairs, such as financial results, business methods, pricing, competitor and product information and all other information designated as confidential. A party's Confidential Information shall not include any information which (i) becomes part of the public domain through no act or omission of the other party; (ii) is lawfully acquired by the other party from a third party without any breach of confidentiality; or (iii) is disclosed by a party to a third party without any obligation of confidentiality. The parties agree to maintain the confidentiality of the Confidential Information and to protect as a trade secret any portion of the other party's Confidential Information by preventing any unauthorized copying, use, distribution, installation or transfer of possession of such information. Each party agrees to maintain at least the same procedures regarding Confidential Information that it maintains with respect to its own Confidential Information. Without limiting the generality of the foregoing, Licensee shall not permit any personnel or Authorized User to remove any proprietary or other legend or restrictive notice contained or included in any material provided by Licensor. (b) Both parties acknowledge that any use or disclosure of the other party's Confidential Information in a manner inconsistent with the provisions of this Agreement may cause the non-disclosing party irreparable damage for which remedies other than injunctive relief may be inadequate, and both parties agree that the non-disclosing party shall be entitled to receive from a court of competent jurisdiction injunctive or other equitable relief to restrain such 4 use or disclosure in addition to other appropriate remedies. (c) The terms and provisions of this Section 6 shall survive any termination of this Agreement for any reason for a period of five years. (d) Licensee and Authorized Users shall not attempt to decompile or disassemble the object code of the Licensed Software and Licensee agrees to use its best efforts to prevent decompilation and disassembly of the object code of the Licensed Software by Authorized Users. 7. Warranties. (a) Licensor represents that it is the lawful owner or licensee of the Licensed Software and has the full right and authority to grant the licenses hereunder. (b) Licensor warrants that the magnetic media on which the Licensed Software or an update is recorded and any Documentation provided under the terms of this Agreement will be free from defects in material and workmanship under normal use for a period of ninety (90) days. Licensor further warrants that the Licensed Software will perform substantially in accordance with the specifications set forth in the Documentation for a period of ninety (90) days from the date it is delivered. (c) Licensor does not warrant that the functions contained in the Licensed Software or in any update will meet the requirements of Licensee or Authorized Users or that the operation of the Licensed Software or update will be uninterrupted or error-free. The warranties set forth in this Section do not cover any copy of the Licensed Software, update or any Documentation which has been altered or changed in any way by the Licensee or any Authorized User. Licensor is not responsible for problems caused by changes in, or modifications to, the operating characteristics of any computer hardware or operating system for which the Licensed Software or any update is procured, nor is Licensor responsible for problems which occur as a result of the use of the Licensed Software in conjunction with software of third parties or with hardware which is incompatible with the operating system for which the Licensed Software is being procured. (d) As an accommodation to Licensee, Licensor may supply Licensee with pre-production releases of software programs ("Beta Releases"). These products are not suitable for production use. Licensor does not warrant that their operation will be uninterrupted or error free. Beta Releases, are distributed "AS IS". (e) ANY IMPLIED WARRANTIES, TERMS OR CONDITIONS, INCLUDING WARRANTIES, TERMS OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED. The warranties, terms and conditions contained in this section are made in lieu of all other express warranties, terms or conditions, whether oral or written. Only an authorized officer of the Licensor may make modifications to this warranty or additional warranties binding on the Licensor, and such modifications or additional warranties must be in writing. 8. Limitation of Remedies. (a) Subject to Section 12 of this Agreement, Licensor's entire liability and Licensee's exclusive remedy for the breach of Licensor's warranty obligations in Section 7 shall be (i) in the case of defects in media the replacement by Licensor of any magnetic media or Documentation not meeting Licensor's Limited Warranty, and (ii) in case of any nonconformity or defect in the Licensed Software, Licensor shall use commercially reasonable efforts to provide maintenance modifications or fixes with respect to any such error in a timely manner or at its option replace the Licensed Software. Licensor, however, shall not be obligated to correct, cure or otherwise remedy any error or defect in the Licensed Software resulting from any (i) modification of the Licensed Software by Licensee, (ii) misuse or damage of the Licensed Software or (iii) failure of Licensee to notify Licensor of the existence and nature of such nonconformity or defect promptly upon its discovery. (b) LICENSOR DISCLAIMS ANY AND ALL LIABILITY FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS) ARISING OUT OF THIS AGREEMENT 5 OR WITH RESPECT TO THE INSTALLATION, USE, OPERATION OR SUPPORT OF THE LICENSED SOFTWARE OR ANY UPDATE OF THE LICENSED SOFTWARE, EVEN IF LICENSOR HAS BEEN APPRISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. (c) Subject to Section 12 of this Agreement, Licensee specifically agrees that any liability on the part of Licensor arising from breach of warranty, breach of contract, negligence, strict liability in tort or any other legal theory shall not exceed the aggregate amounts paid by Licensee in software license fees for the Licensed Software, prorated over a 5 year period from the date of this Agreement, notwithstanding any failure of essential purpose of any limited remedy. 9. Software Maintenance and Support. (a) Upon execution of this Agreement,Licensee shall pay to Licensor the annual maintenance and support fee specified on the Order. Payment of the maintenance and support fee entitles Licensee to receive the maintenance described in Schedule 1 attached hereto for a period of one (1) year following the date of this Agreement. Licensee will be invoiced for annual maintenance and support for subsequent years 30-60 days prior to the expiration of an annual maintenance and support period unless Licensee notifies Licensor in writing of its desire not to renew maintenance and support 60 days prior to the end of the existing maintenance and support period. (b) Updates to the Licensed Software consist of new releases of a version of the Licensed Software which provide functional enhancements or error corrections. Upgrades to the Licensed Software consist of new releases of the Licensed Software with a higher Platinum version number such as from version 1.0 to 2.0. For the first year following the payment of the initial annual maintenance and support fee by Licensee and upon payment of the annual maintenance and support fee every year thereafter, Licensee will receive for its use without payment of any additional license fees all updates and upgrades issued by Licensor. Use of any update or upgrade with or in place of the Licensed Software shall be fully governed by and subject to the terms of this Agreement relating to the use of the Licensed Software. Any portion of the Licensed Software replaced by an update or upgrade shall be destroyed. Licensee may obtain updates or upgrades to the Licensed Software only by subscribing for annual maintenance and support. Updates and upgrades are not separately available. 10. Taxes. Licensee shall, besides other amounts payable under this Agreement, pay all local, state and federal taxes (but excluding taxes imposed on Licensor's income) levied or imposed by reason of the transactions contemplated in this Agreement. Licensee shall promptly pay to Licensor any such taxes actually paid or required to be collected or paid by Licensor. 11. Term, Default and Termination. (a) This Agreement is effective from the date of its execution until terminated by either party as provided below. In the event either party defaults in any material obligation in this Agreement, the other party shall give written notice of such default, and, if the party in default has not cured the default within thirty (30) days of the notice, the other party shall have the right to terminate this Agreement. (b) Upon termination of this Agreement, regardless of the cause of termination, the license granted under this Agreement to use the Licensed Software is immediately revoked. Within ten (10) business days after the termination of this Agreement, for whatever reason, Licensee shall return to Licensor all copies of the Licensed Software, and/or updates and Documentation in Licensee's possession, including all copies of the Licensed Software, and/or updates and Documentation under the supervision and control of Licensee and Authorized 6 Users. In the alternative, upon request of Licensor, Licensee shall destroy all such copies of the Licensed Software and/or updates and/or Documentation and certify in writing that they have been destroyed. TERMINATION SHALL NOT RELIEVE LICENSEE AND AUTHORIZED USERS OF THEIR OBLIGATIONS REGARDING THE CONFIDENTIALITY OF THE LICENSED SOFTWARE, UPDATES AND DOCUMENTATION OR LICENSOR OF ITS CONFIDENTIALITY OBLIGATIONS REGARDING CONFIDENTIAL INFORMATION OF LICENSEE IT RECEIVED. In the event of termination as a result of Licensee's failure to comply with any of its obligations under this Agreement, Licensee shall continue to be obligated for any payments due as of the date of termination. Termination of the license shall be in addition to, and not in lieu of, any other remedies available to Licensor. 12. Infringement Indemnity Licensor, at its own expense, will indemnify and defend any action brought against Licensee to the extent that it is based on a claim that the Licensed Software or any update of the Licensed Software used within the scope of this Agreement infringes any United States patent or copyright provided that Licensor is promptly notified in writing of such claim. Licensor shall have the right to control the defense of all such claims, lawsuits, and other proceedings. In no event shall Licensee settle any such claim, lawsuit, or proceeding without Licensor's prior written approval. Licensor shall have no liability for any claim under this section if a claim for a United States patent or copyright infringement is based on the use of a superseded or altered version of the Licensed Software if such infringement would have been avoided by use of the latest unaltered version of the Licensed Software available as an update, or in the event such claim is based upon any modification or enhancement to the Licensed Software made by Licensee or Authorized Users. In the event a third party infringement claim is sustained in a final judgment from which no further appeal is taken or possible, or if Licensee's use of the Licensed Software is enjoined by a court, then Licensor shall, in its sole election and at its expense either (i) procure for Licensee the right to continue to use the Licensed Software pursuant to this Agreement; (ii) replace or modify the Licensed Software to make it non-infringing; or (iii) terminate this Agreement and refund to Licensee the depreciated value of the Licensed Software, based on straight line depreciation over a period of 5 years. Licensor shall have no other liability or obligation to Licensee except as expressly set forth above. 13. Miscellaneous. (a) Each party acknowledges that it has read this Agreement and the maintenance and product support schedule attached to this Agreement, understands them, and agrees to be bound by their terms, and further agrees that they are the complete and exclusive statement of the agreement between the parties which supersedes and merges all prior proposals, understandings, and all other agreements, oral and written, between the parties relating to the subject matter of this Agreement, including without limitation the terms of any Licensee request for proposal or Licensor response or the standard printed terms on any Licensee purchase order. This Agreement may not be modified or altered except by written instrument duly executed by both parties. (b) Any notice or other communication required or permitted in this Agreement shall be in writing and shall be deemed to have been duly given on the day of service if served personally or by facsimile transmission with confirmation, or three (3) days after mailing if mailed by First Class mail, registered or certified, postage prepaid, and addressed to the respective parties at the addresses set forth above, or at such other addresses as may be specified by either party pursuant to the terms and provisions of this paragraph. (c) This Agreement and performance under this Agreement shall be governed by the laws of the State of California. (d) No action, regardless of form, arising out of this Agreement may be brought by either party more than two years after the cause of action has arisen. 7 (e) If any provision of this Agreement is invalid under any applicable statute or rule of law, it is to that extent to be deemed omitted. The remainder of the Agreement shall be valid and enforceable to the maximum extent possible. (f) Licensee may not assign or sub-license, without the prior written consent of Licensor, its rights, duties, or obligations under this Agreement to any person or entity, in whole or in part, provided, however, that this Agreement may be assigned by Licensee without the consent of Licensor to any successor corporation or entity whether by purchase of all or substantially all of the assets or outstanding capital stock of Licensee or by merger or consolidation, provided that the transferee of the Licensed Software or this Agreement agrees in writing to be bound by and subject to all of the terms and provisions of this Agreement. (g) The waiver or failure of either party to exercise in any respect any right provided for in this Agreement shall not be deemed a waiver of any further right under this Agreement. (h) This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and each of which together shall constitute a single instrument. (i) Neither party shall be responsible for failure to perform in a timely manner under this Agreement when its failure results from any of the following causes; Acts of God or public enemies, civil war, insurrection or riot, fire, flood, explosion, earthquake or serious accident, strike, labor trouble or work interruption or any cause beyond its reasonable control. (j) Licensee agrees to comply with all export and re-export restrictions and regulations ("Export Restrictions") imposed by the government of the United States. Licensee will not commit any act or omission which will result in a breach of any such Export Restrictions. Licensee agrees that it will comply in all respects with any governmental laws, orders or other restrictions on the export of the Licensed Software (and related information and Documentation) which may be imposed from time to time by the governments of the United States and Canada ("Export Requirements"). Licensee will take all actions which may be reasonably necessary to assure that it does not contravene the Export Requirements. This Section shall survive the expiration or termination of this Agreement. (k) For purposes of this Agreement, Licensee is not an agent of Licensor, and Licensee has no express or implied authority to act on behalf of, or make any representations whatsoever on behalf of, Licensor. Licensor has no right to control any activities of Licensee outside the terms of this Agreement. Licensor is an independent contractor and neither party shall have the power or authority to bind the other party to any contract or obligation. (l) Any action arising out of or relating to this Agreement or to its breach shall be brought in any federal or state court sitting in Orange County, California and both parties hereby submit to the exclusive jurisdiction of the state and federal courts in Orange County, California. The parties hereto consent to service of process by any means authorized by California or federal law. The prevailing party shall be entitled to receive from the other party its reasonable attorneys' fees and costs incurred in connection with any action or proceeding hereunder. (m) On Licensor's request, no more frequently than annually, Licensee shall furnish Licensor with a signed certification (i) verifying that the Licensed Software is being used pursuant to the terms of this Agreement, including any user limitations and (ii) listing the locations, types and serial numbers of the Clients which the Licensed Software is being used. Licensee agrees to grant Licensor reasonable access to Licensee's site, upon prior written notice during normal business hours to audit the use of the Licensed Software. (n) Any amounts payable by Licensee which are not paid within thirty (30) days after they are due shall bear interest at a rate of 1% per month from the due date until such amount is paid. (o) Licensee acknowledges that it has been advised by Licensor's personnel that: 8 (i) the Licensed Software is client/server application software which is sophisticated financial accounting software; and (ii) the successful implementation of the Licensed Software requires the formulation of a detailed workplan which includes an implementation plan, a user education plan, and data migration plan and associated consulting and education services. The consulting and education services are offered by Licensor and other third party consultants. Each party has caused this Agreement to be executed by its duly authorized representative. LICENSOR: LICENSEE: Medicis Pharmaceutical Corp. ------------------------------ Platinum Software Corporation [Licensee Name] By: /s/ Perry Tarnofsky By: /s/ Mark A. Prygocki Sr. ------------------------------ ------------------------- Name: Perry Tarnofsky Name: Mark A. Prygocki Sr. ---------------------------- ------------------------ Title: Assistant Secretary Title: Chief Financial Officer -------------------------- ----------------------- Date: March 31, 1997 Date: March 31, 1997 ---------------------------- ------------------------ Schedule 1 Maintenance and Support Upon payment of the annual maintenance and support services fee listed in this Agreement and the Order, Licensor will provide the following maintenance and support services for the Licensed Software: PLATINUM(R) SQL SOFTWARE Unlimited Telephone or Facsimile Support The hours of operation are 6:00 AM to 5:00 PM, Pacific Standard Time, during normal business hours (Monday through Friday), excluding holidays. Licensee shall appoint three (3) individuals within Licensee's organization to serve as the primary contacts between Licensee and Licensor and to receive support through the telephone support center. Maintenance Updates/Upgrades Licensor shall provide to Licensee without additional charge, all updates to the Application Software (including related documentation) commercially released by Licensor during the term of the maintenance agreement. Updates consist of new releases of a particular software version which provide functional enhancements and error corrections. Licensor shall provide to Licensee without additional charge, all upgrades to the Application Software commercially released by Licensor during the term of the agreement. Upgrades consist of new releases with a higher Licensor version number. Remote Diagnostics 9 Licensor may provide remote access software to facilitate remote diagnostics. In order to take advantage of remote diagnostics, Licensee may be required to purchase a compatible modem. Cost The Maintenance and Support Plan is priced at 18% of the then current list price for the Licensed Software. There is a penalty for lapsed coverage of software maintenance. Users who wish to purchase a software maintenance agreement after a lapse of coverage will be charged for all of the time that they were not covered, as follows: The charge for the time the user was not covered will be prorated based upon an annual cost of 18% of the then current list price for the Licensed Software. Thus, if the user had a lapse of nine months, they would be charged for the lapsed period at a rate of 9/12 x 18% of the then current list price for the Licensed Software. To resume coverage, the user must sign up for at least one full year beyond the lapsed period. Each year will be charged at a rate of 18% of the then current list price. Term The term of the maintenance and support plan is one (1) year commencing on the date of the attached License Agreement. Conditions Program maintenance and telephone and other support for previous versions of the Application Software may be discontinued by Licensor upon ninety (90) days advance notice. Licensor only provides support and maintenance for the current and immediately prior release of the Application Software. For example, if version 1.3 is the current release, Licensor will provide support and maintenance for version 1.3 and 1.2 and will cease supporting version 1.1 ninety (90) days following the release of version 1.3. If an end user cancels its subscription anytime during a subscription period, no refund, pro-rated or otherwise, will be given. PLATINUM(R) SQL CUSTOMIZATION WORKBENCH Standard Developer Support The hours of operation are 6:00 AM to 5:00 PM, Pacific Standard Time, during normal business hours (Monday through Friday), excluding holidays. Only one registered user per copy of the Customization Workbench licensed is entitled to receive support through the telephone support center. If Licensee is an entity, it must designate one individual to have the right to obtain developer support. Licensor reserves the right to withhold support to anyone who has not satisfied Licensor's Developer Support training requirements. The present training requirements include attendance at required Licensor Customization Workbench training courses. Licensor reserves the right to modify training requirements from time to time. Standard Developer Support includes consultation via telephone, facsimile or electronic mail concerning the use of the tools, utilities and documentation provided with the Customization Workbench. Standard Developer Support does not include the coding or development of customizations or integration projects. Remote Development Services Remote Development Services, including the design and development of 10 customizations is available under separate contract through Licensor's Developer Support Organization. Such support may include designing, developing and debugging custom software and/or support of third party products. To obtain Remote Developer Services, a registered user should contact Developer Support for further information at (800) 285-7877. Software Updates/Upgrades Licensor shall provide to the registered user without additional charge, all updates to the Customization Workbench (including related documentation) commercially released by Licensor during the term of the maintenance agreement. Updates consist of new releases of the Customization Workbench which provide functional enhancements and error corrections. Electronic Mail and Web Site Access Answers to questions, software code examples and other technical documentation which may constitute the resolution to inquiries may be provided by Licensor to registered users via electronic mail or registered users may be directed to information available on the Platinum Software Corporation Web site (http:/www.platsoft.com). In order to access this information registered users may be required to obtain additional software, equipment and Internet access. Cost and Conditions The Maintenance and Support Plan for the Customization Workbench is priced at 18% of the then current list price for the Customization Workbench. If Licensee allows its maintenance and developer support plan for the Customization Workbench to expire and desires to resume maintenance and developer support, there is a penalty for lapsed coverage of software maintenance and developer support. Users who wish to purchase a software maintenance and developer support agreement after a lapse of coverage will be charged for all of the time that they were not covered, as follows: The charge for the time the user was not covered will be prorated based upon the then current list price for Customization Workbench Developer Support. Thus, if the user had a lapse of nine months, they would be charged for the lapsed period at a rate of 9 /12 x the then current list price for Customization Workbench maintenance and developer support. To resume coverage, the user must sign up for at least one full year beyond the lapsed period. Each year will be charged at a rate equal to the then current list price for maintenance and support for the Customization Workbench. Program maintenance and telephone and other support for previous versions of the Customization Workbench may be discontinued by Licensor upon ninety (90) days advance notice. Licensor only provides support and maintenance for the current and immediately prior release of the Customization Workbench. For example, if version 1.3 is the current release, Licensor will provide support and maintenance for version 1.3 and 1.2 and will cease supporting version 1.1 ninety (90) days following the release of version 1.3. If an end user cancels its subscription anytime during a subscription period, no refund, pro-rated or otherwise, will be given. This maintenance and developer support agreement is for one plan, per registered user, for the Customization Workbench. Term The term of the maintenance and developer support plan is one (1) year commencing on the date of the attached License Agreement. 11 SUPPLEMENT TO LICENSE AGREEMENT This Supplement to License Agreement ("Supplement") is made and entered into as of this 28th day of March, 1997 by and between Platinum Software Corporation ("Licensor") and Medicis Pharmaceutical Corporation ("Licensee"). R E C I T A L S A. Licensee and Licensor are entering into a license agreement (the "License Agreement") pursuant to which Licensee will license from Licensor certain software developed by Licensor known as "Platinum(R) SQL." B. Licensor and Licensee desire to amend and supplement the License Agreement as provided herein. NOW THEREFORE, in consideration of the above recitals and the mutual covenants and conditions contained below, Licensor and Licensee hereby agree as follows: 1. The definition of Application Software shall be revised to read as follows: "All modules of the Licensed Software, including upgrades, updates and new versions provided by Licensor, excluding the Customization Workbench." Add "as defined under applicable federal securities laws" to the end of the definition of Affiliate in Section 1. 2. Add the following to the end of the definition of Authorized Users: "but excluding Licensor and its agents." 3. Add the phrase "and use" after the word "install" in the third and sixth lines of Section 2(a). 4. In the first sentence of Section 2(b) delete "as an individual, a personal," and replace with "a." Revise the second sentence of Section 2(b) to read: "If Licensee is an entity, Licensor grants to Licensee the right to designate one individual (which may change from time to time) within Licensee's organization to have the right to use the Customization Workbench." 5. Revise clause (iv) of Section 2(d) to read as follows: "indemnify, hold harmless and defend Licensor from and against any claims or lawsuits including attorneys fees and expenses that arise or result from the use or distribution of Licensee's software application product, excluding any use or distribution by the Licensor;" 6. In Section 4 add the word "reasonable" before the word "shipping" in the second line. 12 7. Revise the third sentence of Section 5(a) to read as follows: "Except for the license granted to Licensee in this Agreement, Licensee acknowledges that no such right, title or interest in these items is granted under this Agreement, and that no such assertion shall be made by Licensee." 8. Licensor and Licensee acknowledge that from time to time Licensee may engage Licensor's professional consultants to make certain modifications to the Licensed Software. Licensee may request that such modifications be done on a confidential basis and that the modifications not be made available to other parties in the same industry as Licensee, and Licensor will assess such request and not unreasonably withhold its agreement to such request. 9. Revise the final line of Section 7(b) to read "ninety (90) days from the date it is installed." Also, add "after installation" at the end of the first sentence in Section 7(b). 10. Add the following to the end of Section 7(a): "and that the Licensed Software will not infringe any United States, Canadian, UK, Australian or New Zealand patent or copyright or similar intellectual property right." 11. In the tenth line of Section 7(c) add "done by Licensee or contractors of Licensee" after the word "system." Add the following to the end of Section 7(d): "Licensor will not provide Licensee Beta Releases for production purposes unless requested by Licensee." 12. In Section 8 revise clause (iii) at the end of this section to read: "failure of Licensee to notify Licensor of the existence and nature of such non-conformity or defect within a reasonable amount of time following its discovery by Licensee or its Authorized Users." Also, add "caused by Licensee or its Authorized Users" after the word Software in the second clause (ii) in Section 8(a). 13. Add the following to the end of Section 8(b): "This Section 8(b) as well as Section 8(c) shall not apply to violations of Section 6 of this Agreement caused by Licensor or its authorized agents. For purposes of clarification, Focus Soft is not an authorized agent of Licensor." In Section 8(c), delete the last three lines and place a period after the word "Software" at the end of the fifth line. 14. Notwithstanding Section 9(a) and Schedule 1 to the Agreement, payment of the maintenance and support fee specified on the Order entitles Licensee to receive the maintenance and support described on Schedule 1 for the period commencing upon the date of this Agreement and ending on June 1, 1998. 15. Notwithstanding the terms of Schedule 1 to the Agreement, after the first period of maintenance and support (through June 1998) the annual maintenance and support fee for subsequent years shall not increase by more than the amount determined by multiplying the previous year's maintenance and support fee by a fraction, the numerator of which is the Consumer Price Index for the month two months prior to the adjustment and the 2 13 denominator of which shall be the Consumer Price Index for the same month for the prior year, plus five percent (5%). So long as Licensee is subscribing for maintenance from Licensor, in no event shall the maintenance fee be reduced below the prior year. The Consumer Price Index to be used is the CPI For All Urban Consumers, - All Items, for the United States, published monthly by the US Department of Labor in which 1982-1984 equals 100. 16. In Section 9(b) delete the word "license" from the end of the ninth line. In addition, delete the following sentence: "Any portion of the Licensed Software replaced by an update or upgrade shall be destroyed." 17. Revise the first two sentences of Section 11(b) to read as follows: "Upon the termination of this Agreement by Licensor pursuant to Section 11(a) above due to an uncured material breach by Licensee, the license granted under this Agreement to use the Licensed Software is immediately revoked. Within ten (10) business days after such termination of this Agreement, Licensee shall return to Licensor all copies of the Licensed Software, and/or updates and Documentation in Licensee's possession, including all copies of the Licensed Software, and/or updates and Documentation under the supervision and control of Licensee and Authorized Users." 18. Add the word "material" before the word "obligations" in the fourth line from the bottom of Section 11(b). Add the following to the end of Section 11(b): "Termination of this Agreement shall not relieve the parties of their confidentiality obligations under Section 6 or their obligation under Section 8." 19. Revise the first sentence of Section 12 to read as follows: "Licensor, at its own expense, will indemnify and defend (including reasonable attorneys fees and expenses) any action brought against Licensee to the extent that it is based on a claim that the Licensed Software or any update of the Licensed Software used within the scope of this Agreement infringes any United States, Canada, United Kingdom, Australia, or New Zealand patent or copyright. Licensee agrees to promptly notify Licensor in writing of any potential infringement claim." 20. In the eleventh line of Section 12 after the word "States" add ", Canada, United Kingdom, Australia or New Zealand". 21. Revise Section 12(ii) to read as follows: "replace or modify the Licensed Software to make it non-infringing without materially affecting the functionality of the Licensed Software." 22. In the twentieth line of Section 12, after the word "election" add "after consultation with Licensee". 23. Revise clause 12(iii) to read as follows: "terminate this Agreement and refund to Licensee the software license fees paid by Licensee to Licensor for the Licensed 3 14 Software." In addition, revise the final sentence of Section 12 to read as follows: "Licensor shall have no other liability or obligation to Licensee for intellectual property infringement except as expressly set forth above." 24. In the third line of Section 13(b) delete "or by facsimile transmission with confirmation". 25. In Section 13(d) delete the word "arisen" and replace with "been discovered." 26. On Schedule 1 under the section headings Maintenance Updates/Upgrades, and Customization Workbench Software Updates/Upgrades add the word "and upgrades" after the word "updates" in the first sentence. In addition, add the following to the end of the final sentence of both of these paragraphs: "as well subsequent versions of the Application Software or a replacement version if Platinum SQL is discontinued and replaced with another product." Under the heading Cost, delete the second sentence and replace with the following: "There is a penalty for lapsed coverage of software maintenance, which penalty will apply only if Licensee elects to allow its software maintenance and support subscription to lapse." 27. Under the heading Standard Developer Support on Schedule 1, delete the third sentence and in the second line after the word "individual" add "at any time". 28. Licensor and Licensee acknowledge that concurrent with Licensee's purchase of the Licensed Software, Licensee is also purchasing certain manufacturing software from Focus Soft, Inc. Licensee will be engaging Licensor's professional consulting staff to assist in the implementation of the Licensed Software. Licensor agrees to serve as the single point of contact for issues on the implementation of both the Licensed Software and the Focus Soft software. Licensor is aware of several customers that have implemented the Licensed Software and the Focus Soft software and used both packages together. In this regard, Licensor is not aware of any material difficulties incurred by such customers in using the Licensed Software and the Focus Soft software together. If Focus Soft fails to perform its obligations to implement the Focus Soft software, Licensor will assist in the implementation of such software on a time and materials basis, and reserves the right to subcontract such services. If Focus Soft fails to provide an integration to subsequent releases of the Licensed Software within six (6) months following the subsequent release, Licensor will assist in completing an interface between the Focus Soft software and the subsequent version of the Licensed Software on a time and materials basis. If Focus Soft fails to provide maintenance and support for the Focus Soft software, Licensor will use its reasonable best efforts to assist Licensee in locating a third party to provide such maintenance and support. 29. Licensor agrees that Licensee may withhold and not pay up to $7,800 of consulting invoices until such time as the implementation project for the Licensed Software is complete. 4 15 IN WITNESS WHEREOF, the undersigned parties have executed this Supplement as of the date first above written. Platinum Software Corporation Medicis Pharmaceutical Corporation By: /s/ Perry Tarnofsky By: /s/ Mark A. Prygocki Sr. -------------------------- ---------------------------- Its: Assistant Secretary Its: Chief Financial Officer ------------------------- --------------------------- Date: March 31, 1997 Date: March 31, 1997 ------------------------ -------------------------- 5 EX-10.87 11 MASTER SOFTWARE LICENSE BTWN COMPANY & FOCUSSOFT 1 Confidential information indicated by [*] is information omitted pursuant to application for confidential treatment and is filed separately with the Commission. EXHIBIT 10.87 Focus Soft, Inc. MASTER SOFTWARE LICENSE (#F-122) This Master Software License Agreement (this "Agreement") is made as of the last date written below, by and between FocusSoft Inc., a corporation having a principal place of business at 304 Whittington Parkway Louisville, Kentucky 40222, USA ("FocusSoft") and Medicis, a corporation having a place of business at 4343 East Camelback Rd, Phoenix, AZ 85018 ("CUSTOMER"). GENERAL TERMS AND CONDITIONS 1. LICENSE GRANTED. Subject to all of the limitations and conditions contained in this Agreement, FocusSoft hereby grants to CUSTOMER a non-transferable and non-exclusive license to (i) use the software system(s) (the "Software System(s)") described in the schedule(s) attached hereto (the "Software Schedule(s)") and any corrections, enhancements, updates and new versions provided by FocusSoft to CUSTOMER under this Agreement, within North America, in the ordinary business activities of CUSTOMER for its internal operations only, on the production computers specified in the Software Schedule(s) at the locations specified in the Software Schedule(s), and (ii) use the system documentation provided by Focus Soft to CUSTOMER in connection with CUSTOMER's permitted use of the Software System(s). This license does not include the right to use the Software System(s) or the system documentation to process the data of any third parties, whether any such third parties are related to CUSTOMER or not. 2. TERM. This Agreement shall remain in effect until terminated pursuant to the provisions of this Agreement. 3. PAYMENT. For each Software System, CUSTOMER shall pay FocusSoft or its agent or designee, license and service fees in accordance with the payment terms specified in the Software Schedule(s). CUSTOMER shall pay FocusSoft, within thirty (30) days of billing by FocusSoft, all charges for travel and out-of-pocket expenses incurred by FocusSoft, in connection with training, maintenance, implementation and support for the Software Systems(s) and, if CUSTOMER elects to continue maintenance for the Software Systems(s), for ongoing maintenance fees. 4. TAXES. CUSTOMER shall pay all taxes or duties, fees and governmental charges, however designated, (including personal property taxes, sales taxes, use taxes and customs duties), but not including any income or corporate excise taxes accessed against Focus Soft, arising from, or based upon, the Software System(s) licensed hereunder, the license fee for the Software System(s), other amounts payable under this Agreement, any services provided under this Agreement or the operation and use of the Software Systems(s). 5. DELIVERY. Within thirty (30) days after the date of this Agreement, or such later date specified in a Software Schedule, FocusSoft will deliver to CUSTOMER the Software System(s) and all related documentation. 2 6. MODIFICATIONS. CUSTOMER may modify the Software Systems(s) only in order to adapt the Software Systems(s) for CUSTOMER's permitted use hereunder, provided, however, FocusSoft maintenance and support and warranty obligations set forth in Paragraphs 10 and 11 shall apply only to the unmodified Software System(s) and to corrections, enhancements, updates and new versions provided by FocusSoft relating thereto. If modifications are made by CUSTOMER that result in Focus Soft being relieved of its obligation to provide maintenance and support services, Focus Soft shall not be required to reimburse CUSTOMER for any prepaid maintenance and support. 7. WARRANTY OF TITLE. FocusSoft represents and warrants that it is the lawful owner or licensee of the Software System(s) and has full legal power and authority to license the Software Systems(s) to CUSTOMER as provided in this Agreement. 8. OWNERSHIP, NON-DISCLOSURE AND COPIES. (a) CUSTOMER acknowledges that the Software System(s); all source code, object code and algorithms relating thereto; all user interface screens generated by the Software System(s); all updates, upgrades modifications and enhancements thereto, provided by FocusSoft, client or third party, any copies of the foregoing, in whole or in part; as well as all copyright, patent, trade secret and other proprietary rights therein, are and shall remain the sole and exclusive confidential property of FocusSoft or Focus Soft licensor. CUSTOMER AGREES THAT IT WILL NOT DISCLOSE OR OTHERWISE MAKE AVAILABLE TO THIRD PARTIES THE SOFTWARE SYSTEMS(S) EXCEPT WHEN SUCH DISCLOSURE IS NECESSARY TO THE CUSTOMER's PERMITTED USE HEREUNDER OF THE SOFTWARE SYSTEMS(S) AND SUCH THIRD PARTY AGREES TO BE BOUND BY THE TERMS CONTAINED IN THIS PARAGRAPH 8. CUSTOMER shall hold as FocusSoft confidential property, and shall further safeguard against disclosure, all copies of the Software System(s) and all other information furnished by FocusSoft to CUSTOMER in connection with the Software System(s), including, but not limited to, all source and object code, all system documentation relating to the Software System(s), and the terms and conditions of this Agreement, in the same manner as it safeguards its own confidential property against disclosure, provided that such safeguards are at least equal to industry standards, and shall take such steps as are reasonably necessary to ensure that the provisions of this Agreement relating to confidentiality and non-disclosure are not violated by any employee, agent or other representative of CUSTOMER. CUSTOMER shall not decompile, disassemble, or reverse engineer any portion of the Software System(s). CUSTOMER shall indemnify and save FocusSoft harmless from any and all damages arising out of or in connection with a breach of this Paragraph 8, including but not limited to the legal fees and disbursements of FocusSoft incurred in connection with any breach or threatened breach of the Paragraph 8. CUSTOMER agrees that if it learns of any breach of the non-disclosure provisions contained herein, it shall, within ten (10) business days of learning of any such breach, notify FocusSoft in writing of the breach, specifying fully the nature and manner of the breach. CUSTOMER further agrees to cooperate fully with FocusSoft in any investigations and legal actions relating to such breach, including legal actions for injunctive or other equitable relief, that FocusSoft may take in order to eliminate and cure the breach. 3 (b) CUSTOMER may not copy the Software Systems(s) without the prior written permission of FocusSoft except (i) to make a copy of any program which is required as an essential step in its utilization or (ii) to make an archival or back-up copy of the Software System(s) and related documentation. CUSTOMER may copy the system documentation provided by FocusSoft to CUSTOMER in connection with CUSTOMER's permitted use of the Software System(s). CUSTOMER shall not alter or remove any FocusSoft or other copyright notice from the Software System(s), the system documentation or any permitted copied thereof. (c) The Source Code Escrow Package may be released from escrow to CUSTOMER, upon the occurrence of one or more of the following "Escrow Release Events", defined as (i) if LICENSOR becomes insolvent or admits insolvency or admits a general inability to pay its debts as they become due; (ii) if LICENSOR files a petition for protection under the Bankruptcy Code of the United States, or an involuntary petition in bankruptcy is filed against LICENSOR and is not dismissed with sixty (60) days thereafter. The current Source Code Escrow holder is Howard S. Strum, Attorney. Any change in holder of the account will be forwarded to CUSTOMER. 9. USE/CHANGE OF LOCATION. CUSTOMER may redesignate the location of the production computers on which the Software System(s) may be used by giving advance written notice to FocusSoft stating the reason(s) for the proposed change of location. The Software Systems(s) may also be used on a back-up computer located at the designated location if the designated computer is inoperative because of (i) a malfunction, (ii) the performance of preventive maintenance or (iii) engineering changes to the designated computer. Any such computer shall be located within North America. 10. MAINTENANCE AND SUPPORT. An initial period of maintenance for the Software Systems(s) as provided in the Software Schedule(s) is included in the license fee. 11. WARRANTY. (a) FocusSoft warrants that, as long as CUSTOMER is on active maintenance for the Software System(s), the Software System(s) will operate in substantial conformity with the Functional Documentation supplied by FocusSoft within the Software System(s) when used in strict compliance therewith. ("Functional Documentation" is the "help text" and/or the "how to" text provided within the Software System(s).) This warranty is contingent upon (a) CUSTOMER's installation of all corrections, enhancements, updates and new versions provided by FocusSoft to CUSTOMER under this Agreement and (b) the absence of damage or abuse to the Software System(s). Notwithstanding the foregoing, CUSTOMER acknowledges that since the Software System(s) is complex and, therefore, may have defects, CUSTOMER's sole and exclusive remedy for any such defects shall be as follows: If the Software System(s) fails to perform as warranted, FocusSoft shall, within a reasonable period of time, provide all reasonable programming services to correct programming errors in the Software System(s) or, at its option, replace the Software System(s). (b) FOCUSSOFT MAKES NO OTHER WARRANTY, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE SYSTEM(S), ITS (THEIR) MERCHANTABILITY OR ITS (THEIR) FITNESS FOR ANY PARTICULAR PURPOSE. FOCUSSOFT SHALL NOT BE LIABLE IN ANY EVENT FOR LOSS OF PROFITS, BUSINESS, USE OR DATA NOR FOR INTERRUPTION OF BUSINESS NOR FOR ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM ANY DEFECT IN THE SOFTWARE SYSTEM(S) OR FROM ITS (THEIR) USE. THE LIMITATIONS ON FOCUSSOFT LIABILITY STATED HEREIN SHALL NOT BE WAIVED OR ALTERED ON ACCOUNT OF FOCUSSOFT PROVIDING OR RENDERING OF TECHNICAL, PROGRAMMING OR OTHER ADVICE OR SERVICE IN CONNECTION WITH THE SOFTWARE SYSTEM(S). SHOULD ANY OF THE FOREGOING DISCLAIMERS BE HELD INVALID, IN WHOLE OR IN PART, FOR ANY REASON, IN NO EVENT SHALL FOCUSSOFT BE LIABLE FOR DAMAGES IN EXCESS OF THE LICENSE FEE(S) ACTUALLY PAID BY CUSTOMER TO FOCUSSOFT. 12. TRANSFER. CUSTOMER shall not, voluntarily, sublicense, sell, assign, give or otherwise transfer the license granted hereunder, or any copies of the Software System(s) or any other information furnished by FocusSoft to CUSTOMER, to any person or entity or permit any person or entity other than CUSTOMER to use the Software System(s). 4 13. TERMINATION (a) FocusSoft may terminate this Agreement and the license to use the Software System(s) granted hereunder by giving written notice to CUSTOMER if CUSTOMER (i) fails to pay any amount due hereunder within thirty (30) days of the date such amount is due, (ii) breaches any of its obligations under Paragraphs 8 or 12; (iii) fails to perform any other material obligation hereunder if such failure has not been cured within thirty (30) days after FocusSoft has given CUSTOMER notice of such failure; or (iv) causes or permits the winding up or liquidation of its affairs, voluntarily, or by order of a court adjudging CUSTOMER bankrupt or insolvent or approving as properly filed a petition seeking reorganization of CUSTOMER. (b) Upon any termination of this Agreement, CUSTOMER shall cease to use the Software System(s) and shall return to FocusSoft the Software System(s) and all copies thereof and all proprietary and confidential property of FocusSoft, including, without limitation, all source code, object code and system documentation. CUSTOMER shall expunge all copies of the source code or object code from its designated single production computer or any other computer containing such codes and shall provide a certificate of an officer of CUSTOMER stating respect to CUSTOMER's failure to comply with the provisions of this Agreement. CUSTOMER agrees that Paragraphs 4, 8, 11, 12, 13 and 15 of this Agreement shall survive any termination of this Agreement and shall remain in full force and effect. 14. ARBITRATION Any dispute relating to the interpretation or performance of this Agreement shall be resolved through binding arbitration conducted in Louisville, Kentucky, in accordance with the then-existing rules of the American Arbitration Association in Accordance with Kentucky law, and judgment upon any arbitration award may be entered by the state or federal court of appropriate jurisdiction. 15. GENERAL. This Agreement, which shall include all schedules and addenda attached hereto, may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Kentucky. This Agreement sets forth the entire understanding between the parties, is binding upon and inures to the benefit of the parties hereto and their respective successors and may be amended only by a written instrument executed by both an officer of FocusSoft and by CUSTOMER. If two or more entities are named herein as CUSTOMER, their obligations shall be joint and several. This Agreement supersedes any and all prior and contemporaneous conversations, understandings and agreements between the parties, including any request for proposal or similar document and any responses thereto, all of which are of no further force and effect, and supersedes the terms of any and all purchase orders or invoices. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof. No claim or action, regardless of form, arising out of this Agreement may be brought by either party more than one (1) year after the cause of action has arisen. EACH PARTY HAS CAUSED THIS AGREEMENT TO BE EXECUTED BY ITS DULY AUTHORIZED OFFICIAL(S). FocusSoft, Inc. Medicis Corporation By: /s/ John V. Lococo By: /s/ Mark A. Prygocki Sr. Name: John V. Lococo Name: Mark A. Prygocki Sr. Title: President Title: Chief Financial Officer Date: April 2, 1997 Date: March 31, 1997 5 MEDICIS ------- SOFTWARE PROPOSAL MARCH 31, 1997 SCHEDULE A CONFIDENTIAL MILLENIA PROPOSAL - ----------------- MILLENIA SOFTWARE - ----------------- Customer Service, Purchasing, Inventory, Manufacturing, Scheduler II, Quality Control, Receiving, Shipping Proposal for [*] users FocusSoft Millenia software ([*] users) $[*] Additional users [*] are [*] each ([*] users) ([*] users [*]) $[*] users [*] are $[*] each ([*] users [*]) $[*] Millenia Tool Kit (front end source code) $[*] -------- TOTAL FOR FOCUSSOFT MILLENIA SOFTWARE $[*] ([*] price for [*] users and Millenia Tool Kit is [*]. The [*] of [*] which provides [*] users at [*], is only valid if the Millenia Tool Kit is purchased and the Software License Agreement is signed by March 31st, 1997.) MILLENIA SERVICES (ESTIMATE) - ---------------------------- Millenia Training [*] hours at $[*] hour $[*] Millenia Project Management [*] hours at $[*] hour $[*] Millenia setup [*] hours at $[*] hour $[*] -------- TOTAL FOCUSSOFT SERVICES (ESTIMATE) $[*] TOTAL FOR FOCUSSOFT SOLUTION (ESTIMATE) $150,500 - --------------------------------------- OPTIONAL - -------- Source Code Escrow Package $[*] - - [*] months period of maintenance on FocusSoft software commencing on the date of delivery of the software is included in the license fee. After the first [*] month period the current annual software maintenance price is [*] percent ([*]) of the software price. - - Price quote includes FocusSoft's standard interface between Millenia and Platinum SQL Server software. An updated interface from FocusSoft will be provided within [*] months of Platinum issuing a new release. The updated interface is included in the [*] maintenance fee. - - Price quote is valid under the condition that the Software License Agreement is signed by March 31, 1997. - - Travel expenses not included. - - Payment terms: [*] with Agreement, [*] net 30 days from Agreement, [*] by June 30, 1997. [FocusSoft, Inc. Logo] *[Confidential Information Extracted] EX-11.1 12 STATEMENTS RE: COMPUTATIONS OF PER SHARE EARNINGS 1 EXHIBIT 11.1 COMPUTATION OF PER SHARE EARNINGS (Thousands except per share amounts)
Three Months Nine Months Ended March 31, Ended March 31, 1997 1996 1997 1996 ------ ------ ------ ------ PRIMARY Average shares outstanding 14,159 10,259 12,843 10,212 Net effect of dilutive stock options - based on the treasury stock method using average market price 991 588 1,007 227 ------ ------ ------ ------ TOTAL 15,150 10,847 13,850 10,439 ------ ------ ------ ------ Net income 4,337 1,759 11,192 3,809 ------ ------ ------ ------ Per share amount $ 0.29 $ 0.16 $ 0.81 $ 0.36 ------ ------ ------ ------ FULLY DILUTED Average shares outstanding 14,159 10,259 12,843 10,212 Net effect of dilutive stock options - based on the treasury stock method using the quarter-end market price, if higher than the average market price 991 588 1,007 567 ------ ------ ------ ------ TOTAL 15,150 10,847 13,850 10,779 ------ ------ ------ ------ Net income 4,337 1,759 11,192 3,809 ------ ------ ------ ------ Per share amount $ 0.29 $ 0.16 $ 0.81 $ 0.35 ------ ------ ------ ------
EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1997, AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1997, AND THE NOTES THERETO, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS AND NOTES. 9-MOS JUN-30-1997 MAR-31-1997 27,823,391 49,167,969 9,661,545 935,000 2,202,418 95,217,214 618,982 180,914 132,155,875 7,955,983 0 0 0 199,175 123,761,854 132,155,875 26,752,138 26,752,138 6,684,535 12,719,122 0 0 (2,657,778) 10,006,259 (1,185,873) 11,192,132 0 0 0 11,192,132 .81 .81
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