-----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, QvBIx/RZuryUrU2MAAAafFI+uLvADwSjWuL7aTrWOEOEWATgFKX5HXdEzLvch4Ii 1ZVmQirbbwT5Z+fRvvqEgg== 0000950130-95-002217.txt : 19951031 0000950130-95-002217.hdr.sgml : 19951031 ACCESSION NUMBER: 0000950130-95-002217 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941001 FILED AS OF DATE: 19951030 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHARMACEUTICAL RESOURCES INC CENTRAL INDEX KEY: 0000878088 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 223122182 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10827 FILM NUMBER: 95585354 BUSINESS ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 BUSINESS PHONE: 9144257100 MAIL ADDRESS: STREET 1: ONE RAM RIDGE ROAD CITY: SPRING VALLEY STATE: NY ZIP: 10977 10-K/A 1 AMENDMENT #3 TO FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10 - K/A3 Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Fiscal Year Ended October 1, 1994 Commission File Number 1-10827 PHARMACEUTICAL RESOURCES, INC. (Exact name of registrant as specified in its charter) NEW JERSEY 22-3122182 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) ONE RAM RIDGE ROAD, SPRING VALLEY, NEW YORK 10977 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (914) 425-7100 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED The New York Stock Exchange, Inc. Common Stock $.01 par value The Pacific Stock Exchange, Inc. --------------------------- -------------------------------- The New York Stock Exchange, Inc. Common Stock Purchase Rights The Pacific Stock Exchange, Inc. ---------------------------- -------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Series A Convertible Preferred Stock, $.0001 par value --------------------------------------------------------------- (Title of Class) 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 twelve 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] $130,772,610 AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF DECEMBER 19, 1994 (ASSUMING SOLELY FOR PURPOSES OF THIS CALCULATION THAT ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ARE "AFFILIATES"). 14,593,395 Number of shares of common stock outstanding as of December 19, 1994 DOCUMENTS INCORPORATED BY REFERENCE PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. ------- ---------------------------------------------------------------- (a)(1)&(2) Financial Statements. See Index to Financial Statements after Signature Page. (a)(3) Exhibits. 3.1 Certificate of Incorporation of the Registrant. (4) 3.1.1 Certificate of Amendment to the Certificate of Incorporation of the Registrant, dated August 6, 1992--incorporated by reference to the Registrant's Registration Statement on Form 8-A (Commission File No. 0-20834), filed with the Commission November 10, 1992. 3.2 By-Laws of the Registrant, as amended and restated. (3) 4 Rights Agreement, dated August 6, 1991, between the Registrant and Midlantic National Bank, as Rights Agent. (5) 4.1 Amendment to Rights Agreement, dated as of April 27, 1992. (3) 10.1 1983 Stock Option Plan of the Registrant, as amended. (2) 10.2 1986 Stock Option Plan of the Registrant, as amended. (2) 10.3 1989 Directors' Stock Option Plan of the Registrant, as amended. (5) 10.4 1989 Employee Stock Purchase Program of the Registrant. (7) 10.5 1990 Stock Incentive Plan of the Registrant, as amended. (2) 10.6 Form of Retirement Plan of Par. (12) 10.6.1 First Amendment to Par's Retirement Plan, dated October 26, 1984. (6) 10.7 Form of Retirement Savings Plan of Par. (12) 10.7.1 Amendment to Par's Retirement Savings Plan, dated July 26, 1984. (13) 10.7.2 Amendment to Par's Retirement Savings Plan, dated November 1, 1984. (13) 10.7.3 Amendment to Par's Retirement Savings Plan, dated September 30, 1985. (13) 10.8 Par Pension Plan, effective October 1, 1984. (4) 10.9 Employment Agreement, dated as of October 4, 1992, among the Registrant, Par and Kenneth I. Sawyer. (1) 10.10 Lease Agreement between Par and the County of Rockland Industrial Development Agency, dated as of October 1, 1984. (6) 10.10.1 Lessee Guaranty between Par and Midlantic National Bank, dated as of October 1, 1984. (6) 10.10.2 Mortgage from County of Rockland Industrial Development Agency to Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13) 10.10.3 Security Agreement between County of Rockland Industrial Development Agency and Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13) 10.11 Term Loan Agreement, dated September 18, 1987, between Midlantic National Bank/North and Par. (11) 10.11.1 Note and Indenture, dated September 18, 1987, between Midlantic National Bank/North and Par. (11) 10.12 Revolving Credit Agreement, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.13 Agreement Concerning Term Loans, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.14 Amendments to Term Note, dated February 20, 1992. (1) 10.15 Lease for premises located at 12 Industrial Avenue, Upper Saddle River, New Jersey, between Par and Charles and Dorothy Horton, dated October 21, 1978 and extension dated September 15, 1983. (12) 10.15.1 Extension of Lease, dated November 8, 1989, between Par and Charles and Dorothy Horton relating to premises at 12 Industrial Avenue, Upper Saddle River, New Jersey. (9) 10.16 Lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as landlord, and Par as tenant. (4) 10.16.1 Amendment by letter dated March 10, 1988 to the lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as lessor and Par as lessee. (10) 10.17 Lease, dated December 15, 1987, between Ram Ridge Estates Corp. as lessor and Par as lessee. (10) 10.18 Standstill Agreements and Irrevocable Proxies, each dated May 29, 1990, between Par and each of Asrar Burney, Dulal Chatterji, and Raja Feroz. (8) 10.19 Agreement of Purchase and Sale, dated June 4, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 10.19.1 Modification of Agreement of Purchase and Sale, dated July 24, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 10.20 Employment Agreement, dated as of April 1, 1993, between Par and Diana L. Sloane. (14) 10.21 Employment Agreement, dated as of May 19, 1993, between the Registrant and Robert I. Edinger. (14) 10.22 Distribution Agreement, dated as of October 16, 1993, between Genpharm, Inc., the Registrant and PRX Distributors, Ltd. (14) 10.23 Agreement, dated as of September 30, 1993, between National Union Fire Insurance Company of Pittsburgh and Par. (14) 10.24 Settlement Agreement and Release, dated as of November 29, 1993, between Mylan Laboratories, Inc., the Registrant, Par and Quad. (14) 10.25 Settlement Agreement and Release, dated as of January 6, 1994, between Minnesota Mining & Manufacturing Company, Riker Laboratories, Inc., the Registrant and Par. (14) 10.26 Settlement Agreement and Release, dated as of December 22, 1993, between United States Trading Corporation, Marvin Sugarman, Liquipharm, Inc., the Registrant and Par. (14) 10.27 Letter Agreement, dated April 30, 1993, between the Generics Group B.V. and Par. 10.28 Distribution Agreement, dated as of February 24, 1994, between Sano Corporation, the Registrant and Par, as amended. 10.29 Mortgage and Security Agreement, dated May 4, 1994, between Urban National Bank and Par. (15) 10.29.1 Mortgage Loan Note, dated May 4, 1994. (15) 10.29.2 Corporate Guarantee, dated May 4, 1994, by the Registrant to Urban National Bank. (15) 10.30 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. 10.31 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. 10.32 Letter Agreement, dated as of October 13, 1994, between Par and Robert I. Edinger. (16) 10.33 Term Loan Agreement, dated as of November 29, 1994, between Midlantic Bank, NA and Par. (16) 10.34 Amended and Restated Revolving Credit Agreement, dated as of November 29, 1994, between Midlantic Bank, NA and Par. (16) 10.34.1 Revolving Loan Note, dated November 29, 1994. (16) 10.35 Amended and Restated Agreement Concerning Term Loans, dated as of November 29, 1994, between Midlantic Bank, NA and Par. (16) 11 Computation of per share data. (16) 21 Subsidiaries of the Registrant. (16) 23 Consent of Richard A. Eisner & Company, LLP. 27 Financial Data Schedule. (16) ---------------------------------- (1) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 3, 1992 and incorporated herein by reference. (2) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 10, 1992 and incorporated herein by reference. (3) Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 1 on Form 8 to the Registrant's Registration Statement on Form 8-B, filed May 15, 1992, and incorporated herein by reference. (4) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended September 28, 1991 and incorporated herein by reference. (5) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 14, 1991 and incorporated herein by reference. (6) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K (Commission File No. 1-9449) for the year ended September 29, 1990 and incorporated herein by reference. (7) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Proxy Statement dated August 16, 1990 and incorporated herein by reference. (8) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Current Report on Form 8-K dated May 29, 1990 and incorporated herein by reference. (9) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1989 and incorporated herein by reference. (10) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1988 and incorporated herein by reference. (11) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (12) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 2- 86614) and incorporated herein by reference. (13) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 33- 4533) and incorporated herein by reference. (14) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrants' Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 2, 1993 and incorporated herein by reference. (15) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Quarterly Report on Form 10-Q (Commission File No. 1-10827) for the quarter ended April 2, 1994 and incorporated herein by reference. (16) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K, as amended (Commission File No. 1-10827), for the year ended October 1, 1994 and incorporated herein by reference. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: October 26, 1994 PHARMACEUTICAL RESOURCES, INC. ------------------------------ (REGISTRANT) By:/s/ Kenneth I. Sawyer ------------------------------- Kenneth I. Sawyer, Director President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Kenneth I. Sawyer President, Chief Executive Officer, - ----------------------- and Chairman of the Board of Directors October 26, 1995 Kenneth I. Sawyer /s/ Robert I. Edinger Vice President, Chief Financial Officer - ----------------------- and Secretary (Principal Accounting and October 26, 1995 Robert I. Edinger Financial Officer) /s/ Mark Auerbach Director October 26, 1995 - ----------------------- Mark Auerbach /s/ Mony Ben-Dor Director October 26, 1995 - ----------------------- Mony Ben-Dor Director - ----------------------- Andrew Maguire /s/ H. Spencer Matthews Director October 26, 1995 - ----------------------- H. Spencer Matthews /s/ Robin O. Motz Director October 26, 1995 - ----------------------- Robin O. Motz Director - ----------------------- Melvin Van Woert
EXHIBIT INDEX
EXHIBIT NO. PAGE NO. 3.1 Certificate of Incorporation of the Registrant. (4) 3.1.1 Certificate of Amendment to the Certificate of Incorporation of the Registrant, dated August 6, 1992--incorporated by reference to the Registrant's Registration Statement on Form 8-A (Commission File No. 0-20834), filed with the Commission November 10, 1992. 3.2 By-Laws of the Registrant, as amended and restated. (3) 4 Rights Agreement, dated August 6, 1991, between the Registrant and Midlantic National Bank, as Rights Agent. (5) 4.1 Amendment to Rights Agreement, dated as of April 27, 1992. (3) 10.1 1983 Stock Option Plan of the Registrant, as amended. (2) 10.2 1986 Stock Option Plan of the Registrant, as amended. (2) 10.3 1989 Directors' Stock Option Plan of the Registrant, as amended. (5) 10.4 1989 Employee Stock Purchase Program of the Registrant. (7) 10.5 1990 Stock Incentive Plan of the Registrant, as amended. (2) 10.6 Form of Retirement Plan of Par. (12) 10.6.1 First Amendment to Par's Retirement Plan, dated October 26, 1984. (6) 10.7 Form of Retirement Savings Plan of Par. (12) 10.7.1 Amendment to Par's Retirement Savings Plan, dated July 26, 1984. (13) 10.7.2 Amendment to Par's Retirement Savings Plan, dated November 1, 1984. (13) 10.7.3 Amendment to Par's Retirement Savings Plan, dated September 30, 1985. (13) 10.8 Par Pension Plan, effective October 1, 1984. (4) 10.9 Employment Agreement, dated as of October 4, 1992, among the Registrant, Par and Kenneth I. Sawyer. (1) 10.10 Lease Agreement between Par and the County of Rockland Industrial Development Agency, dated as of October 1, 1984. (6) 10.10.1 Lessee Guaranty between Par and Midlantic National Bank, dated as of October 1, 1984. (6) 10.10.2 Mortgage from County of Rockland Industrial Development Agency to Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13) 10.10.3 Security Agreement between County of Rockland Industrial Development Agency and Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13) 10.11 Term Loan Agreement, dated September 18, 1987, between Midlantic National Bank/North and Par. (11)
EXHIBIT NO. PAGE NO. 10.11.1 Note and Indenture, dated September 18, 1987, between Midlantic National Bank/North and Par. (11) 10.12 Revolving Credit Agreement, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.13 Agreement Concerning Term Loans, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.14 Amendments to Term Note, dated February 20, 1992. (1) 10.15 Lease for premises located at 12 Industrial Avenue, Upper Saddle River, New Jersey, between Par and Charles and Dorothy Horton, dated October 21, 1978 and extension dated September 15, 1983. (12) 10.15.1 Extension of Lease, dated November 8, 1989, between Par and Charles and Dorothy Horton relating to premises at 12 Industrial Avenue, Upper Saddle River, New Jersey. (9) 10.16 Lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as landlord, and Par as tenant. (4) 10.16.1 Amendment by letter dated March 10, 1988 to the lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as lessor and Par as lessee. (10) 10.17 Lease, dated December 15, 1987, between Ram Ridge Estates Corp. as lessor and Par as lessee. (10) 10.18 Standstill Agreements and Irrevocable Proxies, each dated May 29, 1990, between Par and each of Asrar Burney, Dulal Chatterji, and Raja Feroz. (8) 10.19 Agreement of Purchase and Sale, dated June 4, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 10.19.1 Modification of Agreement of Purchase and Sale, dated July 24, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 10.20 Employment Agreement, dated as of April 1, 1993, between Par and Diana L. Sloane. (14) 10.21 Employment Agreement, dated as of May 19, 1993, between the Registrant and Robert I. Edinger. (14) 10.22 Distribution Agreement, dated as of October 16, 1993, between Genpharm, Inc., the Registrant and PRX Distributors, Ltd. (14) 10.23 Agreement, dated as of September 30, 1993, between National Union Fire Insurance Company of Pittsburgh and Par. (14) 10.24 Settlement Agreement and Release, dated as of November 29, 1993, between Mylan Laboratories, Inc., the Registrant, Par and Quad. (14) 10.25 Settlement Agreement and Release, dated as of January 6, 1994, between Minnesota Mining & Manufacturing Company, Riker Laboratories, Inc., the Registrant and Par. (14)
EXHIBIT NO. PAGE NO. 10.26 Settlement Agreement and Release, dated as of December 22, 1993, between United States Trading Corporation, Marvin Sugarman, Liquipharm, Inc., the Registrant and Par. (14) 10.27 Letter Agreement, dated April 30, 1993, between the Generics Group B.V. and Par. 10.28 Distribution Agreement, dated as of February 24, 1994, between Sano Corporation, the Registrant and Par, as amended. 10.29 Mortgage and Security Agreement, dated May 4, 1994, between Urban National Bank and Par. (15) 10.29.1 Mortgage Loan Note, dated May 4, 1994. (15) 10.29.2 Corporate Guarantee, dated May 4, 1994, by the Registrant to Urban National Bank. (15) 10.30 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. 10.31 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. 10.32 Letter Agreement, dated as of October 13, 1994, between Par and Robert I. Edinger. (16) 10.33 Term Loan Agreement, dated as of November 29, 1994, between Midlantic Bank, NA and Par. (16) 10.34 Amended and Restated Revolving Credit Agreement, dated as of November 29, 1994, between Midlantic Bank, NA and Par. (16) 10.34.1 Revolving Loan Note, dated November 29, 1994. (16) 10.35 Amended and Restated Agreement Concerning Term Loans, dated as of November 29, 1994, between Midlantic Bank, NA and Par. (16) 11 Computation of per share data. (16) 21 Subsidiaries of the Registrant. (16) 23 Consent of Richard A. Eisner & Company, LLP. 27 Financial Data Schedule. (16)
- -------------------------------------------------- (1) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 3, 1992 and incorporated herein by reference. (2) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 10, 1992 and incorporated herein by reference. (3) Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 1 on Form 8 to the Registrant's Registration Statement on Form 8-B, filed May 15, 1992, and incorporated herein by reference. (4) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant'sAnnual Report on Form 10-K (Commission File No. 1-10827) for the year ended September 28, 1991 and incorporated herein by reference. (5) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 14, 1991 and incorporated herein by reference. (6) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K (Commission File No. 1-9449) for the year ended September 29, 1990 and incorporated herein by reference. (7) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Proxy Statement dated August 16, 1990 and incorporated herein by reference. (8) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Current Report on Form 8-K dated May 29, 1990 and incorporated herein by reference. (9) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1989 and incorporated herein by reference. (10) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1988 and incorporated herein by reference. (11) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (12) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 2- 86614) and incorporated herein by reference. (13) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 33- 4533) and incorporated herein by reference. (14) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrants' Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 2, 1993 and incorporated herein by reference. (15) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Quarterly Report on Form 10-Q (Commission File No. 1-10827) for the quarter ended April 2, 1994 and incorporated herein by reference. (16) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K, as amended (Commission File No. 1-10827), for the year ended October 1, 1994 and incorporated herein by reference. EX-10.27 2 LETTER AGREEMENT DATED 4/30/93 EXHIBIT 10.27 CONFIDENTIAL PORTIONS OF THIS EXHIBIT MARKED [ ] HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION THE GENERICS GROUP, B.V. April 30, 1993 Pharmaceutical Resources, Inc. One Ram Ridge Road Spring Valley, New York 10977 Attention: Kenneth Sawyer, President Dear Ken: We are writing to confirm our agreement on the following matters: New Products ------------ The Generics Group B.V. and its affiliates (collectively referred to herein as "Amerpharm") will appoint Pharmaceutical Resources, Inc. and its affiliates (collectively referred to herein as "Par") as its exclusive U.S. distributor for the products listed on Schedule A hereto (collectively the "New Products"). Subject to the following provisions, definitive distribution agreements and related documentation to be entered into in furtherance of this Letter Agreement with respect to the New Products (collectively the "Distribution Agreements") shall be upon substantially the same terms and conditions as those previously executed and delivered in connection with the distribution arrangements between our affiliate, Genpharm, Inc. and Par for Piroxicam and Pindolol (the "Prior Transaction"). Capitalized terms used herein and not defined herein shall have the meanings given the Prior Transaction. While the Distribution Agreements will be executed and delivered in advance, the obligations of the parties thereto thereunder will only become effective (on a product by product basis) upon the appropriate approval letters being issued in respect of ANDAs as filed by Amerpharm in respect of the New Products. With the exception for Product 1 and certain Substantial Customer sales, Gross Profits (as defined in the Prior Transaction) will be allocated [ ]% to Amerpharm and [ ]% to Par (except on Excluded Contracts [as defined in the Prior Transaction] where the allocation will be [ ] and except that the first [ ] million of aggregate Gross Profits from Net Sales of the New Products will be allocated [ ] to Amerpharm and [ ]% to Par). The Distribution Agreements will also provide that if, after the expiry of six months from the initial shipment of a New Product in a commercial quantity to you, you Pharmaceutical Resources, Inc. April 30, 1993 Page 2 have not sold any of that product to a Substantial Customer (as defined below) or Par at any time has received notice or other reasonably reliable information ("Termination Notice") indicating that such Substantial Customer will not reorder a New Product, Amerpharm,a at its option, may give you thirty days (ninety days in the case of a Termination Notice) prior written notice of its intention to sell such New Product to the named Substantial Customer in question, or, as the case may be, have had the Termination Notice rescinded within the notice period, Amerpharm will be free to sell the Product in question to that Substantial Customer directly. In the event Amerpharm shall determine to sell such Product to such Substantial Customer, it shall, in the following order of priority, (i) sell, package and deliver such Product itself directly to such Substantial Customer, (ii) to the extent practicable, put the order from such Substantial Customer through Par (for repackaging and/or distribution or otherwise) or (iii) if Par, in its discretion, refuses or it shall be impracticable for Amerpharm to put such order through Par, sell, package and deliver such Product to such Substantial Party through a third party. In the event of (ii) above, the Gross Profits from such sale will be allocated [ ]% to Amerpharm and [ ]% to Par. In the event of (i) or (iii) above, the Gross Profits from such sale shall be allocated [ ]% to Amerpharm and [ ]% to Par. "Substantial Customer" shall mean any chain, wholesaler or other purchaser having significant combined purchasing power and constituting one of the top 100 generic drug purchasers in the United States. Gross Profits from Net Sales of Product 1 will be allocated [ ]% to Amerpharm, [ ]% to Par until the earlier of two years from the first commercialization of the product by Par and the date that other generic competition commences selling the same product in the market and thereafter Gross Profits will be allocated [ ]% to Amerpharm and [ ]% to Par (subject to the other exceptions herein described). The Distribution Agreements shall contemplate the following Product's Sales Thresholds (as that term is defined in the Prior Transaction) in respect of the following New Products: (a) for Product 1 (i) for the first twelve months ("Year 1") commencing on the Commencement Date, the sum of (A) [ ] multiplied by the number of months ("NonComp Months") during Year 1 for which there is no generic competition plus (B) [ ] multiplied by the number of months ("Comp Months") in Year 1 for which there is generic competition, (ii) for the second twelve months ("Year 2") after the Commencement Date (subject to the following proviso) the sum of (A) [ ] multiplied by the number of NonComp Months in Year 2 plus (B) [ ] multiplied by the number of Comp Months in Year 2,a (iii) for the third twelve months, 80% of the number of Annualized Units (as defined below) sold in the Pharmaceutical Resources, Inc. April 30, 1993 Page 3 preceding twelve months and (iv) for each twelve month period thereafter, 90% of the number of units sold in the preceding twelve months; provided, however, that if any generic competition shall commence in Year 1, the threshold for Year 2 shall be as set forth in (iii) above and the threshold for all succeeding periods as will be set forth in (iii) above and the threshold for all succeeding periods as will be set forth in (iv) above. For purposes hereof, "Annualized Units" shall mean (a) with respect to any twelve month period consisting of only NonComp Months, the number of units sold in such twelve-month period and (b) with respect to any other twelve month period, the number of units which would be required to be sold in such twelve month period in order to meet the applicable threshold therefor if such period consisted solely of Comp Months. (b) for Product 3 (i) [ ] in the first twelve month period commencing on the Commencement Date; (ii) eighty percent of the number of units sold in such initial twelve-month period for the second twelve month period and (iii) for each twelve month period thereafter, ninety percent of the number of units sold in the preceding twelve month period. With respect to the other New Products, the Product Sales Threshold shall be as set forth in (b) above except that the following shall be used for purpose of (b)(i) above: Product 2 [ ] Product 4 [ ] Product 5 [ ] It is understood and agreed that the Distribution Agreement shall provide that Par shall use reasonable efforts to develop a market for and sell the New Products in the United States, such efforts to be at least as good as those used by Par in relation to their other products and that the satisfaction of a Product Sales Threshold in respect of a New Product for a period shall only be a prima facie evidence that Par has satisfied ----------- its obligation to use reasonable efforts, as aforesaid, in respect of such period. The Distribution Agreements shall also contemplate that if a pharmaceutical company carrying on business in the United States (the "Competitor") acquires securities of Pharmaceutical Resources, Inc. or either of its subsidiaries, Para Pharmaceutical, Inc. or PRX Distributors, Ltd., to which are attached more than fifty percent of the votes attaching to all of its outstanding securities having full voting rights under all circumstances, or which otherwise provide it with de -- facto control, or acquires all or substantially all of the operating ----- assets of Par Pharmaceuticals, Inc. and the Competitor or any Pharmaceutical Resources, Inc. April 30, 1993 Page 4 of its affiliates is marketing a product which directly competes with the New Products or any other products which Par is then marketing or is under a commitment to market on behalf of Amerpharm, then, Amerpharm shall have the right to convert Par to a non-exclusive distributor of the affected New Products or products upon terms similar to those in the Prior Transaction for the conversion of Par from an exclusive to a non- exclusive distributor for failure to satisfy a Product Sales Threshold. In the event of any such conversion, Par's obligations with respect to market development and sales of the affected product will be to use reasonable efforts consistent with efforts used in relation to other Par Products, taking into consideration the changed circumstances then obtaining; provided, however, that if Amerpharm, in its discretion, is -------- ------- not satisfied with the results of Par's efforts at any time, it may terminate the agreement with respect to such product on 60 days' written notice. Warrants -------- In consideration of Amerpharm entering into this Letter Agreement and the above-captioned Distribution Agreements in furtherance hereof, Pharmaceutical Resources, Inc., has agreed to grant to Amerpharm a warrant to acquire 150,000 common shares of Pharmaceutical Resources, Inc. at a price equal to $10 per share. The warrant as to 100,000 shares will become vested upon Par achieving aggregate sales of the New Products of $[ ] million and the balance of the shares will become vested when Par's sales of these products reaches $[ ] million. The terms of the warrant will be substantially similar to those contained in the Warrant Agreement which was executed and delivered in connection with the Prior Transaction (the "Warrant Agreement"). The price to Amerpharm for the option shall be the sum of $[ ] which price shall be satisfied by the allocation of Gross Profits on the first $[ ] million of New Products sales (i.e., that Amerpharm has foregone $[ ] of profit by reducing its share of Gross Profits from [ ]% to [ ]% in respect of the first $[ ] million of Gross Profits). Additional Products of Amerpharm -------------------------------- Amerpharm shall have the right to require Par to distribute in the United States on behalf of Amerpharm up to fourteen additional products (the "Additional Products") upon the following terms and the parties shall incorporate the terms herein contemplated and the terms relating to the sharing of profit (as defined below) from Third Party Products and from Captopril as contemplated beloW, into a definitive agreement or agreements (the "Additional Products Agreement") which shall be executed and delivered simultaneously with the Distribution Agreements. Pharmaceutical Resources, Inc. April 30, 1993 Page 5 Within three months from the date hereof, Amerpharm shall deliver to Par a list of up to the fourteen Additional Products, which list shall include only products in solid dosage form, but shall not include the products listed on product list ("List") signed by the parties which List and the Additional Products list the parties agree to keep confidential. At any time prior to the first anniversary of the date on which the Additional Products list is delivered, Amerpharm shall be entitled to replace, from time to time, up to four products in the aggregate named on the Additional Products list (which Amerpharm, acting reasonably, determines to be a problem product) with another product (which again is in solid dosage form and does not appear on the List) and provided Par, at the time of being notified of the proposed substitution, has not commenced in a substantial way (and is continuing diligently) to develop such product nor has it entered into an agreement with a third party to distribute such product on behalf of the third party. The product so substituted shall be treated as an Additional Product (notwithstanding that is was not initially included on the Additional Product list for which it was substituted shall thereupon cease to be an Additional Product. Par will distribute exclusively for Amerpharm (as Amerpharm's exclusive distributor in the United States) the Additional Products upon the same terms as are contemplated above for the New Products (on a [ ] basis, subject to Excluded Contracts and Significant Customer exceptions contemplated above provided that the Product Sales Threshold for each such product shall be established in a manner contemplated below) provided that Amerpharm diligently proceeds to develop, test and obtain regulatory approval of the manufacture, importation and sale thereof in the United States, within time periods specified in the Additional Products Agreement to be executed in furtherance hereof or, failing agreement of the parties as to such time periods, within such reasonable period of time as shall reasonably be required to obtain such approvals having regard to the circumstances and the diligent and good faith efforts made by Amerpharm to obtain same. The Product Sales Threshold for each Additional Product for the first twelve months after the Commencement Date shall be the aggregate of, as applicable: (i) 25% of the total market units (both brand name and generic) of such product sold in the United States for the period within the first twelve months that such Additional Product of Amerpharm is the only generic product being marketed in the United States; (ii) 10% of the total market units (both brand name and generic) of such product sold in the United States for the period within the first twelve months where there are not more than two Pharmaceutical Resources, Inc. April 30, 1993 Page 6 other competitive generic products (including Amerpharm's Additional Product) being marketed in the United States; (iii)5% of the total market units (both brand name and generic) of such product sold in the United States for the period within the first twelve months where there are more than two other competitive generic products (including Amerpharm's Additional Product) but less than 5 being marketed in the United States; (iv) 1% of the total market units (both brand name and generic) of such product sold in the United States for the period within the first twelve months in any case not contemplated in (i), (ii) or (iii) above. Second year thresholds will be 80% of the annualized number of units required to have been sold by Par in the first twelve months on the assumption that the competition which existed in such last month of such twelve month period existed for the entire initial twelve months. For the third year and each succeeding year, the thresholds will be 90% of the number of units sold in the year preceding it. Notwithstanding the foregoing, at the time each Additional product is designated the parties shall consider the particular circumstances then existing with respect to such Additional Product in order to determine whether adjustments should be made to the above thresholds. Third Party Products -------------------- If Amerpharm introduces Par to a third party (for whom Par is not then distributing any products at the time of the introduction and has not distributed a product for such third party within the prior two years) who agrees to use Par for the distribution of a product in the United States and Par, directly or indirectly, enters into an agreement with such third party for the distribution of that product (and/or within two years of such introduction, directly or indirectly, enters into or is negotiating (and subsequently enters into) any other agreement to distribute any other products of such third party) then Par shall split profits earned from the distribution of those products with Amerpharm on a [ ] basis. Once introduced to Par, Amerpharm will not introduce such third party to any other party for marketing the same product in the United States so long as Par is diligently and in good faith negotiating the agreement. For purposes hereof, "profits" shall mean the net revenue of Par from the distribution of products minus, without duplication, (i) Par's direct out-of-pocket costs in connection with the distribution of such products (including, without limitation, acquisition costs (including net duties), royalties, testing, promotion, packaging, labeling, shipping and any other out-of-pocket costs it incurs in connection with the agreement), (ii) a reasonable allowance for over Pharmaceutical Resources, Inc. April 30, 1993 Page 7 head (in an amount to be specified in the agreement with Amerpharm but not to exceed 2% of sales of such products by Par) and (iii) any other payments (not specifically referred to or contemplated above) which it makes to the third party for the product on account of such sales. Joint Products -------------- Par and Amerpharm shall each endeavor, in good faith, to independently develop and file an ANDA seeking regulatory approval to market the products set forth on Schedule B ("Joint Products") hereto in the United States. If Par files and receives an ANDA on a Joint Product prior to any filing by Amerpharm, the parties shall have no further rights or obligations to each other with respect to such Joint Product. If Amerpharm files and receives an ANDA on a Joint Product prior to Par filing, such Joint Product shall be treated as an Additional Product for purposes hereof with profits to be split [ ] to Amerpharm and [ ] to Par. If both parties have filed on a Joint Product, and one receives an ANDA and final FDA marketing clearance ("Clearance"), such Joint Product will be manufactured (by the ANDA and Clearance holder) and marketed by Par under the first issued ANDA and Clearance thereon and the party to whom such ANDA and Clearance is first issued shall receive [ ] of profits thereon and the other party shall receive [ ]. If problems arise with the ANDA in use with respect to a Joint Product as the result of which the parties utilize an ANDA and Clearance issued to the other, the percentage split of profits and manufacturing obligations will reverse. For purposes hereof, "profits" shall mean the net revenue of Par from the distribution of products minus, without duplication, (i) Par's direct out-of-pocket costs in connection with the distribution of such products (including, without limitation, acquisition costs (including net duties), royalties, testing, promotion, packaging, labeling and shipping, (ii) a reasonable allowance for overhead related to distribution (the amount to be specified in the agreement with Amerpharm but not to exceed 2% of sales of such products by Par) and (iii) the fully loaded manufacturing cost for manufacturing the product (which shall be paid to whichever of Par of Amerpharm manufactures the product pursuant to the regulatory approval) determined in accordance with generally accepted accounting principles and the usual business practices of such party, consistently applied. Fixed Price Contracts --------------------- Where Par has entered into a fixed price contract to supply a Amerpharm product for which Amerpharm may be liable for excess re- procurement costs if it fails to deliver the required product and Par fulfills their contract to their customer by sourcing the products from a third party (which sourcing was required because of Amerpharm's inability to deliver the product), any profit (being revenue less out-of-pocket costs and expenses) which Par earns from Pharmaceutical Resources, Inc. April 30, 1993 Page 8 its fulfillment of such contract shall be split [ ] between Par and Amerpharm. Amending Prior Transactions --------------------------- The distribution agreement executed and delivered in respect of the Prior Transactions shall be amended to (i) correct any typographical errors or omissions in such agreement including incorrect cross- references, (ii) to add the provisions herein contemplated for the Fixed Price Contracts, for Substantial Customers and for the right of Amerpharm's affiliate, Genpharm Inc. to convert Par into a non-exclusive distributor upon a pharmaceutical company acquiring the shares or assets of Par as hereinabove contemplated and the parties shall execute and deliver an amending agreement (the "Amending Agreement") amending the terms of the distribution agreement as herein contemplate. * * * It is understood and agreed that the terms of this Letter Agreement shall be legally binding upon us and shall regulate the conduct of negotiations for finalization of the Distribution Agreements, the Warrant Agreement, if applicable, the Additional Products Agreement, if necessary, and the Amending Agreement (collectively, the "Definitive Agreements"). Upon signing this Letter Agreement we shall both negotiate in good faith and as expeditiously as possible the detailed terms of the Definitive Agreements, which shall include the provisions based on the terms outlined in this Letter Agreement. During negotiations for the Definitive Agreements the parties shall conduct business according to the terms of this Letter Agreement to the extent practicable. Each party shall bear its own costs and expenses relating to the negotiation and execution of the Definitive Agreements and shall share the costs of any mediator. Please confirm your agreement with the foregoing by singing and returning to the undersigned the duplicate copy of this letter enclosed herewith. THE GENERICS GROUP B.V. by its authorized signatory Name: /s/ T. Tabatznik ---------------- Title: Director -------------- Pharmaceutical Resources, Inc. April 30, 1993 Page 9 Accepted and Agreed PHARMACEUTICAL RESOURCES, INC. by its authorized officer Name: /s/Kenneth I Sawyer ------------------- Title: President ------------------- Date: May 8, 1993 ------------------- Pharmaceutical Resources, Inc. April 30, 1993 Page 10 SCHEDULE A ---------- New Products ------------ Product ------- [ ] Pharmaceutical Resources, Inc. April 30, 1993 Page 11 SCHEDULE B ---------- [ ] [ ] LIST ---- Re: Letter Agreement dated April 30, 1993, between The Generics Group ----------------------------------------------------------------- B.V. and Pharmaceutical Resources, Inc. (the "Letter Agreement") ---------------------------------------------------------------- The following is the List referred to in the second paragraph under the heading "Additional Products of Amerpharm" on page 4 of the Letter Agreement: 1. [ ] 2. [ ] 3. [ ] 4. [ ] 5. [ ] 6. [ ] 7. [ ] 8. [ ] DATED this 30th day of April, 1993. THE GENERICS GROUP B.V. PHARMACEUTICAL RESOURCES, INC. by its authorized signatory by its authorized officer Name: /s/ T. Tabatznik Name: /s/Kenneth I. Sawyer --------------------------- ------------------------------ Title: Director Title: President and CEO ---------------------------- --------------------------- EX-10.28 3 DISTRIBUTION AGREEMENT DATED 2/24/94 EXHIBIT 10.28 CONFIDENTIAL PORTIONS OF THIS EXHIBIT MARKED [ ] HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION DISTRIBUTION AGREEMENT ---------------------- This Distribution Agreement (the "Agreement") is entered into as of the 24th day of February, 1994 (the "Execution Date") by and among SANO Corporation, a Florida corporation ("SANO"), Pharmaceutical Resources, Inc., a New Jersey corporation ("PRI"), and Par Pharmaceutical, Inc., a New Jersey corporation ("PPI"). WHEREAS, SANO has two transdermal generic drug delivery products in clinical testing, more fully described in Appendix I hereto as Product "A" and Product "B" (the "Licensed Products"); and WHEREAS, SANO has three other transdermal generic drug delivery products at less advanced stages of development and testing, as more fully described in Appendix II hereto, and may develop other transdermal generic drug delivery products during the term of this Agreement (collectively, the "Option Products"); and WHEREAS, SANO desires to implement the program described in Exhibit A with respect to the Licensed Products (the "Development Program"); and WHEREAS, PPI desires to purchase certain rights with respect to the distribution of the Licensed Products and the Option Products, subject to the terms and conditions of this Agreement; NOW, therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I TERMS AND CONDITIONS -------------------- 1.1 Definitions. As used in this Agreement, the following terms ----------- shall have the meaning ascribed to them below: (a) "Affiliate," as to any Person, shall have the meaning set forth in Rule 405 under the Securities Act of 1933. (b) "Costs" shall mean, with respect to production of a Licensed Product, the cost of goods incurred by SANO in the production thereof determined in accordance with generally accepted accounting principles applied on a consistent basis, as determined by SANO's independent certified public accountants; provided, however, that notwithstanding the foregoing, it being the intent of the parties that Costs make SANO whole with respect to all reasonable expenditures related to the Licensed Product, Costs shall include, without limitation, (i) the delivered cost of all ingredients and other raw materials used therein, (ii) a percentage of SANO's overall labor cost equal to the portion which labor hours devoted to the Licensed Product's production bears to total labor hours devoted to all SANO product production, (iii) packaging and other direct manufacturing and quality control costs and (iv) ratably allocated costs of marketing and promotion (if any), product liability insurance and general overhead; provided, further, that, notwithstanding the foregoing, Costs shall not include (i) any cost incurred by SANO in completing the Development Program, (ii) any royalties or similar payments paid or payable by SANO with respect to any Licensed Product, or (iii) any cost specifically related to the distribution of the Licensed Product outside the United States. (c) "Development Program" shall mean all actions, including, without limitation, research conducted as a part of SANO's pre-clinical and clinical activities, which is required or reasonably necessary to obtain all requisite governmental approvals for the testing, manufacture and sale of Licensed Products during the term of this 2 Agreement, in substantial conformity with the program described in Exhibit A. (d) "Exclusive" shall mean, with respect to any right herein granted, that no other party shall have such right, directly or indirectly. (e) "Generic" shall mean, with respect to any drug or product, that such drug or product does not comprise a substance or compound that is covered by a claim under any unexpired U.S. Patent and/or which is not entitled to any period of market exclusivity under the Orphan Drug Act or the Drug Price Competition and Patent Term Restoration Act of 1984 according to 21 U.S.C.A. 355(j)(4)(D)(i)or (ii). (f) "Licensed Product" shall mean any Transdermal Generic Drug Delivery System listed on Exhibit A hereto, or which may become a Licensed Product pursuant to Article XII hereof. (g) "Net Sales" shall have the meaning set forth in Exhibit B hereto. (h) "Person" shall include any individual, corporation, partnership, association, cooperative, joint venture, or any other form of business entity recognized under the law. (i) "Sale" shall mean any action involving selling. 3 (j) "SANO's Technology" shall mean any and all data, information, technology, know-how, process, technique, method, skill, proprietary information, trade secret, development, discovery, and inventions, owned or controlled by SANO and specifically related to a Transdermal Generic Drug Delivery System for the Licensed Products now existing or developed in the future under and during the course of the Development Program or otherwise, as well as information related to the manufacture of Licensed Product(s) and specifications and procedures related thereto. (k) "Sell" shall mean to, directly or indirectly, sell, distribute, supply, solicit or accept orders for, negotiate for the sale or distribution of, or take any other action that is in furtherance of any of the foregoing. (l) "Specifications" shall mean the terms and conditions applicable to the Licensed Product(s) as described in the abbreviated new drug application ("ANDA") approved by the United States Food and Drug Administration (the "FDA") covering the Licensed Product(s), as the same may be supplemented from time to time. (m) "Standard Packaging" shall mean a Licensed Product packaged in individual pouches and in individual folding cartons consisting of pouch units per carton reasonably specified by PPI and containing any labels and labelling required therefor by the FDA and provided in packages that are appropriate for regulatory and marketing purposes, and produced at a SANO facility in the United States, the grade and quality of 4 the labels, labelling and packaging materials being as specified in the ANDA therefor. (n) "Transdermal Generic Drug Delivery System" shall mean a generic version of a branded transdermal adhesive patch. (o) "United States" shall mean the 50 states of the United States of America, plus the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Island, Guam, Samoa and any other territory which, on the Execution Date, is a United States government protectorate wherein an ANDA approved by the FDA is required to sell the Licensed Products in such territory. ARTICLE II REPRESENTATIONS OF SANO ----------------------- 2.1 SANO represents and warrants as follows: 2.1.1 Organization, etc. It is duly organized and validly ------------------ existing under the laws of the State of Florida, has all requisite power and authority to conduct its business as now, and as proposed to be, conducted and to execute, deliver and perform its obligations under this Agreement. This Agreement has been duly authorized, executed and delivered by SANO and represents a valid and binding obligation enforceable against SANO in accordance with its terms. 2.1.2 No Conflicts; Consents. Execution and delivery hereof, ---------------------- or performance by SANO hereunder, will not (a) violate or create a default under (i) SANO's 5 Articles of Incorporation or by-laws (true and correct copies of which have been delivered to PPI), (ii) any mortgage, indenture, agreement, note or other instrument to which it is a party or to which its assets are subject or (iii) any court order or decree or other governmental directive or (b) result in the action of any lien, charge or encumbrance on any material portion of SANO's assets, except as contemplated hereby. 2.1.3 SANO's Technology. SANO's Technology is, to the best ----------------- knowledge of SANO, sufficient to enable SANO to complete the Development Program as contemplated hereby. SANO has received no notice, and is not aware, that any portion of SANO's Technology infringes upon the rights of any other Person. 2.1.4 Development Program. SANO has successfully completed all ------------------- phases of the Development Program scheduled on Exhibit A hereto for completion on or prior to the Execution Date and has no knowledge of any fact or circumstance which is reasonably likely to delay or prevent completion of the Development Program, other than general conditions related to the approval process; SANO does not hereby represent or warrant that the Development Program will be completed in accordance with the schedule set forth in the Development Program, or at all. 2.1.5 Information. All data and other information relating to ----------- SANO and/or the Licensed Products provided by SANO, or its agents, to PPI was derived from SANO's records (which have been diligently, and to the best of SANO's knowledge, accurately maintained in all material respects) and is an accurate copy or summary thereof in all material respects. 2.1.6 Employees. All key employees of SANO have executed --------- appropriate 6 confidentiality agreements with SANO and assignments of intellectual property rights in favor of SANO. All key employees of SANO have executed appropriate non-compete agreements which, by their terms, extend to not earlier than [December 31, 1996]. 2.1.7 SANO represents and warrants to PPI that, to the best of its knowledge, information and belief, it is not prohibited by any federal, state or local law, rule or regulation or by any order, directive or policy of the United States government or any state or local government thereof or any federal, state or local regulatory agency or authority having jurisdiction with respect to the distribution of pharmaceutical products within its territorial jurisdiction from selling the Licensed Products within the territorial jurisdiction of such government, regulatory agency or authority (on the assumption that it holds whatever licenses are required for a foreign corporation to carry on business generally within such jurisdiction) and that SANO is not an Ineligible Person or Person from whom any United States federal, state or local government, regulatory authority or agency which purchases pharmaceutical products (including, without limitation, the federal Defense Logistics Agency) will or may not purchase any products manufactured by it or with whom it will or may not otherwise conduct business as a result its being publicly listed or otherwise (except for the fact that it is a foreign corporation). SANO further represents and warrants that it is not aware of any claims of infringement against the Licensed Products or of any requirement that it obtain licenses to patents or other proprietary rights with respect thereto. SANO shall use its reasonable efforts to have all its employees and, to the extent reasonably practicable, its agents and consultants employed in or for any Development Program, execute written agreements requiring 7 assignment to SANO of any developments, discoveries, improvements and/or inventions in any Licensed Product made by such employees under and during the course of the Development Program. ARTICLE III OBLIGATIONS OF SANO ------------------- 3.1 Level of Effort. SANO shall use its reasonable efforts, --------------- including, without limitation, the employment of a sufficient number of technically qualified officers and employees, to complete the Development Program for each Licensed Product as set forth in Exhibit A. 3.2 Progress Reports. SANO shall, on a monthly basis, by the ---------------- tenth day of each month, inform PPI in writing of the progress of the Development Program and the commencement of any project within the Development Program. 3.3 Program Updates. On a date which shall be approximately three --------------- (3) months after the date hereof, and at three-month intervals thereafter, representatives of SANO and of PPI shall meet to review the progress and status of the Development Program then underway. At such meetings, PPI shall have the right to request the allocation of priorities to the various projects comprising the Development Program and to suggest procedures for their implementation, which requests shall be reasonably considered by SANO. 3.4 Bioavailability Study; Use of Funds. SANO will commence a ----------------------------------- single dose bioavailability study with respect to the relevant Licensed Product promptly upon its 8 receipt of the payments specified in Section 7.1(a)(ii) and Section 7.1(b)(ii), respectively, and shall use such amounts in respect thereof, to the extent necessary. All payments under Section 7.1 will be added to SANO's general funds and will not be specifically set aside for the development of any other product of SANO or to fund costs specific to the distribution of a Licensed Product outside the United States. 3.5 Supply and Use of Information. The parties shall, as promptly ----------------------------- as possible, provide to each other any information that comes to the knowledge of a responsible officer of any party relating to any adverse reaction or other adverse event occasioned during research on, development or use of a Licensed Product. Any provision of information to PPI shall be subject to the confidentiality obligations of Section 14.4. 3.6 Clinical Testing. All pre-clinical, clinical and post- ---------------- clinical testing and stability testing and other actions, including but not limited to completion of the Development Program, required to obtain all requisite government approvals in the United States for the manufacture and sale of each Licensed Product shall be conducted by SANO, at its sole expense. 3.7 Governmental Approvals. SANO shall file all appropriate ---------------------- requests and other filings with the appropriate government agencies within the United States in order to obtain all requisite approvals for the testing, manufacture, sale and use of the Licensed Product(s). The decision regarding the timing of said filings shall be in SANO's sole discretion. SANO shall have full and complete ownership of all governmental approvals relating to Licensed Products. SANO shall provide PPI with appropriate sections of and a right of reference to any application for registration in the United States except with 9 respect to those aspects of any formulation or manufacturing process that is reasonably deemed proprietary by SANO. 3.8 Other Products. SANO shall reasonably apportion or allocate -------------- its resources among its products to accommodate the Development Programs for Licensed Products. 3.9 Title. SANO will protect and defend its rights to all ----- Licensed Products and SANO's Technology, and will indemnify and hold PPI, PRI and their Affiliates, harmless, from and against any claims of infringement or other claim that SANO is not the owner thereof. 3.10 Subsidiaries and Affiliates. SANO will cause its subsidiaries --------------------------- and affiliates to comply with the restrictions and limitations imposed on SANO hereunder with respect to Licensed Products and Option Products. ARTICLE IV EXCLUSIVE DISTRIBUTOR --------------------- 4.1 Subject to the provisions of this Agreement, SANO hereby appoints PPI as the exclusive distributor of the Licensed Products for the United States and PPI hereby accepts such appointment and agrees to act as such exclusive distributor. The rights and licenses granted to PPI under this Agreement shall henceforth be referred to as "the Right." PPI acknowledges that it has no rights with respect to SANO's Technology or the Licensed Products, except for the distribution rights with respect to the Licensed Products as herein described. 4.2 SANO covenants and agrees that, during the term of this Agreement or until the Right (or its exclusive nature) is terminated in accordance with the provisions hereof: 10 4.2.1 SANO will refer to PPI all inquiries concerning potential purchases of Licensed Products received by it from Persons located in the United States or from Persons outside the United States if SANO knows or reasonably suspects that such Person intends to resell or export the Licensed Product to the United States; 4.2.2 SANO will not, directly or indirectly, knowingly sell any Licensed Product in the United States nor to any Person outside of the United States if SANO reasonably expects that such Person intends to resell or export the Licensed Product to the United States and, if notified by PPI that one of SANO's customers is selling the Licensed Product in the United States in any material respect, SANO shall either cease to supply such customer or obtain (and enforce, if necessary) an undertaking from such customer not to sell the Licensed Product in the United States (unless SANO is precluded from taking such action under applicable law). PPI acknowledges that SANO will use reasonable efforts to prevent the sale of Licensed Products in United States by Persons other than PPI, but shall not be held responsible if, despite such efforts, it is unsuccessful in so doing (subject to its obligations above to cease to supply or to obtain and enforce the undertaking as and to the extent contemplated above). 4.2.3 PPI shall not, and shall not authorize, permit or suffer any of its Affiliates to, purchase any Transdermal Generic Drug Delivery System which has the same strength, contains the same active ingredient and is for the same indication as, and is competitive with, any of the Licensed Products (a "Competitive Product") for distribution, sale or use in the United States from any Person other than SANO. PPI shall not, and shall not authorize, permit or suffer any of its Affiliates to, seek regulatory 11 approval in the United States for any Competitive Product or to, directly or indirectly, manufacture, sell, handle, distribute or be financially interested (except as a stockholder with not greater than a 5% interest in a public company) in the sales of such products within the United States for its own account or for the account of any other Person as agent, distributor or otherwise. The foregoing shall not apply to a Licensed Product that is not then available from SANO for commercial sale by PPI and is substantially behind the schedule set forth in the relevant Development Program. Notwithstanding the foregoing, if PPI or PRI becomes an Affiliate of an entity (the "Merger Partner") as a result of a merger, acquisition, or other similar extraordinary corporate transaction, and such Merger Partner is engaged in the manufacture or distribution of a Competitive Product that PPI is then distributing pursuant to the provisions of this Agreement, PPI shall so notify SANO and shall offer (the "Offer") to sell, assign and transfer to SANO the Right with respect to the Licensed Product with which such Competitive Product is competitive in exchange for an amount equal to the Licensed Product Fee (as hereinafter defined) for such Licensed Product. If, within thirty (30) days after its receipt of the Offer, SANO accepts the Offer, SANO shall, within fifteen (15) days of such acceptance, deliver to PPI, against delivery of appropriate instruments of release and transfer, its promissory note in form and substance reasonably acceptable to PPI, payable to the order of PPI, in the principal amount of the Licensed Product Fee, bearing interest at the prime rate of Citibank, N.A., as announced from time to time at its offices in New York City (the "Prime Rate"), with interest and principal payable on the first anniversary of the date of delivery of such note. From and 12 after the date of delivery of such note, PPI shall have no rights with respect to the relevant Licensed Product and SANO shall be free to grant any rights related thereto to a third party or to retain such rights for itself. If SANO declines to accept the Offer or fails to accept the Offer within the aforesaid 30-day period, this Agreement shall remain in full force and effect, except that the provisions of this Section 4.2.3 shall not apply to the Competitive Product. PPI shall have no rights with respect to an Option Product as to which a Merger Partner has a Competitive Product. PPI shall notify SANO promptly if any Merger Partner has a Competitive Product with respect to an Option Product. 4.2.4 PPI shall not, and shall not authorize, permit or suffer any of its Affiliates to, directly or indirectly, sell any Licensed Product to any Person outside of the United States, nor to any Person in the United States if PPI or any of its Affiliates reasonably expects that such Person intends, directly or indirectly, to sell or export the Licensed Product outside of the United States. If PPI is notified by SANO that one of its customers or a customer of PPI or any of its Affiliates is exporting the Licensed Product out of the United States in any material respect PPI shall (or shall cause its Affiliates to) either cease to supply such customer or obtain (and enforce, if necessary) an undertaking from such customer not to sell the Product outside of the United States (unless PPI or any such Affiliate is precluded from taking such action under applicable law). SANO acknowledges that PPI will use (and will cause its Affiliates to use) reasonable efforts to prevent its customers from exporting any Licensed Product out of the United States but shall not be held responsible if, despite such efforts, it is 13 unsuccessful in so doing (subject to its obligations above to cease to supply or to obtain and enforce the undertaking as and to the extent contemplated above). 4.2.5 PPI shall refer to SANO any inquiry or order for Licensed Products which PPI or any of its Affiliates may receive from any Person located outside of the United States and from any Person located in the United States where PPI or any of its Affiliates knows or has reason to suspect that such Person intends to export the Licensed Products outside of the United States. 4.2.6 The parties acknowledge, agree and declare that the relationship hereby established between PPI and SANO is solely that of buyer and seller, that each is an independent contractor engaged in the operation of its own respective business, that neither party shall be considered to be the agent of the other party for any purpose whatsoever, except as otherwise expressly indicated in this Agreement, and that, except as otherwise expressly indicated in this Agreement, neither party has any authority to enter into any contract, assume any obligations or make any warranties or representations on behalf of the other party. Nothing in this Agreement shall be construed to establish a partnership or joint venture relationship between or among the parties. ARTICLE V REPRESENTATIONS OF PPI AND PRI; OBLIGATIONS ------------------------------------------- 5.1 PPI and PRI represent and warrant as follows: 5.1.1 Organization, etc. They are duly organized and validly ------------------ existing under the laws of the State of New Jersey, have all requisite power and authority to 14 conduct their business as now and as proposed to be conducted and to execute, deliver and perform their obligations under this Agreement. This Agreement has been duly authorized, executed and delivered by PPI and PRI and represents a valid and binding obligation enforceable against PPI and PRI in accordance with its terms. 5.1.2 No Conflicts; Consents. Execution and delivery hereof, ---------------------- or performance by either PPI or PRI hereunder, will not (a) violate or create a default under (i) PPI's and PRI's Certificates of Incorporation or by-laws (true and correct copies of which have been delivered to SANO), (ii) any mortgage, indenture, agreement, note or other instruments to which either is a party or by which either's assets are subject or (iii) any court order or decree or other governmental direction or (b) result in the action of any lien, charge or encumbrance or any material portion of PPI's and PRI's assets. 5.1.3 Information. All data and other information relating to ----------- PPI and PRI provided to SANO by PPI and PRI, or their agents, was derived from PPI's and PRI's records (which have been diligently maintained) and is an accurate copy or summary thereof in all material respects. 5.1.4 Sufficiency. PPI maintains and agrees that it will ----------- continue to maintain those places of business and equipment to be used in storing and shipping the Licensed Products in accordance with Current Good Manufacturing Practices of the FDA and all other applicable requirements of the FDA (as the same may be modified from time to time). PPI hereby further represents and warrants that it currently has and/or has available to it and maintains and agrees to continue to have and/or to have available to it and maintain an adequate marketing organization and qualified sales persons to 15 promote the sale of the Licensed Products in the United States. 5.2 PPI shall purchase the Products from SANO as contemplated in Section 6.1 hereof. 5.3 PPI will use its reasonable efforts (utilizing its marketing, distribution and management systems and those of its Affiliates) to develop a market for and sell the Licensed Products in the United States, such efforts to be not less rigorous than those efforts used by PPI in relation to its leading or principal products. PPI shall devote particular attention to the marketing and sale of the Licensed Products and shall use its resources in a way it deems most effective in promoting the Licensed Products given market conditions. SANO shall not engage in marketing and promotion of the Licensed Products unless reasonably requested to do so by PPI. 5.4 PPI shall have sole discretion in setting the sales price for the sale of the Licensed Products, provided that PPI shall not specifically discount the price of the Licensed Products for the benefit of PPI or any of its Affiliates' other products or to otherwise use the Licensed Products as a loss leader or incentive to procure the sale of PPI's or any of its Affiliates' other products. Rebate and other discount programs (excluding any program where the price of the Licensed Products are discounted primarily for the benefit of enhancing the sale of PPI's or any of its Affiliates' other products) generally available to PPI's customers on the purchase of pharmaceutical products shall not be prohibited by this Section 5.4, provided that such programs shall be in accordance with industry standards for comparable products and shall be designed to promote the sale of the Licensed Products and not other products. 16 5.5 PPI shall comply with all applicable laws, rules and regulations relating to transporting, storing, advertising, promoting and selling of the Licensed Products within the United States and shall assume sole responsibility for all credit risks and collection of receivables with respect to Licensed Products sold by it and its Affiliates, and, except as expressly provided herein, in respect of all dealings between itself (and its Affiliates) and its (and their) customers. 5.6 PPI shall notify SANO promptly upon becoming aware of any adverse information relating to the safety or effectiveness of a Licensed Product and shall consult from time to time with regard to competition or potentially competitive products. 5.7 PPI hereby further represents and warrants to SANO that, to the best of its knowledge, information and belief, neither it nor any of its Affiliates is prohibited by any federal, state or local law, rule or regulation or by any order, directive or policy of the United States government or any state or local government thereof or any federal, state or local regulatory agency or authority having jurisdiction with respect to the distribution of pharmaceutical products within its territorial jurisdiction from selling the Licensed Products within the territorial jurisdiction of such government, regulatory agency or authority and that neither PPI nor any of its Affiliates is a Person who, by public notice, is listed by a United States federal agency as debarred, suspended, proposed for debarment or otherwise ineligible for federal programs in the United States (an "Ineligible Person") or Person from whom any United States federal, state or local government, regulatory authority or agency which purchases pharmaceutical products (including, without limitation, the federal Defense Logistics Agency) will or may not 17 purchase any products or with whom it will or may not otherwise conduct business as a result of any of its Affiliates or PPI being publicly listed or otherwise. 5.8 PPI shall consult with SANO from time to time with respect to opportunities of which it becomes aware for the development of transdermal applications for generic or proprietary drugs or of opportunities for the development of ingredients in transdermal form. In the event that PPI or its Affiliates intend to engage in the development of a transdermal product, PPI or such Affiliate shall afford SANO the opportunity to participate in such development, shall negotiate with SANO on the terms of such participation, and shall not enter into an agreement with any other manufacturer of transdermal delivery systems without offering SANO the right of first refusal in accordance with the following procedure: PPI shall notify SANO of the material terms and conditions on which it proposes to enter into such agreement. Within 30 days of its receipt of such notice, SANO shall notify PPI whether it wishes to enter into such an agreement on such terms and conditions. If SANO notifies PPI within such 30 days that it does wish to enter into such an agreement, PPI and SANO shall prepare and enter into a definitive agreement on substantially the terms and conditions set forth in the notice. If SANO fails to so notify PPI within such 30 days, PPI may enter into such an agreement with a third party on substantially the terms and conditions set forth in the notice. The foregoing shall not be deemed to require PPI (i) to divulge confidential information of other manufacturers, (ii) to disclose to SANO the contents of confidential proposals made to PPI by other Persons, or (iii) to refrain from dealing with manufacturers of transdermal delivery systems under development by such manufacturers that are not a 18 Competitive Product with respect to any Licensed Product or Option Products under active development. ARTICLE VI DELIVERY -------- 6.1 Licensed Products shall be made available to PRI for pickup ready for shipment in Standard Packaging, or as otherwise permitted by the FDA, at SANO's facilities located in Plantation, Florida, or such other facilities in the continental United States as SANO may utilize with the consent of PPI, which consent shall not be unreasonably withheld or delayed, and SANO shall use its reasonable efforts to make available to PPI sufficient quantities of the Licensed Products to satisfy orders for the Licensed Products. SANO shall be solely responsible for the contents of the labels and artwork on all finished labelled products sold by PRI and its Affiliates. SANO shall provide all Standard Packaging for the Licensed Products. 6.2 To assist SANO in scheduling production for the manufacture of the Licensed Products, PPI shall provide to SANO, quarterly, a nine month rolling forecast of its requirements for a Licensed Product. The first forecast shall be provided by PPI to SANO approximately six months prior to the anticipated market launch of a Licensed Product, as reasonably estimated by the parties, and thereafter shall be provided to SANO on or before the 20th day of the first month of each successive quarterly period (to forecast the requirements for the next nine succeeding calendar months). It is understood and agreed that all forecasts are estimates only and PPI shall only be bound 19 to purchase the Licensed Products pursuant to purchase orders submitted by it to SANO. All purchase orders shall be for minimum batch size quantities reasonably agreed by the parties and shall anticipate an order/production/availability cycle of approximately twelve weeks during the first two contract years (as defined below) of this Agreement and an order/production/availability cycle of approximately sixteen weeks thereafter. 6.3 PPI shall arrange for shipping and/or transportation of the Licensed Products from SANO's facility to PPI's Spring Valley, New York facility and pay all shipping and related costs. Risk of loss and title to the Licensed Product(s) shall pass to PPI upon pick-up of the Licensed Products by, on behalf of or for the account of PPI at SANO's facility. 6.3.1 SANO shall promptly notify PPI by both fax and telephone that any order (or part thereof acceptable to PPI) is available for pick- up at SANO (this notice shall hereafter be referred to as the "Availability Notice"). 6.3.2 PPI shall use reasonable and good faith efforts to pick up the Licensed Products that are the subject of an Availability Notice within ten (10) business days of receipt of the Availability Notice; provided that, if such pickup has not occurred on or prior to the expiry of such ten day period, PPI shall, for purposes of its payment obligations to SANO pursuant to Section 7.2 below, be deemed to have picked up the Licensed Products which are the subject of the Availability Notice on the last business day of such ten-day period. If the Licensed Products in question have not been picked up by or on behalf of PPI within twenty business days of an Availability Notice, SANO may, but shall not be obligated to, cause the Licensed Products to be delivered to PPI's 20 Spring Valley, New York, facility by truck or other overland delivery at PPI's sole cost and expense and risk of loss and title to the Products shall pass to PPI upon pickup of the Products at SANO's facility in the same manner as if the pickup had been effected by PPI itself, provided that SANO shall provide for the Licensed Products to be insured during transit in a commercially reasonable manner at PPI's sole cost and expense. ARTICLE VII FEE PRICE AND PAYMENT TERMS --------------------------- 7.1 Initial Fee Payment. As consideration for the rights herein ------------------- granted, in addition to all payments hereinafter described, PRI shall pay to SANO a fee (each, a "Licensed Product Fee") of [ ] for each of the Licensed Products listed in Appendix I hereto, payable by wire transfer or certified check, as follows: (a) PRODUCT "A" - (i) [ ] upon execution of this Agreement. - (ii) [ ] within seven days after receipt of notice from SANO that it is prepared to commence a single- dose bioavailability study. (b) PRODUCT "B" - (i) [ ] upon execution of this Agreement. - (ii) [ ] within seven days after receipt of notice from SANO that it is prepared to commence a single- dose bioavailability study. 7.2 Price. The price to PRI for each order, or part thereof ----- acceptable to PRI as contemplated in Section 8.2(d), of Licensed Products made available to PRI hereunder shall be SANO's Costs related to such order or part thereof. PPI shall also pay to SANO 21 any applicable federal or state sales or excise tax payable on the purchase of such Licensed Products, which payment shall be remitted with the payment of the price as contemplated in Section 7.3 below and upon payment thereof by PPI to SANO, SANO shall be solely responsible for remitting the amount so paid on account of such taxes to the relevant governmental collecting authorities. Promptly upon PPI's request, SANO shall provide PPI with reasonable evidence of such direct costs and applicable taxes and payment of such taxes. 7.3 Payment Terms. Payment for each order of Licensed Products ------------- made available by SANO for pick-up by PPI shall be due within 35 days of pick-up (whether actual or deemed pursuant to Section 6.3.2) by PPI at SANO's facility. ARTICLE VIII PRODUCT ACCEPTANCE ------------------ 8.1 SANO shall manufacture the Licensed Products and make them available for pickup by PPI in accordance with all applicable laws, rules and regulations including, without limitation, the Specifications applicable to the Licensed Product in question, Current Good Manufacturing Practices of the FDA (as the same may change from time to time) and all other applicable requirements of the FDA and other governmental authorities having jurisdiction. 8.2 All Licensed Products made available for pick up by PPI shall be accompanied by quality control certificates of analysis signed by a duly authorized laboratory official of SANO confirming that each batch of Licensed Product covered by such 22 certificate meets its release Specifications and shall be deemed accepted by it unless PPI, acting reasonably and in good faith, shall give written notice of rejection (hereafter referred to as a "Rejection Notice") to SANO within 35 days after pick up of the Licensed Products by, on behalf of or for the account of PPI at SANO's facility. (a) The Rejection Notice shall state in reasonable detail (sufficient to enable SANO to identify the nature of the problem and the tests or studies to be conducted by or on its behalf to confirm or dispute same) the reason why the Licensed Products are not acceptable to PPI. If the Licensed Products meet the applicable provisions of Section 8.1 and are in quantities specified in a purchase order, PPI shall not be entitled to reject them. Any Rejection Notice shall be accompanied by copies of all written reports relating to tests, studies or investigations performed to that date by or for PPI on the Licensed Product batch rejected. (b) Upon receipt of such Rejection Notice, SANO may require PPI to return the rejected Licensed Products or samples thereof to SANO for further testing, in which event such Licensed Products or samples thereof, as the case may be, shall be returned by PPI to SANO or at SANO's direction at SANO's expense. If it is later determined by the parties or by an independent laboratory or consultant that PPI was not justified in rejecting the Licensed Products or that PPI or its Affiliates were the cause of or were responsible for the problem, PPI shall reimburse SANO for the costs of the return, as well as any other costs or expenses incurred by SANO as a result of the rejection or return. (c) PPI's test results or basis for rejection shall be conclusive unless 23 SANO notifies PPI, within 30 days of receipt by SANO of the rejected Licensed Products or samples or such longer periods of time as may be reasonable in the circumstances to enable SANO to conduct (and receive the results of) the appropriate tests, studies or investigations which SANO should reasonably conduct to confirm the problem in question and to identify the source thereof, that it disagrees with such test results or its responsibility for the problem in question. In the event of such a notice by SANO, representative samples of the batch of the Licensed Product in question shall be submitted to a mutually acceptable independent laboratory or consultant (if not a laboratory analysis issue) for analysis or review, the costs of which shall be paid by the party that is determined by the independent laboratory or consultant to have been responsible for the rejection. (d) If a Licensed Product is rejected by PPI, PPI's duty to pay the amount payable to SANO pursuant to Section 7.2 hereof in respect of the rejected Licensed Product shall be suspended until such time as it is determined (I) by an independent laboratory or consultant that the Licensed Product in question should not have been rejected by PPI or (II) by the parties or by any arbitration conducted pursuant hereto or by a final order of a court of competent jurisdiction (which is not subject to further appeal) that any act or omission of, on behalf of or for which PPI or its Affiliates is responsible was the cause of the problem that was the basis for the rejection. If only a portion of an order is rejected, only the duty to pay the amount allocable to such portion shall be suspended. 8.3 In the event any Licensed Products are appropriately rejected by PPI (being 24 Licensed Products that do not meet the applicable provisions of Section 8.1 other than as a result of any act or omission by PPI or its Affiliates), SANO shall replace such Licensed Products with conforming goods or, if requested by PPI, shall provide a credit to PPI for the amount, if any, previously paid by PPI to SANO on account of the Licensed Products in question. The credit shall be provided by SANO to PPI immediately following the expiry of the period during which SANO may dispute a Rejection Notice as contemplated in Section 8.2(c) above (unless the Rejection Notice is disputed by SANO, in which event such credit shall be given only if the dispute is resolved in favor of PPI). Replacement Licensed Products, as aforesaid, shall be delivered to PPI at no cost to PPI if PPI has already paid for the rejected Licensed Products and not received a credit therefor, as aforesaid. All delivery costs, including insurance, incident to the return of Licensed Products to SANO and delivery of the replacement Licensed Products to PPI's Spring Valley facility shall be paid by SANO, unless the rejection is determined not to have been appropriately rejected, in which case the last sentence of Section 8.2(a) shall apply. ARTICLE IX RETURNS AND ALLOWANCES ---------------------- 9.1 Returns. If PPI, acting reasonably and in good faith, accepts ------- from a customer a return of a Licensed Product and issues to such customer a credit for the invoice price thereof, PPI may debit against the amount of Additional Consideration, as hereinafter defined, due to SANO with respect to Net Sales, as hereinafter defined, in 25 the month in which such return occurs, any Gross Profit, as hereinafter defined, previously paid, credited or due to SANO in respect of the sale of such returned Licensed Product. 9.2 Handling of Returns. ------------------- (a) In the event any Licensed Product is returned to PPI by its customers because the Licensed Product is alleged to be defective and PPI reasonably believes that such defect is due to the fault of SANO, PPI shall notify SANO within ten (10) working days of any such return and provide or make available to SANO such samples (if available) and other information concerning the returned Licensed Product so as to allow SANO to test and evaluate the allegedly defective Licensed Product. PPI shall retain a sufficient number of samples of the allegedly defective Licensed Product so that additional samples are available at a later date should additional testing be required by an independent testing laboratory as described in Section 9.2(b) below, or by PPI or SANO for their own purposes. If not enough samples exist to be so divided, then the parties shall confer and reach agreement as to the handling of any available samples. (b) SANO shall complete its review and evaluation of the returned Licensed Product within twenty (20) business days of receiving the returned Licensed Product from PPI or such longer period of time as may be reasonable in the circumstances to enable SANO to conduct or cause to be conducted such tests, studies or investigations (and to receive the results therefrom) as may be required to confirm or dispute the existence of the problem or to identify the cause or source thereof. 9.3 Costs and Credits. ----------------- 26 (a) If SANO concludes or it is otherwise determined pursuant to Section 9.3(b) hereof that the returned Licensed Product is defective due to the fault of SANO: (i) any replacement Licensed Product to be provided by SANO in respect of the returned Licensed Product shall be made available to PPI without charge or appropriate credit shall be given therefor (giving account to any adjustment made pursuant to Section 9.1 hereof); (ii) all delivery costs, including insurance, incident to the delivery of the replacement Licensed Products to PPI's Spring Valley facility shall be paid by SANO or appropriate credit shall be given therefor; and (iii) SANO shall provide a credit to PPI for the reasonable costs incurred by PPI (or where the duty has been performed by an Affiliate, pursuant to the provisions of this Agreement, for the reasonable costs incurred by such Affiliate) in respect of the defective Licensed Product. (b) If SANO asserts that the returned Licensed Product is defective due primarily to any act or omission of PPI or its Affiliates or any agents or other persons acting on their behalf as aforesaid, then representative samples of the Licensed Products shall be submitted to a mutually acceptable independent laboratory or consultant (if not a laboratory analysis issue) for analysis or review, the costs of which shall be paid by the party determined by the independent laboratory or consultant to have been responsible. (c) If it is determined in accordance with Section 9.3(b) above that any such defect is primarily due to any act or omission by PPI, then no credit or other 27 payment of costs shall be due from SANO, and PPI shall reimburse SANO for all costs and expenses it incurred in connection with the return and investigation. (d) If it is determined in accordance with Section 9.3(b) above that no such defect exists or, if existing, cannot be attributable primarily to an act or omission of either party, then any replacement Licensed Product in respect of the returned Licensed Product shall be made available to PPI without additional charge or appropriate credit, if any, shall be given therefor, but no other credits or payments of costs shall be due from SANO. 9.4 PPI acknowledges that the Licensed Products may be of a perishable nature and that the Licensed Product must be stored and shipped in accordance with the Specifications applicable thereto (to the extent disclosed in writing to PPI or its Affiliates) or the conditions, if any, set forth on its package label. 9.5 PPI agrees to notify SANO of any customer complaints with respect to the quality, nature or integrity of a Licensed Product or alleged adverse-drug experiences ("ADE") within five (5) working days of their receipt by PPI and of any PPI or FDA complaints within 24 hours, except on weekends and holidays. SANO shall have the sole and primary obligation to file any required adverse experience report with FDA. SANO shall also be responsible for maintaining complaint files as required by FDA regulations. SANO agrees to investigate and respond in writing to any complaint or ADE forwarded to it by PPI promptly and in no event later than 30 days after receipt of the ADE or complaint from PPI (or such longer period as may be required in the circumstances to enable SANO to conduct such tests, studies or investigations as may be reasonably 28 required [and to receive the results therefrom] to enable SANO to appropriately respond). SANO shall provide PPI with a copy of any correspondence, reports, or other documents relating to a complaint or ADE within a reasonable period following generation of such document by SANO. 9.6 The provisions of this Article 9 shall survive the termination or expiration of this Agreement. ARTICLE X DAMAGES, INDEMNIFICATION AND INSURANCE -------------------------------------- 10.1 Subject to the limitations set forth in this Article X and to the other provisions of this Agreement, SANO, on the one hand, and PPI, on the other hand, covenant and agree to indemnify and save harmless the other of them from and against any and all claims, demands, actions, causes of action, suits, proceedings, judgments, damages, expenses (including reasonable attorney fees and expenses), losses, fines, penalties and other similar assessments (the "Damages") relating to or arising out of a breach by any such party of any of its representations, warranties, covenants or agreements contained herein; provided that, except where the breach arises out of a representation or warranty made by a party in this Agreement being intentionally false or inaccurate, or constitutes a wilful material breach by a party of any of its duties or obligations hereunder, the claim of an aggrieved party for Damages arising out of the breach shall be limited to claiming the amounts owing or payable to it in accordance with the provisions of this Agreement and any out-of-pocket costs and expenses (including 29 amounts paid or payable by it to third parties, other than re-procurement costs [except to the extent contemplated in Section 14.3 hereof] which it has incurred and the aggrieved party shall not be entitled to recover from the defaulting or breaching party any lost profits or consequential or punitive damages, including loss or damage to its goodwill or reputation. For purposes of this Agreement where PPI is in breach of its duties or obligations hereunder and such duties or obligations, if delegated by PPI to any of its Affiliates, could reasonably be performed by such Affiliate and PPI has either not delegated such duty or obligation to such Affiliate or such Affiliate has either refused to perform or wilfully breached such duty or obligation then PPI shall be deemed to have wilfully breached such duty or obligation hereunder. Similarly, whenever in this Agreement PPI is required to cause any of its respective Affiliates to do or to refrain from doing any thing herein provided and such Affiliate refuses to do or refrain from doing such thing or otherwise willfully breaches the provision herein contemplated (on the assumption that such Affiliate were bound by the provision herein contemplated as if a signatory hereto) then PPI will be deemed to have willfully breached the provision of this Agreement in question. 10.2 In the event that the release of a Licensed Product by PPI or its Affiliates in the United States results in a third party claim: (a) to the extent that the Damages awarded or incurred relate to or arise out of the safety or effectiveness of the Licensed Product or the manufacturing, packaging, labelling, storage or handling of the Product by SANO, SANO shall be responsible therefor and shall indemnify and hold PPI harmless from and against all such 30 damages; and (b) to the extent that the Damages awarded or incurred relate to or arise out of the transportation, storage, handling or selling of the Licensed Product by PPI or its Affiliates, then PPI shall be responsible therefor and shall indemnify and hold SANO harmless from and against all such damages. Upon the assertion of any third party claim against a party hereto that may give rise to a right of indemnification under this Agreement, the party claiming a right to indemnification (the "Indemnified Party") shall give prompt notice to the party alleged to have the duty to indemnify (the "Indemnifying Party") of the existence of such claim and shall give the Indemnifying Party reasonable opportunity to control, defend and/or settle such claim at its own expense and with counsel of its own selection; provided, however, that the Indemnified Party shall, at all times, have the right fully to participate in such defense at its own expense and with separate counsel and, provided, further, that both parties, to the extent they are not contractually or legally excluded therefrom or otherwise prejudiced in their legal position by so doing, shall cooperate with each other and their respective insurers in relation to the defense of such third party claims. In the event the Indemnifying Party elects to defend such claim, the Indemnified Party may not settle the claim without the prior written consent of the Indemnifying Party. The Indemnifying Party may not settle the claim without the prior written consent of the Indemnified Party unless, as part of such settlement, the Indemnified Party shall be unconditionally released therefrom or the Indemnified Party otherwise consents thereto in writing. If the Indemnifying Party shall, within a reasonable time after such notice 31 has been given, fail to defend, compromise or settle such claim, then the Indemnified Party shall have the right to defend, compromise or settle such claim without prejudice to its rights of indemnification hereunder. Notwithstanding the foregoing, in the event of any dispute with respect to indemnity hereunder, each party shall be entitled to participate in the defense of such claim and to join and implead the other in any such action. In addition to the foregoing, SANO will defend, at its sole cost and expense, its rights with respect to the Licensed Products and PPI's rights to distribute the Licensed Products hereunder against any claim, action, suit or proceeding ("Action") by any third party asserting prior or superior rights with respect to the Licensed Product, product infringement or similar claims (other than as may be based on acts of PPI not contemplated herein or authorized hereby) and shall indemnify and hold PPI and its affiliates harmless from the cost of the defense thereof. PPI shall, at all times, have the right fully to participate in such defense at its own expense. SANO shall control such defense and shall, in its reasonable discretion, defend or settle such Action; provided that, notwithstanding the foregoing SANO shall not enter into any settlement or compromise of any such Action which requires PPI or any of its Affiliates to make payments of any kind without the prior written consent of PPI or an unconditional release of PPI and its Affiliates with respect to the subject matter of such Action. The provisions of this paragraph should not be construed as requiring SANO to bear any damages, judgments or other liabilities entered against PPI in any such Action, provided that the foregoing shall not be construed as or deemed a waiver of any rights PPI may have against SANO 32 as a result of such Action hereunder, at law or otherwise, and all of such rights, if any, are expressly reserved. 10.3 Insurance. Each of SANO and PPI shall carry product liability --------- insurance in an amount at least equal to [ ] with an insurance carrier reasonably acceptable to the other party, such insurance to be in place at times reasonably acceptable to the parties, but not later than the date of the first commercial sale of a Licensed Product. Each party shall promptly furnish to the other evidence of the maintenance of the insurance required by this Section 10.3 and shall name the other as an "additional insured" under such insurance policy. Each party's coverage shall (i) include broad form vendor coverage and such other provisions as are typical in the industry and (ii) name the other party as an additional insured thereunder. SANO shall carry clinical testing insurance in an amount and at times reasonably acceptable to the parties. 10.4 Survival. The provisions of this Article X shall survive the -------- termination or expiration of this Agreement, provided that the requirement to maintain the insurance contemplated in Section 10.3 above shall only survive for a period of 36 months from the effective date of termination or expiration of this Agreement. 33 ARTICLE XI ADDITIONAL CONSIDERATION, REPORTING AND VERIFICATION ---------------------------------------------------- 11.1 Additional Consideration. As additional consideration for ------------------------ SANO entering into this Agreement and permitting PPI to sell the Licensed Products in the United States in accordance with the provisions hereof, PPI agrees to pay to SANO the additional amounts more particularly described in Exhibit B to this Agreement in respect of the aggregate Net Sales (as that term is defined in Exhibit B) of the Licensed Products. The amount payable to SANO determined in accordance with Exhibit B is herein and in Exhibit B annexed hereto referred to as the "Additional Consideration." PPI shall pay to SANO, monthly, on the seventh day of each month, commencing on the seventh day of the third month after the month in which sales of the Licensed Products commence, the Additional Consideration payable to SANO in respect of the Net Sales of the Licensed Products made by PPI and its Affiliates during the third preceding month. For greater certainty, examples of what constitutes the "third preceding calendar month" are contained in Exhibit B annexed hereto. The consideration payable to SANO pursuant to this Article XI shall be paid to it as part of the sale price of the Licensed Product from SANO to PPI and shall not be treated as a royalty or similar payment. 11.2 Reporting and Information Obligations of PPI. -------------------------------------------- (a) Approved Contracts. PPI shall provide to SANO, monthly, ------------------ within seven days of the expiry of each calendar month during the term hereof, a copy of each Approved Contract (as hereinafter defined), entered into by PPI with its customers during the immediately preceding month irrespective of whether a copy of such contract had 34 previously been forwarded to SANO. If the Approved Contract has a term of less than 18 months, PPI may delete (e.g., by blacking out) any information in the Approved Contract that tends to indicate the identity or location of the PPI customer; provided, however, that PPI marks each such Approved Contract with a unique customer code relative to the customer that is the party to that Approved Contract. (b) Net Sales and Gross Profits. PPI shall report to SANO --------------------------- monthly, on the 7th day of each calendar month during the term hereof and for 12 months after the termination hereof: (i) a sales summary, in the form annexed hereto as Exhibit C, showing all sales of the Licensed Products made by PPI and its Affiliates during the immediately preceding calendar month; (ii) a detailed statement showing all returns and all credits, rebates, allowances and other debit and credits relevant to the calculation of Net Sales and Gross Profits (as those terms are defined in Exhibit B annexed hereto) for the immediately preceding calendar month together with copies of all documentation to support allowable adjustments used in computing Net Sales during the period in question; (iii) a certificate signed by the Chief Financial Officer of PPI certifying that, to the best of his knowledge, information and belief, after reasonable investigation, the foregoing statements contemplated in (i) and (ii) above are true and correct and do not omit any material information required to be provided pursuant to this Section 11.2(b) and 35 (iv) a summary of the calculation of the Additional Consideration payable to SANO on such date. For purposes of this Agreement a sale shall be considered to have been made at the time the Product(s) are shipped to the customer. 11.3 PPI shall make available for inspection by SANO at PPI's facilities and shall cause its Affiliates to make available for inspection by SANO at their respective facilities, promptly following a reasonable request therefor, such additional information concerning any sales (including, without limitation, in respect of any sale, the date of the shipment, the code number of the customer [or the name of the customer in the case of a customer disclosed to SANO pursuant to Section 11.2(a) hereof and an Approved Contract], the number of units of each Licensed Product in each dosage involved (broken down by container size per Product [e.g., 18 boxes of 30 patches of Product A], and the invoice price charged by PPI or its Affiliates), credits, returns, allowances and other credits and debits previously reported to SANO pursuant to Section 11.2(b)(ii) hereof or with respect to Approved Contracts previously reported to SANO pursuant to Section 11.2(a) hereof as SANO may reasonably require from time to time (except information concerning the identity or location of a customer where PPI is not already required to disclose that information to SANO pursuant to Section 11.2(a) hereof) to enable SANO to confirm or reconcile the amounts which are or were to have been paid to it pursuant to this Agreement (without the need to audit the books and records of PPI or its Affiliates pursuant to Section 11.4 hereof). 11.4 PPI shall keep and shall cause its Affiliates to keep complete and accurate 36 records and books of account containing all information required for the computation and verification of the amounts to be paid to SANO hereunder. PPI further agrees that at the request of SANO, it will permit and will cause its Affiliates to permit one or more accountants selected by SANO, except any to whom PPI or such Affiliate has some reasonable objection, at any time and from time to time, to have access during ordinary working hours to such records as may be necessary to audit, with respect to any payment report period ending prior to such request, the correctness of any report or payment made under this Agreement, or to obtain information as to the payments due for any such period in the case of failure of PPI to report or make payment pursuant to the terms of this Agreement. Such accountant shall not disclose to SANO any information relating to the business of PRI except that which is reasonably necessary to inform SANO of: (i) the accuracy or inaccuracy of PPI's reports and payments; (ii) compliance or non-compliance by PPI with the terms and conditions of this Agreement; and (iii) the extent of any such inaccuracy or non-compliance; provided, that if it is not reasonably possible to separate information relating to the business of PPI from that which is reasonably necessary to so inform SANO, the accountant may disclose any information necessary to so inform SANO and SANO shall retain all other information disclosed as confidential. PPI shall provide and shall cause its Affiliates to provide full and complete access to the accountant to PPI's and such Affiliates' pertinent books and records and the accountant shall have the right to make and retain copies (including photocopies). Should 37 any such accountant discover information indicating inaccuracy in any of PPI's payments or non-compliance by PPI or its Affiliates with any of such terms and conditions, and should PPI fail to acknowledge in writing to SANO the deficiency or non-compliance discovered by such accountant within ten (10) business days of being advised of same in writing by the accountant, the accountant shall have the right to deliver to SANO copies (including photocopies) of any pertinent portions of the records and books of account which relate to or disclose the deficiency or non- compliance (to the extent not acknowledged by PPI). In the event that the accountant shall have questions which are not in its judgment answered by the books and records provided to it, the accountant shall have the right to confer with officers of PPI or such Affiliate, including PPI's or such Affiliate's Chief Financial Officer. If any audit under this Section shall reveal an underpayment or understatement of the amount payable to SANO by more than $10,000.00 for any period in question, PPI shall reimburse SANO for all costs and expenses relating to such investigational audit. SANO shall only have the right to audit such books and records of PPI and its Affiliates pursuant to this Section 11.4 no more often than twice in any contract year unless earlier in such contract year or in any of the prior three contract years such investigation revealed a discrepancy of more than $10,000.00, as aforesaid, in which case SANO shall have the right to audit such books and records three times in such contract year. For purposes of this Agreement, a contract year shall be a period of twelve months commencing on either the date of this Agreement or on an anniversary thereof. Unless the disclosure of same is reasonably required by SANO in connection with any litigation or arbitration arising out of such 38 audit, the accountant shall not reveal to SANO the name or address (or other information reasonably tending to identify the location of a customer) of any customer of PPI or its Affiliates [other than one whose name has been disclosed to SANO pursuant to Section 11.2 hereof], but shall identify such customer to SANO, if necessary, by the customer code number used by PPI in its reporting obligations to SANO [and PPI and its Affiliates shall make such information known to the accountant]. PPI may, as a condition to providing any accountant access to its books and records (or those of its Affiliates), require SANO to execute a reasonable confidentiality agreement consistent with the terms of this Section 11.4. 11.5 Except as specifically set forth to the contrary, all payments to be made under this Agreement shall bear interest equal to two percent above the prime rate as quoted by Citibank N.A., New York, New York, calculated daily (as at the close of business on each such day) and compounded monthly, from the day following the day the payment is due until the date on which it is paid. Any adjustment to the prime rate as quoted by Citibank N.A. from time to time shall result in a corresponding adjustment to the rate of interest payable hereunder, the rate of interest quoted by Citibank N.A. at the close of business on each day to be the rate applicable for such day. 11.6 The obligation of PPI to make the payments contemplated in Section 11.1 and to provide the reports and information contemplated in Sections 11.2 and 11.3 and the right of SANO to conduct its audits or investigations pursuant to Section 11.4 hereof shall survive the termination or expiration of this Agreement and shall apply to all Licensed Products made available to PPI by SANO prior to the effective date of the 39 termination or expiration of this Agreement (or made available to PPI after such date pursuant to any provision of this Agreement) notwithstanding that such Licensed Products may have been resold by PPI or its Affiliates to its or their customers after the effective date of termination or expiration. For greater certainty, the parties acknowledge and agree that it is their intention that PPI pay to SANO the Additional Consideration applicable to Net Sales of all Licensed Products supplied by SANO to PPI pursuant to this Agreement (in respect of which the purchase price charged by SANO to PPI therefor [whether paid or owing] was determined in accordance with the provisions of Section 7.2 hereof or was provided to PPI free of such charge pursuant to any other provision of this Agreement) irrespective of whether such Licensed Product is resold by PPI or its Affiliates prior to or subsequent to the effective date of termination or expiration of this Agreement and that SANO's rights pursuant to Section 11.4 hereof shall continue for a period of twelve (12) months following the final sale of all such Licensed Products. 11.7 PPI shall have the right, upon reasonable advance written notice to SANO, to inspect SANO's facilities at which the Licensed Products are being manufactured to monitor compliance by SANO with FDA Good Manufacturing Practices and to otherwise confirm that the Licensed Products are being manufactured in accordance with their respective Specifications. Similarly, SANO shall have the right, upon reasonable advance written notice to PPI to inspect those facilities of PPI and any of its Affiliates which are used in the storage of any of the Licensed Products to ensure compliance by PPI or such Affiliate with FDA Good Manufacturing Practices and to otherwise ensure that the Licensed Products do not cease to meet their Specifications as a result of any 40 storage or shipping conducted by PPI or its Affiliates. SANO shall cooperate with PPI in providing access to its facilities and PPI shall cooperate and shall cause its Affiliates to cooperate in providing access to SANO to its facilities and those of its Affiliates used as aforesaid. 11.8 SANO shall keep complete and accurate records and books of account containing all information required for the computation and verification of SANO's Costs as contemplated in Section 7.2 hereof with respect to the Licensed Product(s) made available to PPI by SANO pursuant hereto. SANO further agrees that at the request of PPI it will permit one or more accountants selected by PPI except any to whom SANO has some reasonable objection, to have access during ordinary working hours to such books and records as may be necessary to audit the amounts previously charged by SANO to PPI pursuant to Section 7.2 hereof. Such accountant shall not disclose to PPI any information relating to the business of SANO except the accuracy or inaccuracy of SANO's previously reported charges and the amount, if any, that PPI may have been overcharged or undercharged with respect to Licensed Products made available to it. Should any such accountant discover information indicating that PPI has been overcharged for Products made available to it, and should SANO fail to acknowledge in writing to PPI the inaccuracy discovered by such accountant within ten (10) business days of being advised of same in writing by the accountant, the accountant shall have the right to make and retain copies (including photocopies) of any pertinent portions of the records and books of account which relate to or disclose the inaccuracy (to the extent not acknowledged by SANO). SANO shall provide full and complete access to the 41 accountant to SANO's pertinent books and records. In the event that the accountant shall have questions which are not in its judgment answered by such books and records, the accountant shall have the right to confer with officers of SANO, including SANO's Chief Financial Officer. If any audit under this Section shall reveal an overstatement of the amount payable to SANO by more than $10,000.00 for the Licensed Products in question, SANO shall reimburse PPI for all costs and expenses relating to such investigation/audit. It is understood and agreed that PPI shall only have the right to audit such books and records of SANO pursuant to this Section 11.8 no more often than twice in any contract year unless earlier in such contract year or in any of the prior three contract years such investigation revealed a discrepancy of more than $10,000.00, as aforesaid, in which case PPI shall have the right to audit such books and records three times in such contract year. Unless the disclosure of same is reasonably required by PPI in connection with any litigation or arbitration arising out of such audit, the accountant shall not reveal to PPI the name or address (or other information reasonably tending to identify the location of a supplier) of any supplier of materials to SANO in the manufacturing or packaging of the Licensed Products (but shall identify such supplier to PPI if necessary, by a code name or number supplied by such accountant) or the name of or financial information relating to any employee of SANO. SANO may, as a condition to providing any accountant access to its books-and records, require PPI to execute a reasonable confidentiality agreement consistent with the terms of this Section 11.8. The rights of PPI pursuant to this Section 11.8 shall survive the termination or expiration of this Agreement for a period of one year. 42 ARTICLE XII OPTION PRODUCTS --------------- 12.1 Option Products. With respect to the Option Products, --------------- including for the purposes of this Section 12.1, any product developed by SANO within ten years of the Effective Date which is a generic version of an existing marketed transdermal drug, PPI shall have the option, in its sole and absolute discretion, to include such products, on a product-by- product basis, as Licensed Products hereunder, in accordance with the following provisions. 12.2 Option Product Development Program. For each Option Product, ---------------------------------- SANO shall devise and communicate to PPI a clinical and product development program and a related budget, setting forth (i) a proposed schedule for pre-clinical and clinical activities required or reasonably necessary to obtain governmental approvals for such Option Product, (ii) the Licensed Product Fee for which it is willing to include such product as a Licensed Product hereunder (which shall be reasonably related to the Costs of product development and shall include only [ ]% [but not more than [ ] ] of the costs of pre-clinical activities); (iii) the developmental milestones that would trigger payment of appropriate portions of such Licensed Product Fee, which payments shall reflect the related expenditures involved in the pre-clinical activities (to the limits set forth above) and the clinical testing program and (iv) any special storage or shipping requirements (the "Option Product Development Program"). SANO shall also advise PPI of a reasonable Product Sales Threshold (as hereinafter defined) for the initial 24-month period after the product is to be made available for commercial sale, that would be 43 applicable to the product if it were included as a Licensed Product hereunder. Within 30 days of its receipt of an Option Product Development Program, PPI shall notify SANO whether it wishes to exercise its option to have the relevant product included hereunder as a Licensed Product. If PPI notifies SANO within such 30 days that it wishes to exercise such option, the product will be treated for all purposes as a Licensed Product hereunder, the Option Product Development Program shall become a part of this Agreement and PPI shall become obligated to make the payments described therein. If PPI fails to notify SANO of its election to exercise such option within such 30 days, SANO may enter into a license or distribution agreement with respect to such Option Product with a third party on substantially the same terms as set forth in the Option Product Development Program, and providing for payments for products and additional consideration consistent with the provisions hereof. SANO may not enter into such an agreement with a third party on terms substantially different from those set forth in the relevant Option Product Development Program and herein without first offering such terms to PPI for a period of thirty days. ARTICLE XIII TERMS AND TERMINATION --------------------- 13.1 This Agreement shall become effective on the date hereof and shall remain in effect for a period of ten years per Licensed Product starting on the date such Licensed Product becomes available for sale in commercial quantities, unless earlier terminated in accordance with the provisions of this Agreement. Thereafter, this Agreement shall 44 automatically be renewed as to each Licensed Product from year to year unless either party gives notice of termination to the other party at least one hundred and twenty days prior to the expiry of the initial term or of any renewal term. 13.2 Either party may, by notice in writing to the other party, terminate this Agreement if such other party shall have breached any of its material duties or obligations under this Agreement (other than the obligations of PPI to pay to SANO any amount due to SANO hereunder [whether on account of Additional Consideration, the price for the Licensed Products or otherwise] or to provide SANO with the reports or information contemplated in Section 11.2 or 11.3 hereof) and such breach shall remain uncured for at least sixty days after the aggrieved party shall have given notice of the breach to the other party. 13.3 SANO may, by notice in writing to PPI, terminate this Agreement if PPI fails to pay to SANO any amount payable by PPI to SANO hereunder, whether on account of the Additional Consideration, the purchase price for the Licensed Products, interest or otherwise, as and when the same shall have become due and payable or PPI shall have failed to deliver (or caused to be delivered, as the case may be), in timely fashion, the reports or information contemplated in Section 11.2 or 11.3 hereof, and in either case, such breach shall have continued unremedied for a period of twelve business days after written notice of such breach has been given by SANO to PPI; provided that PPI shall not have the right to such twelve-day grace period within which to cure such default and SANO shall have the immediate right to terminate the Agreement for such breach if PPI shall have previously breached Section 11.2 or 11.3, or failed to remit any 45 sums of at least $10,000.00 to SANO, when due, in the aggregate, one time in the twelve month period immediately preceding the default in question. 13.4 Either party may terminate this Agreement on thirty days prior written notice to the other party if such party or the other party is legally prohibited from performing its obligations hereunder (other than by reason of a breach of its obligations hereunder) or becomes (or, in the case of PPI, its Affiliate becomes) an Ineligible Person (and, where the party purporting to terminate the Agreement is also the party prohibited from performing or it or its Affiliate is the Ineligible Person, it [or its Affiliate, as the case may be] has made diligent good faith best efforts to remove the prohibition or its status as an Ineligible Person) and such prohibition or status as an Ineligible Person shall have continued uninterrupted for a period of 120 days. 13.5 Either party may terminate this Agreement in respect of a particular Licensed Product (the "Specific Product"), but this Agreement shall continue in respect of any other Licensed Product, on thirty (30) days prior written notice to the other party (which notice must be delivered within 90 days of the expiration of the applicable contract year) if the Gross Profit (as that term is defined in Exhibit B annexed hereto) attributable to aggregate Net Sales of the Specific Product made by PRI and its Affiliates for any complete contract year after the second anniversary of the date on which such Specified Product became available for sale shall be less than the amounts stated in or determined pursuant to Section 13.8; provided, however, SANO may not terminate with respect to any Specific Product pursuant to this Section 13.5 without the consent of PPI in the event that SANO shall have previously terminated the exclusive nature of the Right 46 pursuant to Section 13.8 and shall be selling, directly or indirectly, such Licensed Product in the United States. 13.6 Either party may terminate this Agreement in accordance with the provisions of Section 15.1 hereof. 13.7 PPI or SANO shall have the right to terminate this Agreement upon written notice to the other in the event that any one or more of the following events shall become applicable to such other party (herein referred to as the "Party"): (a) an order is made or a resolution or other action of such Party is taken for the dissolution, liquidation, winding up or other termination of its corporate existence; (b) the Party commits a voluntary act of bankruptcy, becomes insolvent, makes an assignment for the benefit of its creditors or proposes to its creditors a reorganization, arrangement, composition or readjustment of its debts or obligations or otherwise proposes to take advantage of or shelter under any statute in force in the United States for the protection of debtors; (c) if any proceeding is taken with respect to a compromise or arrangement, or to have such Party declared bankrupt or to have a receiver appointed in respect of such Party or a substantial portion of its property and such proceeding is instituted by such Party or is not opposed by such Party or if such proceeding is instituted by a Person other than such Party, such Party does not proceed diligently and in good faith to have such proceeding withdrawn forthwith; (d) a receiver or a receiver and manager of any of the assets of such 47 Party is appointed and such receiver or receiver and manager is not removed within ninety days of such appointment; (e) such Party ceases or takes steps to cease to carry on its business. SANO shall similarly have the right to terminate this Agreement upon written notice to PRI if any of the foregoing events becomes applicable to any of its Affiliates. 13.8 (a) If (i) in the twenty-four (24) month period (such period being herein referred to as the "A Period") beginning on the date (the "A Commencement Date") the first of any shipments of Licensed Product "A" is made available to PPI hereunder, the aggregate Net Sales of Licensed Product "A" for such A Period is less than the Product Sales Threshold (as hereinafter defined); (ii) in the twenty-four (24) month period (such period being herein referred to as the "B Period") beginning on the date (the "B Commencement Date") the first of any shipments of Licensed Product "B" is made available to PPI hereunder, the aggregate Net Sales of Licensed Product "B" for such B Period is less than the Product Sales Threshold; or (iii) in any twenty-four (24) month period (such period being herein referred to as the "O Period") beginning on the date (the "O Commencement Date") the first of any shipments of each other Licensed Product, if any, hereunder is made available to PPI hereunder, the aggregate Net Sales of any such other Licensed Product for such Period is less than the Product Sales Threshold; or 48 (iv) in any twelve month period commencing on the second and each subsequent anniversary of the A Commencement Date, the B Commencement Date or any O Commencement Date, the Net Sales of the relevant Licensed Product sold by PPI and its Affiliates in such period is less than the Product Sales Threshold; and the shortfall in sales cannot be attributable primarily to the fault of SANO, SANO shall have the right to convert PPI's Right hereunder from an exclusive to a non-exclusive right to distribute such Licensed Product upon ninety days prior written notice to PPI. As used herein, as to any Licensed Product, the Product Sales Threshold shall mean an amount reasonably agreed upon by PPI and SANO after consideration of relevant market factors and conditions, provided that if PPI and SANO shall fail or be unable to agree as to any Licensed Product for any period in question, the Product Sales Threshold for such period and Licensed Product shall be [ ]. (b) Notwithstanding the exercise by SANO of its right pursuant to Section 13.8(A) hereof, and the resultant conversion of PPI to a non- exclusive distributor hereunder, PPI shall have the right to sell the Licensed Products on a non-exclusive basis on the terms and conditions as set forth herein, except as provided otherwise in this Paragraph 13.8, during the balance of the term of the Agreement (subject to earlier termination as herein provided) and SANO shall continue to supply the Licensed Products to PPI in accordance with the provisions hereof, provided that the obligation of SANO to use its reasonable best efforts to supply PPI with its requirements of the Licensed Products shall take into account PPI's requirements as well as the requirements of SANO 49 and any other third party distributor or distributors appointed by SANO to sell the Licensed Products in the United States. (c) In the event that SANO exercises its rights under Section 13.8(a) and contemporaneously therewith or subsequent thereto enters into an agreement with any Person (herein referred to as a "Third Party Licensee"), authorizing or licensing such Third Party Licensee to sell any of the Products in the United States on royalty, payment or other cash equivalent or otherwise readily economically measured terms more favorable to the Third Party Licensee (such more favorable terms being herein referred to as the "MFP") then: (i) SANO shall promptly notify PPI of such agreement and shall describe in the notice both the MFP and any obligations, duties, undertakings or other consideration to be provided by the Third Party Licensee; and (ii) PPI shall have thirty days from the date of receipt of such notice to notify SANO whether PPI desires to have the benefit of the MFP, which can be accepted only if PPI shall agree (to the extent not already assumed in this Agreement) to any additional obligations, duties, or undertakings, and to provide any consideration to be provided by the Third Party Licensee. PPI's entitlement to seek the benefit of the MFP shall be conditioned upon and subject to PPI assuming and being capable of fully performing all the non-cash obligations assumed by the Third Party Licensee in a manner substantially as valuable to SANO. If PPI shall dispute such assessment, PPI shall so notify SANO, whereupon the issue shall be deemed to be a dispute between the parties and subject to resolution pursuant to 50 Section 16.2 hereof. 13.9 Notwithstanding the termination or expiration of this Agreement pursuant to this Article XIII or any other provision of this Agreement, all rights and obligations which were incurred or which matured prior to the effective date of termination or expiration, including accrued Additional Consideration and any cause of action for breach of contract, shall survive termination and be subject to enforcement under the terms of this Agreement. Termination of this Agreement shall not affect any duty of PPI or SANO existing prior to the effective date of termination or expiration and which is, whether or not by expressed terms, intended to survive termination. Without limiting the generality of the foregoing, termination shall not affect any duty to keep confidential any Confidential Information (within the meaning of Section 14.4 hereof) disclosed by one party to the other (or its Affiliate) as contemplated in Section 14.4 hereof, but rather such Confidential Information shall be held by the receiving party subject to such restrictions on use and disclosure as provided in the said Section. 13.10 Upon termination of this Agreement by PPI pursuant to Section 13.2 or 13.7 or pursuant to Section 13.4 as a result of SANO's inability to perform its obligations hereunder or becoming an Ineligible Person or the termination of this Agreement by SANO pursuant to Section 13.5 hereof, SANO shall, at the request of PPI, repurchase all Licensed Products then in the possession, custody or control of PPI and available for sale (and which have not been adulterated since they were made available for pick up by PPI) and all packaging material in the possession, custody or control of PPI which were specifically acquired by PPI for these Licensed Products and which cannot be used by 51 PPI or its Affiliates for any other products sold by any of them, at the price originally paid by PPI therefor plus all transportation costs previously incurred (even if not yet paid) by PPI payable in cash on delivery by PPI to SANO. SANO shall pay all transportation costs associated with shipping the repurchased Licensed Product to SANO or to such other places SANO may require. 13.11 In the event that this Agreement is terminated pursuant to the provisions of Section 13.4 hereof as a result of a party (herein referred to as the "Prohibited Party") being unable to perform its obligations hereunder as therein contemplated or having become (or its Affiliate having become) an Ineligible Person and within twelve (12) months of the effective date of termination of this Agreement the Prohibited Party is again able to perform its obligations hereunder or has ceased (or its Affiliate has ceased) to be an Ineligible Person, then the Prohibited Party shall, by notice in writing, advise the other party (herein referred to as the "Receiving Party") that it is no longer legally prohibited from performing its duties and obligations hereunder or that it has ceased (or that its Affiliate has ceased) to be an Ineligible Person and the Receiving Party shall have the right, to be exercised by notice in writing given to the Prohibited Party within thirty (30) days of receipt of the aforesaid notice from Prohibited Party, to reinstate this Agreement; provided, however, that if the Prohibited Party is PPI then SANO shall have the right to reinstate this Agreement as if a proper notice had been given pursuant to Section 13.8 of this Agreement and PPI shall be reinstated on a non-exclusive basis, but only to the extent that such reinstatement will not violate the provisions of any agreement SANO shall have entered into during the period PPI was a Prohibited Party. 52 13.12 If SANO terminates this Agreement pursuant to Section 13.2, 13.3 and 13.7 hereof then PPI shall not and shall cause its Affiliates not to, for a period of twelve (12) months following the effective date of termination, sell in the United States any Competitive Product. 13.13 In the event that SANO terminates this Agreement pursuant to Section 13.5 hereof, SANO shall, at the request of PPI, make available to PPI within a reasonable period of time of such termination, such number of units of each Licensed Product as shall be equal to the net number of units of such Licensed Product sold by PPI during the entire contract year immediately preceding the year in which this Agreement is so terminated or such lesser number of units of each such Product as PPI shall advise SANO in writing within ten business days of such termination. Such Licensed Products shall be made available to PPI in accordance with the provisions of this Agreement and the provisions of this Agreement shall apply to all such Licensed Products as if such Licensed Products had been supplied by SANO during the term of this Agreement. 13.14 If SANO has not received at least one approval of an ANDA for a Licensed Product prior to November 30, 1996, PPI may terminate this Agreement and neither party shall have any obligation hereunder (other than applicable confidentiality provisions). 53 ARTICLE XIV RECALLS, ADMINISTRATIVE MATTERS AND CONFIDENTIALITY --------------------------------------------------- 14.1 Recalls. In the event that it becomes necessary to conduct a ------- recall, market withdrawal or field correction (hereafter collectively referred to as "recall") of any Product manufactured by SANO and sold by PPI or its Affiliates the following provisions shall govern such a recall: (a) After consulting with SANO, and on terms and conditions reasonably satisfactory to SANO, PPI shall conduct (and shall cause its Affiliate to conduct) the recall and shall have primary responsibility therefore and SANO and PPI shall each cooperate with the other in recalling any affected Licensed Product(s). PPI covenants and agrees to maintain and to cause its Affiliates to maintain such records of all sales of the Products made by PPI or its Affiliates as are required by the FDA or as are reasonably appropriate for a distributor of pharmaceutical products to maintain so as to enable a recall to be properly completed. (b) Irrespective of whether the recall is initiated by PPI or by SANO: (i) If it is later demonstrated that the reason for the recall was due primarily to acts or omissions of SANO (or the safety or efficacy of the Licensed Product other than as a result of acts or omissions of PPI or its Affiliates), then SANO shall pay or reimburse, as the case may be, all reasonable direct out-of- pocket expenses, including but not limited to reasonable attorney's fees and expenses and credits and recall expenses claimed by and paid to customers, incurred by PPI or SANO in connection with performing any such recall, provided 54 that expenses incurred by PPI shall be in accordance with the terms and conditions of the recall approved by SANO; or (ii) If it is later determined that the reason for the recall was due primarily to the acts or omissions of PPI or its Affiliates, then PPI shall pay or reimburse, as the case may be, all direct out-of-pocket expenses, including but not limited to reasonable attorney's fees and expenses and credits and recall expenses claimed by and paid to customers, incurred by PPI or SANO in connection with performing any such recall; or (iii) If the parties are unable to agree that the cause of the recall was due primarily to the act or omission of one of the parties (or its Affiliates, as the case may be) within sixty days of the initiation of the recall and have not commenced arbitration proceedings to resolve such dispute within such sixty day period then all direct out-of-pocket costs incurred by PPI and SANO, including but not limited to reasonable attorney's fees and expenses and credits and recall expenses claimed by and paid to customers, shall be shared by the parties in proportion to their sharing of Gross Profits in respect of the Licensed Products recalled. Each of the parties shall use its reasonable best efforts to minimize the expenses of recall which it incurs. It is understood and agreed that the direct out-of-pocket costs and expenses of the recall contemplated in Paragraphs (i), (ii) and (iii) above shall not include the invoice price charged by PRI or its Affiliates to the customers for the Products recalled, which amount shall be dealt with in accordance with the provisions of 55 Section 9 hereof and shall also not include any excess re-procurement costs (within the meaning of Paragraph 14.3 hereof) and related penalties and assessments, which costs, penalties and assessments shall be an expense of PPI except to the extent that it is an expense of SANO pursuant to Section 14.3 hereof (provided that where the provisions of Paragraph (iii) above apply, the excess reprocurement costs and related penalties and assessments incurred pursuant to Approved Contracts [as that term is defined in Section 14.3 hereof] shall be shared by the parties in the proportion in which Gross Profits are shared in respect of the recalled Products sold pursuant to such Approved Contracts). (c) All Licensed Products recalled pursuant to this Section 14.1 shall be treated as Licensed Products returned to PPI by its customers and the provisions of Section 9 shall apply thereto. (d) The party initiating the recall shall inform FDA of the proposed recall; however, nothing contained herein shall preclude either party from informing FDA of any proposed or actual recall by either party should the recalling party fail to inform FDA of that recall within ten (10) days of a written request by the non-recalling party to so inform FDA. (e) For greater certainty, in the event of a recall, neither party or its Affiliates shall profit from any out-of-pocket expenses incurred by it in connection with the recall and for which it is reimbursed by the other party and, except where the recall relates directly to an intentional breach of a representation or warranty contained in this Agreement or arises directly out of a wilful material breach by a party of any of its duties or obligations hereunder (in each case, as contemplated in Section 10.1 hereof), neither 56 party shall have a claim against the other party for any damages, losses or expenses which it suffers or incurs as a result thereof except to the extent permitted or contemplated in this Section 14. (f) Each party shall provide reasonable evidence to the other of the out-of-pocket expenses being claimed by it and the rights of SANO pursuant to Section 11.4 and the rights of PPI pursuant to Section 11.8 shall apply thereto. 14.2 ANDA-Related FDA Correspondence. Each of the parties shall ------------------------------- provide the other with a copy of any correspondence or notices received by such party from FDA relating or referring to the Licensed Product(s) within ten (10) days of receipt. Each party shall also provide the other with copies of any responses to any such correspondence or notices within ten (10) days of making the response. 14.3 Excess Re-procurement Costs. --------------------------- (a) In the event that a recall occurs which recall was necessitated primarily by any act or omission of SANO and SANO does not supply PPI with replacement Licensed Product on a timely basis or if SANO, in breach of its obligations under this Agreement, fails to make Licensed Product(s) available to PPI, SANO shall, in addition to any reimbursement required under Section 14.1, pay any excess re-procurement costs and/or related penalties or assessments incurred by, or assessed on, PPI by a customer of PPI pursuant to an Approved Contract (as that term is defined below) due to PPI's inability to supply Licensed Product(s) to such customer due to the aforesaid acts, omissions or breaches of SANO. (b) SANO shall cooperate with PPI with respect to any legal or adminis- 57 trative proceedings that arise pursuant to the Approved Contracts as a result of PPI's inability to supply Licensed Product(s) to such customer due to the aforesaid acts, omissions or breaches by SANO. The foregoing shall be without prejudice to any other damages, expense or costs that PPI may have suffered in connection with SANO's inability to supply the Licensed Product as aforesaid, subject to the limitations and other provisions set forth in this Agreement. (c) For purposes hereof the term "Approved Contract" shall mean a contract entered into by PPI on or after the Execution Date with one of its customers: (i) pursuant to which PPI agrees to supply such customer with pharmaceutical products which include the Licensed Products (or any of them), and which provides that if PPI fails to supply such customer with the Licensed Product in accordance with specified terms and conditions therein set forth then such customer shall have the right to procure a comparable replacement product for the Licensed Product in substitution for the Licensed Products that PPI has failed to supply to such customer in accordance with the provisions of its agreement and to charge back to PPI any costs and expenses incurred by such customer to acquire such comparable replacement product in excess of the price which was to have been charged by PPI to the customer for the Licensed Products which it failed to provide (such excess costs and expenses being the excess re-procurement costs contemplated in Section 14.1 and in this Section 14.3); (ii) which has a term of twelve (12) months or less; and (iii) which provides for the supply of the relevant Licensed Product 58 in an amount not greater than the amount forecast by PPI pursuant to Section 6.2 hereof, taking into account all other sales of the Licensed Product in the relevant period; or (iv) where the contract has a term of more than 12 months, or provides for an amount greater than that contemplated by Paragraph (iii) above, SANO has approved or has been deemed to have approved such contract in accordance with the provisions of Section 14.3(v) hereof; or (v) if the approval of SANO as contemplated in Paragraph (iv) above is requested, PPI shall have provided to SANO, in accordance with the provisions of this paragraph, a complete copy of the proposed final agreement between PPI and its customer prior to entering into such contract. A copy of any contract to be provided to SANO as contemplated in this Paragraph (v) shall be forwarded to SANO in the manner contemplated in Section 15.4 hereof. SANO shall have a period of ten business days from the date upon which copies of such contract are actually received by it as aforesaid to notify PPI in writing that it does not approve of the contract and failing such notice from SANO within such ten business day period SANO shall be deemed to have approved of such contract. 14.4 Confidentiality. --------------- (a) The parties agree that, without the prior written consent of the other party (such consent not to be unreasonably withheld) or except as may be required under law or court order, the provisions of the Agreement shall remain confidential and shall not be disclosed to any Person not affiliated with any of the parties. 59 (b) PPI and SANO hereby agree not to reveal or disclose any Confidential Information (as defined below) to any Person without first obtaining the written consent of the disclosing party, except as may be necessary in regulatory proceedings or litigation. For purposes hereof Confidential Information shall mean all information, in whatever form, which is or was disclosed by one party to another or to an Affiliate of the other prior to or during the term of this Agreement and which relates in any way to the Products or to the business of the disclosing party, including, without limitation information relating to customers and pricing. Confidential Information shall not include information that a party can demonstrate by written evidence: (i) is in the public domain (provided that information in the public domain has not and does not come into the public domain as a result of the disclosure by the receiving party or any of its Affiliates); (ii) is known to the receiving party or any of its Affiliates prior to the disclosure by the other party: or (iii) becomes available to the party on a non- confidential basis from a source other than an Affiliate of that party or the disclosing party and PPI covenants and agrees to cause its Affiliates to comply with the provisions of this Section 14.4. 60 ARTICLE XV GENERAL TERMS AND CONDITIONS ---------------------------- 15.1 Force Majeure Clauses. Neither party shall be considered to --------------------- be in default in respect of any obligation hereunder, other than the obligation of a party to make payment of amounts due to the other party under or pursuant to this Agreement, if failure of performance shall be due to Force Majeure. If either party is affected by a Force Majeure event, such party shall, within 20 days of its occurrence, give notice to the other party stating the nature of the event, its anticipated duration and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and not longer duration than is required and the non-performing party shall use its reasonable best efforts to remedy its inability to perform. The obligation to pay money in a timely manner is absolute and shall not be subject to the Force Majeure provisions, except to the extent prohibited by governmental rule or regulations other than rules or regulations incident to bankruptcy or insolvency proceedings of a party. Force Majeure shall mean an unforeseeable or unavoidable cause beyond the control and without the fault or negligence of a party (and, where the party is PPI, beyond the control and without the fault or negligence of any of its Affiliates) including, but not limited to, explosion, flood, war (whether declared or otherwise), accident, labor strike, or other labor disturbance, sabotage, acts of God, newly enacted legislation, newly issued orders or decrees of any Court or of any governmental agency. Notwithstanding anything in this Section to the contrary, the party to whom performance is owed but to whom it is not rendered because of any event of Force Majeure as contemplated in this Section 15.1 61 shall, after the passage of one hundred and twenty days, have the option to terminate this Agreement on thirty days prior written notice to the other party hereto. For greater certainty, the inability or failure of PPI to cause any of its respective Affiliates to comply with any of the provisions of this Agreement expressed to be applicable to its Affiliates or which require such party to cause the Affiliate to do or not to do something shall not be considered Force Majeure unless the Affiliate in question is unable to comply by reason of unforeseeable or unavoidable causes beyond the control and without the fault or negligence of such Affiliate. 15.2 Arbitration. All disputes arising out of, or in relation to, ----------- this Agreement (other than disputes arising out of any claim by a third party in an action commenced against a party), shall be referred for decision forthwith to a senior executive of each party not involved in the dispute. If no agreement can be reached through this process within thirty days of request by one party to the other to nominate a senior executive for dispute resolution, then either party hereto shall be entitled to refer such dispute to a single arbitrator for arbitration under Florida law, such arbitration to be held in Miami, Florida on an expedited basis in accordance with the rules and regulations of the American Arbitration Association. Any party demanding arbitration shall with service of its demand for arbitration propose a neutral arbitrator selected by it. In the event that the parties cannot agree upon a neutral arbitrator within thirty (30) days after the demand for arbitration, an arbitrator shall be appointed by the American Arbitration Association who shall be a partner in a Miami, Florida law firm having at least ten (10) partners. 15.3 Assignment. This Agreement may not be assigned nor can the ---------- performance 62 of any duties hereunder be delegated by PPI or by SANO without the prior written consent of the other parties, which consent shall not be unreasonably withheld; provided that any such assignment shall not relieve the assignor from any of its obligations hereunder or under any other document or agreement delivered by such party pursuant to, or delivered (or acknowledged to have been delivered) contemporaneously with or in connection with the execution of, this Agreement, which shall continue to be binding upon such party notwithstanding such assignment. Notwithstanding the foregoing, PPI may delegate from time to time some of its duties hereunder to any of its Affiliates provided that, prior to any such delegation, it gives written notice thereof to SANO (indicating the duties being so delegated and the duration of such delegation); provided that no such delegation shall relieve PPI from any of its obligations hereunder in respect of the duties being delegated or otherwise. 15.4 Notices. Any notice required or permitted to be given under ------- this Agreement shall be sufficiently given if in writing and delivered by registered or certified mail (return receipt requested), facsimile (with confirmation of transmittal), overnight courier (with confirmation of delivery), or hand delivery to the appropriate party at the address set forth below, or to such other address as such party may from time to time specify for that purpose in a notice similarly given: If to SANO: SANO Corporation 1700 N. W. 65th Avenue Suite 13 Plantation, Florida 33313 Attn: President Fax: 305-587-9909 63 with a copy to (other than regularly prepared notices, reports, etc. required to be delivered hereunder): Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. 1221 Brickell Avenue Miami, Florida 33131 Attn: Gary Epstein, Esq. Fax: 305-579-0717 If to PRI c/o PRI Distributors, Ltd. One Ram Ridge Road Spring Valley, NY 10977 Attn: President Fax: 914-425-7922 with a copy to (other than regularly prepared notices, reports, etc. required to be delivered hereunder): Hertzog, Calamari & Gleason 100 Park Avenue New York, New York 10017 Attn: Stephen A. Ollendorff, Esq. Fax: (212) 213-1199 Any such notice shall be effective (i) if sent by mail, as aforesaid, five business days after mailing, (ii) if sent by facsimile, as aforesaid, when sent, and (iii) if sent by courier or hand delivered, as aforesaid, when received. Provided that if any such notice shall have been sent by mail and if on the date of mailing thereof or during the period prior to the expiry of the third business day following the date of mailing there shall be a general postal disruption (whether as a result of rotating strikes or otherwise) in the United States then such notice shall not become effective until the fifth business day following the date of resumption of normal mail service. 64 15.5 Governing Law and Consent to Jurisdiction. ----------------------------------------- (a) Except as otherwise provided herein, this Agreement shall be deemed to have been made under, and shall be governed by, the laws of the State of Florida in all respects including matters of construction, validity and performance, but without giving effect to Florida's choice of law provisions. (b) In connection with any action commenced hereunder, each of the undersigned consent to the jurisdiction of the state and federal courts located in Miami, Florida. Notwithstanding the foregoing, each party also agrees to the jurisdiction of any court in which any third party claim may be brought. 15.6 Binding Agreement. This Agreement shall be binding upon the ----------------- parties hereto, and their respective successors and permitted assigns. 15.7 Entire Agreement. This Agreement and all other documents and ---------------- instruments delivered by any of the parties or their Affiliates pursuant hereto or in connection with the execution and delivery of this Agreement contain the entire agreement and understanding of the parties with respect to the subject matter hereof and thereof and supersedes all negotiations, prior discussions and agreements relating to the Licensed Products or the Right. This Agreement may not be amended or modified except by a written instrument signed by all of the parties hereto. 15.8 Headings. The headings to the various articles and paragraphs -------- of this Agreement have been inserted for convenience only and shall not affect the meaning of the language contained in this Agreement. 15.9 Waiver. The waiver by any party of any breach by another ------ party of any 65 term or condition of this Agreement shall not constitute a waiver of any subsequent breach or nullify the effectiveness of that term or condition. 15.10 Counterparts. This Agreement may be executed in identical ------------ duplicate copies. The parties agree to execute at least two identical original copies of the Agreement. Each identical counterpart shall be deemed an original, but all of which together shall constitute one and the same instrument. 15.11 Severability of Provisions. If, for any reason whatsoever, -------------------------- any term, covenant or condition of this Agreement or of any other document or instrument executed and delivered by either PPI or SANO pursuant hereto or in connection with the completion of the transaction contemplated herein, or the application thereof to any party or circumstance is to any extent held or rendered invalid, unenforceable or illegal, then such term, covenant or condition: (i) is deemed to be independent of the remainder of such document and to be severable and divisible therefrom and its validity, unenforceability or illegality does not affect, impair or invalidate the remainder of such document or any part thereof; and (ii) continue to be applicable and enforceable to the fullest extent permitted by law against any party and circumstances other than those as to which it has been held or rendered invalid, unenforceable or illegal. 15.12 Publicity. Neither party shall issue any press release or --------- other public statement regarding, or disclosing the existence of, this Agreement without the prior written consent of the other party; provided, however, that neither party shall be 66 prevented from complying with any disclosure obligation it may have under applicable law. The parties shall use their best efforts to agree on the form and content of any such public statement. ARTICLE XVI GUARANTEE OF PRI 16.1 Guarantee. PRI does hereby unconditionally guarantee to SANO --------- the full and prompt payment and performance by PPI of all of the obligations of every nature whatsoever to be performed by PPI under this Agreement (the "Guaranteed Obligations") as and when required to be paid or performed under this Agreement. The guarantee set forth in the preceding sentence (this "Guarantee") is an absolute, unconditional and continuing guarantee of the full and punctual payment and performance of the Guaranteed Obligations and is in no way conditioned upon any requirement that SANO first attempt to enforce any of the Guaranteed Obligations against PPI, any other guarantor of the Guaranteed Obligations or any other Person or resort to any other means of obtaining performance of any of the Guaranteed Obligations. This Guarantee shall continue in full force and effect until PPI shall have satisfactorily performed or fully discharged all of the Guaranteed Obligations. No performance or payment made by PPI, PRI, any other guarantor or any other Person, or received or collected by SANO from PPI, PRI, any other guarantor or any other Person in performance of or in payment of the Guaranteed Obligations shall be deemed to modify, reduce (except to the extent that any such performance or payment shall reduce the Guaranteed Obligations), release or otherwise 67 affect the liability of PRI under this Guarantee which shall, notwithstanding any such payment or performance other than those made by PRI in respect of the Guaranteed Obligations or those received or collected from PRI in respect of the Guaranteed Obligations, remain liable for the amount of the Guaranteed Obligations, until the Guaranteed Obligations are paid and performed in full. 16.2 No Subrogation. Notwithstanding any payment or performance by -------------- PRI, PRI shall not be entitled to be subrogated to any of the rights of SANO or any other guarantor or any collateral security held by SANO against PPI or any other guarantor or any collateral security for the payment of the Guaranteed Obligations, nor shall PRI seek or be entitled to seek any contribution or reimbursement from PPI or any other guarantor in respect of payments made by PRI under this Guarantee. PRI HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS AND CLAIMS WHICH PRI MAY NOW HAVE OR HEREAFTER ACQUIRE TO BE SUBROGATED TO ANY SUCH RIGHTS OF SANO AND TO SEEK OR BE ENTITLED TO SEEK ANY SUCH CONTRIBUTION OR REIMBURSEMENT FROM PPI OR ANY OTHER GUARANTOR. THE OBLIGATIONS OF AND WAIVERS BY PRI SET FORTH IN THIS SECTION 16.2 SHALL SURVIVE THE TERMINATION OF THIS GUARANTEE AND THE PAYMENT, PERFORMANCE AND SATISFACTION IN FULL OF ALL OF THE GUARANTEED OBLIGATIONS. 16.3 Amendments, etc with Respect to Guaranteed Obligations; Waiver -------------------------------------------------------------- of Rights. PRI shall remain obligated under this Guarantee --------- notwithstanding that, without any reservation of rights against PRI and without notice to or further assent by PRI, any 68 demand for payment or performance of any of the Guaranteed Obligations made by SANO may be rescinded by SANO and any of the Guaranteed Obligations continued, and the Guaranteed Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security (or guarantee therefor may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by SANO and this Agreement, any collateral security document or other guarantee or document in connection herewith may be amended, modified, supplemented or terminated, in whole or in part, as SANO may deem advisable from time to time, and any collateral security or guarantee at any time held by SANO for the payment or performance of the Guaranteed Obligations may be sold, exchanged, waived, surrendered or released. SANO shall not have any obligation to protect, secure, perfect or insure any lien at any time held by it as security for the Guaranteed Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against PRI, SANO may, but shall be under no obligation to, make a similar demand on PPI or any other guarantor, and any failure by SANO to make any such demand or to collect any payments from PPI or any such other guarantor or any release of PPI or such other guarantor shall not relieve PRI of its obligations or liabilities under this Guarantee, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of SANO against PRI. 16.4 Extent of Liability and Waivers. PRI understands and agrees ------------------------------- that the obligation of guarantee of PRI pursuant to Section 16.1 are intended to render PRI liable hereunder in each instance where PPI would be liable under this Agreement, and no 69 more, and except that the obligations of PRI hereunder shall not be discharged by any bankruptcy or similar proceeding which may discharge PPI herefrom. Accordingly, PRI acknowledges that it will not assert, and hereby waives to the fullest extent permitted by law, any rights to avoid performance hereunder available to it as guarantor which are not also available to PPI. PRI waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by SANO upon this Guarantee or acceptance of this Guarantee; the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between PPI or PRI, on the one hand, and SANO on the other, pursuant to this Agreement shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. PRI waives diligence, presentment, protest, demand for payment and notice of default or nonpayment or nonperformance to or upon PPI or any other guarantors with respect to the Guaranteed Obligations. When pursuing its rights and remedies hereunder against PRI, SANO may, but shall be under no obligation to, pursue such rights and remedies as it may have against PPI or any other Person or against any collateral security or guarantee for the Guaranteed Obligations, and any failure by PRI to pursue such other rights or remedies or to collect any payments from PPI or any such other Person or to realize upon any such collateral security or guarantee, or any release of PPI or any such other Person or any such collateral security or guarantee, shall not relieve PRI of any liability hereunder and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, 70 of SANO against PRI. This Guarantee shall remain in full force and effect and be binding upon PRI and its successors and assigns and shall inure to the benefit of SANO and its successors and assigns, until all the Guaranteed Obligations shall have been satisfied by payment and performance in full. 16.5 Reinstatement. This Guarantee shall continue to be effective, ------------- or be reinstated, as the case may be, if at any time payment or performance, or any part thereof, of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by SANO upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of PPI or PRI, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, PPI or PRI, or any substantial part of its or their property, or otherwise, all as though such payments had not been made. 16.6 No Waiver; Cumulative Remedies. SANO shall not by any act ------------------------------ (except by a written instrument pursuant to Section 15.7), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions of this Agreement. No failure to exercise, nor any delay in exercising, on the part of SANO, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by SANO of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the SANO would otherwise have on any future occasion. The rights and remedies 71 herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 16.7 Affiliates. To the extent that PPI or PRI is obligated ---------- hereunder to cause its Affiliates to do or refrain from doing anything, PRI will do all things that it may lawfully and reasonably do to cause such Affiliate to comply. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the Execution Date. SANO CORPORATION By:/s/Mark M. Watson ----------------- (Signature) Name:Mark M. Watson -------------- Title:Chairman -------- PHARMACEUTICAL RESOURCES, INC. By:/s/Kenneth I. Sawyer -------------------- (Signature) Name:Kenneth I. Sawyer ----------------- Title:President & CEO --------------- PAR PHARMACEUTICAL, INC. By:/s/Kenneth I. Sawyer -------------------- (Signature) Name:Kenneth I. Sawyer ----------------- Title:President & CEO --------------- 72 APPENDIX I LICENSED PRODUCTS Product "A" ----------- [ ] Product "B" ----------- [ ] APPENDIX II OPTION PRODUCTS [ ] [ ] [ ] EXHIBIT A DEVELOPMENT PROGRAM [ ] EXHIBIT B As used herein, the term "Net Sales" shall mean the gross amount invoiced for sales of Licensed Product(s) made by PRI or its Affiliates to independent third parties, reduced by the following to the extent that they are properly allocable to the quantity of Licensed Product(s) so sold: all trade, quantity and cash discounts allowed; credits or allowances actually granted on account of rejections; returns, billing errors and retroactive price reductions (including, without limitation, shelf stock adjustments); credits, rebates, chargeback rebates, fees, reimbursements or similar payments granted or given to wholesalers and other distributors, buying groups, health care insurance carriers, governmental agencies and other institutions in respect of the purchase price; freight, transportation, insurance or other delivery charges; and all taxes (except income taxes), tariffs, duties and other similar governmental charges paid by the seller on sales of the Licensed Product(s) and not reimbursed by the purchaser. "Gross Profit" shall mean the difference between Net Sales for any amount of Licensed Product(s) and the price paid to SANO pursuant to Section 7.2 hereof in respect of such Licensed Product(s). [ ] [ ] EXHIBIT C [SALES SUMMARY FORM] EX-10.30 4 NON-EXCLUSIVE DISTRIBUTION DATED 9/13/94 EXHIBIT 10.30 CONFIDENTIAL PORTIONS OF THIS EXHIBIT MARKED [ ] HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION NON EXCLUSIVE DISTRIBUTION AGREEMENT EXCLUSIVE SUPPLY AGREEMENT This Agreement, entered into as of the day of September, 1994, by and between MOVA PHARMACEUTICAL CORPORATION ("MOVA"), a Puerto Rico corporation, having offices in Caguas, Puerto Rico, and PAR PHARMACEUTICAL, INC., a New York corporation, having offices in One Ram Ridge Road, Spring Valley, New York 10977 ("PAR"). WITNESSETH: WHEREAS, MOVA manufactures and sells pharmaceutical products and has represented that it has developed a generic version of Albuterol Sulfate Syrup defined hereinafter as the "Product"); and WHEREAS, PAR distributes a line of generic versions of branded pharmaceutical products such as the Product; and WHEREAS, PAR would like to distribute the Product as manufactured by MOVA and MOVA is willing to supply the Product to PAR for such purpose, all upon the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the foregoing premises, which are hereby incorporated as substantive part of this Agreement, and in consideration of the performance of the mutual covenants and promises herein contained, MOVA and PAR have agreed as follows: ARTICLE 1 - DEFINITIONS ----------------------- 1.1 The Product. The "Product" shall mean Albuterol Sulfate Syrup ----------- for which the FDA approves an Abbreviated New Drug Application with an AA rating when compared with Proventil Syrup. 1.2 The ANDA. The "ANDA" shall mean the Abbreviated New Drug -------- Application for the Product which has been submitted to the FDA by MOVA, including any amendments or supplements thereto. 1.3 The FDA. The "FDA" shall mean the United States Food and Drug ------- Administration. 2 1.4 Patents. The "Patents" shall mean any issued patents or patent ------- rights held by third parties which would be infringed by the manufacture, use or sale of the Product to be sold by MOVA to PAR pursuant to the terms of this Agreement. 1.5 Approval Date. The "Approval Date" shall mean the date on which ------------- MOVA is in receipt of all required regulatory approvals for the manufacture and sale of the Product. 1.6 Purchase Term. The "Purchase Term" shall mean the five (5) year ------------- period that begins on the date the first order for Product is shipped after the Approval Date. 1.7 Average Selling Price. The "Average Selling Price" shall mean the --------------------- actual Net Sales of Product by shelf keeping unit sold by PAR to unrelated third parties per calendar quarter divided by the total number of units of each shelf keeping unit of Product sold in the said calendar quarter. 1.8 Net Sales. "Net Sales" shall mean the gross sales for each shelf --------- keeping unit of Product less the following: (i) trade, quantity or cash discounts, if any, allowed or paid; (ii) chargebacks, shelf stock adjustments, returns, credits or allowances, if any, given or made on account of Products previously delivered; and (iii) Federal, State or local government rebates whether in effect now or enacted at any time during the term of this Agreement. 1.9 Net Profit. "Net Profit" shall mean the Net Sales for each shelf ---------- keeping unit of Product less the Base Price as specified in Exhibit A hereof. 1.10 Purchase Price. The "Purchase Price" shall mean the base price as -------------- specified in Exhibit A hereof, plus [ ] of actual Net Profits per shelf keeping unit. 1.11 Base Price. "The Base Price" shall mean the base price per shelf ---------- keeping unit as specified in Exhibit A hereof. The Base Price set forth in Exhibit A shall remain firm through December 31, 1994. The Base Price will be adjusted on January 1st. every year, commencing on January 1, 1995 for the annual change in the CPI for the previous year. 3 1.12 Affiliate. "Affiliate" shall mean, with respect to either party, --------- all corporations or other business entities which, directly or indirectly, are controlled by, control or are under the common control with that party. For this purpose, the meaning of the word "control" shall include, but not be limited to, ownership of more than fifty percent (50%) of the voting shares or interest of such corporation or other business entity. 1.13 CPI. "CPI" shall mean the Consumer Price Index published by the --- Puerto Rico Department of Labor. ARTICLE 2 - SUPPLY ------------------ 2.1 Purchase and Sale. Subject to the terms and conditions of this ----------------- Agreement, MOVA shall supply and PAR shall purchase from MOVA substantially all of PAR's requirements for the Product from the Approval Date and throughout the Purchase Term. PAR shall not purchase the Product or any product having the same active ingredient, strength and indication as the Product, from any party other than MOVA after the Approval Date and throughout the Purchase Term except that PAR may purchase the Product or any such product from any party pursuant to Paragraph 2.4 and Article 14 hereunder. PAR shall have the non-exclusive right to sell, market and distribute the Product except in the Commonwealth of Puerto Rico and the U.S. Virgin Islands. 2.2 Forecasts. As early as reasonably possible (but no later than --------- thirty (30) days prior to the date which MOVA notifies PAR should be the Availability Date) and thirty (30) days prior to every calendar quarter thereafter, PAR shall give to MOVA a written forecast of the quantities of the Product, including quantities for each strength and unit size of the Product, and delivery dates that PAR anticipates it will order from MOVA during the two (2) calendar quarters following the date of the written forecast. Such forecast shall not create a binding obligation on the part of either MOVA or PAR, except as provided in Paragraph 2.3 hereof. However, PAR shall use all reasonable efforts to make each forecast as accurate as possible. PAR shall promptly advise MOVA of any significant changes in its estimated forecast of Product. 2.3 Orders. PAR shall submit written purchase orders to MOVA for the ------ quantities of the Product, including the quantity of each strength and unit size and delivery dates, which PAR desires to purchase under this Agreement. For the first three (3) month period of each forecast given by PAR pursuant to Paragraph 2.2 hereof, PAR shall submit purchase orders to MOVA for at least the greater of: seventy-five percent (75%) of the forecasted quantities for that period on the then current forecast or fifty percent (50%) of the forecasted quantities for that period as shown on the immediately preceding forecast. If applicable, each purchase order shall specify the country in which the Product is to be resold by PAR. 4 Regardless of the quantities ordered, MOVA shall use all reasonable efforts to deliver the full quantities of the Product ordered by PAR. Deliveries of the Product ordered by PAR to the destination designated by PAR will be made within sixty (60) days following the date on which PAR submitted the purchase order unless a later delivery date has been specified by PAR. 2.4 Inability to Supply. Within thirty (30) days following its ------------------- receipt of each forecast according to Paragraph 2.2 hereof, MOVA shall advise PAR in writing if it is unable to supply the entire quantity forecasted. PAR shall have the right to purchase from third parties such quantities of the Product for which MOVA shall have advised that it will be unable to supply, for as long as MOVA's inability to supply continues. 2.5 Shipments. Delivery shall be f.o.b. Caguas, Puerto Rico, freight --------- and insurance prepaid by MOVA. Product shall be shipped by MOVA according to PAR's instructions, to PAR's facility at One Ram Ridge Road, Spring Valley, NY 10977; provided, however, that should PAR -------- ------- instruct MOVA to ship to another location, MOVA shall do so and PAR shall reimburse for any incremental costs involved. 2.6 Purchase Price and Payment. MOVA shall invoice PAR the Base --------------------------- Price for all shelf keeping units in each shipment of Product delivered to PAR. Such amount shall be payable sixty (60) days from receipt of the invoice therefor. At the end of each calendar quarter, PAR shall determine and advise MOVA of the Actual Net Profits obtained from the sale of the Product by PAR during such calendar quarter. Within twenty (20) days after the end of each such quarter, PAR shall pay to MOVA, the difference between the Base Price and the Purchase Price times the actual number of shelf keeping units actually sold during said calendar quarter. Payment will be made only with respect to Product actually shipped by PAR during such calendar quarter. In addition, within thirty (30) days after the end of each calendar quarter, PAR shall provide MOVA with a report of the number of units of Product shipped and returned, gross sales of Product and Net Sales of Product during such calendar quarter and the number of units of Product inventory remaining under PAR's control at the end of such calendar quarter. 2.7 Conflicting Terms. In ordering and delivering the Product, PAR ----------------- and MOVA may use their standard forms, but nothing in such forms shall be construed to amend or modify the terms of this Agreement and in case of conflict herewith, the terms of this Agreement shall control. ARTICLE 3 - QUALITY ------------------- 3.1 Quality Control. Prior to each shipment of the Product, MOVA --------------- shall perform such quality control procedures to verify that each shipment of the 5 Product made under this Agreement conforms to the specifications for the Product contained in the approved ANDA and otherwise complies with the representations and warranties given by MOVA in Article 4 hereof. Each shipment of the Product shall be accompanied by a quality assurance analytical data sheet (the "Q.A. Certificate of Analysis"). 3.2 Rejection. PAR shall have thirty (30) days following the day on --------- which it receives a shipment to reject same because all or part of the shipment fails to conform to the applicable specifications or otherwise fails to conform to the representations and warranties given by MOVA herein, by giving written notice to MOVA specifying the manner in which all or part of such shipment fails to meet the foregoing requirements. If PAR rejects a shipment before the date on which payment therefor is due according to Paragraph 2.6 hereof, it may withhold payment for that shipment or the rejected portion thereof. All shipments or portions thereof not rejected by PAR before such date shall be paid for in accordance with Paragraph 2.6 hereof. All shipments or portions thereof which PAR rejected but, as determined pursuant to Paragraph 3.4 hereof, did not have the right to reject, shall be paid within fifteen (15) days following the day on which such determination was made, unless PAR had paid earlier. In the event PAR rejects a shipment or portion thereof within such thirty (30) day period in accordance with the terms hereof but after payment therefor had been made, PAR shall be entitled to recoup the payment amount by, at PAR's election, MOVA's issuing a prompt refund or by PAR's offsetting such amount against the payment of future invoices or other payments that may become due hereunder. The representations and warranties given by MOVA hereunder shall survive any failure to reject by PAR under this Paragraph. 3.3 Recalls. If the Product is recalled pursuant to FDA regulation ------- or other applicable laws and returned as a result of any such recall and such recall is due to MOVA's negligence or willful misconduct or a breach of any representation or warranty of MOVA hereunder, then MOVA shall bear all incremental out-of-pocket direct costs in connection with the recall, including, but not limited to, all notification letters and all shipping expenses. In no event shall MOVA be responsible for any indirect expenses incurred by PAR. If the recalled Product is to be destroyed, MOVA, at PAR's request, shall replace free of charge said Product or issue a credit to PAR's account or refund payment to PAR. If the recalled Product is to be reworked, MOVA shall bear all costs of reworking said product. If the Product is recalled and such recall is due to PAR's negligence or willful misconduct or a breach of any representation or warranty of PAR hereunder, then PAR shall bear all incremental out-of-pocket direct costs in connection with the recall, including, but not limited to, all notification letters and all shipping expenses. In no event shall PAR be responsible for any indirect expenses incurred by MOVA. 6 3.4 Disputes. If MOVA disputes PAR's right to reject all or part of -------- any shipment of the Product as set forth in Paragraph 3.2 or 3.3 hereof, such dispute shall be resolved by an independent approved FDA testing organization or consultant of recognized repute within the U.S. pharmaceutical industry mutually agreed upon by the parties, the appointment of which shall not be unreasonable withheld or delayed by either party. The determination of such entity with respect to all or part of any shipment of the Product shall be final and binding upon the parties, but only as to the reasons given by PAR in rejecting the shipment or portion thereof and shall have no effect on any matter for which said entity did not render a determination. The fees and expenses of the third party making the determination shall be paid by the party against which the determination is made. 3.5 Obligation to Inform the Other. Parties agree to keep each other ------------------------------ regularly and fully informed of any notification or other information, whether received directly or indirectly, which might in any way affect the marketability, safety or effectiveness of the Product, or which might result in potential liability for either party, or which might necessitate action on the part of either party, or which might result in recall of the Product, or which might otherwise in any way affect either of the parties' interest with respect to the distribution or use of the Product. Nothing contained in this Paragraph shall obligate either party to provide the other with any information other than information regarding the quality of the Product. 3.6 Inspections. Upon reasonable notice given to MOVA, PAR shall ----------- have the right to have a reasonable number of its employees inspect any facility at which the Product to be sold to PAR hereunder is manufactured, packaged, stored or shipped. 3.7 Packaging. MOVA shall supply the Product to PAR in finished --------- bottles bearing the PAR label as specified by PAR and approved by the FDA. ARTICLE 4 - REPRESENTATIONS AND WARRANTIES ------------------------------------------ MOVA hereby covenants, represents and warrants to PAR that: (a) on the date of shipment, all of the Product sold by MOVA to PAR hereunder will comply with the specifications for the Product contained in the approved ANDA, conform with the information shown on the Q.A. Data Sheet and, when applicable, the sample provided for the particular shipment according to Paragraph 3.1 hereof; (b) all of the Product sold by MOVA to PAR hereunder shall have been manufactured, packaged and stored and shipped in conformance with all applicable current Good Manufacturing Practices which are in force or hereinafter adopted by the FDA or any successor agency thereto; 7 (c) on the date of shipment, all of the Product shipped by MOVA to PAR hereunder will not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as amended and in effect at the time of shipment (the "Act"), or within the meaning of any applicable state or municipal laws in the USA under which such terms have the same meaning as set forth under the Act; (d) on the date of shipment, all of the Product sold by MOVA to PAR hereunder may be legally distributed or sold in the USA; (e) title to all the Product sold by MOVA to PAR hereunder shall pass to PAR as provided herein free and clear of any security interest, lien or other encumbrance; (f) the Product sold hereunder shall have been manufactured, packaged and stored in facilities which are approved by the FDA at the time of such manufacture, packaging and storage, to the extent such approval is required by law; (g) to the best of MOVA's knowledge and belief, the manufacture, use or sale of the Product sold by MOVA to PAR hereunder shall not constitute an infringement of any Patents; and (h) to the best of MOVA's knowledge and belief, MOVA and its employees, affiliates and agents have never been (i) debarred or (ii) convicted of a crime for which a person can be debarred, under Section 306(a) of the U.S. Federal Generic Drug Enforcement Act of 1992 ("Section 306(a) or (b)") and, to the best of MOVA's knowledge and belief, MOVA and its employees, affiliates and agents has ever been threatened to be (i) debarred or (ii) indicted for a crime or otherwise engaged in conduct for which a person can be debarred under Section 306(a) or (b), and it will promptly notify PAR in the event of any such debarment, conviction, threat or indictment. ARTICLE 5 - APPROVALS --------------------- 5.1 ANDA. MOVA shall be responsible for obtaining the approval of ---- the ANDA by the FDA and in so doing shall exercise what it in good faith believes to be reasonable commercial effort to obtain such approval at the earliest possible date. 5.2 Inspections by Government Agencies. Without limiting the ---------------------------------- generality of Paragraph 5.1 hereof, MOVA shall permit the FDA to conduct whatever 8 inspections of the facilities at which the Product is to be manufactured, packaged and/or stored and shall cooperate with the FDA during any such inspections. 5.3 Administration of the ANDA and other Approvals. MOVA shall be ---------------------------------------------- responsible for maintaining the ANDA and any other approvals current and in effect. In so doing, MOVA shall comply with all applicable requirements of the FDA and counterpart governmental agencies outside of the USA. 5.4 Product Complaints. Each party shall immediately inform the ------------------ other of product quality, health or safety related concerns or inquiries that raise potentially serious and unexpected quality, health or safety concerns. All such other information not involving the above described situation shall be transmitted to the other party within three (3) business days following receipt. ARTICLE 6 - ADJUSTMENTS ------------------------ 6.1 Adjustment. In the event that PAR's average selling price for ---------- the Product to any other party becomes less than [ ] per bottle of 16 ounces, adjusted on January 1st. every year, commencing on January 1, 1995 for the annual change in the CPI as set forth in Exhibit A, the parties shall negotiate such modification to this Agreement as may be necessary to enable each to perform thereunder on terms fair and reasonable under the circumstances and if no agreement thereon can be reached within a reasonable time, either party may terminate this agreement by giving ninety (90) days prior notice. 6.2 Independent Prices. Each of the parties shall establish the ------------------ prices at which it sells the Product to its customers independently of the other party. ARTICLE 7 - INDEMNIFICATION --------------------------- 7.1 MOVA's Obligation to Indemnify. MOVA agrees to indemnify, ------------------------------ defend, and hold harmless PAR, its affiliates and subsidiaries and their respective employees against any and all claims, losses, damages and liabilities, including reasonable attorneys' fees and costs associated with a recall of the Product as defined in Paragraph 3.3 hereof, incurred by any of them arising out of any breach of any obligation hereunder or any representation or warranty by MOVA hereunder or any act or omission of MOVA in connection with its obligations hereunder. 7.2 PAR's Obligation to Indemnify. PAR agrees to indemnify, defend ----------------------------- and hold harmless MOVA, its affiliates and subsidiaries and their respective employees against any and all claims, losses, damages and liabilities, including reasonable attorneys' fees and costs associated with a recall of the Product as defined in 9 Paragraph 3.3 hereof, incurred by any of them arising out of any breach of any obligation hereunder or any representation or warranty by PAR hereunder or any act or omission of PAR in connection with its obligations hereunder. 7.3 Obligations of the Party Seeking to be Indemnified. If PAR or any --------------------------------------------------- of its affiliates or subsidiaries or MOVA or any of its affiliates or subsidiaries (in each case an "Indemnified Party") receive any written claims which it believes is the subject of indemnity hereunder by MOVA or PAR, as the case may be (in each case an "Indemnifying Party"), the Indemnified Party shall, as soon as reasonably practicable after forming such belief, give notice thereof to the Indemnifying Party, including full particulars of such claim to the extent known to the Indemnified Party; provided, that the failure to give timely notice to the Indemnifying Party as contemplated hereby shall not release the Indemnifying Party from any liability to the Indemnified Party except to the extent that the Indemnifying Party is injured by such delay. The Indemnifying Party shall have the right, by prompt notice to the Indemnified Party, to assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Party, and at the cost of the Indemnifying Party. If the Indemnifying Party does not assume the defense of such claim, or, having done so, does not diligently pursue such defense, the Indemnified Party may assume such defense, with counsel of its choice, but for the account of the Indemnifying Party. If the Indemnifying Party so assumes such defense, the Indemnified Party may participate therein through counsel of its choice, but the cost of such counsel shall be for the account of the Indemnified Party. The party not assuming the defense of any such claim shall render all reasonable assistance to the party assuming such defense, and all out-of-pocket costs of such assistance shall be for the account of the Indemnifying Party. No such claim shall be settled other than by the party defending the same, and then only with the consent of the other party, which shall not be unreasonably withheld; provided, that the Indemnified Party shall have no obligation to consent to any settlement of any such claim which imposes on the Indemnified Party and liability or obligation which cannot be assumed and performed in full by the Indemnifying Party. 7.4 Insurance. Each party and its Affiliates shall carry products --------- liability insurance in an amount at least equal to [ ] with an insurance carrier reasonably acceptable to the other party. Such insurance shall cover the indemnifications set forth in Article 7 hereof. Each party shall name the other party as additional insured under such policy. A copy of such policy or policies shall be delivered to the other party within ten (10) days prior to the date any such Product is first commercially sold by such party, and shall provide among other things, that such insurance shall not be canceled or modified without giving the other party at least thirty (30) days prior written notice. ARTICLE 8 - CONFIDENTIALITY --------------------------- 10 8.1 Each party shall at all times maintain as confidential any know- how or other business information received from the other party under this Agreement during the term of this Agreement, shall only use such information in furtherance of this Agreement shall only disclose such information to those of its employees with a need to know in furtherance of this Agreement, provided, however, that nothing -------- ------- contained herein shall prevent a party from submitting information to a governmental instrumentality in connection with seeking approval to market the Product. Said obligation of confidentiality shall not apply, however, to any information which: (a) was known to the receiving party, as evidenced by its written records, prior to receipt from the other party; (b) is in the public domain at time of receipt or subsequently enters the public domain through no breach of this Agreement by the receiving party; (c) after the date of receipt from the disclosing party, is received without cover of secrecy from a third party with a bona fide right to disclose without violating any right of the disclosing party; or (d) is independently developed by the receiving party without the aid, application or use of any information for which it is obligated to maintain as confidential according to this Paragraph. The respective obligations of MOVA and PAR under this Paragraph shall be in effect during the term of this Agreement and for the three (3) years thereafter. ARTICLE 9 - RECORDS ------------------- 9.1 PAR shall keep appropriate and complete records in sufficient detail so that the payments due hereunder can be properly ascertained. PAR shall, on the request of MOVA, permit a certified public accountant, selected by MOVA and to whom PAR has no reasonable objection, to have access during normal business hours, to such books and records as may be necessary to determine, in respect of any accounting period ending not more than three (3) years prior to the date of such request, the correctness of any payment under this Agreement. Any such accountant shall not disclose any information to MOVA except that which specifically relates to the payment obligations hereunder. ARTICLE 10 - TERM, TERMINATION ------------------------------ 10.1 Term. This Agreement shall become effective as of the date first ---- written above and shall remain in full force and effect through the end of the Purchase Term. 11 10.2 Termination for Cause. This Agreement may be terminated at any --------------------- time by either party: (a) upon breach of this Agreement by the other party, on sixty (60) days' prior written notice to the breaching party, this notice to become effective at the end of such sixty (60) day period unless the breach is sooner cured by the breaching party; or (b) upon bankruptcy or insolvency of the other party or placing of the business of such party in receivership. 10.3 Waiver. Failure to terminate this Agreement following a breach ------ or failure to comply with terms and conditions of this Agreement shall not be deemed a waiver of the non breaching party's defenses, rights or causes of action arising from such or any future breach or noncompliance. ARTICLE 11 - TRADE NAMES AND TRADEMARKS --------------------------------------- 11.1 PAR and MOVA hereby acknowledge that they do not have, and shall not acquire by virtue of this Agreement, any rights to or in any goodwill, trademark, trade name, copyright, patent or other property of the other, nor in any of the other's trademarks or trade names appearing on the label or packaging materials of the Product. PAR and MOVA each agrees to do nothing by act or omission which would impair, the rights, ownership and title to the other, including its Affiliates, in the aforementioned. ARTICLE 12 - NOTICES -------------------- 12.1 Any notice required or permitted to be given or made under this Agreement by either of the parties to the other shall be in writing and delivered to the other party at its address indicated below or to such other address as the addressee shall have theretofore furnished in writing to the addressor by hand, courier or by registered or certified mail (postage prepaid) or by telefax, provided all telefax notices shall be promptly confirmed, in writing, by registered or certified mail (postage prepaid): If to MOVA: MOVA Pharmaceutical Corporation P. O. Box 8639 Caguas, Puerto Rico 00626 Telefax: (809) 258-6405 12 Attention: Joaquin B. Viso President With a Copy to: Ledesma, Palou & Miranda Hato Rey Tower, Suite 1103 268 Munoz Rivera Avenue Hato Rey, Puerto Rico 00918 Telefax: (809) 754-6344 Attention: Silvestre M. Miranda If to PAR: Par Pharmaceutical, Inc. One Ram Ridge Road Spring Valley, New York 10977 Telefax: (914) 425-7907 Attention: Ken Sawyer President All notices shall be effective as of the date received by the addressee. ARTICLE 13 - NON ASSIGNABILITY ------------------------------ 13.1 This Agreement and the rights of the parties hereunder shall not be assignable nor shall the obligations of either party be delegable, except as to affiliates of PAR or MOVA, without the prior written consent of the other party, which consent shall not be unreasonably withheld. In the event either party seeks and obtains the other party's consent to assign or delegate its rights or obligations to another party, or in the event of an assignment or delegation to an affiliate, the obligations of the assignee or transferee must be guaranteed in writing by the party who is the assignor or transferor. ARTICLE 14 - FORCE MAJEURE -------------------------- 14.1 Force Majeure. No failure or omission by the parties in the ------------- performance of any obligation according to this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the party, including, but not limited to, strikes, riots, war, acts of God, invasion, fire, explosion, floods, delay of carrier, shortage or failure in the supply of materials, energy shortage and acts of government or governmental agencies or instrumentalities. 13 14.2 Obligations of the Parties in case of Force Majeure. In the --------------------------------------------------- event that due to force majeure either party hereto shall be delayed or hindered in or prevented from the performance of its duties or doing acts required under the terms of this Agreement, the performance of such act, except for the obligation to pay amounts due under this Agreement, shall be excused for the period of the delay. Notwithstanding the aforementioned, the party subject to force majeure shall take all reasonable steps to resolve the condition(s) forming the basis of force majeure. ARTICLE 15 - MISCELLANEOUS -------------------------- 15.1 Governing Law. This Agreement shall be governed by, and ------------- construed in accordance with, the laws of the Commonwealth of Puerto Rico. 15.2 Independent Contractor. The parties shall be considered ---------------------- independent contractors, and neither the making of this Agreement nor the performance of any of the provisions hereof shall be construed to make either party an agent, employee or legal representative of the other, nor shall this Agreement be deemed to establish a joint venture or partnership. 15.3 Public Announcements. MOVA and PAR shall consult with each other -------------------- before issuing any press releases or otherwise making any public statements with respect to this Agreement and neither of them shall issue any press release or make any public statement prior to obtaining the other party's approval, which approval shall not be unreasonably withheld, except that no such approval shall be necessary to the extent disclosure may be required by law. 15.4 Severability. Should any section, or portion thereof, of this ------------ Agreement be held invalid by reason of any law, statute or regulation existing now or in the future in any jurisdiction by any court of competent authority or by a legally enforceable directive of any governmental body, then such section or portion thereof shall be validly reformed so as to approximate the intent of the parties as nearly as possible and, if unreformable, shall be deemed divisible and deleted with respect to such jurisdiction; this Agreement shall not otherwise be affected. 15.5 Taxes. Each party shall be responsible for its own taxes. ----- 15.6 Entire Agreement. The terms and provisions contained in this ---------------- Agreement, including the Exhibit hereto, constitute the entire agreement between the parties and shall supersede all previous communications, representations, agreements or understandings, either oral or written, between the parties with respect to the subject matter hereof. No agreement or understanding varying or extending this Agreement shall be binding upon either party hereto, unless set forth in a writing which specifically refers to this Agreement, signed by duly authorized officers or representatives of the respective parties, and the provisions hereof not specifically 14 amended thereby shall remain in full force and effect. IN WITNESS WHEREOF, MOVA and PAR have executed this Agreement in duplicate as of the day and year first above written. MOVA PHARMACEUTICAL PAR PHARMACEUTICAL, INC. CORPORATION By:/s/ Joaquin B. Viso By:/s/ Kenneth I. Sawyer ---------------------------- --------------------------- Joaquin B. Viso Kenneth I. Sawyer President President EXHIBIT A --------- PRICING SCHEDULE Minimum Average Size Base Price Selling Price ---- ---------- ------------- [ ] [ ] [ ] The Base Price and the Minimum Average Selling Price will be adjusted on January 1st every year, commencing on January 1, 1995 for the annual change in the CPI. EX-10.31 5 NON-EXCLUSIVE DISTRIBUTION DATED 9/13/94 EXHIBIT 10.31 NON EXCLUSIVE DISTRIBUTION AGREEMENT EXCLUSIVE SUPPLY AGREEMENT This Agreement, entered into as of the 13th day of September, 1994, by and between MOVA PHARMACEUTICAL CORPORATION ("MOVA"), a Puerto Rico corporation, having offices in Caguas, Puerto Rico, and PAR PHARMACEUTICAL, INC., a New York corporation, having offices in One Ram Ridge Road, Spring Valley, New York 10977 ("PAR"). WITNESSETH: WHEREAS, MOVA manufactures and sells pharmaceutical products and has represented that it has developed a generic version of cimetidine (defined hereinafter as the "Product"); and WHEREAS, PAR distributes a line of generic versions of branded pharmaceutical products such as the Product; and WHEREAS, PAR would like to distribute the Product as manufactured by MOVA and MOVA is willing to supply the Product to PAR for such purpose, all upon the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the foregoing premises, which are hereby incorporated as substantive part of this Agreement, and in consideration of the performance of the mutual covenants and promises herein contained, MOVA and PAR have agreed as follows: ARTICLE 1 - DEFINITIONS ----------------------- 1.1 The Product. The "Product" shall mean cimetidine (300mg., ----------- 400mg., and 800mg.) and any future dosage strength for which the FDA approves an Abbreviated New Drug Application with an AB rating when compared with the corresponding strength of Tagemet (cimetidine) tablets. 1.2 The ANDA. The "ANDA" shall mean the Abbreviated New Drug -------- Application for the Product which has been submitted to the FDA by MOVA, including any amendments or supplements thereto. 1.3 The FDA. The "FDA" shall mean the United States Food and Drug ------- Administration. 1.4 Patents. The "Patents" shall mean any issued patents or patent ------- rights held by third parties which would be infringed by the manufacture, use or sale of the Product to be sold by MOVA to PAR pursuant to the terms of this Agreement. 2 1.5 Patents Expiration Day. The "Patents Expiration Day" shall mean ---------------------- the day on which all of the Patents have expired or are no longer in effect. 1.6 Availability Date. The "Availability Date" shall mean the date ----------------- on which MOVA is first legally permitted and able to ship commercial quantities of the Product in the interstate commerce of the USA. 1.7 Approval Date. The "Approval Date" shall mean the date on which ------------- MOVA is in receipt of all required regulatory approvals for the manufacture and sale of the Product. 1.8 Purchase Term. The "Purchase Term" shall mean the five (5) year ------------- period that begins on the date the first order for Product is shipped after the Approval Date. 1.9 Average Selling Price. The "Average Selling Price" shall mean the --------------------- actual Net Sales of Product by shelf keeping unit sold by PAR to unrelated third parties per calendar quarter divided by the total number of units of each shelf keeping unit of Product sold in the said calendar quarter. 1.10 Net Sales. "Net Sales" shall mean the gross sales for each shelf --------- keeping unit of Product less the following: (i) trade, quantity or cash discounts, if any, allowed or paid; (ii) chargebacks, shelf stock adjustments, returns, credits or allowances, if any, given or made on account of Products previously delivered; and (iii) Federal, State or local government rebates whether in effect now or enacted at any time during the term of this Agreement. 1.11 Net Profit. "Net Profit" shall mean the Net Sales for each shelf ---------- keeping unit of Product less the Base Price as specified in Exhibit A hereof. 1.12 Purchase Price. The "Purchase Price" shall mean the base price as -------------- specified in Exhibit A hereof, plus a percent of Actual Net Profits per shelf keeping unit to be determined as follows: (i) [ ] % in the event the Availability Date occurs by Patents Expiration Day; (ii) [ ] % in the event the Availability Date occurs within the first sixty (60) days following the Patents Expiration Day; 3 (iii) [ ] % in the event the Availability Date occurs during the second sixty (60) days following the Patents Expiration Day; or (iv) [ ] % in the event the Availability Date occurs more than one hundred twenty (120) days following the Patents Expiration Day. 1.13 Base Price. "The Base Price" shall mean the base price per shelf ---------- keeping unit as specified in Exhibit A hereof. The Base Price set forth in Exhibit A shall remain firm through December 31, 1994. The Base Price will be adjusted on January 1st. every year, commencing on January 1, 1995 for the annual change in the CPI for the previous year. 1.14 USA. The "USA" shall mean the United States of America and the --- District of Columbia, its territories and possessions, excluding the Commonwealth of Puerto Rico and the U.S. Virgin Islands. 1.16 Affiliate. "Affiliate" shall mean, with respect to either party, --------- all corporations or other business entities which, directly or indirectly, are controlled by, control or are under the common control with that party. For this purpose, the meaning of the word "control" shall include, but not be limited to, ownership of more than fifty percent (50%) of the voting shares or interest of such corporation or other business entity. 1.17 CPI. "CPI" shall mean the Consumer Price Index published by the --- Puerto Rico Department of Labor. 1.18 Competitive Product. "Competitive Product" shall mean versions ------------------- of the Product which are manufactured by other pharmaceutical companies for which the FDA approves an Abbreviated New Drug Application with an AB rating when compared with the corresponding strength of Tagemet (cimetidine) tablets. 1.19 Active Ingredient. "Active Ingredient" shall mean Cimetidine as ----------------- defined in the USP. ARTICLE 2 - SUPPLY ------------------ 2.1 Purchase and Sale. Subject to the terms and conditions of this ----------------- Agreement, MOVA shall supply and PAR shall purchase from MOVA substantially all of PAR's requirements for the Product in the USA from the Approval Date and throughout the Purchase Term. PAR shall not purchase the Product or any product having the same active ingredient, strength and indication as the Product, from any party other than MOVA after the Approval Date and throughout the 4 Purchase Term except that PAR may purchase the Product or any such product from any party pursuant to Paragraph 2.4 and Article 14 hereunder. It is understood and agreed that PAR may purchase the Product from third parties before the Approval Date, including accepting shipments of the Product made after the Approval Date pursuant to orders submitted by PAR before the Approval Date. PAR shall have the non-exclusive right to sell, market and distribute the Product in the USA. It is understood and agreed further that PAR may, but is not obligated to, purchase the Product for sale in countries outside of the USA. Notwithstanding the foregoing purchase obligations, if as a result of a merger, acquisition or other similar extraordinary corporate transaction PAR becomes an Affiliate of a corporate entity (a "Merger Party") who at the time of such transaction either manufactures or has filed an ANDA for the manufacture of a Competitive Product, then PAR may purchase such Competitive Product from the Merger Party one (1) year after giving MOVA written notice of such intent, and provided further that, within ninety (90) days from the date of the merger, acquisition or other similar extraordinary transaction, PAR notifies MOVA of the occurrence of such transaction and of its intent of purchasing the Competitive Product from the Merger Party. At the time of such notice, the restrictions contained in Paragraph 2.7 hereof, with respect to sales by MOVA to certain parties, shall no longer be applicable. 2.2 Forecasts. As early as reasonably possible (but no later than --------- thirty (30) days prior to the date which MOVA notifies PAR should be the Availability Date) and thirty (30) days prior to every calendar quarter thereafter, PAR shall give to MOVA a written forecast of the quantities of the Product, including quantities for each strength and unit size of the Product, and delivery dates that PAR anticipates it will order from MOVA during the two (2) calendar quarters following the date of the written forecast. Such forecast shall not create a binding obligation on the part of either MOVA or PAR, except as provided in Paragraph 2.3 hereof. However, PAR shall use all reasonable efforts to make each forecast as accurate as possible. PAR shall promptly advise MOVA of any significant changes in its estimated forecast of Product. 2.3 Orders. PAR shall submit written purchase orders to MOVA for the ------ quantities of the Product, including the quantity of each strength and unit size and delivery dates, which PAR desires to purchase under this Agreement. For the first three (3) month period of each forecast given by PAR pursuant to Paragraph 2.2 hereof, PAR shall submit purchase orders to MOVA for at least the greater of: seventy-five percent (75%) of the forecasted quantities for that period on the then current forecast or fifty percent (50%) of the forecasted quantities for that period as shown on the immediately preceding forecast. If applicable, each purchase order shall specify the country in which the Product is to be resold by PAR. Regardless of the quantities ordered, MOVA shall use all reasonable efforts to deliver the full quantities of the Product (each strength and unit size) ordered by 5 PAR. Deliveries of the Product ordered by PAR to the destination designated by PAR will be made within sixty (60) days following the date on which PAR submitted the purchase order unless a later delivery date has been specified by PAR. 2.4 Inability to Supply. Within thirty (30) days following its ------------------- receipt of each forecast according to Paragraph 2.2 hereof, MOVA shall advise PAR in writing if it is unable to supply the entire quantity forecasted. PAR shall have the right to purchase from third parties such quantities of the Product for which MOVA shall have advised that it will be unable to supply, for as long as MOVA's inability to supply continues. 2.5 Shipments. Delivery shall be f.o.b. Caguas, Puerto Rico, freight --------- and insurance prepaid by MOVA. Product shall be shipped by MOVA according to PAR's instructions, to PAR's facility at One Ram Ridge Road, Spring Valley, NY 10977; provided, however, that should PAR -------- ------- instruct MOVA to ship to another location, MOVA shall do so and PAR shall reimburse for any incremental costs involved. 2.6 Purchase Price and Payment. MOVA shall invoice PAR the Base --------------------------- Price for all shelf keeping units in each shipment of Product delivered to PAR. Such amount shall be payable sixty (60) days from receipt of the invoice therefor. At the end of each calendar quarter, PAR shall determine and advise MOVA of the Actual Net Profits obtained from the sale of the Product by PAR during such calendar quarter. Within twenty (20) days after the end of each such quarter, PAR shall pay to MOVA, the difference between the Base Price and the Purchase Price times the actual number of shelf keeping units actually sold during said calendar quarter. Payment will be made only with respect to Product actually shipped by PAR during such calendar quarter. In addition, within thirty (30) days after the end of each calendar quarter, PAR shall provide MOVA with a report of the number of units of Product shipped and returned, gross sales of Product and Net Sales of Product during such calendar quarter and the number of units of Product inventory remaining under PAR's control at the end of such calendar quarter. 2.7 Sales to certain customers. Throughout the term of this -------------------------- Agreement, MOVA agrees not to knowingly sell the Product to the customers listed in Exhibit B hereof. MOVA shall not knowingly sell the Product to any third party to whom PAR shall have sold the Product under PAR's label within the sixty (60) day period immediately following the Availability Date, provided however, that such -------- ------- restriction shall end one (1) year after the end of the aforementioned sixty (60) day period. 2.8 Conflicting Terms. In ordering and delivering the Product, PAR ----------------- and MOVA may use their standard forms, but nothing in such forms shall be construed to 6 amend or modify the terms of this Agreement and in case of conflict herewith, the terms of this Agreement shall control. ARTICLE 3 - QUALITY ------------------- 3.1 Quality Control. Prior to each shipment of the Product, MOVA --------------- shall perform such quality control procedures to verify that each shipment of the Product made under this Agreement conforms to the specifications for the Product contained in the approved ANDA and otherwise complies with the representations and warranties given by MOVA in Article 4 hereof. Each shipment of the Product shall be accompanied by a quality assurance analytical data sheet (the "Q.A. Certificate of Analysis"). 3.2 Rejection. PAR shall have thirty (30) days following the day on --------- which it receives a shipment to reject same because all or part of the shipment fails to conform to the applicable specifications or otherwise fails to conform to the representations and warranties given by MOVA herein, by giving written notice to MOVA specifying the manner in which all or part of such shipment fails to meet the foregoing requirements. If PAR rejects a shipment before the date on which payment therefor is due according to Paragraph 2.6 hereof, it may withhold payment for that shipment or the rejected portion thereof. All shipments or portions thereof not rejected by PAR before such date shall be paid for in accordance with Paragraph 2.6 hereof. All shipments or portions thereof which PAR rejected but, as determined pursuant to Paragraph 3.4 hereof, did not have the right to reject, shall be paid within fifteen (15) days following the day on which such determination was made, unless PAR had paid earlier. In the event PAR rejects a shipment or portion thereof within such thirty (30) day period in accordance with the terms hereof but after payment therefor had been made, PAR shall be entitled to recoup the payment amount by, at PAR's election, MOVA's issuing a prompt refund or by PAR's offsetting such amount against the payment of future invoices or other payments that may become due hereunder. The representations and warranties given by MOVA hereunder shall survive any failure to reject by PAR under this Paragraph. 3.3 Recalls. If the Product is recalled pursuant to FDA regulation ------- or other applicable laws and returned as a result of any such recall and such recall is due to MOVA's negligence or willful misconduct or a breach of any representation or warranty of MOVA hereunder, then MOVA shall bear all incremental out-of-pocket direct costs in connection with the recall, including, but not limited to, all notification letters and all shipping expenses. In no event shall MOVA be responsible for any indirect expenses incurred by PAR. If the recalled Product is to be destroyed, MOVA, at PAR's request, shall replace free of charge said Product or issue a credit to PAR's account or refund payment to PAR. If the recalled Product is to be reworked, MOVA shall bear all costs of reworking said 7 product. If the Product is recalled and such recall is due to PAR's negligence or willful misconduct or a breach of any representation or warranty of PAR hereunder, then PAR shall bear all incremental out-of- pocket direct costs in connection with the recall, including, but not limited to, all notification letters and all shipping expenses. In no event shall PAR be responsible for any indirect expenses incurred by MOVA. 3.4 Disputes. If MOVA disputes PAR's right to reject all or part of -------- any shipment of the Product as set forth in Paragraph 3.2 or 3.3 hereof, such dispute shall be resolved by an independent approved FDA testing organization or consultant of recognized repute within the U.S. pharmaceutical industry mutually agreed upon by the parties, the appointment of which shall not be unreasonable withheld or delayed by either party. The determination of such entity with respect to all or part of any shipment of the Product shall be final and binding upon the parties, but only as to the reasons given by PAR in rejecting the shipment or portion thereof and shall have no effect on any matter for which said entity did not render a determination. The fees and expenses of the third party making the determination shall be paid by the party against which the determination is made. 3.5 Obligation to Inform the Other. Parties agree to keep each other ------------------------------ regularly and fully informed of any notification or other information, whether received directly or indirectly, which might in any way affect the marketability, safety or effectiveness of the Product, or which might result in potential liability for either party, or which might necessitate action on the part of either party, or which might result in recall of the Product, or which might otherwise in any way affect either of the parties' interest with respect to the distribution or use of the Product. Nothing contained in this Paragraph shall obligate either party to provide the other with any information other than information regarding the quality of the Product. 3.6 Inspections. Upon reasonable notice given to MOVA, PAR shall ----------- have the right to have a reasonable number of its employees inspect any facility at which the Product to be sold to PAR hereunder is manufactured, packaged, stored or shipped. 3.7 Packaging. MOVA shall supply the Product to PAR in bulk and in --------- finished bottles bearing the PAR label as specified by PAR and approved by the FDA or such other labeling specified by PAR for the Product to be sold outside of the USA. ARTICLE 4 - REPRESENTATIONS AND WARRANTIES ------------------------------------------ MOVA hereby covenants, represents and warrants to PAR that: (a) on the date of shipment, all of the Product sold by MOVA to PAR 8 hereunder will comply with the specifications for the Product contained in the approved ANDA, conform with the information shown on the Q.A. Data Sheet and, when applicable, the sample provided for the particular shipment according to Paragraph 3.1 hereof; (b) all of the Product sold by MOVA to PAR hereunder shall have been manufactured, packaged and stored and shipped in conformance with all applicable current Good Manufacturing Practices which are in force or hereinafter adopted by the FDA or any successor agency thereto; (c) on the date of shipment, all of the Product shipped by MOVA to PAR hereunder will not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as amended and in effect at the time of shipment (the "Act"), or within the meaning of any applicable state or municipal laws in the USA under which such terms have the same meaning as set forth under the Act; (d) on the date of shipment, all of the Product sold by MOVA to PAR hereunder may be legally distributed or sold in the USA; (e) title to all the Product sold by MOVA to PAR hereunder shall pass to PAR as provided herein free and clear of any security interest, lien or other encumbrance; (f) the Product sold hereunder shall have been manufactured, packaged and stored in facilities which are approved by the FDA at the time of such manufacture, packaging and storage, to the extent such approval is required by law; (g) to the best of MOVA's knowledge and belief, the manufacture, use or sale of the Product sold by MOVA to PAR hereunder shall not constitute an infringement of any Patents; and (h) to the best of MOVA's knowledge and belief, MOVA and its employees, affiliates and agents have never been (i) debarred or (ii) convicted of a crime for which a person can be debarred, under Section 306(a) of the U.S. Federal Generic Drug Enforcement Act of 1992 ("Section 306(a) or (b)") and, to the best of MOVA's knowledge and belief, MOVA and its employees, affiliates and agents has ever been threatened to be (i) debarred or (ii) indicted for a crime or otherwise engaged in conduct for which a person can be debarred under Section 306(a) or (b), and it will promptly notify PAR in the event of any such debarment, conviction, threat or indictment. 9 ARTICLE 5 - APPROVALS --------------------- 5.1 ANDA. MOVA shall be responsible for obtaining the approval of ---- the ANDA by the FDA and in so doing shall exercise what it in good faith believes to be reasonable commercial effort to obtain such approval at the earliest possible date. 5.2 Inspections by Government Agencies. Without limiting the ---------------------------------- generality of Paragraph 5.1 hereof, MOVA shall permit the FDA to conduct whatever inspections of the facilities at which the Product is to be manufactured, packaged and/or stored and shall cooperate with the FDA during any such inspections. 5.3 Administration of the ANDA and other Approvals. MOVA shall be ---------------------------------------------- responsible for maintaining the ANDA and any other approvals current and in effect. In so doing, MOVA shall comply with all applicable requirements of the FDA and counterpart governmental agencies outside of the USA. 5.4 Product Complaints. Each party shall immediately inform the ------------------ other of product quality, health or safety related concerns or inquiries that raise potentially serious and unexpected quality, health or safety concerns. All such other information not involving the above described situation shall be transmitted to the other party within three (3) business days following receipt. ARTICLE 6 - ADJUSTMENTS ------------------------ 6.1 Price Protection. Notwithstanding any provision herein to the ---------------- contrary, if at any time MOVA makes sales of the Product to any other party within the USA or for resale in the USA, except sales to federal, state and local government agencies, at a price lower than one hundred twenty-five percent (125%) of the Base Price to PAR then in effect under this Agreement, the Base Price to PAR then in effect under this Agreement shall be reduced to eighty percent (80%) of such lower price given to the other party for so long as MOVA continues to make such sales to such other party at such lower price, unless sale to PAR at such lower price would violate the provisions of any pertinent law, order or regulation. 6.2 Adjustment. In the event that PAR's average selling price for ---------- the Product to any other party becomes less than [ ] per bottle of 100 tablets for 300 mg tablets adjusted on January 1st. every year, commencing on January 1, 1995 for the annual change in the CPI (with comparable limits for other strengths as set forth in Exhibit A), the parties shall negotiate such modification to this Agreement as may be necessary to enable each to perform thereunder on terms fair and reasonable under the circumstances and if no agreement thereon can be reached within a reasonable time, either party may terminate this agreement by giving ninety (90) days prior notice. 10 6.3 Independent Prices. Each of the parties shall establish the ------------------ prices at which it sells the Product to its customers independently of the other party. 6.4 Active Ingredient Cost Fluctuations. In the event that the cost ----------------------------------- of the Active Ingredient purchased from third parties by MOVA, as defined in Exhibit A, increases or decreases by more than 10% at any time, such change shall be added or deducted to the Base Prices paid by PAR to MOVA according to Paragraph 2.6 hereof. MOVA shall provide PAR with the necessary information to verify the changes in the cost of the Active Ingredient. ARTICLE 7 - INDEMNIFICATION --------------------------- 7.1 MOVA's Obligation to Indemnify. MOVA agrees to indemnify, ------------------------------ defend, and hold harmless PAR, its affiliates and subsidiaries and their respective employees against any and all claims, losses, damages and liabilities, including reasonable attorneys' fees and costs associated with a recall of the Product as defined in Paragraph 3.3 hereof, incurred by any of them arising out of any breach of any obligation hereunder or any representation or warranty by MOVA hereunder or any act or omission of MOVA in connection with its obligations hereunder. 7.2 PAR's Obligation to Indemnify. PAR agrees to indemnify, defend ----------------------------- and hold harmless MOVA, its affiliates and subsidiaries and their respective employees against any and all claims, losses, damages and liabilities, including reasonable attorneys' fees and costs associated with a recall of the Product as defined in Paragraph 3.3 hereof, incurred by any of them arising out of any breach of any obligation hereunder or any representation or warranty by PAR hereunder or any act or omission of PAR in connection with its obligations hereunder. 7.3 Obligations of the Party Seeking to be Indemnified. If PAR or any --------------------------------------------------- of its affiliates or subsidiaries or MOVA or any of its affiliates or subsidiaries (in each case an "Indemnified Party") receive any written claims which it believes is the subject of indemnity hereunder by MOVA or PAR, as the case may be (in each case an "Indemnifying Party"), the Indemnified Party shall, as soon as reasonably practicable after forming such belief, give notice thereof to the Indemnifying Party, including full particulars of such claim to the extent known to the Indemnified Party; provided, that the failure to give timely notice to the Indemnifying Party as contemplated hereby shall not release the Indemnifying Party from any liability to the Indemnified Party except to the extent that the Indemnifying Party is injured by such delay. The Indemnifying Party shall have the right, by prompt notice to the Indemnified Party, to assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Party, and at the cost of the Indemnifying Party. If the Indemnifying Party does not assume the 11 defense of such claim, or, having done so, does not diligently pursue such defense, the Indemnified Party may assume such defense, with counsel of its choice, but for the account of the Indemnifying Party. If the Indemnifying Party so assumes such defense, the Indemnified Party may participate therein through counsel of its choice, but the cost of such counsel shall be for the account of the Indemnified Party. The party not assuming the defense of any such claim shall render all reasonable assistance to the party assuming such defense, and all out-of-pocket costs of such assistance shall be for the account of the Indemnifying Party. No such claim shall be settled other than by the party defending the same, and then only with the consent of the other party, which shall not be unreasonably withheld; provided, that the Indemnified Party shall have no obligation to consent to any settlement of any such claim which imposes on the Indemnified Party and liability or obligation which cannot be assumed and performed in full by the Indemnifying Party. 7.4 Insurance. Each party and its Affiliates shall carry products --------- liability insurance in an amount at least equal to [ ] with an insurance carrier reasonably acceptable to the other party. Such insurance shall cover the indemnifications set forth in Article 7 hereof. Each party shall name the other party as additional insured under such policy. A copy of such policy or policies shall be delivered to the other party within ten (10) days prior to the date any such Product is first commercially sold by such party, and shall provide among other things, that such insurance shall not be canceled or modified without giving the other party at least thirty (30) days prior written notice. ARTICLE 8 - CONFIDENTIALITY --------------------------- 8.1 Each party shall at all times maintain as confidential any know- how or other business information received from the other party under this Agreement during the term of this Agreement, shall only use such information in furtherance of this Agreement shall only disclose such information to those of its employees with a need to know in furtherance of this Agreement, provided, however, that nothing -------- ------- contained herein shall prevent a party from submitting information to a governmental instrumentality in connection with seeking approval to market the Product. Said obligation of confidentiality shall not apply, however, to any information which: (a) was known to the receiving party, as evidenced by its written records, prior to receipt from the other party; (b) is in the public domain at time of receipt or subsequently enters the public domain through no breach of this Agreement by the receiving party; (c) after the date of receipt from the disclosing party, is received without 12 cover of secrecy from a third party with a bona fide right to disclose without violating any right of the disclosing party; or (d) is independently developed by the receiving party without the aid, application or use of any information for which it is obligated to maintain as confidential according to this Paragraph. The respective obligations of MOVA and PAR under this Paragraph shall be in effect during the term of this Agreement and for the three (3) years thereafter. ARTICLE 9 - RECORDS ------------------- 9.1 PAR shall keep appropriate and complete records in sufficient detail so that the payments due hereunder can be properly ascertained. PAR shall, on the request of MOVA, permit a certified public accountant, selected by MOVA and to whom PAR has no reasonable objection, to have access during normal business hours, to such books and records as may be necessary to determine, in respect of any accounting period ending not more than three (3) years prior to the date of such request, the correctness of any payment under this Agreement. Any such accountant shall not disclose any information to MOVA except that which specifically relates to the payment obligations hereunder. ARTICLE 10 - TERM, TERMINATION ------------------------------ 10.1 Term. This Agreement shall become effective as of the date first ---- written above and shall remain in full force and effect through the end of the Purchase Term. 10.2 Termination for Cause. This Agreement may be terminated at any --------------------- time by either party: (a) upon breach of this Agreement by the other party, on sixty (60) days' prior written notice to the breaching party, this notice to become effective at the end of such sixty (60) day period unless the breach is sooner cured by the breaching party; or (b) upon bankruptcy or insolvency of the other party or placing of the business of such party in receivership. 10.3 Termination Upon Merger. If PAR exercises its right under ----------------------- Paragraph 2.1 to purchase a Competitive Product from a Merger Partner MOVA may terminate this Agreement at any time after one (1) year from the time such notice is given by PAR by giving PAR ninety (90) days' prior written notice. 13 10.4 Waiver. Failure to terminate this Agreement following a breach ------ or failure to comply with terms and conditions of this Agreement shall not be deemed a waiver of the non breaching party's defenses, rights or causes of action arising from such or any future breach or noncompliance. ARTICLE 11 - TRADE NAMES AND TRADEMARKS --------------------------------------- 11.1 PAR and MOVA hereby acknowledge that they do not have, and shall not acquire by virtue of this Agreement, any rights to or in any goodwill, trademark, trade name, copyright, patent or other property of the other, nor in any of the other's trademarks or trade names appearing on the label or packaging materials of the Product. PAR and MOVA each agrees to do nothing by act or omission which would impair, the rights, ownership and title to the other, including its Affiliates, in the aforementioned. ARTICLE 12 - NOTICES -------------------- 12.1 Any notice required or permitted to be given or made under this Agreement by either of the parties to the other shall be in writing and delivered to the other party at its address indicated below or to such other address as the addressee shall have theretofore furnished in writing to the addressor by hand, courier or by registered or certified mail (postage prepaid) or by telefax, provided all telefax notices shall be promptly confirmed, in writing, by registered or certified mail (postage prepaid): If to MOVA: MOVA Pharmaceutical Corporation P. O. Box 8639 Caguas, Puerto Rico 00626 Telefax: (809) 258-6405 Attention: Joaquin B. Viso President With a Copy to: Ledesma, Palou & Miranda Hato Rey Tower, Suite 1103 268 Munoz Rivera Avenue Hato Rey, Puerto Rico 00918 Telefax: (809) 754-6344 Attention: Silvestre M. Miranda 14 If to PAR: Par Pharmaceutical, Inc. One Ram Ridge Road Spring Valley, New York 10977 Telefax: (914) 425-7907 Attention: Ken Sawyer President All notices shall be effective as of the date received by the addressee. ARTICLE 13 - NON ASSIGNABILITY ------------------------------ 13.1 This Agreement and the rights of the parties hereunder shall not be assignable nor shall the obligations of either party be delegable, except as to affiliates of PAR or MOVA, without the prior written consent of the other party, which consent shall not be unreasonably withheld. In the event either party seeks and obtains the other party's consent to assign or delegate its rights or obligations to another party, or in the event of an assignment or delegation to an affiliate, the obligations of the assignee or transferee must be guaranteed in writing by the party who is the assignor or transferor. ARTICLE 14 - FORCE MAJEURE -------------------------- 14.1 Force Majeure. No failure or omission by the parties in the ------------- performance of any obligation according to this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the party, including, but not limited to, strikes, riots, war, acts of God, invasion, fire, explosion, floods, delay of carrier, shortage or failure in the supply of materials, energy shortage and acts of government or governmental agencies or instrumentalities. 14.2 Obligations of the Parties in case of Force Majeure. In the --------------------------------------------------- event that due to force majeure either party hereto shall be delayed or hindered in or prevented from the performance of its duties or doing acts required under the terms of this Agreement, the performance of such act, except for the obligation to pay amounts due under this Agreement, shall be excused for the period of the delay. Notwithstanding the aforementioned, the party subject to force majeure shall take all reasonable steps to resolve the condition(s) forming the basis of force majeure. ARTICLE 15 - MISCELLANEOUS -------------------------- 15.1 Governing Law. This Agreement shall be governed by, and ------------- construed in 15 accordance with, the laws of the Commonwealth of Puerto Rico. 15.2 Independent Contractor. The parties shall be considered ---------------------- independent contractors, and neither the making of this Agreement nor the performance of any of the provisions hereof shall be construed to make either party an agent, employee or legal representative of the other, nor shall this Agreement be deemed to establish a joint venture or partnership. 15.3 Public Announcements. MOVA and PAR shall consult with each other -------------------- before issuing any press releases or otherwise making any public statements with respect to this Agreement and neither of them shall issue any press release or make any public statement prior to obtaining the other party's approval, which approval shall not be unreasonably withheld, except that no such approval shall be necessary to the extent disclosure may be required by law. 15.4 Severability. Should any section, or portion thereof, of this ------------ Agreement be held invalid by reason of any law, statute or regulation existing now or in the future in any jurisdiction by any court of competent authority or by a legally enforceable directive of any governmental body, then such section or portion thereof shall be validly reformed so as to approximate the intent of the parties as nearly as possible and, if unreformable, shall be deemed divisible and deleted with respect to such jurisdiction; this Agreement shall not otherwise be affected. 15.5 Taxes. Each party shall be responsible for its own taxes. ----- 15.6 Entire Agreement. The terms and provisions contained in this ---------------- Agreement, including the Exhibit hereto, constitute the entire agreement between the parties and shall supersede all previous communications, representations, agreements or understandings, either oral or written, between the parties with respect to the subject matter hereof. No agreement or understanding varying or extending this Agreement shall be binding upon either party hereto, unless set forth in a writing which specifically refers to this Agreement, signed by duly authorized officers or representatives of the respective parties, and the provisions hereof not specifically amended thereby shall remain in full force and effect. 16 IN WITNESS WHEREOF, MOVA and PAR have executed this Agreement in duplicate as of the day and year first above written. MOVA PHARMACEUTICAL PAR PHARMACEUTICAL, INC. CORPORATION By:/s/Joaquin B. Viso By:/s/Kenneth I. Sawyer ------------------------- ----------------------- Joaquin B. Viso Ken Sawyer President President EXHIBIT A --------- PRICING SCHEDULE Minimum Average --------------- Strength Size Base Price Selling Price - ---------- ---- ---------- --------------- 300 mg 100s [ ] [ ] 500s [ ] [ ] 400 mg 100s [ ] [ ] 500s [ ] [ ] 800 mg 60s [ ] [ ] 250s [ ] [ ] Per 1,000 tablets (bulk) 300 mg [ ] 400 mg [ ] 800 mg [ ] The Base Price and the Minimum Average Selling Price will be adjusted on January 1st, every year, commencing on January 1, 1995 for the annual change in the CPI. Cost of Active Ingredient [ ] MOVA/PAR NON EXCLUSIVE DISTRIBUTION AGREEMENT EXCLUSIVE SUPPLY AGREEMENT Example of the provisions of Paragraph 6.1 Price Protection Using 300 mg. 100's
Scenario 1 Scenario 2 Scenario 3 Scenario 4 Price to third party Price to third party Price to third party Price to third party is higher than [ ]% of is higher than [ ]% of is higher than [ ]% of is higher than [ ]% of Base Price Base Price Base Price Base Price Base Price to PAR [ ] [ ] [ ] [ ] [ ]% of Base Price to Par [ ] [ ] [ ] [ ] Price to third party [ ] [ ] [ ] [ ] Adjusted Base Price to PAR [ ] [ ] [ ] [ ] ([ ]% of price to third party)
EXHIBIT B --------- PRIVATE LABEL CUSTOMERS [ ] EX-23 6 CONSENT OF RICHARD A. EISNER & CO. EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statements on Form S-3 (Registration Nos. 33-35242 and 33-74052) and Form S-8 (Registration Nos. 2-99035, 33-15640, 33-51914, 33-45785, 33-29992, 33-79954 and 33-79956 of our reports dated November 30, 1994 on the consolidated financial statements and schedules included in the annual report on Form 10\KA-3 of Pharmaceutical Resources, Inc. as at and for the year ended October 1, 1994. Richard A. Eisner & Company, LLP New York, New York October 26, 1995 -----END PRIVACY-ENHANCED MESSAGE-----