EXHIBIT 10.2 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS. CO-PROMOTION AGREEMENT

 

<PAGE>

 

                                                                EXHIBIT 10.2

 

             CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH

                     THE SECURITIES AND EXCHANGE COMMISSION.

                        ASTERISKS DENOTE SUCH OMISSIONS.

 

                             CO-PROMOTION AGREEMENT

 

     This Co-promotion Agreement (hereafter, the "AGREEMENT") is entered into as

of April 12, 2005 (the "EFFECTIVE DATE"), by and between Kos Pharmaceuticals,

Inc., a Florida corporation and Kos Life Sciences, Inc., a Delaware corporation

(collectively, "KOS"), Duramed Pharmaceuticals, Inc., a Delaware corporation,

and Duramed Pharmaceuticals Sales Corp., a Delaware Corporation (collectively

"DURAMED"), and Barr Laboratories, Inc., a Delaware corporation ("BARR"), for

the marketing of Kos' fixed-dose niacin product marketed under the brand name

"Niaspan(R)", including certain extensions thereof as provided herein, and

combination niacin and lovastatin product marketed under the brand name

"Advicor(R)", including certain extensions thereof as provided herein (each, a

"PRODUCT" and collectively, the "PRODUCTS", as more fully defined below).

 

                                    RECITALS

 

     WHEREAS, Kos owns the Products;

 

     WHEREAS, compared to well-known cholesterol treatments such as the single

active statins and other statin combination products, niacin-based therapies

such as Niaspan(R) and Advicor(R) are relatively much less well known to

consumers and to physicians and are under-promoted, and the sale of niacin-based

treatments remains highly sensitive to promotion;

 

     WHEREAS, the Products are at an early stage of their promotional lives and

consequently there is a significant need to increase the promotion of the

Products in order to compete more effectively against established single active

statins, statin combination products and other cholesterol reducing products;

 

     WHEREAS, Kos has identified a potential new opportunity for the Products

with respect to women's health, and believes that women who need cholesterol

treatment can be reached effectively by detailing to obstetricians,

gynecologists and other health care professionals with prescribing authority and

an interest in women's health care, and that the potential number of lives that

can be saved measures in the tens of thousands;

 

     WHEREAS, it is estimated that there exists in excess of 4 million women who

have lipid abnormalities that could be addressed by cholesterol reducing

products such as Niaspan or Advicor;

 

     WHEREAS, in order to pursue such opportunity, Kos wishes to promote and

detail the Products to obstetricians, gynecologists and other health care

professionals with prescribing authority and an interest in women's health care

in the Territory (as defined below);

 

     WHEREAS, Kos is not experienced in promoting or detailing pharmaceutical

products to obstetricians, gynecologists and women's health care practitioners

in the Territory and wishes to collaborate with another party that provides

expertise in the promotion and detailing of pharmaceutical products to

obstetricians, gynecologists and other health care professionals with

prescribing authority and an interest in women's health care in the Territory;

<PAGE>

     WHEREAS, Duramed possesses expertise in the promotion and detailing of

pharmaceutical products to obstetricians, gynecologists and other health care

professionals with prescribing authority and an interest in women's health care

in the Territory and has in place a substantial and experienced

obstetrics/gynecology specialist sales and marketing team;

 

     WHEREAS, this Agreement serves numerous consumer interests by increasing

awareness of Niaspan(R) and Advicor(R) among physicians and other health care

professionals with prescribing authority and patients and especially women, who

are uniquely underserved for cardiovascular health purposes;

 

     WHEREAS, this Agreement would directly serve the growing need for treatment

for the risks of cardiovascular disease in women as identified by the American

Heart Association;

 

     WHEREAS, Kos seeks to engage Duramed's expertise in detailing and educating

obstetricians, gynecologists and other health care professionals with

prescribing authority and an interest in women's health care, and their

patients, in an effort to save lives by introducing women to the substantial

benefits of Niaspan(R) and Advicor(R) therapy;

 

     WHEREAS, this collaboration between Kos and Duramed pursuant to this

Agreement is expected to increase the sales for the Products and therefore

expand output;

 

     WHEREAS, co-promotion of Niaspan and Advicor by Kos and Duramed was not

practicable while litigation was pending between Kos and Barr, but with the

resolution of that litigation, there is now the possibility for collaboration

between Kos and Duramed on the co-promotion of Niaspan and Advicor; and

 

     WHEREAS, in connection with the resolution of such litigation pending

between Kos and Barr and concurrent with execution of this Agreement, the

Parties are entering into the Settlement and License Agreement and the License

and Manufacturing Agreement;

 

     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual

promises, representations, warranties, covenants and conditions contained in

this Agreement, together with other good and valuable consideration, the receipt

and sufficiency of which are hereby acknowledged, the Parties, intending to be

legally bound, hereby agree as follows:

 

1. DEFINITIONS

 

     1.1 ADVERSE EVENT(S) shall mean those events defined as adverse drug

experiences in Title 21 of the U. S. Code of Federal Regulations, Section

314.80, as amended from time to time and published in the Federal Register.

 

     1.2 ADVICOR PRODUCT shall mean:

 

          (a) (i) the prescription extended release lovastatin 20mg/niacin 1gm

     tablet product for human use; (ii) the prescription extended release

     lovastatin 20mg/niacin 500 mg tablet product for human use; and (iii) the

     prescription extended release lovastatin 20mg/niacin 750 mg tablet product

     for human use, each of which is approved under NDA 21-249 and distributed

     and sold (or is intended to be distributed or sold) by Kos in the

<PAGE>

     Territory under the trademark Advicor(R) as of the Effective Date (together

     the "EXISTING ADVICOR PRODUCTS"); and

 

          (b) future dosage formulations, strengths and presentations of the

     Existing Advicor Products, including all product extensions or newly named

     formulations of the Existing Advicor Products containing niacin (empirical

     formula of C(6)H(5)NO(2)) and lovastatin (empirical formula of

     C(24)H(36)O(5)) as the only active ingredients .

 

     1.3 AFFILIATE shall mean any corporation, firm, partnership or other entity

that directly or indirectly owns, is owned by or is under common ownership with

a Party to the extent of at least fifty percent (50%) of the equity or other

ownership interest having the power to vote on or direct the affairs of the

entity and any person, firm, partnership, corporation or other entity actually

controlled by, controlling or under common control with a Party.

 

     1.4 BUSINESS DAY shall mean a day on which commercial banks are open for

business in New York, New York. References in this Agreement to "days" other

than Business Days shall mean calendar days.

 

     1.5 CODE or CODES shall mean the Code on Interactions with Healthcare

Professionals promulgated by the Pharmaceutical Research and Manufacturers of

America (PhRMA) and the American Medical Association Guidelines on Gifts to

Physicians, as either of the foregoing may be amended.

 

     1.6 COMMERCIALLY REASONABLE EFFORTS means, with respect to a Party, the

efforts and resources which would be used by that Party consistent with its

normal business practices with respect to a product at a similar stage in its

development or product life and of similar market potential taking into account

efficacy, safety, the anticipated approved labeling, the competitiveness of

alternative products in the market place or under development, the patent and

other proprietary position of the product, the likelihood of regulatory

approval, the commercial value of the product and other relevant factors.

 

     1.7 CO-PROMOTION ACTIVITIES shall have the meaning set forth in Section

5.4.

 

     1.8 EFFECTIVE DATE shall mean the date upon which this Agreement becomes

effective and shall be the date first written above.

 

     1.9 FDA shall mean the United States Food and Drug Administration and any

successor agency thereto.

 

     1.10 FIELD shall mean obstetrics, gynecology and other areas of medical

practice with a focus on women's health care.

 

     1.11 FULL TIME EQUIVALENT (or "FTE") shall mean the number of Sales Calls

for Products under this Agreement carried out by an individual Duramed or

Affiliate employee, based on such entity's internal time reporting system,

converted into full-time equivalent units, where one full-time equivalent unit

is **** (as defined below).

<PAGE>

     1.12 GAAP shall mean Generally Accepted Accounting Principles in the United

States.

 

     1.13 KOS TRADEMARKS shall mean the Niaspan(R) and Advicor(R) trademarks

owned by Kos in the Territory, and any other trademark, service mark, trade

dress or logo developed, applied for, registered, or to be applied for or

registered for use in connection with the sale of the Products in the Territory,

including any trademark rights existing under common law.

 

     1.14 KNOW-HOW shall mean all present and future information developed by

Kos, whether or not in written form, that is not in the public domain and that

relates to the Products and shall include, without limitation, all biological,

chemical, pharmacological, toxicological, medical or clinical, analytical,

quality, manufacturing, research, or sales and marketing information including

all processes, methods, procedures, techniques, plans, programs, and data and

any other information relating to the Products or useful for the development or

commercialization of the Products in the Territory.

 

     1.15 LICENSE AND MANUFACTURING AGREEMENT shall mean the License and

Manufacturing Agreement between the Parties dated as of the Effective Date.

 

     1.16 MARKETING LICENSE EFFECTIVE DATE shall have the meaning set forth in

the Settlement and License Agreement.

 

     1.17 MARKETING ADVISORY COMMITTEE shall mean the committee established and

conducted in accordance with the procedures set forth in Article 5.

 

     1.18 MINIMUM DURAMED DETAILS shall have the meaning set forth in Section

2.2(c).

 

     1.19 NDA shall mean a New Drug Application for a Product in accordance with

the requirements of the FDA.

 

     1.20 NIASPAN PRODUCT shall mean:

 

          (a) (i) the prescription extended release niacin 1gm tablet product

     for human use; (ii) the prescription extended release niacin 500 mg tablet

      product for human use; and (iii) the prescription extended release niacin

     750mg tablet product for human use, each of which is approved under NDA

     20-381 and distributed and sold by Kos in the Territory under the trademark

     Niaspan(R) as of the Effective Date (together the "EXISTING NIASPAN

     PRODUCTS"); and

 

          (b) future dosage formulations, strengths and presentations of the

     Existing Niaspan Products (including any potential modified or reduced

     flush version of any Existing Niaspan Product), including all product

     extensions or newly named formulations of the Existing Niaspan Products

     containing niacin (empirical formula of C6H5NO2) as the single active

     ingredient.

 

     1.21 NET SALES shall mean the recorded gross sales of both Products in the

Territory to Third Parties in accordance with GAAP less the following

deductions:

<PAGE>

          (i)   sales and excise taxes, duties, and any other governmental

               charges imposed upon the production, importation, use or sale of

               a Product;

 

          (ii) trade, quantity, cash and other discounts allowed on a Product to

               wholesalers or other Third Parties to whom the Products are sold

               and shipped directly;

 

           (iii) provisions for actual or expected allowances or credits to

               customers on account of rejection or return of a Product or on

               account of price reductions for a Product;

 

          (iv) Product rebates and Product charge-backs and other price

               reduction programs granted to managed care entities and

               pharmaceutical benefit management service entities (If Kos

               chooses to contract one or more of the Products together with

                another Kos product with composite rebates or chargebacks, then

               rebates and or chargebacks for the affected Product will be

               recalculated based on the then average rebate or chargeback of

               the Product to the applicable customer category as if such

               Product is contracted independently of any other Kos product.);

               and

 

          (v)   provisions for actual or expected write-offs of uncollectible

               customer accounts for previously recorded sales;

 

in each case determined in accordance with Kos' commercial and accounting

policies and practices consistently applied in a manner consistent with GAAP. In

the event that Net Sales as calculated for any period under this Agreement are

lower than the net Product sales utilized by Kos in reporting Kos' net revenue

for financial reporting purposes in Kos' SEC filings for the same period,

including Kos' quarterly SEC Form 10-Q and annual SEC Form 10-K ("REPORTED

PRODUCT NET SALES"), then Net Sales under this Agreement shall be increased by

such amount as is necessary to make them equal to the Reported Net Sales.

 

     1.22 PARTY(IES) shall mean each of Kos and Duramed.

 

     1.23 PATENTS shall mean all patents and patent applications in the

Territory that are or become owned by Kos, or to which Kos otherwise has, now or

in the future, the right to grant licenses and license rights, that generically

or specifically cover the Products or a use or formulation of the Products.

Included within the definition of Patents are all continuations,

continuations-in-part, divisions, patents of addition, reissues, renewals or

extensions thereof. The current list of patents and patent applications

encompassed within Patents is set forth in Appendix B attached hereto.

 

     1.24 PRODUCTS shall mean all Niaspan Products and all Advicor Products for

all indications approved by the FDA at any time during the Term (as defined

below).

 

     1.25 PRODUCT DETAIL(S) shall mean a face-to-face meeting, between (i) a

professional pharmaceutical sales representative meeting minimum professional

standards of a four-year college degree (B.A., B.S. or equivalent) with sales

experience and or training in the promotion of products to obstetricians,

gynecologists and health care professionals with prescribing authority and an

interest in women's health, and (ii) a Professional in the Field, during which a

presentation of one of the Product's attributes is orally presented in a manner

consistent with the

<PAGE>

quality of such presentations made by Duramed's professional representatives for

Duramed's other products. A "PRIMARY PRODUCT DETAIL" shall mean a Product Detail

where the presentation of such Product during the Product Detail is the first

presentation made and is the presentation on which the most time is spent during

such meeting. A "SECONDARY PRODUCT DETAIL" is the presentation on which the

second most amount of time is spent during such meeting. When used as a verb,

"PRODUCT DETAIL" shall mean to engage in a Product Detail to a Professional in

the Field.

 

     1.26 PROFESSIONALS shall mean physicians, physician assistants and other

health care practitioners, including nurses and nurse practitioners, in the

Field who are permitted under applicable laws in the Territory to prescribe the

Products.

 

     1.27 "SALES CALL" shall mean a sales call on a Targeted Professional (as

defined below).

 

     1.28 SETTLEMENT AND LICENSE AGREEMENT shall mean the Settlement and License

Agreement between the Parties dated as of the Effective Date.

 

     1.29 STEERING COMMITTEE shall have the meaning set forth in Section 5.6.

 

     1.30 TARGETED PROFESSIONALS shall mean the universe of Professionals in the

Field targeted for Product Details, initially established using the process

outlined in Appendix C to this Agreement, and as changed, from time to time, by

the Marketing Advisory Committee.

 

     1.31 TERM shall have the meaning set forth in Section 3.1.

 

     1.32 TERRITORY shall mean the United States of America its territories and

possessions, including the Commonwealth of Puerto Rico and the District of

Columbia.

 

     1.33 THIRD PARTY(IES) shall mean any person or entity other than Kos and

Duramed or their Affiliates.

 

     1.34 YEAR shall mean each calendar year during the Term.

 

2. CO-PROMOTION

 

     2.1 GRANT OF RIGHTS. With effect from the Effective Date, Kos grants to

Duramed the right to co-promote the Products to Targeted Professionals in the

Field in the Territory, subject to (i) Kos' right to co-promote the Products

(itself or with a Third Party, including, without limitation, Takeda

Pharmaceuticals North America, Inc. and Takeda Pharmaceuticals America, Inc.)

throughout the Territory and (ii) all the other terms and conditions of this

Agreement. Kos shall retain exclusively all of its rights with respect to the

Products outside the Field in the Territory and outside of the Territory, and

Duramed shall have no rights with respect to the Products outside of the Field

in the Territory or outside the Territory as a result of the execution or

performance of this Agreement. Duramed shall have no other rights relating to

the Products except as expressly set forth in this in this Agreement, the

Settlement and License Agreement or the License and Manufacturing Agreement.

<PAGE>

     2.2 EFFORTS.

 

          (a) Duramed shall dedicate no less than **** professional

pharmaceuticals sales representatives, meeting minimum professional standards of

a four-year college degree (B.A., B.S. or equivalent) with sales experience and

or training in the promotion of products to obstetricians, gynecologists and

health care professionals with prescribing authority and an interest in women's

health to detail the Products pursuant to this Agreement and will use

commercially reasonable efforts to have such sales force in place and available

for Product-specific training by Kos by no later than June 15, 2005. Throughout

the Term, Duramed will maintain a sales force of not less than **** professional

pharmaceuticals sales representatives, meeting minimum professional standards of

a four-year college degree (B.A., B.S. or equivalent) with sales experience and

or training in the promotion of products to obstetricians, gynecologists and

health care professionals with prescribing authority and an interest in women's

health to detail the Products pursuant to this Agreement. Except with the prior

written consent of Kos, all Duramed sales representatives who are responsible

for Product Details shall be employees of Duramed or its Affiliates.

 

          (b) Duramed shall deploy its sales forces in an effort to promote

effectively and conduct the Product Details in accordance with the terms of this

Agreement and the instructions of the Marketing Advisory Committee. Duramed

shall use Commercially Reasonable Efforts consistent with accepted

pharmaceutical industry business practices in conducting its promotional and

Product Detailing activities hereunder.

 

          (c) Duramed will dedicate not less than **** FTEs to Product Detailing

between June 15, 2005 and August 31, 2006, and not less than **** FTEs per Year

to Product Detailing from September 1, 2006 and throughout the remainder of the

Term. Duramed agrees to perform at least one Primary Product Detail during each

Sales Call and will use its best efforts to provide at least one Secondary

Product Detail during each Sales Call, as long as the Marketing Advisory

Committee determines that there are at least two Products that will benefit from

promotion to the Targeted Professionals ("MINIMUM DURAMED DETAILS"). Any

decision by the Marketing Advisory Committee to reduce promotion on the Products

will result in a decision to jointly reevaluate the number and position of the

Minimum Duramed Details by the Marketing Advisory Committee. The Parties

recognize that the Duramed professional sales representatives conducting the

Sales Calls may have the opportunity to promote the Products by using an

additional **** FTEs to conduct prescriber calls between June 15, 2005 and

August 31, 2006 and by using an additional **** FTEs to conduct prescriber calls

in each subsequent twelve month period to Targeted Professionals or to other

health care professionals targeted for Duramed's or its Affiliate's other

products or for the products of Third Parties. Duramed will utilize its

Commercially Reasonable Efforts to deliver details on the Products during such

additional calls if Duramed determines that an available unreserved detail

position exists for such promotional activities; provided, however, that nothing

in this Agreement shall prevent Duramed, in its sole discretion, from reserving

the detail positions in such additional sales calls for other Duramed or Duramed

Affiliate products or for products of Third Parties.

 

          (d) Duramed shall provide internal administrative and logistical

support of its sales representatives consistent with its normal practices for

other sales forces employed by Duramed, which support shall include without

limitation, general (non-Product specific) training,

<PAGE>

administrative support services and a sales representative incentive plan

related to the marketing and promotion of the Products to Targeted Professionals

in the Field. Such incentive plans shall be consistent with Duramed's

obligations hereunder and shall provide an incentive that is weighted at a level

commensurate with the Product Detail position of the Products within the total

number of products handled by Duramed's sales force and shall be administered in

a manner consistent with the other sales force incentive programs that Duramed

provides to its other sales forces. Kos shall have the right to review Duramed's

incentive plan with respect to the Products.

 

          (e) The Parties acknowledge and agree that some or all of Duramed's

obligations hereunder may be performed by Affiliates. To the exent that Duramed

causes or permits its Affiliate to perform any of Duramed's obligations under

this Agreement: (i) Duramed hereby guarantees the performance of all such

obligations in accordance with the terms of this Agreement; and (ii) Duramed

shall cause such Affiliate to comply with all of the terms, provisions and

conditions contained in this Agreement that would be applicable to Duramed in

the performance of such obligations.

 

     2.3 COMPLIANCE WITH LAW. Duramed agrees that in promoting the Products and

performing Product Details, it will comply in all material respects with

applicable laws and regulations applicable to the marketing, sale and promotion

of pharmaceutical products (including without limitation the Prescription Drug

Marketing Act ("PDMA"), Federal Health Care Program Anti-Kickback Law (42 U.S.C.

Section 1320a-7b) and the Health Insurance Portability and Accountability Act of

1996), the Codes, and the terms of this Agreement. No Party shall be required to

undertake any obligation, or incur any cost or reimbursement obligation, in

connection with any activity under this Agreement that such Party believes, in

good faith, may violate any applicable law, regulation or Code. Consistent with

recent guidance in the pharmaceutical industry promulgated by the Office of

Inspector General of the Health and Human Services Department on April 28, 2003,

Duramed agrees to maintain a compliance program with respect to its promotional

and sales activities pursuant to this Agreement.

 

3. TERM AND TERMINATION

 

     3.1 TERM. The Term of this Agreement shall commence on the Effective Date

(it being understood and agreed that Duramed shall not be obligated to perform

Product Details prior to the later of: (a) July 1, 2005, or (b) the date on

which Kos' sales training has been completed), and, unless earlier terminated

pursuant to Section 3.2, shall terminate at 11:59 p.m. Eastern Standard Time on

the earlier of:

 

     (a) the Marketing License Effective Date on a Product-by-Product and

     dose-by-dose basis; and

 

     (b) the date which is seven (7) years after the Effective Date (the

     "INITIAL EXPIRATION DATE"); provided, that such date may be extended for an

     additional period of one (1) year at the election of either Party by

     delivery to the other Party of a written notice at least ninety (90) days

     prior to the Initial Expiration Date.

<PAGE>

     3.2 EARLY TERMINATION. Each Party shall have the right to terminate this

Agreement before the end of the Term by written notice to the other Party:

 

     (i) if the other party fails to pay any amount of money due and payable

     hereunder and which is not disputed in good faith, and fails to remedy the

     same after thirty (30) days written notice;

 

     (ii) if the other Party has materially breached any provision of this

     Agreement, which breach materially adversely affects the terminating

     Party's rights under this Agreement, in the aggregate, and the breaching

     Party fails to remedy the same within ninety (90) days after written notice

     from the terminating Party (a "BREACH NOTICE") (or, if applicable, such

     longer period (not exceeding one hundred twenty (120) days) as would be

     reasonably necessary for a diligent party to cure such a breach; provided

     that the breaching Party has commenced and continues diligent efforts to

     cure during the initial ninety (90) day period following receipt of the

     Breach Notice); provided that, in the event of a final adjudication by a

     court of competent jurisdiction that a material breach had not occurred,

     the terminating Party shall compensate the alleged breaching Party for any

     amount of money that otherwise would have been due and payable hereunder

     plus interest on such amount set at a rate equal to the average one-year

     London Inter-Bank Offering Rate for the United States Dollar as reported

     from time to time in the Wall Street Journal (or, if such rate is not

     regularly published, as published in such source as the Parties agree)

     ("LIBOR") ****.

 

     (iii) as to any Niaspan Product or Advicor Product, on a Product by Product

     and dose by dose basis, upon any withdrawal of such Product or dose due to

     the occurrence of serious Adverse Events related to the use of such Product

      that cause a Party to reasonably conclude that the continued use of such

     Product by patients will result in serious life-threatening health and/or

     safety concerns that cannot be addressed through appropriate labeling; or

 

     (iv) upon the bankruptcy or insolvency, or the making or seeking to make or

     arrange an assignment for the benefit of creditors of the other Party, or

     the initiation of proceedings in voluntary or involuntary bankruptcy, or

     the appointment of a receiver or trustee of such Party's property that is

     not discharged within ninety (90) days.

 

4. FEES AND PAYMENTS

 

     4.1 ROYALTY ON NET SALES.

 

          (a) In consideration for the performance of its obligations hereunder,

Duramed shall be entitled to receive from Kos royalty payments (together

"ROYALTY PAYMENTS") in an amount equal to:

 

          (i)   Beginning April 1, 2005 and for the remainder of 2005, the Net

               Sales of the Products in a given calendar quarter up to the

               applicable quarterly net sales cap set forth on Appendix A

               (together the "QUARTERLY NET SALES CAPS") for such quarter

               multiplied by the applicable royalty rate as set forth on

               Appendix A (together the "ROYALTY RATES") for such Year; and

<PAGE>

          (ii) thereafter throughout the Term, the aggregate Net Sales of the

               Products in a given Year up to the applicable annual net sales

               cap set forth on Appendix A (together the "ANNUAL NET SALES

               CAPS") multiplied by the applicable Royalty Rates.

 

          (b) The amount of each Royalty Payment shall be determined and paid on

a calendar quarterly basis; provided, however, that with effect from January 1,

2006, in no event shall any such quarterly payment for the first, second or

third calendar quarter in any Year exceed an amount equal to the applicable

Quarterly Net Sales Cap for the Year multiplied by the applicable Royalty Rate

for such Year. Kos shall provide Duramed with a written statement, as provided

in Section 4.4(b), of the Net Sales for a calendar quarter and the amount of the

Royalty Payment for such quarter within thirty (30) days following the end of

each calendar quarter during a Year, except following the fourth calendar

quarter of each Year. Within forty five (45) days following the end of the

fourth calendar quarter of each Year, Kos shall provide Duramed with a written

statement, as provided in Section 4.4(c), of the Net Sales for such fourth

calendar quarter and the Net Sales for such entire Year. The Royalty Payment to

be paid by Kos following the fourth calendar quarter of each Year shall be

calculated by multiplying the Net Sales of the entire Year, up to the amount of

the applicable Annual Net Sales Cap, by the applicable Royalty Rate and

subtracting from such amount the aggregate amount of all Royalty Payments paid

by Kos following the first three calendar quarters during such Year.

 

          (c) All Royalty Payments required to be paid by Kos shall be paid by

Kos within ten (10) Business Days following Kos' delivery of the written

statement of the Net Sales and Royalty Payment amount for a calendar quarter. In

the event either Party elects to terminate the Agreement pursuant to Section

3.2, a pro-rated quarterly Royalty Payment will be due to Duramed at the close

of the quarter in which such termination occurs. The amount of such Royalty

Payment will be calculated for the pro-rated Net Sales for such quarter, based

on the number of days that have elapsed during such quarter immediately prior to

the effective date of such termination.

 

     4.2 PAYMENTS. All payments under this Agreement shall be in U.S. dollars in

immediately available funds, and, unless instructed otherwise by the receiving

Party, shall be made via check or wire transfer to the account designated from

time to time by the receiving Party.

 

     4.3 TAXES. Unless otherwise required by law, each Party shall be

responsible for paying and reporting all of its own taxes and fees, including

without limitation income taxes, payroll taxes, franchise taxes and all taxes

and fees in connection with the Party conducting business in any jurisdiction.

 

     4.4 REPORTS.

 

          (a) Within ten (10) Business Days following the end of each month

during the Term, Kos shall provide Duramed with an initial good faith estimate

of the Net Sales for the month and for the calendar quarter and year-to-date

period that includes such month. Within thirty (30) days following the end of

each of the first three calendar quarters of each Year during the Term, Kos

shall provide Duramed with a written statement of the Net Sales for such quarter

<PAGE>

and for the year-to-date period through the end of such quarter, and a

calculation of the Royalty Payment for such quarter.

 

           (b) Within forty five (45) days following the end of each calendar

Year of the Term, Kos shall provide Duramed with a written statement of the Net

Sales for such Year, and a calculation of the Royalty Payment for such Year

pursuant to Section 4.1.

 

          (c) For the avoidance of doubt, the reports provided under

sub-sections (a) and (b) above shall report only aggregate Net Sales of the

Products but shall not report gross sales of the Products or any deductions from

gross sales in the calculation of Net Sales. Upon request by Duramed within

ninety (90) days after a calendar quarter has ended, or within one hundred

twenty (120) days after a Year has ended, Kos shall provide to an independent

nationally-recognized certified public accountant or like person, satisfactory

to Duramed and Kos in their respective reasonable discretion, a written report

setting forth an itemized accounting and calculation of the Net Sales of

Products sold by Kos during such preceding calendar quarter or such preceding

Year, which report shall include information in sufficient detail reasonably

necessary for such accountant to confirm the computational accuracy of the

report provided to Duramed pursuant to sub-section (a) above with respect to

such calendar quarter or such Year. Such accountant shall sign a written

confidentiality agreement reasonably satisfactory to Kos and shall report to

Duramed and Kos only its conclusions as to whether the report provided to

Duramed pursuant to sub-section (a) above is consistent with the itemized

accounting and calculation provided to such accountant, and without limiting the

foregoing, under no circumstances shall such accountant report to Duramed the

prices at which Kos sold any Product or any deductions from gross sales in the

calculation of Net Sales. Duramed shall pay all costs of the independent

accountant. Nothing in this Section 4.4(c) shall limit in any way either Party's

rights under Section 8 of this Agreement.

 

          (d) Whenever information relating to the Products is reported under

this Agreement, such information shall be listed separately by Product and in

the aggregate.

 

     4.5 NET SALES TRUE-UP PAYMENT. Within one hundred eighty (180) days

following the end of each Year during the Term, Kos shall determine the actual

cash paid, allowances or credits issued and write-offs taken related to its

recorded gross sales of both Products in the Territory to Third Parties that

occurred during such Year. In the event that any such annual reconciliation

reveals any overpayment or underpayment hereunder, the amount of such

underpayment or overpayment will be added or subtracted, as appropriate, to or

from the next Royalty Payment in accordance with Section 4.1 or, if no further

Royalty Payments are due, by payment to the Party owed such adjustment within

thirty (30) days after identification of such adjustment. Nothing in this

Section 4.5 shall limit in any way either Party's rights under Section 8 of this

Agreement.

 

5. CO-PROMOTION MANAGEMENT

 

     5.1 MARKETING ADVISORY COMMITTEE.

 

          (a) Within thirty (30) days after the Effective Date, Kos and Duramed

shall assemble a team of appropriate personnel from both Kos and Duramed (the

"MARKETING

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ADVISORY COMMITTEE") to plan the ongoing sales and promotional strategi