EXHIBIT 10.6 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS. DISTRIBUTION AND PRODUCT ACQUISITION AGREEMENT

 

<PAGE>

                                                                 EXHIBIT 10.6

 

 

           CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE

                       SECURITIES AND EXCHANGE COMMISSION.

                        ASTERISKS DENOTE SUCH OMISSIONS.

 

                 DISTRIBUTION AND PRODUCT ACQUISITION AGREEMENT

 

     THIS DISTRIBUTION AND PRODUCT ACQUISITION AGREEMENT (the "AGREEMENT") is

dated as of May 2, 2005 (the "EFFECTIVE DATE") by and between Biovail

Laboratories International SRL, a Barbados International Society with Restricted

Liability having a principal place of business at Chelston Park, Building 2,

Collymore Rock, St. Michael, BHI, Barbados, W.I. ("BLS"), and Kos

Pharmaceuticals, Inc., a Florida corporation having a principal place of

business at 1 Cedar Brook Drive, Cranbury, New Jersey 08512 ("KOS"). BLS and Kos

are sometimes referred to herein individually as a "PARTY" and collectively as

the "PARTIES".

 

                                    RECITALS

 

     WHEREAS, BLS desires to sell to Kos, and Kos desires to purchase from BLS,

all of BLS's rights in the Territory to the Transferred Products, including the

assets described herein, and the assumption of certain liabilities relating to

such Transferred Products;

 

     WHEREAS, BLS desires to grant certain exclusive distribution rights

relating to the Marketed Product to Kos;

 

     WHEREAS, BLS has rights to develop the Vasocard Product in the Territory

and BLS and Kos desire to form a strategic alliance for the purposes of

developing and commercializing the Vasocard Product in the Territory;

 

     WHEREAS, BLS desires to grant certain rights to Kos, and Kos desires to

accept such rights, to perform Phase IV Clinical Trials with respect to the

Marketed Product in the Territory; and

 

     WHEREAS, the Parties hereto desire to set forth the terms and conditions of

such transfers, grants and related matters.

 

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

covenants contained herein, the Parties, intending to be legally bound, agree as

follows:

 

                                    ARTICLE 1

                                   DEFINITIONS

 

The following terms shall have the following meanings as used in this Agreement:

<PAGE>

     1.1 "ACT" means the United States Federal Food, Drug and Cosmetics Act, as

amended from time to time, and the rules, regulations and guidelines promulgated

thereunder.

 

     1.2 "AFFILIATE" means a Person that controls, is controlled by or is under

common control with a Party. For the purposes of this definition, the word

"control" (including, with correlative meaning, the terms "controlled by" or

"under common control with") means the actual power, either directly or

indirectly through one or more intermediaries, to direct the management and

policies of such Person, whether by the ownership of fifty percent (50%) or more

of the voting stock of such Person (it being understood that the direct or

indirect ownership of a lesser percentage of such stock shall not necessarily

preclude the existence of control), or by contract or otherwise. Notwithstanding

the foregoing, for the purposes of this Agreement, none of the following persons

shall be considered to be an "Affiliate" of Kos or any of Kos's Affiliates: (i)

Michael Jaharis or the spouse or any sibling or lineal descendent of Michael

Jaharis or their estates, (ii) any trust for the benefit of Michael Jaharis or

the spouse or any sibling or lineal descendent of Michael Jaharis, or (iii) any

corporation, limited liability company, partnership, limited partnership, or

other entity that is beneficially owned or controlled by any of the persons in

clauses (i) or (ii) above, other than a publicly traded entity and its direct

and indirect subsidiaries.

 

     1.3 "AUTHORIZED GENERIC" means a generic equivalent of the Marketed Product

for sale in the Territory which has been authorized by the holder of the NDA for

the Marketed Product and has been mutually agreed upon by the Parties pursuant

to Section 4.6 of this Agreement.

 

     1.4 "BANKRUPTCY EVENT" means that the person or entity in question becomes

insolvent, or voluntary or involuntary proceedings by or against such person or

entity are instituted in bankruptcy or under any insolvency law, or a receiver

or custodian is appointed for such person or entity, or proceedings are

instituted by or against such person or entity for corporate reorganization or

the dissolution of such person or entity, which proceedings, if involuntary,

shall not have been dismissed within sixty (60) days after the date of filing,

or such person or entity makes an assignment for the benefit of its creditors,

or substantially all of the assets of such person or entity are seized or

attached and not released within sixty (60) days thereafter.

 

     1.5 "BIOSTUDY" means that certain study in connection with the Development

of the Vasocard Product as more particularly described on Schedule 1.5.

 

     1.6 "BIOVAIL TRADE DRESS" means the packaging and labeling (including the

package insert) that has been approved by the FDA prior to the Closing Date for

use with the Marketed Product in the Territory.

 

     1.7 "BIOVAIL TRADEMARK" means each trademark that has been utilized by BLS

(or its Affiliates) prior to the Closing Date in the Territory in connection

with the Distribution of the Marketed Product and which are set forth on

Schedule 1.7.

 

 

                                       -2-

<PAGE>

     1.8 "BUSINESS DAY" means any day other than (i) Saturday or Sunday or (ii)

any other day on which banks in New York, New York, United States or Bridgetown,

Barbados are permitted or required to be closed.

 

     1.9 "CGCP" means current Good Clinical Practices for the design, conduct,

performance, monitoring, auditing, recording, analyses, and reporting of

clinical trials, including the requirements in 21 C.F.R. Parts 11, 50, 54, 56,

312, and 314, that provide assurance that the data and reported results are

credible and accurate, and that the rights, integrity, and confidentiality of

trial subjects are protected.

 

     1.10 "CGLP" means current Good Laboratory Practices as promulgated under

the Act at 21 C.F.R. Part 58, as the same may be amended or re-enacted from time

to time and as required by Law in countries other than the United States where

non-clinical laboratory studies are conducted.

 

     1.11 "CGMP" means current Good Manufacturing Practices relating to

manufacturing practices for fine chemicals, active pharmaceutical ingredients,

intermediates, bulk products or finished pharmaceutical products, including the

principles set forth in 21 C.F.R. Parts 210 and 211.

 

     1.12 "COMPLETION OF THE BIOSTUDY" means the availability of the report for

the study referenced in the definition of "Initiation of the Biostudy"

hereunder.

 

     1.13 "CONTROL" means, with respect to any intellectual property right or

other intangible property, that a Party or one of its Affiliates owns or has a

license or sublicense to such item or right, and has the ability to grant

access, license or sublicense in or to such right without violating the terms of

any agreement or other arrangement with any Third Party.

 

     1.14 "CORPORATE TRADEMARK" means the "Biovail" or "Biovail Pharmaceuticals"

tradenames, the Biovail symbol, the Biovail.com website addresses and all

goodwill associated therewith and all other trademarks, trade names, brand

names, logo types, symbols, trade dress and domain names (including the overall

look and feel of BLS's (or its Affiliate's) package design, the block color

design of all BLS's (and its Affiliate's) packaging, the color coding of all

BLS's (and its Affiliate's) packaging, labeling and package inserts) other than

the Transferred Product Trade Dress and the Transferred Product Trademarks

(including registrations and applications for registration thereof and all

renewals, modifications and extensions thereof) used by BLS or its Affiliates in

connection with the manufacture, marketing, sale and distribution of their

products.

 

     1.15 "COVER" means, with respect to the Marketed Product, or with respect

to technology, that, in the absence of a license granted under a Valid Claim,

the making, use, offering for sale, sale, or importation of the Marketed

Product, or the practice of such technology, would infringe such Valid Claim.

 

     1.16 "DILIGENT EFFORTS" means, (i) with respect to the Vasocard Product,

the carrying out of obligations or tasks consistent with the standard of

practice in the pharmaceutical industry for the development of a pharmaceutical

product having similar market potential, profit potential or strategic value as

the Vasocard Product, based on conditions then prevailing, including,

 

 

                                       -3-

<PAGE>

without limitation, the maturity of the Vasocard Product and the intellectual

property protection surrounding the Vasocard Product and (ii) with respect to

the Marketed Product, the carrying out of obligations or tasks consistent with

the standard of practice in the pharmaceutical industry for the distribution,

marketing, offering for sale and selling, of a pharmaceutical product having

similar market potential, profit potential or strategic value as the Marketed

Product, based on conditions then prevailing, including, without limitation, the

maturity of the Marketed Product and the intellectual property protection

surrounding the Marketed Product. Diligent Efforts requires that the Party, at a

minimum, provided that such actions are commercially reasonable: (a) determine

the general industry practices with respect to the applicable activities; (b)

reasonably promptly assign responsibility for such obligations to specific

employee(s) who are held accountable for progress, and monitor such progress on

an on-going basis; (c) set and consistently seek to achieve specific and

meaningful objectives for carrying out such obligations; and (d) make and

implement decisions and allocate resources designed to advance progress with

respect to such objectives.

 

     1.17 "DEVELOP", "DEVELOPED" or "DEVELOPMENT" means all activities relating

to the development of the Vasocard Product up through, and including, obtaining

Regulatory Approval of the Vasocard Product, including all test method

development, stability testing, toxicology, formulation, process development,

cGMP audits (but only those performed prior to Regulatory Approval and excluding

any audits for commercial manufacture), cGLP audits, cGCP audits, validation,

quality assurance/quality control development, preclinical and clinical testing

and studies, regulatory affairs and outside counsel regulatory legal services

relating to any of the foregoing, and any activities relating to the manufacture

of the Vasocard Product other than commercial quantities thereof. For the

avoidance of doubt, the conduct of Phase IV Clinical Trials shall not be

considered Development.

 

     1.18 "DEVELOPMENT EXPENSES" means any and all expenses incurred by BLS or

its Affiliates in connection with the Development of the Vasocard Product.

 

     1.19 "DISTRIBUTION" means any and all activities directed to the

distribution, marketing, offering for sale and selling of a pharmaceutical

product, including, advertising, educating, planning, promoting and conducting

reporting. For purposes of clarity, Distribution shall not include any Phase IV

Clinical Trials.

 

     1.20 "DRUG APPROVAL APPLICATION" means an application for Regulatory

Approval required before commercial sale or use of a pharmaceutical product in

the Territory as a drug in a regulatory jurisdiction, including, without

limitation, an NDA.

 

     1.21 "FIRST COMMERCIAL SALE" means, with respect to a pharmaceutical

product, the first commercial sale of such product in the Territory in

compliance with all applicable Laws. For the avoidance of doubt, sales for

clinical studies, compassionate use, named patient programs, under a treatment

IND, for test marketing, in any nonregistrational studies or in any similar

instances shall not constitute a First Commercial Sale.

 

     1.22 "FDA" means the United States Food and Drug Administration or any

successor federal agency thereto.

 

 

                                        -4-

<PAGE>

     1.23 "GAAP" means United States generally accepted accounting principles,

consistently applied.

 

     1.24 "GENERIC ENTRY" means the first to occur of (i) the end of the ****

during which the aggregate number of prescriptions filled for an A/B rated

generic version(s) of the Marketed Product (which generic version(s) is labeled

for the same indications as the Marketed Product) sold by one or more Third

Parties in the Territory constitutes on average at **** of the Total Market for

the Marketed Product during such **** period; provided, however in the event

that the date of such Generic Entry is triggered pursuant to this clause (i),

then the date of Generic Entry shall be deemed to be the beginning of the ****

period; or (ii) the first commercial sale in the Territory of an Authorized

Generic.

 

     1.25 "GENERIC ENTRY LOST PROFITS" means, if Generic Entry occurs prior to

**** an amount equal to the profits (after taking into account any and all costs

and expenses associated with the sale of the Marketed Product) (such "profits",

"costs" and "expenses" being determined in accordance with GAAP) that Kos would

have actually realized from the date of such Generic Entry through **** on the

sale of Ordered Product by Kos in the Territory had such Generic Entry not

occurred prior to ****.

 

     1.26 "GENERIC ENTRY LOST PROFITS CAP" means the amount in effect during a

given calendar month from the Closing Date and ending **** in which Generic

Entry first occurs, calculated based on the following formula: an amount equal

to **** on the Closing Date and until ****, which amount shall be decreased

monthly in equal monthly installments, on a straight line amortization basis

over the period from **** through **** to zero.

 

     1.27 "GENT AGREEMENT" means that certain Product Development and License

Agreement dated as of May 31, 2000, between BLS (or its predecessors in

interest), the University of Gent and Jean-Paul Remon ("REMON"), as amended from

time to time.

 

     1.28 "GOVERNMENTAL AUTHORITY" means any court, tribunal, arbitrator,

agency, legislative body, commission, official or other instrumentality of (i)

any government of any country, (ii) a federal, state, province, county, city or

other political subdivision thereof or (iii) any supranational body, in each

case having jurisdiction over the applicable subject matter.

 

     1.29 "IND" means an Investigational New Drug Application filed with FDA, or

any successor applications, as defined in the Act.

 

     1.30 "INITIATION OF THE BIOSTUDY" means the initiation of the Biostudy to

be conducted with the highest strength between the "Vasocard" and

Vasocard/Cardizem LA formulations.

 

     1.31 "INTELLECTUAL PROPERTY" means Know-How and Patents.

 

     1.32 "KNOW-HOW" means any of the following that is directly related to the

Marketed Product in the Territory that either (a) is Controlled by BLS or its

Affiliates on the Closing Date or (b) comes within the Control of BLS or its

Affiliates during the Term (with respect to the Marketed Product): non-public

information, whether or not patented or patentable, results and data of any type

whatsoever, in any tangible or intangible form whatsoever, including without

limitation, databases, ideas, discoveries, inventions, trade secrets, practices,

methods, tests,

 

 

                                        -5-

<PAGE>

assays, techniques, specifications, processes, formulations, formulae,

knowledge, know-how, skill, experience, materials, including pharmaceutical,

chemical and biological materials, products and compositions, scientific,

technical or test data (including pharmacological, biological, chemical,

biochemical, toxicological and clinical test data), analytical and quality

control data, stability data, studies and procedures, drawings, plans, designs,

diagrams, sketches, technology, documentation, and patent-related and other

legal information or descriptions.

 

     1.33 "LAW" or "LAWS" means all laws, statutes, rules, codes, regulations,

orders, judgments and/or ordinances of any Governmental Authority.

 

     1.34 "LOSSES" means any and all amounts paid or payable to Third Parties

with respect to a Third Party Claim, including without limitation, damages

(including all incidental and consequential damages), deficiencies, defaults,

awards, settlement amounts, assessments, fines, dues, penalties, costs,

liabilities, obligations, taxes, liens, losses, lost profits, fees and expenses

(including, without limitation, court costs, interest and reasonable fees of

attorneys, accountants and other experts).

 

     1.35 "LIABILITIES" means any and all debts, liabilities and obligations,

whether accrued or fixed, absolute or contingent, matured or unmatured, or

determined or determinable, including those arising under any laws, action or

governmental order and those arising under any contract, agreement, arrangement,

commitment or undertaking, or otherwise.

 

     1.36 "MARKETED PRODUCT" means the extended release tablet formulation

pharmaceutical product of the active pharmaceutical ingredient diltiazem

hydrochloride currently marketed under the Biovail Trademark Cardizem(R) LA as

specified in the FDA approved NDA # 21-392.

 

     1.37 "MARKETED PRODUCT INVENTORY LEVEL FOR LARGE WHOLESALERS" means the

number of Units of inventory of the Marketed Products held in stock by the Large

Wholesalers as reported in accordance with BLS's (or its Affiliate's)

distribution services agreements with such wholesalers, as of the Closing Date,

on an SKU-by-SKU basis.

 

     1.38 "NDA" means a new drug application or any supplements or amendments

thereto submitted to the FDA for commercial sale or use of a pharmaceutical

product in the Territory.

 

     1.39 "ORDERED PRODUCT" means Marketed Product ordered from an Authorized

Supplier.

 

     1.40 "PATENT" means any of the following that is directly related to the

Marketed Product in the Territory that (a) Cover Know-How and (b) are Controlled

by BLS or its Affiliates: (i) patents, re-examinations, reissues, renewals,

extensions, supplementary protection certificates and term restorations, any

confirmation patent or registration patent or patent of addition based on any

such patent, (ii) pending applications for patents, including without limitation

continuations, continuations-in-part, divisional, provisional and substitute

applications, and inventors' certificates, (iii) all priority applications of

any of the foregoing, and (iv) patent applications filed during the Term which

claim any invention conceived prior to the Closing Date, including, without

limitation, all patents listed on Schedule 7.1.3(c)(i).

 

 

                                       -6-

<PAGE>

     1.41 "PERSON" means any natural person, corporation, firm, business trust,

joint venture, association, organization, company, partnership or other business

entity, or any government, or any agency or political subdivisions thereof.

 

     1.42 "PHASE IV CLINICAL TRIALS" means certain post-marketing studies to

delineate additional information about a pharmaceutical product's risks,

benefits, and optimal use, commenced after receipt of Regulatory Approval in the

indication for which such trial is being conducted.

 

     1.43 "PRE-MARKETING" means all sales and marketing activities undertaken

prior to and in preparation for the launch of the Vasocard Product in the

Territory. Pre-Marketing shall include advertising, education, product-related

public relations, health care economic studies, governmental affairs activities

for reimbursement and formulary acceptance, sales force training, trademark

selection, filing, prosecution and enforcement, and other pre-launch activities

prior to the First Commercial Sale of the Vasocard Product in the Territory.

 

     1.44 "REGULATORY APPROVAL" means all approvals (including, without

limitation, where applicable, pricing and reimbursement approval and schedule

classifications), product and/or establishment licenses, registrations or

authorizations of any Regulatory Authority, necessary for the manufacture, use,

storage, import, export, transport, offer for sale, or sale of a pharmaceutical

product in a regulatory jurisdiction in the Territory.

 

     1.45 "REGULATORY AUTHORITY" means any national (e.g., the FDA), regional,

state or local regulatory agency, department, bureau, commission, council, court

or Governmental Authority in the Territory.

 

     1.46 "SUPPLY AGREEMENT" means that certain Supply and Employee Agreement to

be entered into between an Affiliate of BLS and Kos as of the date hereof

relating to the Marketed Product.

 

     1.47 "TAXES" (and with correlative meaning, "TAX" and "TAXABLE") means all

taxes of any kind imposed by a federal, state, local or foreign Governmental

Authority, including those on, or measured by or referred to as, income, gross

receipts, sales, use, ad valorem, value added, franchise, profits, license,

excise, stamp, premium, property, transfer or windfall profits taxes, customs,

duties or similar fees, assessments or charges of any kind whatsoever, together

with any interest and any penalties, additions to tax or additional amounts

imposed by such Governmental Authority with respect to such amounts.

 

     1.48 "TERRITORY" means (i) with respect to the Transferred Products, the

United States, Puerto Rico and the US Virgin Islands and (ii) in all other

cases, the United States of America and Puerto Rico.

 

     1.49 "TEVETEN AGREEMENTS" means, collectively, the Teveten Rights Agreement

and the Teveten Supply Agreement. A "Teveten Agreement" shall mean either of the

Teveten Rights Agreement or the Teveten Supply Agreement, individually, as

applicable.

 

 

                                       -7-

<PAGE>

     1.50 "TEVETEN RIGHTS AGREEMENT" means that certain Teveten Rights Agreement

dated as of February 18, 2002 between BLS (or predecessor thereof) and Solvay

Pharmaceuticals Marketing & Licensing AG, as amended.

 

     1.51 "TEVETEN SUPPLY AGREEMENT" means that certain Teveten Products and

Eprosartan Supply Agreement dated as of February 18, 2002 between BLS (or

predecessor thereof) and Solvay, as amended.

 

     1.52 "THIRD PARTY" means any entity other than Kos or BLS or their

respective Affiliates.

 

     1.53 "TOTAL MARKET" means, with respect to the Marketed Product, the

aggregate total number of prescriptions filled for said Marketed Product and any

generic and other versions of said Marketed Product made available in finished

form in the Territory.

 

     1.54 "TRANSFERRED PRODUCTS" means, collectively, the Teveten(R) Products,

as such term is defined in the Teveten Rights Agreement.

 

     1.55 "TRANSFERRED PRODUCT ADVERSE EVENT DOCUMENTATION" means copies of

BLS's and its Affiliates' files (whether paper or electronic), in each case

relating solely to the Transferred Products in the Territory and containing (i)

data for both postmarketing (PMS) and IND safety, (ii) records for all expedited

reports submitted by BLS in the Territory, (iii) documents relating to label

changes in the Territory, if any, and (iv) FDA submissions by BLS relating to

safety since the receipt of marketing authorization in the Territory, in the

case of each of the foregoing to the extent that such information is in the

possession of BLS or its Affiliates as of the Closing Date and is legally

permitted to be assigned.

 

     1.56 "TRANSFERRED PRODUCT ASSIGNED CONTRACTS" means those agreements listed

on Schedule 1.56 attached hereto.

 

     1.57 "TRANSFERRED PRODUCT BOOKS AND RECORDS" means copies of the material

books and records of BLS and/or its Affiliates related solely (or, to the extent

not related solely, those portions thereof related solely) to the Transferred

Products in the Territory or the Purchased Assets.

 

     1.58 "TRANSFERRED PRODUCT COPYRIGHTS" means any and all Transferred Product

Marketing Materials for the Territory as of the Closing Date which may be

subject to copyright protection and/or registration, including, but not limited

to, designs, graphics, logos, colors, text and any combination thereof, but

excluding the Corporate Trademarks.

 

     1.59 "TRANSFERRED PRODUCT FINISHED GOODS" means a Transferred Product

packaged and ready for sale to an ultimate customer in the Territory.

 

     1.60 "TRANSFERRED PRODUCT INVENTORY" or "TRANSFERRED PRODUCT INVENTORIES"

means all of BLS's (or its Affiliate's) inventories of Transferred Product

Finished Goods owned by BLS (or its Affiliates) as of the Closing Date, and all

work-in-process, components, packaging materials and other raw materials related

solely to the Transferred Products as set forth on Schedule 1.60, whether in the

possession of BLS or an Affiliate of BLS or in the

 

 

                                       -8-

<PAGE>

possession of or in transit to any distribution center. For purposes of this

Agreement, "TRANSFERRED PRODUCT INVENTORY" shall be deemed to include samples of

Transferred Product Finished Goods as set forth on Schedule 1.60 for use in

promoting Transferred Product Finished Goods and that are not intended to be

sold, consistent with FDA requirements.

 

     1.61 "TRANSFERRED PRODUCT INVENTORY LEVEL FOR LARGE WHOLESALERS" means the

number of Units of inventory of the Transferred Products held in stock by BLS's

(or its Affiliate's) wholesalers in the Territory, namely, Cardinal Health,

McKesson Corporation and AmerisourceBergen Drug Corporation and their affiliates

(collectively, the "LARGE WHOLESALERS"), as reported in accordance with BLS's

(or its Affiliate's) distribution services agreements with such wholesalers, as

of the Closing Date, on an SKU-by-SKU basis.

 

     1.62 "TRANSFERRED PRODUCT KNOW-HOW" shall have the meaning ascribed to the

term "Teveten Know How" in the Teveten Rights Agreement.

 

     1.63 "TRANSFERRED PRODUCT MARKETING MATERIALS" means copies of all

marketing materials used solely and specifically with respect to the Transferred

Product in the Territory, including all advertising and display materials,

product data, price lists, sales materials, marketing information, and marketing

plans, in the case of each of the foregoing to the extent that such information

is in existence, in the possession of BLS or its Affiliates as of the Closing

Date and is legally permitted to be assigned.

 

     1.64 "TRANSFERRED PRODUCT REGISTRATIONS" means those Regulatory Approvals

for the Transferred Products in the Territory listed on Schedule 1.64.

 

     1.65 "TRANSFERRED PRODUCT TRADEMARKS" means the trademarks (whether

registered or not), including registrations and applications for registration

thereof and all goodwill associated therewith (and all renewals, modifications

and extensions thereof), and the registrations and applications for registration

and all goodwill associated therewith (and all renewals, modifications and

extensions thereof) for domain names used in connection with the Transferred

Products in the Territory, and which are listed on Schedule 1.65.

 

     1.66 "TRANSFERRED PRODUCT TRADE DRESS" means the current trade dress used

solely in connection with the Transferred Products in the Territory and the

packaging, labeling and package inserts solely and exclusively associated with

the sale of the Transferred Products in the Territory (including the lettering

of each of the Transferred Product's name used solely and exclusively in

connection with the sale of the Transferred Products in the Territory).

 

     1.67 "UNIT" means an individual unit of a Transferred Product.

 

     1.68 "VALID CLAIM" means: (a) a claim of an issued Patent that has not (i)

expired or been canceled, (ii) been declared invalid or unenforceable by a

decision of a court or other appropriate body of competent jurisdiction, from

which no appeal is or can be taken, (iii) been admitted to be invalid or

unenforceable through reissue, disclaimer or otherwise, or (iv) been abandoned,

disclaimed or dedicated to the public; and (b) a claim included in a pending

patent application that is being actively prosecuted in accordance with this

Agreement and that has not been (i) canceled, (ii) withdrawn from consideration,

(iii) finally determined to be unallowable

 

 

                                       -9-

<PAGE>

by the applicable governmental authority (from which no appeal is or can be

taken), or (iv) abandoned or disclaimed.

 

     1.69 "VASOCARD PRODUCT" means that certain combination pharmaceutical

product combining the Product with the active pharmaceutical ingredient

enalapril to be Developed by BLS pursuant to the terms of this Agreement and

which is known as Vasocard.

 

INTERPRETATION. Unless the context of this Agreement otherwise requires: (a)

words of one gender include the other gender; (b) words using the singular or

plural number also include the plural or singular number, respectively; (c) the

terms "hereof," "herein," "hereby," and other similar words refer to this entire

Agreement; (d) the terms "Article" and "Section" refer to the specified Article

and Section of this Agreement; and (e) the term "including" shall mean

"including, without limitation". Whenever this Agreement refers to a number of

days, unless otherwise specified, such number shall refer to calendar days.

 

ADDITIONAL DEFINITIONS. Each of the following definitions is set forth in the

Section of this Agreement indicated below:

 

<TABLE>

<CAPTION>

                DEFINITION                       SECTION

-----------------------------------------    --------------

<S>                                          <C>

Agreement                                    Preamble

Actual Inventory Value                       Section 5.2

Breaching Party                              Section 9.2.1

BLS                                          Preamble

Closing Date Payment                         Section 5.1

Confidential Information                     Section 8.1.1

Disclosing Party                             Section 8.1.1

Dollars                                       Section 14.8

Effective Date                               Preamble

Estimated Inventory Value                    Section 5.2

First Milestone Payment                      Section 5.8.1

Indemnification Claim Notice                 Section 11.2

Indemnified Party                            Section 11.2

Indemnifying Party                           Section 11.2

Indemnitee                                   Section 11.2

Indemnitees                                  Section 11.2

Independent Accounting Firm                  Section 5.2.2

Kos                                          Preamble

Large Wholesalers                            Section 1.61

Material Breach                              Section 9.2.1

Milestones                                   Section 5.9

Notice of Termination For Material Breach    Section 9.2.3

Notifying Party                              Section 9.2.1

Open Purchase Orders                         Section

Parties                                      Preamble

Party                                         Preamble

Purchased Assets                             Section 2.2.1

</TABLE>

 

 

                                      -10-

<PAGE>

<TABLE>

<CAPTION>

                DEFINITION                       SECTION

-----------------------------------------    --------------

<S>                                          <C>

Receiving Party                              Section 8.1.1

Representatives                              Section 12.1

Statement of Actual Inventory Value          Section 5.2.1

Term                                          Section 9.1

Third Party Claim                            Section 11.1.1

Transaction Documents                        Section 13.1.3

Transferred Product Grants                   Section 2.3

$                                            Section 14.8

</TABLE>

 

                                    ARTICLE 2

                            SALE OF PURCHASED ASSETS

 

     2.1 GENERAL. This Agreement, among other things, has the purpose of

effectuating the sale and transfer by BLS to Kos, and the purchase and

acceptance by Kos from BLS, of the Purchased Assets and rights to the

Transferred Product in the Territory.

 

     2.2 SALE OF ASSETS.

 

          2.2.1 PURCHASED ASSETS. On the Closing Date, and on the terms and

subject to the conditions of this Agreement, BLS will, and will cause its

Affiliates, where applicable, to, sell, assign, convey and transfer to Kos or

other entity designated by Kos, and Kos or such designated entity will purchase

and accept from BLS and its Affiliates, the following assets related to the

Transferred Products (collectively, the "PURCHASED ASSETS"):

 

               (A) the Transferred Product Registrations;

 

               (B) copies of BLS's and its Affiliates' files (whether paper or

electronic) pertaining to the Transferred Product Registrations to the extent

such information is within the possession of or otherwise attainable by BLS or

its agents as of the Closing Date;

 

               (C) all Transferred Product Inventories;

 

               (D) copies of the Transferred Product Books and Records;

 

               (E) the Transferred Product Trademarks (and the Transferred

Product Trademark registrations in the Territory), the Transferred Product Trade

Dress and Transferred Product Copyrights;

 

               (F) the Transferred Product Marketing Materials;

 

               (G) the Transferred Product Adverse Event Documentation;

 

               (H) all rights and interest of BLS and BLS's Affiliates to all

Transferred Product Assigned Contracts, pursuant to and in accordance with the

Assignment and Assumption Agreement;

 

 

                                      -11-

<PAGE>

               (I) the existing lists of all current customers and suppliers for

the Transferred Products in the Territory;

 

               (J) any and all other information or documentation in BLS's or

its Affiliates possession solely to the extent relating to the marketing or sale

of the Transferred Product in the Territory;

 

               (K) the Transferred Product Know-How; and

 

               (L) all of BLS' or its Affiliate's rights to the Opadry film coat

solely with respect to the Transferred Products and other references on Schedule

7.1.2(b).

 

          2.2.2 TIMING OF TRANSFER. Notwithstanding Section 2.2.1 above, the

transfer of the Transferred Product Registrations shall occur in accordance with

the provisions of Section 2.6 below, and the transfer of Transferred Product

Inventory shall occur in accordance with the provisions of Section 5.2 below.

Furthermore, the delivery of the Purchased Assets described in Sections

2.2.1(b), (d), (e), (f), (g), (i), and (j) shall occur as promptly as reasonably

practicable following the Closing but in no event later than thirty (30) days

after the Closing Date.

 

          2.2.3 OTHER ASSETS.

 

               (A) GENERAL. The Parties agree and acknowledge that the Purchased

Assets shall not include the Corporate Trademark, any plant, real property,

equipment, accounts receivable, cash or any refund or credit of Taxes

attributable to any period of time prior to the Closing Date, those items set

forth on Schedule 2.2.3, any other patents or intellectual property that do not

relate to the Transferred Products in the Territory, and any and all other

information or documentation in BLS' or its Affiliates' possession except solely

to the extent relating to the marketing or sale of the Transferred Product in

the Territory. Kos acknowledges and agrees that BLS may retain a copy of all or

part of the documentation that it delivers to Kos hereunder for archival

purposes or for other permitted activities under this Agreement.

 

               (B) OPEN PURCHASE ORDERS. With respect to any customer orders

relating to the Transferred Products in the Territory received by BLS or its

Affiliates after 3:00 p.m. EST on April 29, 2005 through the Closing Date (the

"OPEN PURCHASE ORDERS"), BLS shall (or shall cause its applicable Affiliates to)

either (i) cancel such Open Purchase Orders and direct the customer to place

such orders with Kos or (ii) transfer all right, title and interest in and to

such Open Purchase Orders to Kos.

 

     2.3 GRANTS RELATED TO TRANSFERRED PRODUCTS. Subject to the terms and

conditions of this Agreement, BLS hereby grants (and BLS shall cause its

applicable Affiliates to grant) to Kos the right to use the Corporate Trademark

solely to the extent necessary for Kos to distribute and sell finished

Transferred Product Inventory in the Territory and only to the extent permitted

by applicable Law (the "TRANSFERRED PRODUCT GRANTS"). Unless this Agreement

terminates earlier, the grant of rights pursuant to this 2.3 shall terminate

immediately upon the exhaustion of the Transferred Product Inventory transferred

pursuant to the terms of this Agreement.

 

 

                                      -12-

<PAGE>

     2.4 ASSUMED LIABILITIES AND RETAINED LIABILITIES.

 

          2.4.1 ASSUMED LIABILITIES. As of the Closing Date, Kos shall assume,

be responsible for and pay, perform and discharge when due the following

(collectively, the "ASSUMED LIABILITIES"):

 

               (A) any Liability arising from any product liability, breach of

warranty, patent or trademark infringement claim, or any other action or claim

resulting from the sale of any Transferred Product (including any Liabilities,

relating to voluntary or involuntary recalls of such Transferred Product),

arising out of, and to the extent attributable to, acts, omissions or events

occurring after the Closing Date or relating to the sale of any Transferred

Product after the Closing Date, other than such Liabilities to the extent

resulting from the actions of BLS taken after the Closing Date;

 

               (B) any Liabilities arising after the Closing Date relating to

the Purchased Assets and the Transferred Product Grants, including, without

limitation, all obligations incurred on or after the Closing Date under the

Transferred Product Assigned Contracts including, pursuant to Section 2.2.3(b),

the obligation to fill Open Purchase Orders transferred to Kos;

 

               (C) subject to Section 2.7, all Rebates in connection with the

sale of the Transferred Product from and after the Closing Date;

 

               (D) subject to Section 2.7, all Chargebacks, and any other

post-sale refunds, price adjustments and other similar payments, credits or

liabilities regarding sales of Transferred Products from and after the Closing

Date;

 

               (E) subject to Section 2.7, all returns of Transferred Product in

connection with the sale of the Transferred Product from and after the Closing

Date; and

 

               (F) credits, reimbursements, and similar payments to buying

groups, insurers and other institutions in connection with Transferred Product

sold after the Closing Date.

 

     Assumed Liabilities shall not include any Liability for Taxes (including

any penalties, additions, fines, surcharges, or interest relating thereto),

including costs, expenses, and legal counsel fees, attributable to transactions

between BLS (and/or its Affiliates) and any other person (other than

transactions entered into pursuant to this Agreement and any Open Purchase

Orders transferred to Kos pursuant to Section 2.2.3(b)) in respect of the

Purchased Assets or the Transferred Products.

 

          2.4.2 RETAINED LIABILITIES. All Liabilities relating to the Purchased

Assets or the Transferred Products arising out of or attributable to acts,

omissions or events occurring on or prior to the Closing Date or relating to the

sale of any Transferred Product prior to the Closing Date (in each case, other

than such Liabilities to the extent resulting from the actions of Kos taken

prior to the Closing Date), shall be retained by BLS, or its Affiliates, as the

case may be (collectively, the "RETAINED LIABILITIES"). Retained Liabilities

shall include any Liability for Taxes (including any penalties, additions,

fines, surcharges, or interest relating thereto),

 

 

                                      -13-

<PAGE>

including costs, expenses, and legal counsel fees attributable to transactions

between BLS (and/or its Affiliates) and any other person (other than

transactions entered into pursuant to this Agreement and any Open Purchase

Orders transferred to Kos pursuant to Section 2.2.3(b)) in respect of the

Purchased Assets or the Transferred Products.

 

     2.5 NONASSIGNABILITY OF ASSETS. Notwithstanding anything to the contrary

contained in this Agreement, to the extent that the sale, assignment or delivery

to Kos of any asset that would be a Purchased Asset or any claim or right

arising thereunder is prohibited by any applicable Law or would require any

governmental or Third Party authorizations, consents or waivers, and such

authorizations, consents or waivers shall not have been obtained prior to the

Closing, the Closing shall proceed without the sale, assignment or delivery of

such asset (and the failure to obtain such authorization, consent or waiver and

the failure to sell, assign or deliver such assets shall not constitute a breach

of this Agreement by BLS), and this Agreement shall not constitute a sale,

assignment, or delivery of such asset or an attempt thereof. Following the

Closing, the parties shall use commercially reasonable efforts (other than the

payment of monies), at BLS's sole cost and expense, and shall cooperate with

each other, to obtain promptly such authorizations, consents or waivers. Pending

such authorization, consent or waiver, the Parties shall cooperate with each

other in any mutually agreeable, reasonable and lawful arrangements designed to

provide to Kos the benefits of use of such asset and to BLS the benefits,

including any indemnities, that they would have obtained had the asset been

conveyed to Kos at the Closing without liability to BLS.

 

     2.6 REGULATORY MATTERS WITH RESPECT TO THE TRANSFERRED PRODUCTS.

 

          2.6.1 FILINGS WITH REGULATORY AUTHORITIES REGARDING TRANSFER OF

REGISTRATIONS IN THE TERRITORY. BLS and Kos will establish a mutually acceptable

and prompt communication and interaction process to ensure the orderly transfer

of the Transferred Product Registrations in the Territory. Promptly after

Closing, the Parties shall file with the FDA, such information as may be

required in order to transfer the Transferred Product Registrations from BLS to

Kos. BLS shall file the information required of a former owner, and Kos shall

file the information required of a new owner, at each Party's own expense. Both

Kos and BLS also agree to use commercially reasonable efforts to take any

actions required by the Regulatory Authorities or other government/health

agencies to effect the transfer of the Transferred Product Registrations from

BLS to Kos, and hereby further agree to cooperate with each other in order to

effectuate the foregoing transfer of Transferred Product Registrations at Kos's

expense. The Parties agree to use commercially reasonable efforts to complete

the filing of the transfer of the Transferred Product Registrations in the

Territory within thirty (30) days from the Closing Date. BLS may retain an

archival copy of the Transferred Product Registrations, including supplements

and records that are required to be kept under 21 C.F.R. Section 314.81.

 

          2.6.2 RESPONSIBILITY FOR THE TRANSFERRED PRODUCT. From and after the

Closing Date, Kos shall assume all regulatory responsibilities permitted or

required by applicable Laws, in connection with the Transferred Product and the

Transferred Product Registrations in the Territory, including (i) responding to

all medical inquiries, (ii) responsibility for reporting any adverse drug events

in connection with the Transferred Products, and (iii) responsibility for

compliance with the Prescription Drug Marketing Act of 1987, as the same may be

amended from time to time. After the Closing Date, Kos shall assume all

responsibility for any and all fee

 

 

                                      -14-

<PAGE>

obligations for holders or owners of approved NDAs and Regulatory Approvals

relating to the Transferred Products, including those defined under the

Prescription Drug User Fee Act of 1992, as the same may be amended from time to

time.

 

          2.6.3 MARKETING ACTIVITIES. Promptly following the Closing, BLS and

Kos shall mutually agree on the form of correspondence to be sent to each

customer and supplier of the Transferred Products, and any other relevant Third

Party mutually agreed to by BLS and Kos, informing each such party of the sale

and transfer of the Transferred Products to Kos.

 

          2.6.4 AFFILIATES. Kos hereby agrees and acknowledges that all or some

of the rights and obligations of BLS under this Section 2.6 may be held and

fulfilled by its Affiliate.

 

     2.7 CHARGEBACKS, REBATES AND RETURNS.

 

          2.7.1 MANAGED MARKET ACTIVITIES. As soon as is reasonably practicable

following the Closing Date and to the extent permitted by applicable Law, Kos

shall become responsible for managing the marketing and promotion of the

Transferred Products across all managed market and government segments in the

Territory, and with respect thereto, shall have exclusive responsibility for:

(i) contracting execution, (ii) government reporting, rebate and chargeback

processing and payment, federal supply schedule calculations and pricing

schedules, (iii) contract compliance, monitoring and audits, and (iv) contract

administration and claims processing (collectively, the "MANAGED MARKET

ACTIVITIES"). Without limiting the generality of the foregoing, with respect to

Rebates under Medicaid and federal supply service contracts, Kos shall assume as

soon as is reasonably practicable following the Closing Date responsibility

therefor after the Closing Date under its own Medicaid and federal supply

service contracts. In furtherance of its obligations to become responsible as

soon as is reasonably practicable following the Closing Date with respect to

Managed Market Activities and all reporting obligations thereunder, Kos has

obtained as of the Closing Date, its own NDC numbers for each of the Transferred

Products and shall use commercially reasonable efforts to have in place as soon

as reasonably practicable all resources such that sales can be accomplished

under the NDC numbers of Kos. Kos shall have the right to utilize the existing

BLS (or its applicable Affiliate's) packaging and NDC number on all invoices,

orders and other communications with customers and Governmental Authorities

until the later of such time as (A) new inventory of packaged Transferred

Product is available with Kos packaging and NDC numbers and (B) Kos has

exhausted any remaining portion of the Transferred Product Inventory that is in

BLS (or its applicable Affiliate) packaging and contains BLS (or its applicable

Affiliate's) NDC numbers, but in no event more than six (6) months after the

Closing Date. Thereafter, Kos shall use its new NDC numbers on all invoices,

orders and other communications with customers and Governmental Authorities. As

used herein, the term "NDC" means the "National Drug Code", which is the eleven

digit code registered by a company with the FDA with respect to a Transferred

Product.

 

          2.7.2 AVERAGE MANUFACTURER PRICE AND BEST PRICE. From and after the

Closing Date, Kos shall be responsible for calculating for the Transferred

Products in the Territory (i) the "Best Price" (or "BP") (as defined under the

Social Security Act, 42 U.S.C. Section 1396r-8(c)(1)(C), and (ii) the "Average

Manufacturer Price" (or "AMP") (as defined under the Social Security Act, 42

U.S.C. Section 1396r-8(k)(1). To the extent not otherwise

 

 

                                      -15-

<PAGE>

prohibited by applicable confidentiality restrictions, for so long as the

Transferred Products are sold under BLS's (or its applicable Affiliate's) NDC

numbers, Kos shall submit to BLS the AMP and BP values and a written summary

describing Kos's methodology for calculating such values, in each case by the

twenty-fifth (25th) day of the month following the end of each calendar month

during the Term; provided, however that Kos agrees to use commercially

reasonable efforts to obtain permission from Third Parties to share such

information with BLS (and its Affiliates). Following receipt of such values, BLS

shall submit (or shall cause its Affiliate to submit) such values to the Center

for Medicaid and Medicare Services in compliance with all applicable Laws. To

the extent not otherwise prohibited by applicable confidentiality restrictions

or by applicable Law, within thirty (30) days of the Closing Date, BLS (or its

applicable Affiliate) shall provide Kos with the baseline information and AMP

and any such similar information needed by Kos to establish its rebate and

chargeback systems. BLS (or its applicable Affiliate) agrees to use commercially

reasonable efforts (or cause its Affiliate to use commercially reasonable

efforts) to obtain permission from Third Parties to share such information with

Kos.

 

          2.7.3 CHARGEBACKS. For so long as a given Transferred Product is sold

under BLS's (or its applicable Affiliate's) NDC numbers, BLS (or its applicable

Affiliate) shall continue to be responsible for the processing, payment,

administration and support of all chargebacks under any government or managed

market contract ("CHARGEBACKS"), regardless of when the claim for such

Chargeback is made; provided, however that Kos shall reimburse BLS for all such

amounts relating to Chargebacks for Transferred Product sold after the Closing

Date on a monthly basis within thirty (30) days after receipt of an invoice from

BLS (or its applicable Affiliate) therefor and BLS (or its applicable Affiliate)

shall remain solely responsible for all such amounts relating to Chargebacks for

Transferred Product sold prior to the Closing Date. Notwithstanding the

foregoing, to the extent that a Third Party incorrectly reports a Chargeback

using the wrong NDC number, the Parties will discuss any equitable adjustment to

account for such incorrect reports.

 

          2.7.4 REBATES. For so long as a given Transferred Product is sold

under BLS's (or its applicable Affiliate's) NDC numbers, BLS (or its applicable

Affiliate) shall continue to be responsible for the processing, payment,

administration and support of (i) all quarterly Medicaid rebates with respect to

such Transferred Product in the Territory submitted by state governments to be

paid by manufacturers in accordance with Section 1927(c)(1), (2) and (3) of the

Social Security Act, (ii) supplemental rebates in accordance with supplemental

rebate agreements with state governments for such Transferred Product in the

Territory (but only until the time such supplemental rebate agreements for such

Transferred Product expire or are terminated by Kos), (iii) rebates submitted

with respect to such Transferred Product in the Territory for participating in

State Pharmacy Assistance Programs and (iv) rebates submitted pursuant to

managed market contracts, including, Pharmacy Benefit Managers and Health

Maintenance Organizations (collectively, "REBATES"), in each case, solely for

the Transferred Product labeled with BLS's (or its applicable Affiliate's) NDC

number, regardless of when the claim for such Rebate is made; provided, however

that Kos shall reimburse BLS for all such Rebates relating to the Transferred

Products sold after the Closing Date on a quarterly basis within thirty (30)

days after receipt of an invoice from BLS (or its applicable Affiliate) therefor

and BLS (or its applicable Affiliate) shall remain solely responsible for all

such Rebates relating to the Transferred Products sold prior to the Closing

Date. Notwithstanding the foregoing, to the extent that a Third Party

 

 

                                      -16-

<PAGE>

incorrectly reports a Rebate using the wrong NDC number, the Parties will

discuss any equitable adjustment to account for such incorrect reports.

 

          2.7.5 OTHER DISCOUNTS. Notwithstanding the provisions of Section 2.7.3

or 2.7.4, Kos will be solely responsible for all discounts, receivables and

trade terms with respect to sales of the Transferred Products following the

Closing Date, and BLS (or its applicable Affiliate) shall be solely responsible

for all discounts, receivables and trade terms with respect to sales of the

Transferred Product prior to the Closing Date. Kos shall ensure that all

information provided with respect to any sales of the Transferred Product with

the NDC number of BLS (or its applicable Affiliate) shall be in compliance with

applicable Laws.

 

          2.7.6 RETURNS. Kos shall be responsible for handling and processing

all returns of Transferred Product in the Territory from and after the Closing

Date. Notwithstanding the foregoing, (i) BLS (or its applicable Affiliate) shall

continue to be solely responsible for the financial obligations relating to

returns of Transferred Products (in accordance with BLS's, or its applicable

Affiliate's returned goods policies) sold in the Territory prior to the Closing

Date (based on lot numbers), (ii) Kos shall be solely responsible for the

financial obligations relating to returns of Transferred Product sold in the

Territory from and after the Closing Date (based on lot numbers) and (iii) to

the extent that Transferred Products bearing the same lot number were sold by

BLS (or its Affiliate) prior to Closing Date and sold by Kos (or available for

sale by Kos) from and after the Closing Date (each, a "SHARED LOT"), the Parties

shall share all financial responsibility for such Shared Lot returns based on

the percentage of such Shared Lot sold by BLS (or its Affiliate) prior to the

Closing Date and the percentage of the Shared Lot sold by Kos (or available for

sale by Kos) from and after the Closing Date.

 

     2.8 OTHER RIGHTS. Except as expressly provided in this Agreement, neither

Party grants to the other Party any right in any intellectual property right,

whether by implication, estoppel or otherwise. Any rights of either Party not

expressly granted to the other Party under the provisions of this Agreement

shall be retained by such Party. In addition, BLS shall retain all rights

necessary for BLS to fulfill its obligations hereunder.

 

     2.9 ACCESS TO INFORMATION. After the Closing, each Party agrees to

cooperate with the other Party (the "REQUESTING PARTY") and to grant to the

Requesting Party and its employees (and to cause such access to be available to

the employees of its Affiliates), attorneys, accountants, officers,

representatives, and agents, during normal business hours and upon at least two

(2) Business Days' advance written notice, reasonable access to such Party's

management personnel and to the records relating to the Transferred Product

(including the Transferred Product Registrations) and to permit copying at the

Requesting Party's expense or, where reasonably necessary, to documents relating

to the Purchased Assets during the period the Purchased Assets were owned by

such Party for the sole purposes of (i) any financial reporting or tax matters

(including any financial and tax audits, tax contests, tax examination,

preparation of any tax returns or financial records for the Requesting Party or

its Affiliates) relating to the Transferred Product; (ii) any claims or

litigation involving the Requesting Party and the Purchased Assets relating to

the Transferred Product; or (iii) any investigation of the Requesting Party

being conducted by any federal, state, or local governmental authority relating

to the Transferred Product. Each Party shall maintain, for the extent required

by applicable law, but in any event for not less than six (6) years, all such

records and documents in the Territory and shall

 

 

                                      -17-

<PAGE>

not destroy or dispose of any such records and documents prior to the end of

such required or six (6) year period, without the prior written consent of the

other Party.

 

                                    ARTICLE 3

          PHASE IV CLINICAL TRIALS AND DEVELOPMENT OF VASOCARD PRODUCT

 

     3.1 GRANT OF PHASE IV RIGHTS WITH RESPECT TO THE MARKETED PRODUCT. Upon the

terms and subject to the conditions of this Agreement and effective as of the

Closing Date, BLS hereby grants to Kos, during the Term, a royalty-free license

to refer to the NDA for the Marketed Product for the limited purpose of enabling

Kos to conduct Phase IV Clinical Trials for the Marketed Product in the

Territory. For purposes of clarity, the foregoing grant shall not give Kos any

other rights with respect to the commercialization, sale or use of the Marketed

Product in the Territory. Kos shall have the sole discretion to determine all

such Phase IV Clinical Trials to be conducted by Kos, provided however, that Kos

shall, prior to conducting such Phase IV Clinical Trials, provide a detailed

protocol for such Phase IV Clinical Trial to BLS for BLS's review and shall

consider BLS's comments thereto in good faith. BLS shall provide its comments to

Kos promptly after receipt of Kos's detailed protocol and Kos shall not finalize

such protocol until receipt of BLS's comments and due consideration thereof

pursuant to the terms of this Section 3.1. Kos shall solely own all data and

other information arising out of any such Phase IV Clinical Trial; provided,

however that Kos shall grant, and hereby does grant to BLS, an exclusive,

worldwide, irrevocable, fully-paid, royalty-free, sublicensable, right and

license in and to such data and other information in each case, for use by BLS

(and its Affiliates) from and after the end of the Term (with respect to the

Marketed Product), which license shall survive the expiration or termination of

this Agreement. Kos shall conduct and complete each such Phase IV Clinical Trial

in accordance with all applicable Laws (including, without limitation all cGCPs,

cGLPs and cGMPs) and all Regulatory Approvals for the Marketed Product in the

Territory. BLS hereby agrees to use commercially reasonable efforts to supply,

or cause its Affiliates or Third Parties to supply, to Kos all bulk finished

Marketed Product and bulk placebos (but not comparator drugs or other materials)

to conduct any such Phase IV Clinical Trials at BLS or its Affiliates' actual

cost of manufacture (or purchase price, as applicable), as determined by BLS or

its Affiliates' accounting policies and procedures, consistently applied in

conformity with GAAP. The costs of any such Phase IV Clinical Trial shall be

borne by solely by Kos. Kos shall not conduct any Phase IV Clinical Trial with

respect to the Marketed Product except in accordance with the terms of this

Agreement. If Kos engages a Third Party to perform any Phase IV Clinical Trials

for Marketed Product in the Territory, such Third Party will be directed and

controlled by Kos and Kos shall remain liable for all activities of such Third

Party and all obligations of Kos hereunder. Any such Third Parties shall be

subject to confidentiality and non-use obligations at least as stringent as

those set forth in Article 8.

 

     3.2 DEVELOPMENT OF VASOCARD PRODUCT. On the terms and subject to the

conditions of this Agreement, BLS shall use Diligent Efforts to pursue the

Development of the Vasocard Product for sale in the Territory. The Parties

further agree and acknowledge that all Development Expenses in connection with

the Development of the Vasocard Product shall be borne initially by BLS,

subject, however, to the payment of the Milestones by Kos pursuant to Section

5.8. Notwithstanding anything to the contrary contained herein, BLS shall have

the right to assign or subcontract any or all of its Development obligations

hereunder to an Affiliate. BLS shall provide Kos quarterly updates with respect

to the status of the Development of the

 

 

                                       -18-

<PAGE>

Vasocard Product by BLS hereunder describing in reasonable detail the status of

the Development of the Vasocard Product, including without limitation the then

current status of completed Development, Development accomplished during the

preceding calendar quarter, known problems and the anticipated effect on the

Development of the Vasocard Product, current and planned staffing, and any other

information pertaining to the Development of the Vasocard Product reasonably

requested by Kos, in each case to the extent not otherwise prohibited by

applicable confidentiality restrictions or applicable Law (provided, however,

that BLS shall use commercially reasonable efforts to obtain permission from

Third Parties to share such information with Kos). BLS shall promptly inform Kos

of all material interaction, correspondence or meetings with the FDA or other

Regulatory Authority relating to the Vasocard Product. BLS shall solicit Kos's

input and recommendations with respect to the labeling of the Vasocard Product

for sale in the Territory and shall consider such input and recommendations in

good faith.

 

     3.3 SUPPLY AND DISTRIBUTION AGREEMENT FOR THE VASOCARD PRODUCT IN THE

TERRITORY. Prior to payment of the First Milestone Payment, the Parties (or

their Affiliates) shall negotiate and enter into an agreement for the

Distribution and supply of the Vasocard Product in the Territory with the supply

term economics set forth on Schedule 3.3 hereto and such other terms and

conditions mutually agreed upon by the Parties (or their Affiliates), pursuant

to which Kos shall be responsible for the Distribution (including, without

limitation, any and all Pre-Marketing activities) of the Vasocard Product in the

Territory.

 

     3.4 LIMITATIONS ON OUTSIDE DEVELOPMENT. Notwithstanding anything to the

contrary contained herein, neither Party shall undertake or pursue any

Development of the Vasocard Product for sale in the Territory except in

accordance with the terms of this Agreement.

 

     3.5 USE OF THIRD PARTIES. BLS may retain Third Parties to perform its

Development activities hereunder; provided, however that BLS shall remain liable

for the performance of its obligations hereunder which it assigns or

subcontracts to such Third Parties. Any Third Parties performing Development

activities hereunder shall be subject to confidentiality and non-use obligations

at least as stringent as those set forth in Article 8.

 

     3.6 DRUG APPROVAL APPLICATIONS AND REGULATORY APPROVALS FOR THE VASOCARD

PRODUCT. All existing Drug Approval Applications and INDs for the Vasocard

Product in the Territory shall be owned by and held in the name of BLS (or its

Affiliate) as sponsor of record. All future Drug Approval Applications and INDs

for the Vasocard Product in the Territory shall be filed in the name of and

owned by BLS (or its Affiliate). During the Term, BLS shall seek, at its

expense, consistent with applicable Laws, all necessary Regulatory Approvals for

the Vasocard Product, including, without limitation, INDs, drug master file and

NDA, as applicable.

 

     3.7 ASSISTANCE. Subject to the terms of this Article 3, each Party agrees

to provide the other with all reasonable assistance and take all actions

reasonably requested by the other Party that are necessary or desirable to

enable the other Party to comply with any Law applicable to the Development of

the Vasocard Product hereunder, including, but not limited to, meeting,

reporting and other obligations to maintain and update any Regulatory Approvals

therefor.

 

 

                                       -19-

<PAGE>

     3.8 COMPLIANCE WITH LAWS. Each Party or its permitted Third Party

contractors shall perform its responsibilities under this Article 3 in

accordance with all applicable Laws, including without limitation cGLPs, cGCPs

and cGMPs.

 

     3.9 RIGHT OF NOTICE. In the event that during the Term (with respect to the

Marketed Product), BLS (or its Affiliate) proposes to grant rights to a Third

Party to sell and distribute the pharmaceutical products set forth on Schedule

3.9 for the treatment of cardiovascular diseases in the Territory (a "PROPOSED

TRANSACTION"), then BLS (or its applicable Affiliate) shall provide Kos written

notice thereof (the "PROPOSED TRANSACTION NOTICE") prior to consummation of such

Proposed Transaction and thereafter BLS and Kos shall, for a period of thirty

(30) days, discuss terms for such Proposed Transaction (the "KOS PROPOSAL"). In

the event the Parties agree on the Kos Proposal within such thirty (30) day

period, the Parties shall have an additional thirty (30) days to enter into

definitive agreements with respect thereto. Notwithstanding anything to the

contrary contained herein, in the event the Parties do not agree on the Kos

Proposal or are not able to enter into definitive agreements within such

subsequent thirty (30) day period, (i) BLS (or its applicable Affiliate) shall

be entitled to consummate any such Proposed Transaction with any Third Party, in

any form, without any liability or other obligation to Kos and (ii) Kos shall

have no other rights with respect to the Proposed Transaction other than merely

making the Kos Proposal to BLS (or its applicable Affiliate).

 

                                   ARTICLE 4

                        DISTRIBUTION OF MARKETED PRODUCT

 

     4.1 PRINCIPLES OF DISTRIBUTION. Upon the terms and subject to the

conditions of this Agreement, and effective as of the Closing Date, BLS hereby

appoints Kos, during the Term of this Agreement, as BLS's exclusive distributor,

including to the exclusion of BLS and its Affiliates, of the Marketed Product in

the Territory, and in connection therewith, grants to Kos the exclusive right to

Distribute the Marketed Product for sale in the Territory (provided, however,

that Kos acknowledges that it does not have the right to Distribute the Product

outside the Territory). Kos shall be solely responsible for, at its sole cost

and expense, the Distribution of the Marketed Product in the Territory. Kos

shall be the Party responsible for the booking of sales of Marketed Product in

the Territory. Kos shall not promote, market or otherwise Distribute the

Marketed Product for any use outside the Territory. Kos shall use Diligent

Efforts to Distribute the Marketed Product in the Territory. BLS hereby grants

to Kos the right to use the Biovail Trademarks and Biovail Trade Dress to

Distribute the Marketed Product for sale in the Territory upon the terms and

subject to the conditions of this Agreement (and Kos shall be entitled to grant

such rights to use the Biovail Trademarks and Biovail Trade Dress to an

Authorized Supplier). Kos undertakes that, following expiration or termination

of this Agreement, it will refrain from all further use of the Biovail

Trademarks and Biovail Trade Dress and that it will not use any marks or dress

which are confusingly similar to the Biovail Trademarks or Biovail Trade Dress;

provided however, that for a period of up to six (6) months following expiration

of the Term (with respect to the Marketed Product), Kos shall be entitled to

continue to use the Biovail Trademarks and Biovail Trade Dress in connection

with the sale of any Marketed Product in Kos' inventory (or being held for

delivery to Kos). For purposes of clarity, the foregoing appointment shall not

give Kos any rights with respect to (i) the development of the Marketed Product

or (ii) except as set forth in this Agreement, regulatory matters in connection

with the Marketed Product. Kos hereby agrees that it shall only order

 

 

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Marketed Product for Distribution in the Territory from a supplier reasonably

approved by BLS and reasonably acceptable to Kos (an "AUTHORIZED SUPPLIER"). BLS

and Kos acknowledge that BLS has designated Biovail Pharmaceuticals, Inc. as an

Authorized Supplier as of the Closing Date. On, or as promptly as reasonably

practicable after, the Closing Date, BLS (or its applicable Affiliate) shall

notify the FDA, which notification shall be substantially in the form attached

hereto as Schedule 4.1, that with respect to the Marketed Product in the

Territory, Kos shall have full responsibility for, and thereafter during the

Term (with respect to the Marketed Product), Kos shall be responsible for,

certain regulatory activities with respect to the Marketed Product.

 

     4.2 TERMS AND CONDITIONS OF SALE. Subject to the diligence obligations set

forth in Section 4.1, Kos shall have the right to determine the distribution and

selling strategies with respect to the Marketed Product in the Territory,

including the price and other terms and conditions under which the Marketed

Product will be sold to Third Parties in the Territory (including price

variations among customers); provided that Kos shall not rename or re-brand the

Marketed Product. Within twelve (12) days after the end of each calendar month

during the Term (with respect to the Marketed Product), Kos shall submit to BLS

a report providing in reasonable detail, the gross sales and net sales

information for all sales of the Marketed Product during such month.

 

     4.3 DISTRIBUTION DATA. Kos shall own all marketing, sales, distribution and

other commercialization data and other marketing, sales, distribution and

commercialization information resulting from the Distribution of the Marketed

Product in the Territory following the Closing Date (the "DISTRIBUTION DATA").

For purposes of clarity, nothing contained in this Agreement grants Kos the

right to conduct any clinical studies, except with respect to any Phase IV

Clinical Trials as set forth in Section 3.1, with respect to the Marketed

Product.

 

      4.4 USE OF THIRD PARTIES. Kos covenants and agrees not to use any Third

Party to perform its Distribution activities for the Marketed Product in the

Territory without the prior written approval of BLS, such approval not to be

unreasonably withheld, and it being agreed that Kos may engage DDN to provide

warehousing and distribution services without the consent of BLS. If Kos engages

a Third Party sales force, such Third Party sales force will be directed,

trained and controlled by Kos and Kos shall remain liable for all activities of

such Third Party and all obligations of Kos hereunder.

 

     4.5 RESTRICTIONS ON COMPETITION.

 

          4.5.1 During the Term (with respect to the Marketed Product) and

without the prior written consent of BLS in its sole discretion, for so long as

there has been no Generic Entry with respect to the Marketed Product, neither

Kos nor its Affiliates shall, directly or indirectly, either alone or through

any Third Parties, distribute, market or sell in any part of the Territory, any

pharmaceutical product that is a calcium channel blocker for hypertension and/or

angina having an approved indication the same as or similar to the Marketed

Product, except for the Marketed Product pursuant to the terms of this

Agreement. During the Term (with respect to the Marketed Product) and without

the prior written consent of BLS in its sole discretion, for so long as there

has been no Generic Entry with respect to the Marketed Product (and for a period

of **** thereafter), neither Kos nor its Affiliates shall, directly or

indirectly, either alone or through

 

 

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<PAGE>

any Third Parties, distribute, market or sell in any part of the Territory, any

pharmaceutical product containing diltiazem having an approved indication the

same as or similar to the Marketed Product, except for the Marketed Product

pursuant to the terms of this Agreement.

 

          4.5.2 During the Term (with respect to the Marketed Product) and

without the prior written consent of Kos in its sole discretion, for so long as

there has been no Generic Entry with respect to the Marketed Product (and for a

period of **** thereafter), neither BLS nor its Affiliates shall, directly or

indirectly, either alone or through any Third Parties, distribute, market or

sell in any part of the Territory any prescription, over-the-counter or other

form of product that is a modification of or improvement to, or new dosage

strength of or new indication for, the Marketed Product, except that an

Affiliate of BLS may be Kos's Authorized Supplier.

 

     4.6 AUTHORIZED GENERIC. At the request of a Party from time to time during

the Term (with respect to the Marketed Product), the Parties shall meet to

discuss the possibility of partnering with a Third Party for the purpose of

Distributing an Authorized Generic for sale in the Territory and agree on a plan

of execution with respect to such Authorized Generic. Thereafter, in the event

Kos desires to so Distribute an Authorized Generic, Kos shall notify BLS in

writing of its request to Distribute an Authorized Generic in the Territory,

which request shall include a forecast of Kos's demand for the Authorized

Generic for the first eighteen (18) months from launch. BLS may, (i) from and

after the Effective Date through ****, in BLS's sole discretion and (ii) after

**** to the end of the Term (with respect to the Marketed Product), in BLS's

reasonable discretion (which discretion shall not take into account the supply

price financial terms), within thirty (30) Business Days of Kos's written

request, notify Kos whether it agrees to grant rights to Kos to Distribute an

Authorized Generic on the terms of this Agreement, mutatis, mutandis and

thereafter (x) such Authorized Generic shall be included as a "Marketed Product"

under this Agreement and (y) Kos hereby agrees that it shall only order

Authorized Generic for Distribution in the Territory from BLS or on behalf of

BLS from an Authorized Supplier.

 

     4.7 PROMOTIONAL MATERIALS. Kos shall own all right, title and interest in

and to any promotional materials created by Kos relating to the Marketed

Product, but excluding trademarks owned or used by BLS or its Affiliates in

accordance with the terms of this Agreement. Any such promotional materials, and

any aspects of those uniquely tied to the Marketed Product, shall be used

exclusively in connection with the Marketed Product in accordance with the terms

of this Agreement. BLS hereby grants to Kos the right to use the Corporate

Trademark in connection with the promotional materials transferred to Kos on the

Closing Date for sale of the Marketed Product in the Territory upon the terms

and subject to the conditions of this Agreement; provided, however that such

grant shall end on the earlier of (i) **** anniversary of the Closing Date and

(ii) the date when Kos has exhausted all of the promotional materials

transferred to Kos on the Closing Date and all of the Marketed Product inventory

transferred to Kos on the Closing Date.

 

     4.8 COMPLIANCE PROGRAM. Kos shall establish and maintain a compliance

program conforming in all material respects to the "Compliance Program Guidance

for Pharmaceutical Manufacturers" promulgated by the Office of Inspector

General, United States Department of Health and Human Services and other

applicable Law.

 

 

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