MANUFACTURING AND DISTRIBUTION LICENSE AGREEMENT

 

 

MANUFACTURING AND DISTRIBUTION LICENSE AGREEMENT

 

THIS AGREEMENT, effective this 1st day of  September, 2003,

 

 

BETWEEN:

 

ALPHARX INC., a corporation incorporated under the laws of the State of Delaware, United States of America, and having its principal place of business at 10-75 East Beaver Creek, Richmond Hill, Ontario, Canada L4B 1B8

(“Licensor”)

and

 

INDUSTRIA FARMACEUTICA ANDROMACO, S.A.DE C.V., a corporation incorporated under the laws of Mexico, and having its principal office at Andromaco No. 104 Col. Amp Granada, Mexico  11520, D.F.

(“Licensee”)

 

WHEREAS:

 

A.

AlphaRx is an emerging specialty pharmaceutical company that develops, formulates and commercializes innovative therapeutic products using proprietary drug delivery technologies, and in particular is focused on the discovery, development and marketing of products in neurology, oncology and pain management;

B.

AlphaRx owns and/or has rights to the Intellectual Property Rights (as defined herein) relating to a pharmaceutical agent for pain control and inflammation treatment;

C.

IFA is a pharmaceutical company which specializes in the manufacturing, distribution and commercialization of pharmaceutical compounds in the Territory (as defined herein); and

D.

IFA desires to obtain certain manufacturing and distribution rights to the pharmaceutical agent for pain control and inflammation treatment (the “Product” as defined herein) in the Territory, and AlphaRx desires to grant such manufacturing and distribution rights to IFA, upon the terms and conditions set forth herein.

 

NOW THEREFORE , in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

INDUSTRIA FARMACEUTICA ANDROMACO	Page 2 of 34
License Agreement

 

1

RECITALS

 

1.1

The Parties hereby acknowledge and declare that the foregoing recitals are true and accurate in substance and fact.

 

2

DEFINITIONS

 

Wherever used in this Agreement, the following words and terms shall have the respective meanings ascribed to them as follows:

 

2.1

“Accounting Period” means a three month period commencing on the first day of the month and ending on the last day of the month, with each successive Accounting Period to commence on the first business day following the close of the preceding Accounting Period.  The Accounting Period will end on the last day of each March, June, September and December during the term of this Agreement and any subsequent renewals. The first accounting period under this Agreement will be for a period commencing on the Effective Date of this Agreement and concluding on June 30, 2003.

 

2.2

“Affiliate(s)” means with respect to any corporation, any other corporation which directly or indirectly controls or is controlled by or is under direct or indirect common control with such first mentioned corporation or any corporation which is directly or indirectly controlled by a corporation which controls the first mentioned corporation;

 

2.3

“Agreement” means this Intellectual Property Rights License Agreement, and includes authorized amendments and Schedules;

 

2.4

“Applicable Laws” means all laws, statutes, codes, ordinances, decrees, rules, regulations, by-laws, any law, statute, code, ordinance, decree, rule, regulation, by-law, statutory rules, principles rule, principle of law, published policies policy and guidelines guideline, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards judgment, order, decision, or ruling, including general principles of common and civil law, and terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity, statutory body or self-regulatory authority;

2.5

“Confidential Information” means any and all information, in whatever, form, that is not generally available to third parties or the public including, without limiting the generality of the foregoing, all research, data, specifications, plans, drawings, prototypes, models, documents, recordings, instructions, manuals, papers, business practices and strategies, business plans, know-how, inventions, techniques, processes, methods of doing business, software, personnel data, contracts, purchase requirements, business plans, forecasts and market strategies, plans production processes, product specifications and formulas, methods, technical and product bulletins, data on equipment sold and serviced, surveys, and research and development programs, or other materials, of any nature or embodiment whatsoever, whether written or otherwise, relating to same, as well as the existence of this Agreement and its terms and conditions.  Confidential Information does not include any information which is publicly available at the time of disclosure or subsequently becomes publicly available through no fault of the recipient party, or is rightfully acquired by the recipient party from a third party who is not in breach of an agreement to keep such information confidential;

(28 May 2003)

 

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2.6

Control means with respect to any corporation, the ownership of shares of the corporation to which are attached more than fifty per cent of the votes that may be cast to elect directors of the corporation and the votes attached to those securities are sufficient, if exercised, to elect a majority of directors of the body corporate;

 

2.7

“Contraindication” means any reaction to the Products by a person that is not a side effect as specified by the Licensor;

 

2.8

“Distribution Rights” means the right to use, store, package, sell, offer for sale, market, advertise, promote or otherwise commercially exploit the Products;

 

2.9

“Effective Date” shall mean the date first written above;

 

2.10

“Field” means the use of the Products in neurology, oncology and pain management and inflammation treatment;

 

2.11

“GAAP” means Generally Accepted Accounting Principles in the Territory;

 

2.12

“Governmental Entity” means any (a) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, administrative or regulatory board, agency or body, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign, (b) any subdivision, agent, commission, board, or authority of or any of the foregoing, or (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing;

 

2.13

“Gross Revenue” means the aggregate of all sales and other income from whatever source derived by the Licensee in relation to Products whether or not collected by the Licensee, including without limitation all proceeds from business interruption insurance but excluding all refunds and discounts made in good faith for Products that are flawed.  The date of sale for the purposes of this agreement shall be the date on which the revenue is recorded in accordance with GAAP in the Territory;

 

2.14

 “Intellectual Property Rights” means all rights, including common law and equitable rights and all rights of priority in all patents and designs, inventions, trade-marks, service-marks, copyrights, industrial designs, trade names, logos, graphics, commercial symbols, Confidential Information, Trade Secrets, and other intellectual property rights, including but not limited to, any pending applications and rights to file applications for any of the aforementioned, whether registered or not, that are owned by or licensed to Licensor, including all pending applications and rights to file applications, and any improvements and discoveries in relation to formulations for topical delivery of pharmaceutically active ingredients designed for pain control and inflammation treatment;those applications and registrations listed in Schedule A – Applications and Registrations for Intellectual Property attached hereto ;

(28 May 2003)

 

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2.15

“Manufacturing Rights” means the right to manufacture and produce the Products and its components;

 

2.16

“Minimum Annual Royalty” has the meaning given to such term in Article  hereof;

 

2.17

“Products” means any and all authorized products manufactured, purchased, marketed, sold or otherwise used in association with the Intellectual Property Rights;

 

2.18

“Regulatory Approvals” means any and all approvals, consents or licenses from the Mexican Ministry of or any other Governmental Entity necessary to warehouse, store, package, sell, offer for sale, market, advertise, promote, and otherwise commercially exploit the Products in the Territory;

 

2.19

“Regulatory Documents” means, with respect to the Products, all regulatory documents, materials or other information required for: (i) a new drug application; (ii) market and reimbursement approvals; (iii) product labels and (iv) product inserts;

2.20

“Reporting Period” means a monthly period commencing on the first day of the month and ending on the last day of the month, with each successive Reporting Period to commence on the first business day following the close of the preceding Reporting Period;

2.21

“Royalty” has the meaning given to such term in Article  hereof;

2.22

“Schedules” mean schedules annexed and forming part of this Agreement, as amended from time to time and comprise the following:

2.22.1

Schedule “A” – Applications and Registrations for Intellectual Property;

2.22.2

Schedule “B” – Standards of Quality;

2.22.3

Schedule “C” – Minimum Performance Targets;

 

2.23

“Standards of Quality” shall mean the standards specified by the Licensor and communicated to the Licensee from time to time as listed in a Schedule to this Agreement;

 

2.24

“Term” means the Term of this Agreement and any Renewal Terms;

 

2.25

“Territory” means the Republic of Mexico or such other territory as may be agreed upon by the Parties in writing from time to time;

 

2.26

“Trade-marks” means the all common law rights and registrations, pending applications for registrations and rights to file applications for trade-marks, including all rights of priority to trade names, designs, graphics, logos and other commercial symbols whether registered or not by the Licensor and which are used in connection with or in association with the Products identified in a Schedule to this Agreement;

(28 May 2003)

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2.27

“Trade Secrets” shall mean written information, including formulae, patterns, compilations, programs, devices, methods, know-how, techniques, process or business information that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  However, such disclosure shall not be considered “Trade Secrets” for the purposes of this Agreement if and when it:

 

i)

is made subject to an order by judicial or administrative process requiring the recipient to disclose any or all of the Trade Secrets, provided however that the recipient shall promptly notify the provider and allow the provider reasonable time to oppose such process before disclosing any of the Trade Secrets;

ii)

is published or becomes available to the general public other than through a breach of this Agreement;

iii)

is obtained by the recipient from a third party with a valid right to disclose it, provided that said third party is not under a confidentiality obligation to the provider;

iv)

is independently developed by employees, agents or consultants of the recipient who had no knowledge of or access to the provider’s Trade Secrets as evidenced by the recipient’s business records; or

v)

was possessed by the recipient prior to receipt from the provider, other than through prior disclosure by the provider, as evidenced by the recipient's business records;

 

2.28

Transfer means any event pursuant to which rights or obligations of the affected party under this Agreement are or are attempted to be sold, disposed of, assigned, pledged, hypothecated, charged, mortgaged, encumbered, sublicensed or transferred and includes any transfer by operation of law;

 

(28 May 2003)

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3

GRANT AND TERM

 

3.1

Subject to the terms of this Agreement, the Licensor hereby grants to the Licensee exclusive and non-transferable Manufacturing Rights and Distribution Rights for the Products and to use the Intellectual Property Rights in the Territory for the duration of the Term, provided such Products conform to the Standards of Quality defined in the Agreement.

 

3.2

The grant of this license by the Licensor is conditional upon the occurrence of all of the following events:

 

3.2.1

The Licensee shall have filed all Regulatory Documents and obtained all Regulatory Approvals, and any other approvals, consents or licenses required under Applicable Laws, for the commercial exploitation of the Products in the Territory in accordance with this Agreement;

3.2.2

The Licensee shall have notified the Licensor in writing, with evidence satisfactory to the Licensor, in its sole discretion, that the Licensee has met all of the conditions;

3.2.3

The Licensor shall have provided written confirmation to the Licensee that it accepts that the Licensee has fulfilled its obligations set out in this Section .

 

3.3

The Licensee or any Affiliate shall not manufacture, market, sell or otherwise commercially exploit or permit to be commercially exploited the Products, either directly or indirectly outside the Territory granted under this Agreement.

 

3.4

This Agreement shall be for an initial term of Five (5) years commencing on the Effective Date, and it shall automatically be renewed on terms as provided in this Agreement.

 

3.5

This Agreement will be automatically renewed for additional terms of  each unless:

 

3.5.1

The Licensee shall have given to the Licensor at least six (6) months prior written notice of its election not to renew this Agreement;

3.5.2

The Licensor shall have given to the Licensee at least six (6) months prior written notice of its election not to renew this Agreement; or

3.5.3

The Agreement is otherwise terminated pursuant to Article  herein.

 

3.6

The Licensee shall not be entitled to grant sub-licenses to third parties.

 

(28 May 2003)

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4

USE OF THE INTELLECTUAL PROPERTY BY LICENSEE

 

4.1

The Licensee shall take all necessary steps and use its best efforts to diligently, market, promote, sell and commercialize the Products under this Agreement within the Territory.

 

4.2

The Products shall be commercialized in accordance with or exceed the Standards of Quality and specifications listed by the Licensor in the Schedule to this Agreement and applicable laws.

 

4.3

The Licensee understands and agrees that:

 

4.3.1

The Licensor is the exclusive owner of the Intellectual Property Rights and all goodwill associated therewith;

4.3.2

Any unauthorized use of the Intellectual Property Rights is and shall be deemed an infringement of the Licensor’s rights;

4.3.3

Except as expressly provided in this Agreement, the Licensee acquires no right, title or interest in the Intellectual Property Rights;

4.3.4

The Licensee shall use the Intellectual Property Rights only in connection with the authorized Products;

4.3.5

The Licensee shall ensure that all materials bearing the Trade-marks will properly identify the Trade-marks, the Licensor as the owner of the Trade-marks and that the Trade-mark use by Licensee is a licensed use, in the form as provided by Licensor from time to time;

4.3.6

The Licensee shall comply with any and all other marking provisions reasonably designated by Licensor from time to time and as prescribed by applicable laws;

4.3.7

The Licensee shall throughout the Term have, meet the requirements of all Applicable Laws and obtain the permits necessary to perform its obligations under this Agreement.

 

4.4

The Licensee understands and agrees that it shall not:

 

4.4.1

in any manner represent that it has any ownership interest in the Intellectual Property Rights or applications or registration therefore;

4.4.2

sub-license or sub-contract any of the rights or licenses granted to it in itself reverse engineer, or permit its Affiliates or any person to reverse engineer, the Products;

4.4.3

itself use, store, sell, offer for sale, market, advertise, promote or otherwise commercially exploit the Products outside of the Field or Territory, or otherwise permit any Affiliate or Third Party to use, store, sell, offer for sale, market, advertise, promote or otherwise commercially exploit the Product outside of the Field or Territory;

4.4.4

retain any person to exercise any of its rights or obligations under this Agreement without the prior written consent of the Licensor.  Where the Licensor provides its prior written consent to the Licensee to subcontract any of its rights or obligations under this Agreement, the Licensee shall ensure that any permitted subcontractor abides by all of the provisions of this Agreement as they apply to the Licensee, including the obligations relating to confidentiality of information, regulatory approval and reporting of side effects.  Any breach of this Agreement by any subcontractor will be deemed to be a breach by the Licensee. (b) reverse engineer any Supplied Compounds;

(28 May 2003)

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4.4.5

warehouse, store, sell, offer for sale, market, promote or commercially exploit any Products without first satisfying all of the requirements of Section ;

4.4.6

alter the Trade-marks in any manner;

4.4.7

use any other trade-mark or any trade name or product name or any other means of designation or commercial identification in connection with the Products without the express written consent of Licensor;

4.4.8

without the prior written consent of the Licensor, use any word or symbol or combination thereof which is not a trade-mark in close association with the Trade-marks or any other trade-mark or business, trade, corporate, partnership or other name or symbol such that the use would be likely to result in a loss of distinctiveness or goodwill of the Trade-marks;

4.4.9

use or advertise the Trade-marks in association with any products other than the Products or use in any manner any trade mark confusing with or similar to the Trade-marks in association with the Products or in association with any other wares or services;

4.4.10

without the prior written consent of the Licensor, use any of the Trade-marks as a verb or in the plural or in any manner that results in the Trade-marks being incorrectly spelled and/or depicted;  

4.4.11

use the Trade-marks as part of its corporate or other business or trade name and agrees to use, promote and advertise the Products under the Trade-marks without any prefix, suffix or modifying words, terms, designs or symbols, unless authorized in writing by Licensor;

4.4.12

use the Trade-marks in signing any contract, cheque, purchase agreement, negotiable instrument or other legal document, application for any license or permit, or in any manner that may incur liability of Licensor for any debt or obligation of Licensee;

4.4.13

create any derivative product(s) which could likely compete with the Products in the opinion of the Licensor.

 

4.5

The Licensee shall not sell the Products to any person who might in turn sell the Products outside the Territory.  If there are any sales of the Products outside the Territory, the Licensee shall immediately cease such sales and be responsible and accountable any such sales to the Licensor.

 

5

INSPECTION AND QUALITY STANDARDS

 

5.1

The Licensee acknowledges the Licensor’s right to exercise control over the character and quality of the wares and services sold by the Licensee under the Trade-marks.

 

5.2

The Licensee shall at all reasonable times permit the Licensor or its authorized representative, to inspect the premises of the Licensee where the Products are manufactured, stored, performed or sold to determine whether the Licensee is maintaining the Licensor’s Standards of Quality.

(28 May 2003)

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License Agreement

 

5.3

The Licensee shall supply to the Licensor from time to time, upon request, representative current sample products and packaging of all use of the Trade-marks and other Intellectual Property Rights.

 

5.4

The Licensee agrees to submit to the Licensor, if requested by the Licensor for reasonable inspection and testing, samples of every type of the Products and to withdraw from the course of manufacture, trade and from the market any Products or items that do not comply with the Standards of Quality as determined by the Licensor.

 

(28 May 2003)

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6

ROYALTIES AND OTHER PAYMENTS

 

6.1

In consideration of the ongoing rights, licenses and privileges granted under this Agreement and subject to Article 3 , the Licensee shall pay to the Licensor within thirty  (30 days) after the last day of each Accounting Period a royalty of  of the Gross Revenue (the “Royalty”) for such Accounting Period.

 

6.2

The Minimum Annual Royalty payable by the Licensee to the Licensor shall be as stated in Schedule “C” to this Agreement.

 

6.3

The royalty payable within thirty (30 days) after the last day of each Accounting Period by the Licensee to the Licensor under Article  shall be the greater of:

 

6.3.1

the Royalty; or

6.3.2

One quarter (1/4) of the Minimum Annual Royalty.

 

(28 May 2003)

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7

RECORDS AND REPORTS

 

7.1

The Licensee shall keep complete and accurate books and records with respect to the Products and in particular in relation to the purchasing, marketing, selling and commercializing efforts in relation to the Products.  The Licensee shall grant the Licensor and its authorized representative reasonable access during business hours to inspect and audit such portions of such books and records and make copies thereof.  The Licensee shall also permit the Licensor and its representative to inspect its premises and the Products and obtain any necessary samples during business hours.  The Licensee shall keep and preserve the accounts and records referred to in this Agreement for the duration of this Agreement and its renewals and for a period of six (6) years thereafter.  

 

7.2

The Licensee shall keep separate records in sufficient detail to permit the determination of royalties payable hereunder. At the request of the Licensor, the Licensee shall permit independent auditors or technical consultants selected by the Licensor to examine, during ordinary business hours, up to a maximum of four (4) times in each calendar year such records and other documents as may be necessary to verify or determine the Gross Revenue and royalties paid or payable under this Agreement.

 

7.3

The fees and expenses of the Licensor’s representatives performing any examination of records under this Agreement shall be borne by the Licensor.  However, if an error or variance in royalties of more than ten percent (10.0%) of the total royalties due is discovered for any year examined, then the total fees and expenses of these representatives shall be borne by the Licensee.

 

7.4

The Licensee shall submit to the Licensor within Thirty (30) days of each Reporting Period a complete and accurate statement of account detailing the Gross Revenue within that Reporting Period.  All such statements shall include a calculation of the amount due to the Licensor for royalties and be certified as accurate by an officer of the Licensee.

 

7.5

The royalty payable by the Licensee to the Licensor shall be payable in United States dollars within thirty (30 days) after the last day of each Accounting Period to the Financial Institution specified by the Licensor.  The Licensee shall also provide a complete and accurate statement of account detailing the Gross Revenue within that Accounting Period.  All such statements shall include a calculation of the amount due to the Licensor for royalties and be certified as accurate by an officer of the Licensee.

 

7.6

If the Licensee sells the Products to an Affiliate who sells or re-sells the Products to the consumer at a higher price, the Gross Revenue shall be based on the greater of the prices charged between the prices charged to the Affiliate and the process charged by the Affiliate to the ultimate consumer.

 

7.7

The statement of account required for the Reporting Period and the Accounting Period shall include the following information:

 

(28 May 2003)

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7.7.1

the quantity of each item for the Products manufactured and distributed upon which royalty has accrued;

7.7.2

identification of the royalty basis used under Article  for the Products; and

7.7.3

the Gross Revenue, the amount of royalties due for each of the Products type, all information required to show how such amount has been calculated, and the aggregate amount of all royalties due; and

7.7.4

in the event no royalties are due, Company’s report shall so state.

 

7.8

All parties to this Agreement agree to keep Confidential Information provided to each other under the this Agreement confidential and not to disclose it to any person or to use it for any purpose, except as may be necessary in the proper discharge of their obligations under this Agreement.  

 

7.9

The Confidential Information may only be disclosed with the written permission of the party providing the Confidential Information, unless and until such Confidential Information has ceased to be secret or confidential without their fault, or if required by applicable law.

 

7.10

The obligation not to disclose Confidential Information shall continue to be effective after the term of this agreement.

 

7.11

All royalties for the Accounting Period computed on invoiced amounts in currencies other than United States dollars shall be converted directly into United States dollars, without intermediate conversions to another currency, at the Telegraphic Transfer Selling (TTS) rate quoted by either the edition of the Wall Street Journal or the head office of Citibank N.A. of New York, New York at the close of banking on the last business day of such Accounting Period. The Licensee shall bear and pay, for its activities and supplier’s activities, all taxes required by its national government, including any political subdivision thereof, as the result of the existence or operation of this Agreement, except any necessary, appropriate and required national income tax imposed upon royalties or other payments by the national government of the Licensor.  The Licensee may deduct or withhold such national income tax from said royalties or other payments, provided the Licensee furnishes the Licensor with an original tax certificate or other original document evidencing payment of such income tax as may be requested by the Licensor.

 

(28 May 2003)

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8

INTEREST ON OVERDUE ROYALTIES AND OTHER PAYMENTS

 

8.1

The Licensee shall be liable for interest at a rate of two percent (2.0 %) per month (24 per cent annually) compounded annually on any overdue royalty or other payment payable under this Agreement, commencing on th