Exhibit 10.2
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY A TRIPLE ASTERISK
(***). THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION.
EXECUTION COPY
PATENT LICENSE AGREEMENT
          This Patent License Agreement (the “Patent License Agreement”), dated
as of June 9, 2009 (the “Effective Date”), is by and among Purdue Pharma L.P., a
Delaware limited partnership, The P.F. Laboratories, Inc., a New Jersey
corporation, and Purdue Pharmaceuticals L.P., a Delaware limited partnership
(the foregoing are individually and collectively referred to for purposes of
this Patent License Agreement as the “Purdue Companies”), and KV Pharmaceutical
Company, a Delaware corporation (“KV”, and together with its Affiliates referred
to for purposes of this Patent License Agreement as “KVCO”). The Purdue
Companies, on the one hand, and KV, on the other hand, are sometimes referred to
herein individually as a “Party” and collectively as the “Parties”. Capitalized
terms used herein without definition shall have the meanings ascribed to them in
the Settlement Agreement entered into by the Parties on the date hereof (the
“Settlement Agreement”).
WITNESSETH:
          WHEREAS, the Purdue Companies are the owners of United States patent
number 5,508,042 (the “’042 Patent”), relating to and protecting
controlled-release oxycodone products, including the product OxyContin®, a
controlled-release oxycodone product marketed and sold under NDA No. 20-553
(“OxyContin®”); and
          WHEREAS, the Purdue Companies and KV are involved in litigation, Civil
Action No. 07 Civ. 3972, Civil Action No. 07 Civ. 3973 and Civil Action No. 07
Civ. 4810 (SHS) (collectively, the “Action”) in the United Stated District Court
for the Southern District of New York (the “District Court”) (Civil Action Nos.
07 Cir. 3972 and 07 Cir. 3973 were originally pending in the United States
District Court for the District of Delaware as Civil Action Nos. 07-CV-0032-_ _
_ and 07-CV-0077-_ _ _, but were transferred by the Judicial Panel on
Multidistrict Litigation, In re OxyContin Antitrust Litigation, Docket
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

 

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No. 1603, as of May 17, 2007), concerning, inter alia, the validity and
enforceability of the ’042 Patent, as well as the infringement by KV of the ’042
Patent resulting from KV requesting approval (“FDA Approval”) from the United
States Food and Drug Administration (the “FDA”) of certain generic versions of
controlled-release oxycodone products through its submission of Abbreviated New
Drug Application No. 78-506 (collectively with all amendments and supplements
thereto, the “KV ANDA”); and
          WHEREAS, in the Action, certain of the Purdue Companies have asserted
claims against KV and KV has asserted claims and counterclaims against the
Purdue Companies and certain of their Affiliates, including violations of
federal and state antitrust and anticompetition laws, which the Parties now seek
to resolve without further litigation; and
          WHEREAS, the Purdue Companies and KV have entered into the Settlement
Agreement, to resolve the Action and as a result of and pursuant to the
Settlement Agreement, the Purdue Companies desire to grant to KV certain limited
license rights under the ’042 Patent to manufacture, use, offer to sell and sell
generic versions of certain dosage strengths of controlled-release oxycodone
products that are specifically described in the KV ANDA in the United States
(collectively, the “KV Products”).
          NOW THEREFORE, the Parties agree as follows:

          1. License Grant; Royalty.
(a) Subject to the terms and conditions of this Patent License Agreement, the
Purdue Companies hereby grant to KVCO a limited, non-exclusive, royalty-bearing,
non-transferable (except in conjunction with an assignment of this Patent
License Agreement in accordance with Section 11 of this Patent License
Agreement) license (the “License”) of limited duration under the ’042 Patent to
make, have made, use, offer to Sell (as defined below) and Sell, in the United
States, up to an aggregate of *** bottles, subject to the reductions set forth
below (the “Maximum Number of Bottles”), of the generic versions of 10 mg, 15
mg, 20 mg, 30 mg, 40 mg, 60 mg and 80 mg dosage strengths of the KV Products,
allocated among the dosage strengths in the manner set forth in Schedule 1
hereto under “Maximum Total Number of Bottles During
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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License Term.” Each bottle (a “Bottle”) shall contain 100 tablets. In no event
will KVCO be permitted to sell, in the aggregate, tablets containing more than
*** kilograms of Oxycodone API, subject to the reductions set forth below,
pursuant to the License (the “Maximum Kilos”). The term of the License (the
“License Term”) shall commence on the Effective Date (the “License Commencement
Date”) and, unless the License is terminated earlier pursuant to Section 10
hereof, shall terminate upon the earliest to occur of: (i) the date on which
KVCO has Sold *** Bottles, (ii) the date on which KVCO has Sold, in the
aggregate, tablets containing *** kilograms of Oxycodone API and (iii) ***;
provided, however, that (A) if as of ***, KVCO has Sold fewer than *** Bottles
and, in the aggregate, tablets containing less than *** kilograms of Oxycodone
API, the License Term shall be extended to the earliest to occur of (1) the date
on which KVCO has Sold *** Bottles, (2) the date on which KVCO has Sold, in the
aggregate, tablets containing *** kilograms of Oxycodone API and (3) ***; (B) if
as of ***, KVCO has Sold fewer than *** Bottles and, in the aggregate, tablets
containing less than *** kilograms of Oxycodone API, the License Term shall be
extended to the earliest to occur of (1) the date on which KVCO has Sold ***
Bottles, (2) the date on which KVCO has Sold, in the aggregate, tablets
containing *** kilograms of Oxycodone API and (3) and ***; (C) if as of ***,
KVCO has Sold fewer than *** Bottles and, in the aggregate, tablets containing
less than *** kilograms of Oxycodone API, the License Term shall be extended to
the earliest to occur of (1) the date on which KVCO has Sold *** Bottles,
(2) the date on which KVCO has Sold, in the aggregate, tablets containing ***
kilograms of Oxycodone API and (3) and ***; and (D) if as of ***, KVCO has Sold
fewer than *** Bottles and, in the aggregate, tablets containing less than ***
kilograms of Oxycodone API, the License Term shall be extended to the earliest
to occur of (1) the date on which KVCO has Sold *** Bottles (2) the date on
which KVCO has Sold, in the aggregate, tablets containing *** kilograms of
Oxycodone API and (3) and ***. If the License Term is extended pursuant to any
one or more of clauses (A) through (D) above, in no event shall KVCO Sell more
Bottles or a greater amount of Oxycodone API than the amount specified in the
last applicable clause. The date on which this License terminates is referred to
herein as the
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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“License Termination Date.” For purposes of determining the total number of
Bottles Sold or kilograms of Oxycodone API utilized for any purpose hereunder
(including for the purpose of determining the Maximum Number of Bottles or the
Maximum Kilos), the number of Bottles shall include any Bottles Sold or
otherwise disposed of to customers by KVCO, but shall not include any Bottles
that are returned, recalled or otherwise rejected before the License Termination
Date. For the purpose of clarity, KV’s right to replace returned, recalled or
otherwise rejected KV Products shall not exceed the Maximum Number of Bottles or
the Maximum Kilos. For purposes hereof, the terms “Sale,” “Sell,” “Selling” or
“Sold” mean selling by KVCO to a third party bona fide purchaser for commercial
sale. Notwithstanding anything to the contrary contained herein, this Patent
License Agreement shall automatically terminate prior to the License
Commencement Date upon the Effective Date of the Distribution and Supply
Agreement being entered into by the Parties simultaneously herewith (such date
referred to herein as the “PLA Termination Date”), and in no event shall both
this Patent License Agreement and the Distribution and Supply Agreement be
effective at the same time.
               For the avoidance of doubt, KVCO shall have no right to grant
sublicenses under the License granted to it under this Section 1(a) or any other
provision of this Patent License Agreement. Except with respect to the Sale of
KV Products specifically permitted by this Patent License Agreement, nothing in
this Section 1(a) or in any provision of this Patent License Agreement or any of
the Settlement Documents shall be construed to be a grant of any rights,
licenses or covenants, whether express, implied or otherwise, by any or all of
the Purdue Companies or their Affiliates to KV, KVCO or any of their Affiliates
with respect to the manufacture, use, offer for sale, sale, import or supply of
pharmaceutical products, or any components, portions, ingredients or excipients
relating thereto, on behalf of or to third parties.
               (b) Immediately upon the occurrence of the License Termination
Date, all solicitations for Sale, offers to Sell, Sales and shipments of KV
Products into interstate commerce for commercial sale in the United States by or
on behalf of KVCO under the License shall cease as set forth in
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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Section 2 hereof. Notwithstanding anything to the contrary set forth in this
Patent License Agreement, KV shall not, and shall not permit any Affiliate or
other third party to, replace any returned, recalled or otherwise rejected KV
Products after the License Termination Date, regardless of whether any such
return, recall or other rejection occurred prior to, on or after the License
Termination Date. Nothing herein will prohibit KV from making, having made,
using, Selling, or offering for Sale, any KV Products, after the Terminal Date
and subject to the provisions of the Settlement Documents.
               (c) Except as expressly granted herein, no other right, written
or oral license or sublicense, covenant not to sue, waiver or release of future
infringement or other written or oral authorization is granted or implied by
this Patent License Agreement. For the avoidance of doubt, the Purdue Companies
reserve all rights not expressly granted herein, including the right to sue for
patent infringement for sales that are not permitted pursuant to the License. In
addition, KV acknowledges and agrees that nothing herein shall preclude the
Purdue Companies, for themselves or through an Affiliate or a third party acting
on their behalf, from soliciting offers for sale, offering for sale, selling,
shipping or causing to be shipped any controlled-release oxycodone product,
including oxycodone products marketed and sold under NDA No. 20-553.
               (d) No activity by KVCO with respect to the making, having made,
using, offering to sell, selling, shipping, distributing or importing of any
(a) KV Product and (b) any other pharmaceutical product or ingredient, shall be
authorized under this Section 1, and no determination that any patent rights of
the Purdue Companies in the ’042 Patent or any other intellectual property have
been terminated or exhausted may be based on any activity by KVCO whatsoever
unless and solely to the extent that such activity relates to an authorized sale
of a KV Product expressly permitted and authorized under this Section 1.
               (e) In consideration of the License granted herein, KV agrees to
pay to the Purdue Companies a royalty (the “Royalty”) equal to *** percent
(***%) of KVCO’s Net Sales (as defined herein) from the
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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Sale of KV Products by KVCO or any party acting on KV’s behalf, determined in
accordance with United States generally accepted accounting principles
consistently applied (and derived from KV’s audited financial statements to the
extent possible). KV shall pay such Royalty to the Purdue Companies in United
States dollars in cash, or by wire transfer to an account designated in writing
by the Purdue Companies (x) within forty-five (45) days following the end of
each period of each calendar quarter during the License Term (each, a “License
Quarter”) with respect to Net Sales under the License derived during the
immediately preceding License Quarter, and (y) in any event within thirty
(30) days following the License Termination Date with respect to any Net Sales
under the License for which payment has not yet been made. For clarity, License
Quarters shall mean the three (3) month periods ending on each March 31,
June 30, September 30 and December 31 during the License Term and the first
License Quarter during the License Term shall consist of the period from the
License Commencement Date to the first to occur of March 31, June 30,
September 30 or December 31 of such year. KV shall pay interest on any and all
amounts not paid when due under this Patent License Agreement (including any
amount owing pursuant to any other provision set forth in this Patent License
Agreement) at a rate equal to the lesser of (i) *** percent (***%) above the
prime rate reported in The Wall Street Journal (Eastern Edition) on the date
such Royalty was due, but not less than *** percent (***%), and (ii) the maximum
permissible rate under the law. Such interest shall accrue from the date such
payment was originally due. Each Royalty payment by KV hereunder shall be
accompanied by a certificate (a “Royalty Certificate”) from the Chief Executive
Officer or Chief Financial Officer of KV certifying as to (i) the number of
Bottles of KV Products in each dosage strength Sold by KVCO during the License
Quarter for which the Royalty is being paid, (ii) the amount of kilograms of
Oxycodone API included in the KV Products Sold by KVCO during the License
Quarter for which the Royalty is being paid, (iii) the Net Sales derived from
the Sale of such Bottles and (iv) the amount of the Royalty payable with respect
to such Net Sales. If the Purdue Companies dispute the Net Sales and/or Royalty
amounts set forth in the Royalty Certificate, such dispute shall be resolved in
accordance with Section 1(f). In addition, KV
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

6

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shall deliver a report to the Purdue Companies for each calendar month during
the License Term that summarizes the following: (i) the total number of Bottles
shipped, on a dosage strength by dosage strength basis, for such month; (ii) the
number of returns, on a dosage strength by dosage strength basis, during such
month; (iii) the differences between the number of Bottles shipped and returns
for each month, on a dosage strength by dosage strength basis; (iv) the total
number of Bottles shipped, on a dosage by dosage strength basis, since the
License Commencement Date; (v) the number of returns, on a dosage by dosage
strength basis since the License Commencement Date; and (vi) the difference
between (iv) and (v), on a dosage strength by dosage strength basis (each a
“Monthly Report”). KV shall deliver each Monthly Report to the Purdue Companies
no later than ten (10) days after the end of the month that such Monthly Report
covers to the attention of: Executive Vice President, CFO of Purdue Pharma L.P.,
One Stamford Forum, 201 Tresser Boulevard, Stamford, CT 06901-3431. For purposes
of this Patent License Agreement, “Net Sales” shall mean the gross amount
invoiced for the sale or other disposition of the KV Products less the following
amounts: (a) sales and excise taxes, value added taxes, and duties which fall
due as a direct consequence of such sales and any other governmental charges
imposed upon the importation, use or sale, but only to the extent that such
taxes and duties are (i) actually included and itemized in the gross amounts
invoiced to and specifically paid by the purchaser over and above the usual
selling price, (ii) not recovered or recoverable, and (iii) not income taxes or
franchise taxes or taxes in lieu thereof; (b) trade, sales, trade show, quantity
and cash discounts and stocking allowances, except to the extent such discounts
are greater than they otherwise would be for similar products sold in similar
competitive markets in order to gain, maintain or otherwise facilitate sales of
any of KV’s or its Affiliates’ other products; (c) credits to customers for
purchaser returns, returned goods allowances, billing and shipping errors,
recalls, rejected goods and damaged goods; (d) price adjustments, including
those on customer inventories following price changes; (e) allowances or credits
to customers on account of withdrawal, recall or return; and (f) rebates, PBM
administrative fees and
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

7

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wholesaler chargebacks or similar credits or payments granted to customers
pursuant to contract or otherwise, including those granted to government
agencies.
               (f) (i) The Purdue Companies shall have the right to engage
Deloitte & Touche Financial Advisory Services LLP, or another independent
certified public accounting firm chosen by the Purdue Companies and reasonably
acceptable to KV (a “CPA Firm”), to conduct an audit of KVCO for the purposes of
confirming compliance with this Patent License Agreement including the Net Sales
and Royalty for the period for which the Royalty is being paid.
                    (ii) The CPA Firm shall be given access to and shall be
permitted to examine and copy such books and records of KVCO as it shall request
upon five (5) business days’ notice having been given by the Purdue Companies,
during regular business hours, for the purpose of determining compliance with
this Patent License Agreement including the Net Sales and Royalty amounts. Prior
to any such examination taking place, the CPA Firm shall enter into a
confidentiality agreement reasonably acceptable to KV with respect to the
information to which they are given access.
                    (iii) If the CPA Firm determines that the Net Sales or
Royalty amounts set forth in the Royalty Certificate are incorrect, then the
Purdue Companies and KV shall be entitled to receive a full written report of
the CPA Firm with respect to its findings. Absent manifest error by the CPA
firm, the determination by the CPA Firm following such audit shall be final and
binding on the Parties.
                    (iv) Upon completion of the CPA Firm’s audit, KV shall pay
to the Purdue Companies the Royalty amount determined by the CPA Firm. If the
report of the CPA Firm shows that the Royalty to which the Purdue Companies is
entitled differs from the Royalty amount reflected by KV in the Royalty
Certificate by *** percent (***%) or more, then in addition to the payment of
the Royalty amount and late payment interest in accordance with Section 1(e), KV
shall be responsible for the fees and expenses of the CPA Firm in performing
such audit. If the CPA Firm confirms that the Royalty amount reflected by KV
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

8

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in the Royalty Certificate is correct, the Purdue Companies shall be responsible
for the fees and expenses of the CPA Firm in performing such audit.
          2. Commencement Date and Termination Date. (a) The provisions of this
Patent License Agreement shall become effective on the License Commencement
Date. This Patent License Agreement and all rights granted to KV under the
License will terminate on the License Termination Date. From and after the
License Termination Date until the Terminal Date, KV shall prohibit any third
party, for or on its behalf, from soliciting offers for, offering to Sell,
Selling, shipping, or causing to be shipped or distributed, or indemnifying
others regarding or participating in the profits of others arising from the Sale
of, any KV Products into interstate commerce for commercial sale in the United
States. Promptly after the License Termination Date, KV and its Affiliates shall
destroy any inventories of the KV Products remaining on the License Termination
Date. Promptly following the License Termination Date, KV shall deliver to the
Purdue Companies a certificate from the Chief Executive Officer or Chief
Financial Officer of KV certifying (i) that KV ceased directly or indirectly
soliciting offers for, offering to Sell, Selling, shipping or causing to be
shipped, or facilitating in any manner, or indemnifying others regarding or
participating in the profits of others arising from the Sale of, any
controlled-release oxycodone product described in or covered by the KV ANDA or
that otherwise infringes any of the claims of the ’042 Patent, into interstate
commerce for commercial sale in the United States on or before the License
Termination Date, (ii) that no Sales above the Maximum Number of Bottles or
Maximum Kilos were made by KV prior to the License Termination Date, and
(iii) that all inventories of KV Products in KV’s possession or control and
remaining on the License Termination Date have been destroyed. The
certifications of KV referred to above shall be delivered two (2) business days
following the License Termination Date.
               (b) KV acknowledges and agrees that KV’s violation or breach of
Section 1(a) or 1(b) of this Patent License Agreement or its material breach of
any other provision of this Patent License Agreement would cause the Purdue
Companies to suffer substantial damages and irreparable harm that
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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could not adequately be remedied by an action at law. Accordingly, KV agrees
that the Purdue Companies will be entitled to specific performance or
preliminary or permanent injunctive relief without the requirement of posting a
bond in any action, hearing, litigation or suit for violation or breach of this
Patent License Agreement, such rights and remedies being in addition to all
other rights and remedies available to the Purdue Companies at law, in equity or
otherwise, and KV will not assert in opposition to the Purdue Companies’ request
for any equitable relief that the Purdue Companies have an adequate remedy at
law. KV hereby waives and agrees, on behalf of itself and its Affiliates, not to
raise or assert as a defense or counterclaim in any action brought by the Purdue
Companies to enforce KV’s obligations hereunder, any contention of
non-infringement, invalidity or unenforceability of the 5,508,042 Patent, or
that the 5,226,331 Patent, the 5,549,912 Patent or the 5,656,295 Patent were
invalid or unenforceable and could not have been infringed during their
respective terms, or any contention under Federal or state antitrust or unfair
competition laws. In addition to the foregoing rights and reservations, and in
addition to any other rights the Purdue Companies may have, should KVCO (or any
other party acting on its behalf) ship any KV Products into interstate commerce
for commercial sale in the United States in excess of the Maximum Number of
Bottles or Maximum Kilos before the License Commencement Date or after the
License Termination Date but prior to the Terminal Date (in either case, “Excess
Sales”), the Purdue Companies shall have the right to receive, and KV agrees
promptly to pay the Purdue Companies (without any waiver or offset by the Purdue
Companies of any right to further damages), an amount equal to $*** for each
kilogram (or pro rata amount for any portion thereof) of Oxycodone API of Excess
Sales sold; provided, however, that the rate per kilogram payable by KV shall be
increased by a percentage equal to the amount of any Purdue Company-announced
percentage increase, subsequent to the date hereof, in the price of the
wholesale acquisition cost of OxyContin®.
               (c) (i) In addition to the audit rights set forth in
Section 1(f), the Purdue Companies shall have the right to engage the CPA Firm
to conduct an audit of KVCO at any time after the License Termination Date for
the purposes of confirming that no Sales of KV Products resulted in Excess
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

10

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Sales. Subject to entering into a confidentiality agreement reasonably
acceptable to KV, the CPA Firm shall be given access to and shall be permitted
to examine and copy such books and records of KVCO as it shall request,
including DEA 222 forms, upon five (5) business days’ notice having been given
by the Purdue Companies, during regular business hours, for the purpose of
reporting to the Parties that no Sales of KV Products resulted in Excess Sales.
                    (ii) Whether or not the CPA Firm determines that Sales of KV
Products resulted in Excess Sales, KV and the Purdue Companies shall be entitled
to receive a full written report of the CPA Firm with respect to its findings.
The determination by the CPA Firm following such audit shall be final and
binding on the Parties unless KV or the Purdue Companies challenges the findings
of the CPA firm. In the event KV or the Purdue Companies challenges the findings
of the CPA Firm, the Parties shall submit such findings to a binding arbitrator
mutually acceptable to both Parties and the findings of such arbitrator shall be
binding upon the Parties.
                    (iii) If the report of the CPA Firm shows that Sales of KV
Products resulted in Excess Sales, KV shall pay to the Purdue Companies (A) the
amount specified in Section 2(b) for such Excess Sales and (B) the fees and
expenses of the CPA Firm. If the CPA Firm reports that no such Sales resulted in
Excess Sales, the Purdue Companies shall pay the fees and expenses of the CPA
Firm. KV shall cooperate with the CPA Firm in conducting such audit, including
by providing books and records, including DEA 222 forms, relating to its Sale
and manufacture of KV Products.
          3. Food and Drug Administration. (a) Within ten (10) days after the
Effective Date, KV shall submit to the FDA, with a copy to the Purdue Companies,
pursuant to 21 C.F.R. § 314.94(a)(12)(v), a statement that KV has been granted a
license pursuant to the terms of this Patent License Agreement.
               (b) Within ten (10) days after the Consent Judgment Date, KV
shall submit to the FDA, with a copy to the Purdue Companies, pursuant to 21
C.F.R. § 314.107(e), a copy of the Consent
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

11

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Judgment or, if the Consent Judgment is not entered, such other document as is
executed by the District Court dismissing the Action. Pursuant to 21 C.F.R. §
314.94(a)(12)(viii)(A), within five (5) days after the License Termination Date
or two (2) days after KV receives the Initial Supply Amount or Equivalent Supply
Amount pursuant to the Distribution and Supply Agreement. KV shall submit to the
FDA, with a copy to the Purdue Companies, an amendment to KV’s certifications in
the KV ANDA with respect to the ’042 Patent, changing those certifications to
certifications under 21 C.F.R. § 314.94(a)(12)(i)(A)(3) and unconditionally
requesting that the FDA promptly change the requested approval of the KV ANDA to
a tentative approval and, if the KV ANDA has received effective approval, such
approval be rescinded, and instead a tentative approval granted. Within five (5)
days of receipt, KV shall provide copies to the Purdue Companies of any response
by the FDA to said request. From and after the date on which, following the
entry of a district court judgment in another case or proceeding after the
Effective Date, each and every asserted claim of the ’042 Patent is either
(I) unenforceable or (II) invalid, nothing herein will prohibit KV from filing
or maintaining with respect to the KV Products a certification, including a
certification based on invalidity or unenforceability, pursuant to 21 U.S.C. §
355(j)(2)(A)(vii)(IV) and 21 C.F.R. § 314.94 (a)(12)(i)(A)(4); provided,
however, that if there is a vacatur or reversal of the district court judgment
referred to above, then within ten (10) days after such vacatur or reversal, KV
shall submit to the FDA, with a copy to the Purdue Companies, an amendment to
KV’s certifications and requests to the FDA specified in the second sentence of
this Section 3(b).
               (c) KV acknowledges and agrees that (i) it assumes all risks that
it will not be able to Sell the Maximum Number of Bottles or the Maximum Kilos
during the License Term for any reason; and (ii) if any Governmental Entity (as
described below) takes action (a “Governmental Action”) to prevent or restrict
the manufacture, marketing, sale, distribution or substitution of KV Products or
otherwise inhibits or interferes with KV’s ability, in connection with this
Patent License Agreement or in any other respect, to Sell the KV Products, such
inability may not form the basis for any claim for legal or
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

12

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equitable relief by KV against any of the Purdue Companies or any of their
Affiliates or any third party acting on their behalf (including a claim under
this Patent License Agreement or any of the Settlement Documents) or a basis for
amendment of this Patent License Agreement, and this Section 3(c) shall be
effective notwithstanding any allegation or evidence that the Governmental
Action was caused, directly or indirectly, by any action by or on behalf of any
of the Purdue Companies or their Affiliates. For purposes of this Patent License
Agreement, “Governmental Entity” shall be defined as any federal, state, county,
local, municipal or other entity, department, commission, bureau, agency,
political subdivision, instrumentality, branch, department, authority, board,
court, arbitral or other tribunal, official or officer, exercising executive,
judicial, legislative, police, regulatory, administrative or taxing authority or
functions of any nature pertaining to government, including the Drug Enforcement
Administration (“DEA”) or the FDA.
          4. Registration. KV will be responsible for, and will bear all costs
involved in respect of, the registration of the KV Products with any
Governmental Entity.
          5. WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS PATENT
LICENSE AGREEMENT OR IN THE SETTLEMENT AGREEMENT, NEITHER PARTY NOR THEIR
AFFILIATES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT,
INCLUDING (1) FOR THE PURDUE COMPANIES, WITH RESPECT TO THE PURDUE PATENTS OR
ANY LICENSE GRANTED BY ANY OF THE PURDUE COMPANIES HEREUNDER, OR (2) ANY
MATERIALS OR INFORMATION PROVIDED BY SUCH PARTY OR ANY OF ITS AFFILIATES UNDER
THIS PATENT LICENSE AGREEMENT OR THE SETTLEMENT AGREEMENT, OR (3) WITH RESPECT
TO ANY PRODUCTS OR SERVICES OF EITHER PARTY HERETO OR THEIR AFFILIATES.
FURTHERMORE, UNLESS EXPRESSLY STATED IN THIS PATENT LICENSE AGREEMENT OR IN THE
SETTLEMENT AGREEMENT, NOTHING IN THIS
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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PATENT LICENSE AGREEMENT OR THE SETTLEMENT AGREEMENT SHALL BE CONSTRUED AS A
WARRANTY THAT ANY PATENT, THE PRACTICE OF ANY INVENTION CLAIMED IN ANY PATENT OR
OTHER PROPRIETARY RIGHTS INCLUDED IN THE ’042 PATENT OR ANY LICENSE GRANTED BY
ANY OF THE PURDUE COMPANIES DO NOT, OR THE MAKING, HAVING MADE, USING, SELLING,
OFFERING FOR SALE OR IMPORTING OF KV PRODUCTS BY ANY PERSON DOES NOT, INFRINGE
ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. IT
IS HEREBY AGREED AND ACKNOWLEDGED BY KV THAT THE PURDUE COMPANIES ARE GIVING NO
GUARANTEE OR WARRANTY, EXPRESS OR IMPLIED, TO KV IN RELATION TO THE SAFETY OR
THERAPEUTIC EFFECTIVENESS OF THE KV PRODUCTS OR THE VALIDITY OR ENFORCEABILITY
OF ANY INTELLECTUAL PROPERTY RIGHTS. FURTHER, KV WILL NOT GIVE ANY SUCH
GUARANTEE OR WARRANTY TO ANY THIRD PARTIES ON BEHALF OF THE PURDUE COMPANIES.
          6. Bankruptcy. The License is, and shall otherwise be deemed to be,
for purposes of Section 365(n) of Title XI of the United States Code (the
“Bankruptcy Code”), a license of rights to “intellectual property,” as defined
in Section 101(56) of the Bankruptcy Code.
          7. Indemnification. (a) KV shall defend, indemnify and hold harmless
the Purdue Companies, their Affiliates and their respective owners, directors,
officers, agents and employees of each of them (collectively, the “Purdue
Parties”), from and against any and all expenses (including reasonable
attorneys’ fees), demands, liabilities, damages or money judgments (“Losses”)
incurred by or rendered against the Purdue Parties resulting from (i) any claim,
action or proceeding by any third party arising out of the making, use, offer
for sale, sale, marketing, shipping or distribution of the KV Products or any
products previously made, used, offered for sale or sold, marketed, shipped or
distributed under the KV ANDA, (ii) any claim, action or proceeding by any third
party arising out of any material breach by KV of any of its
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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representations, warranties, covenants or agreements made under this Patent
License Agreement and (iii) any action against any of the Purdue Parties based
upon the dissemination of information concerning any product which contains
oxycodone.
               (b) The Purdue Companies shall defend, indemnify and hold
harmless KV, its Affiliates, and the respective directors, officers, agents and
employees of each of them (collectively, the “KV Parties”), from and against any
and all Losses incurred by or rendered against the KV Parties resulting from
(i) any claim, action or proceeding by any third party arising out of the sale
by the Purdue Companies of their controlled-release oxycodone products, and
(ii) any claim, action or proceeding by any third party arising out of any
material breach by the Purdue Companies of any of their representations,
warranties, covenants or agreements made under this Patent License Agreement.
               (c) The provisions of this Section 7 shall not apply to any
claims made by either Party or by third parties under Federal or state antitrust
or unfair competition laws.
          8. Purdue Companies’ Representations and Warranties. The Purdue
Companies hereby represent and warrant as of the Effective Date that: (i) each
of them has all necessary partnership or corporate, as applicable, power and
authority to execute and deliver this Patent License Agreement and to perform
its obligations hereunder, and that the execution, delivery and performance of
this Patent License Agreement have been duly and validly authorized by each of
them; (ii) upon execution and delivery of this Patent License Agreement by each
of the Purdue Companies, this Patent License Agreement shall constitute the
legal, valid and binding agreement of each of them, enforceable against each of
them in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforceability of
creditors’ rights generally and other general equitable principles which may
limit the right to obtain certain remedies; and (iii) the Purdue Companies or
their Affiliates collectively own all right, title and interest in and to each
and every patent and/or patent application within the Purdue U.S. Patent Family,
and have not granted or otherwise transferred to any third party any right to
enforce any
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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patent or patent applications included in the Purdue U.S. Patent Family, or any
right to practice any patent or patent applications included in the Purdue U.S.
Patent Family that would conflict with the License granted to KV hereunder.
          9. KV’s Representations and Warranties. KV hereby represents and
warrants as of the Effective Date that: (i) it has all necessary corporate power
and authority to execute and deliver this Patent License Agreement and to
perform its obligations hereunder, and that the execution, delivery and
performance of this Patent License Agreement have been duly and validly
authorized by it; (ii) upon execution and delivery of this Patent License
Agreement by KV, this Patent License Agreement shall constitute the legal, valid
and binding agreement of KV and its Affiliates, enforceable against them in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors’
rights generally and other general equitable principles which may limit the
right to obtain certain remedies; (iii) the only dosage strengths for which KV
has requested approval from the FDA with respect to controlled-release oxycodone
products are 10mg, 15mg, 20mg, 30mg, 40mg, 60mg and 80mg; (iv) no Affiliate of
KV has offered to Sell, Sold, marketed, shipped, distributed or imported the KV
Products; and (v) KV has not appointed any third party to make, have made, use,
offer to Sell, Sell, market, ship, distribute or import the KV Products.
          10. Termination. In the event of a material breach by KV of this
Patent License Agreement or the Settlement Agreement, the Purdue Companies will
have the right to terminate this Patent License Agreement upon written notice to
KV, such termination to take effect immediately upon the delivery of such notice
to KV. With respect to all other terminations of this Patent License Agreement,
except for material breach as provided for in the immediately preceding
sentence, this Patent License Agreement shall automatically terminate and be of
no further force or effect in the event that (i) the Settlement Agreement is no
longer in full force or effect or (ii) KV or any party acting on its behalf or
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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succeeding to its rights attempts to reject, avoid or disavow the Settlement
Agreement or any of the other Settlement Documents.
          11. No Assignment. This Patent License Agreement is binding upon and
shall inure to the benefit of each Party hereto and each of its successors and
permitted assigns. KV may not assign (by way of merger, acquisition, statute,
operation of law or otherwise), in whole or in part, any of its rights or
obligations under this Patent License Agreement (an “Assignment”) without the
prior written consent of the Purdue Companies, which consent may be withheld in
the Purdue Companies’ sole discretion; provided, however, that, in the event
such consent is granted, no such Assignment shall in any manner limit or impair
the obligations of KV hereunder; and provided further, however, that any party
that acquires this Patent License Agreement as a result of such Assignment and
any Affiliate of such party will thereby become subject to the terms and
conditions of this Patent License Agreement. If notwithstanding the above, there
is a Change of Control of KV, this Patent License Agreement shall be deemed to
be assigned and each person or entity directly or indirectly controlling KV and
each Affiliate of such person or entity shall become subject to the terms and
conditions of this Patent License Agreement and shall agree in writing to be
bound hereby and KV shall remain primarily liable for the performance of all its
obligations under this Patent License Agreement and for causing its assignees to
act in a manner consistent herewith. For purposes of this Section 11, “Change of
Control” shall mean the transfer or disposition (including by way of merger,
acquisition, consolidation, sale of stock, sale of assets, operation of law or
otherwise), directly or indirectly, of more than 50% of the total assets, equity
interests, or voting power of KV. Any Assignment, attempted Assignment or
assignment of the rights granted hereunder, by KV, in contravention of the
provisions of this Section 11 shall be void and shall have no force or effect.
In the event that the Purdue Companies (or any of their respective successors
and assigns) sells or assigns (other than in connection with the grant of a
security interest) the ’042 Patent to any other person or entity, such person or
entity shall agree to assume the
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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obligations of the Purdue Companies under this Patent License Agreement in
writing as a condition to such acquisition.
          12. Entire Agreement. This Patent License Agreement, along with the
Settlement Agreement and the documents referred to herein and therein, set forth
the entire agreement and understanding among the Parties hereto as to the
subject matter hereof and supersede all other documents, oral consents or
understandings, if any, made between the Purdue Companies and KV (excluding any
agreements or stipulations endorsed by court order) before the date hereof with
respect to the subject matter hereof. None of the terms of this Patent License
Agreement shall be amended or modified except in a writing signed by each of the
Parties hereto. To the extent there is an inconsistency between any provisions
of this Patent License Agreement and the Settlement Agreement, the provisions of
the Settlement Agreement shall govern. The Parties acknowledge that there have
been a number of drafts of this Patent License Agreement exchanged between them
prior to the Parties’ agreement on the final version of this Patent License
Agreement which has been executed by them. The Parties expressly agree that all
such prior drafts have been superseded by this executed Patent License Agreement
and shall not be used in any dispute between the Parties as evidence with
respect to interpreting the meaning of any provision of this Patent License
Agreement.
          13. Enforceability. Any term or provision of this Patent License
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability, without rendering invalid or unenforceable the remaining terms
and provisions of this Patent License Agreement in such jurisdiction or in any
other jurisdiction.
          14. Governing Law. This Patent License Agreement, and the rights and
obligations created hereunder, shall be governed by and interpreted according to
the substantive laws of the State of New York without regard to its choice of
law or conflicts of law principles.
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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          15. Notices. Any notice required under this Patent License Agreement
shall be in writing and shall be given (and shall be deemed to be duly given
upon receipt) by delivery in person, by facsimile or by registered or certified
mail (postage prepaid, return receipt requested) to the respective Parties at
the following addresses (or at such other address for a Party as shall be
specified by like notice):
If to any of the Purdue Companies:
Purdue Pharma L.P.
One Stamford Forum
201 Tresser Boulevard
Stamford, CT 06901-3431
Attention: General Counsel
Fax No.: (203) 588-6204
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: Stuart D. Baker
Fax No.: (212) 489-7130
If to KV:
KV Pharmaceutical Company
2503 South Hanley Road
St. Louis, Missouri 63144
Attention: Paul Brady
Fax No.: (314) 644-2419
with a copy to:
Locke Lord Bissell & Liddell
3 World Financial Center
New York, New York 10281-2101
Attention: John F. Sweeney
Fax No.: (212) 303-2754
          16. Effect of Waiver. A waiver by any Party of any term or condition
of this Patent License Agreement in any one instance shall not be deemed or
construed to be a waiver of such term or condition for any other instance in the
future (whether similar or dissimilar) or of any subsequent breach hereof. All
rights, remedies, undertakings, obligations and agreements contained in this
Patent License
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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Agreement shall be cumulative and none of them shall be a limitation of any
other remedy, right, undertaking, obligation or agreement of any of the Parties.
          17. Legal Advice; Investigation. Each of the Parties agrees that it
has received independent legal advice from its attorneys with respect to the
rights and asserted rights arising out of this Patent License Agreement and the
Settlement Agreement. Each of the Parties further agrees that it and its counsel
have had adequate opportunity to make whatever investigation or inquiry they may
deem necessary or desirable in connection with the subject matter of this Patent
License Agreement, prior to the execution hereof.
          18. Counterparts. This Patent License Agreement may be executed in
counterparts (including by facsimile or other electronic transmission), and each
fully executed counterpart shall be deemed an original of this Patent License
Agreement.
          19. Enforcement of Patents. Purdue shall have the sole right, but no
obligation to enforce any of the patent and/or patent applications within the
Purdue U.S. Patent Family and to retain any recoveries in such actions. KV shall
not have any right to participate in any such actions.
          20. Definitions. The definitions of the terms herein apply equally to
the singular and plural of the terms defined. Whenever the context may require,
any pronoun will include the corresponding masculine, feminine and neuter forms.
The words “include”, “includes” and “including” will be deemed to be followed by
the phrase “without limitation”. Unless the context requires otherwise, (A) any
definition of or reference to any agreement, instrument or other document herein
will be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or therein) and (B) the words “herein”, “hereof” and “hereunder”, and words of
similar import, will be construed to refer to this Patent License Agreement in
its entirety and not to any particular provision hereof.
[remainder of this page intentionally left blank]
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

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Patent License Agreement Signature Page
          IN WITNESS WHEREOF, each of the Parties has caused this Patent License
Agreement to be executed as of the date first written above by its duly
authorized officer or agent.

          PURDUE PHARMA L.P.
      By:   Purdue Pharma Inc., its general partner
      By:   /s/ Edward B. Mahony       Name:   Edward B. Mahony       Title:  
EVP, CFO & Treasurer       THE P.F. LABORATORIES, INC.
      By:   /s/ Edward B. Mahony       Name:   Edward B. Mahony       Title:  
EVP, CFO & Treasurer       PURDUE PHARMACEUTICALS L.P.
      By:   Purdue Pharma Inc., its general partner
      By:   /s/ Edward B. Mahony       Name:   Edward B. Mahony       Title:  
EVP, CFO & Treasurer       KV PHARMACEUTICAL COMPANY
      By:   /s/ Paul T. Brady       Name:   Paul T. Brady       Title:  
Corporate Vice President, B.D.      

 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

 

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Schedule 1
to Patent License Agreement

              Maximum Total     Number of Bottles Dosage Strength   During
License Term* 10 mg     ***   15 mg     ***   20 mg     ***   30 mg     ***   40
mg     ***   60 mg     ***   80 mg     ***  

 

*   If KV is unable to sell any Bottles of a dosage strength shown in the chart
above, the Maximum Number of Bottles of the remaining dosage strengths will be
adjusted proportionately; provided that the total kilograms of Oxycodone API
included in the tablets contained in such Bottles may not exceed ***. In lieu of
the foregoing, KV at its option may reallocate Bottles among the dosage
strengths set forth in the chart by up to ***% of the Total Number of Bottles
set forth for each dosage strength; provided that the total number of Bottles
shall not exceed *** Bottles and provided further that the total kilograms of
Oxycodone API included in the tablets contained in such Bottles may not exceed
***.

If the numbers of Bottles for which the License is granted are reduced in
accordance with the provisions of Section 1(a), the allocation of Bottles set
forth on Schedule 1 and the limitation on the total kilograms of Oxycodone API
included in the tablets contained in such Bottles shall be reduced as set forth
in Section 1(a).
Notwithstanding the foregoing, in no event may the total kilograms of Oxycodone
API contained in the total number of Bottles exceed the amounts specified in
Section 1(a).
 

***   Certain confidential information contained in this document, marked with
three asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.