Exhibit 10.3


 


CONFIDENTIAL TREATMENT REQUESTED:


 


Portions of this Exhibit have been redacted
pursuant to a request for confidential treatment under Rule 24b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.  Such redacted portions have been replaced with “{***}” in this Exhibit.  An unredacted version of this document has
been filed separately with the Securities and Exchange Commission along with
the request for confidential treatment.


 


DISTRIBUTION
RIGHTS AGREEMENT


 


This
AMENDED AND RESTATED DISTRIBUTION RIGHTS AGREEMENT (this “Agreement”) is made
this            day of
January, 2004, to be effective as of October 26, 2001 (“Original Agreement
Effective Date”), by and among SmithKline Beecham Corporation, a GlaxoSmithKline
company, a corporation duly organized and existing under the applicable laws of
the Commonwealth of Pennsylvania having a principal place of business at One
Franklin Plaza, Philadelphia, PA 19101 (“GSK”) and Biovail Laboratories
Incorporated, a Barbados corporation incorporated under the International
Business Companies Act, 1991-24, having a principal place of business at
Chelston Park, Building 2, Collymore Rock, St. Michael BH1, Barbados, West
Indies (“Biovail”).


 


RECITALS


 


WHEREAS,
GSK markets prescription pharmaceutical products sold under the Zovirax®
(acyclovir) brand in various formulations, presentations and strengths; and


 


WHEREAS,
the parties entered into a Distribution Rights Agreement (the “Original
Agreement”) dated October 26, 2001, pursuant to which GSK granted to
Biovail the exclusive right to distribute, market, promote, detail, advertise
and sell the Products (as hereinafter defined) as GSK’s exclusive distributor
of the Products in the Territory (as hereinafter defined), and to utilize GSK’s
Trademarks (as defined herein below) to identify the Products in connection
with the distribution, marketing, promotion, advertisement and sale of the
Products in the Territory as described herein and Biovail agreed to purchase
from GSK, and GSK agreed to supply to Biovail, Biovail’s entire requirements of
the Products, for distribution in the Territory for the Term (as hereinafter
defined);


 


WHEREAS,
the parties now desire to amend the provisions of the Original Agreement and to
redefine their respective rights and obligations under the Memorandum of
Understandings made effective on October 1, 2002 and April 1, 2003
and the Original Agreement by means of this Agreement.


 


NOW,
THEREFORE, in consideration of the mutual covenants and agreements hereinafter
set forth and other good and valuable consideration, the receipt and legal
sufficiency of which are mutually acknowledged, GSK and Biovail hereby agree as
follows:


 

















 


ARTICLE 1.




DEFINED TERMS


 


1.01         Defined Terms.  The following terms, whether used in the
singular or plural, shall have the meanings assigned to them below for purposes
of this Agreement:


 


“Actual
Shipment Quantity” shall have the meaning set forth in Section 5.04(d).


 


“Additional
Rights Payment” shall have the meaning set forth in Section 5.01(b).


 


“Additional
Rights Lump Sum Payment” shall have the meaning set forth in Section 5.01(b)(iii).


 


“Additional
Rights Payment Cash Flow” shall mean the series of future cash payments at
specific points in time as would be required for the full payment and
satisfaction of the aggregate total dollar amount of the Fixed Adjustments.


 


“Adjustment
Amount” shall mean the difference between:


 


(i)                                     the aggregate value of Product purchased by Biovail between October 1,
2002 and September 30, 2003, calculated by multiplying the actual
quantities of such Product, by the prices specified in Section 5.06(a) and
(b) for such purchases; minus


 


(ii)                                  the aggregate value of Product purchased by Biovail between October 1,
2002 and September 30, 2003, calculated by multiplying the actual
quantities of such Product so purchased by the Reduced Zovirax® Price for such
purchases.


 


“Adverse
Event” shall mean any adverse event associated with the use of the Product in
humans, whether or not considered drug-related, including (i) an adverse
event occurring in the course of the use of the Product in professional
practice, (ii) an adverse event occurring from Product overdose (whether
accidental or intentional), (iii) adverse events occurring from Product
abuse, or from Product withdrawal and (iv) any failure of pharmacological
action, or such other definition as may from time to time be set forth in 21
C.F.R. Part 314.80.


 


“Affiliate”
shall mean any corporation or non-corporate entity that controls, is controlled
by, or is under common control with a Party. A corporation or non-corporate
entity shall be regarded as in control of another corporation if (a) it
owns or directly or indirectly controls at least fifty percent (50%) of the
voting stock of the other corporation or, (b) in the absence of the
ownership of at least fifty percent (50%) of the voting stock of a corporation
or in the case of a non-corporate entity, has the power to direct or cause the
direction of the management and policies of such corporation or non-corporate
entity, as applicable.


 


“Aggregate
Unit Purchase Price” shall have the meaning set forth in 5.08(a).


 


2

















 


“Agreement”
shall mean this agreement, together with all appendices, exhibits and schedules
attached hereto, as the same may be amended or supplemented in accordance with
this Agreement.


 


“ANDA”
shall mean an Abbreviated New Drug Application for a Product, requesting
permission to place a drug on the market in accordance with 21 C.F.R. Part 314
Subpart C, and all supplements filed pursuant to the requirements of the FDA,
including all documents, data and other information concerning a Product which
are necessary for FDA approval to market a Product in the Territory.


 


“Annual
Minimum Purchase Requirement” shall have the meaning set forth in Section 5.02(c).


 


“Applicable
Laws” shall mean all applicable laws, ordinances, rules, regulations and
guidances applicable to this Agreement or the activities contemplated
hereunder, including without limitation the Federal Food, Drug and Cosmetic Act
and applicable regulations, FDA-issued guidances, federal and state
anti-kickback laws, privacy laws, consumer protection statutes, laws relating
to sample accountability, and any requirements under any Product Registration
applicable to the Products in the Territory.


 


“Bupropion
Product” shall mean “The Product”, as such term is defined in the Development
Agreement.


 


“Business
Day” shall mean a day of the year in which banks are not required or authorized
to close in Charlotte, North Carolina.


 


“Calendar
Quarter” shall mean a period of three (3) consecutive calendar months
during the Term of this Agreement ending on either March 31, June 30,
September 30 or December 31.


 


“Calendar
Year” shall mean a period of twelve (12) consecutive months commencing on January 1
and ending December 31.


 


“Commercially
Reasonable Efforts” of a Party shall mean those efforts consistent with the
exercise of prudent scientific and/or business judgment as applied to
commercialization efforts for products of similar scientific and commercial
potential within relevant product lines of such Party.


 


“Confidential
Information” shall have the meaning set forth in Section 11.01(a).


 


“Confidentiality
Agreement” shall have the meaning set forth in Section 11.01(b).


 


“DDMAC”
shall mean FDA’s Division of Drug Marketing, Advertising and Communications.


 


“Delivery
Date” shall have the meaning set forth in Section 5.04(b).


 


“Developed
Cream Trade Product” shall mean a 5 gram presentation of Zovirax® Cream intended
for marketing and sale in the Territory.


 


3

















 


“Development
Agreement” shall mean that certain Product Development, License and Copromotion
Agreement by and between GSK and Biovail, of even date herewith.


 


“Development
Work” shall mean any and all analytical testing, stability testing and
regulatory support necessary to generate sufficient stability data for Sample
Products and prepare a supplement that complies with FDA requirements and
guidelines governing submissions to FDA.


 


“Distribution
Rights Payment” shall have the meaning set forth in Section 5.01(a).


 


“Distributorship
Commencement Date” except as otherwise provided hereinbelow, shall mean the
date upon which Biovail’s rights as exclusive distributor of the Products shall
commence, which date shall be January 1, 2002.


 


“Effective
Date” shall mean the date first set forth above.


 


“Existing
Inventory” shall mean GSK’s entire finished goods inventory of Products in the
Territory as of December 15, 2001.


 


“Extension
Period” shall mean the period commencing on January 1, 2012 and ending at
11:59 pm, PST, December 31, 2021.


 


“Federal
Programs” shall have the meaning set forth in Section 3.12.


 


“FDA”
shall mean the United States Food and Drug Administration, or any successor
agency of the United States.


 


“Firm
Zone” shall mean any period of time in respect of which there is a firm
commitment by Biovail to purchase Product pursuant to Sections 5.03 or 5.04.


 


“Fixed
Annual Minimum Purchase Requirement” shall have the meaning set forth in Section 5.02(c)(i).


 


“Generic
Entry” shall mean, with respect to a Product, the first point in time during
the Term, subsequent to a generic form of said Product being made commercially
available by a Third Party in the Territory, at which the total number of
prescriptions filled for the Product falls below {***}† of the Market Share (as defined hereinbelow) for that Product in
each of three (3) consecutive calendar months.


 


“Good
Manufacturing Practices” shall mean all current good manufacturing practices as
defined under 21 U.S.C. § 351(a)(2)(B) and the FDA regulations promulgated
thereunder, applicable to the Product, as in effect from time to time.


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


4

















 


“Governmental
Authority” shall mean any Federal, state, local or foreign governmental
authority, agency or other body.


 


“Gross
Sales” shall mean the gross amount invoiced by a Party, ex-factory, for
Products shipped and delivered to said Party’s customers.


 


“GSK
Entities” shall mean GSK and those Affiliates of GSK that manufacture either of
the Products for sale in the Territory, or distribute, sell, or market either
of the Products in the Territory.


 


“IND”
shall mean an Investigational New Drug application filed with the FDA for any
Product requesting permission to perform human clinical studies in accordance
with 21 C.F.R. Part 312, as the same may be amended or supplemented from
time to time hereafter.


 


“Invoiced
Amount” shall mean the aggregate invoiced purchase price payable by Biovail for
all Products included in any shipment of Products to Biovail by GSK.


 


“Manufacturing
Documentation” shall mean , with respect to the Product, any and all current
validation reports, any current formulation’s manufacturing instructions, and
current batch record templates, and which are specific to or otherwise used in
the Secondary Manufacture of the finished form of the Products. For avoidance
of doubt, it is understood and agreed that the term “Manufacturing
Documentation” shall only apply to such documents as are used in, or which
relate to, the finished goods manufacturing process, and shall not in any case
apply to the Primary Manufacturing process or to the synthesis of any of the
active drug substance in any of the Products.


 


“Market
Share” shall mean , with respect to a Product, the aggregate total number of
prescriptions filled for said Product and any generic versions of said Product
made available in finished goods form in the Territory by a Third Party.


 


“Maximum
Returns Credit Amount” shall have the meaning set forth in Section 6.05(b).


 


“Monthly
Product Supply Schedule” shall have the meaning set forth in Section 5.03(a).


 


“NDA”
shall mean a New Drug Application for any product, requesting permission to
place a drug on the market in accordance with 21 C.F.R. Part 314, and all
supplements filed pursuant to the requirements of the FDA, including all
documents, data and other information concerning a product which are necessary
for FDA approval to market a product in the Territory.


 


“NDC”
shall mean National Drug Code.


 


“Net
Wholesale Price” shall mean the gross list price published by Biovail,
ex-factory, to its wholesale customers for a Product.


 


“New
Products” shall mean the Developed Cream Trade Product and the Zovirax® Cream
Sample Products.


 


“NOV”
shall mean an FDA Notice of Violation or “untitled” letter.


 


5

















 


“Order
Quantities” shall have the meaning set forth in Section 5.05.


 


“Party”
shall mean GSK or Biovail and, when used in the plural, shall mean GSK and
Biovail.


 


“Patent”
shall mean the Mac-P formulation patent for Zovirax® Cream, United States
Patent #4,963,555.


 


“Person”
shall mean any natural person, corporation, firm, business trust, joint
venture, association, organization, company, partnership, limited liability
company, or other business entity, or any government or any agency or political
subdivision thereof.


 


“Phase
IV Clinical Study” shall mean the NDA post-approval clinical study to be
conducted by GSK, as required by FDA, for Zovirax® Cream in pediatric patients
ages six (6) through twelve (12).


 


“Primary
Manufacture” or Primary Manufacturing” shall mean the process used in the
manufacture of an active drug substance (including, but not limited to, the
synthesis thereof), the result or product of which will be used in Secondary
Manufacturing of a pharmaceutical product.


 


“Product”
shall mean Zovirax® Ointment or Zovirax® Cream; “Products” shall mean Zovirax®
Ointment and Zovirax® Cream; each in the presentations and formulations in finished
product form, as described on Exhibit 1.01A, or as developed by GSK under
the terms of this Agreement.


 


“Product
Registrations” shall mean the approvals or registrations for a Product which
have been received by GSK in the Territory, including without limitation each
IND, Drug Master File (DMF), NDA and ANDA for the Product, as applicable.


 


“Promotional
Spend Requirement” shall have the meaning set forth in Section 3.14.


 


“Promotional
Support” shall mean personal field selling of Products to healthcare
professionals, Product advertising directed to healthcare professionals and to
consumers directly, educational programs for healthcare professionals and sales
training for sales representatives and managers, and all of the activities
identified in Section 3.02(d) and shall expressly exclude; (i) general
and administrative expenses attributable to the foregoing and (ii) expenses
incurred in the sampling of the Products.


 


“Purchase
Order” shall have the meaning set forth in Section 5.03(a).


 


“Purchase
Price” shall have the meaning set forth in Section 5.08(a).


 


“Recall”
shall have the meaning set forth in Section 6.06.


 


6

















 


“Reduced
Zovirax® Price” shall mean , for each Zovirax® Product, is {***}† of that Product’s Net Wholesale Price.


 


“Sachet
Sample” shall mean the 0.9 gram presentation of Zovirax® Ointment or the 0.9
gram presentation of Zovirax® Cream, not intended or approved for commercial
sale, but intended and approved for use exclusively in the detailing and
promotion of the Product.


 


“Sachet
Sample Availability Date” shall mean the date upon which the Sachet Sample for
Zovirax® Cream or Zovirax® Ointment, as appropriate, becomes commercially
available for shipment to Biovail.


 


“Sample
Products” shall mean the Sachet Samples and the Tube Samples.


 


“Secondary
Manufacture” or “Secondary Manufacturing” shall mean the manufacturing and
packaging process used in formulating the active drug substance and all
excipients into a final dosage form of a pharmaceutical product.


 


“Serious
Adverse Event” shall mean an Adverse Event that is fatal, life-threatening,
persistently or significantly disabling or incapacitating, results in new or
prolonged in-patient hospitalization, or is a congenital anomaly, or such other
definition as may be provided from time to time in 21 C.F.R. Part 312.32(a).
As permitted under 21 C.F.R. Part 312.32(a), important medical events that
may not result in death, be life-threatening or require hospitalization may be
considered Serious Adverse Events when, based upon appropriate medical
judgment, they may jeopardize the patient or subject and may require medical or
surgical intervention to prevent one of the outcomes listed in this definition.


 


“Supplemental
Allowance Payment” shall mean each payment of eleven million, two hundred and
fifty thousand U.S. dollars (US $11,250,000) to be made by Biovail to GSK on
the March 31 of each of the Calendar Years of 2004, 2005, 2006 and 2007,
respectively, pursuant to Section 5.01(e)).


 


“Term”
or “Term of this Agreement” shall mean the period, which commenced on the
Original Agreement Effective Date and ends on expiry of the Extension Period,
unless sooner terminated as provided herein.


 


“Territory”
shall mean the United States of America and Puerto Rico, but excluding all
other United States territories and possessions.


 


“Third
Party” shall mean any Person who or which is neither a Party nor an Affiliate
of a Party.


 


“To
The Knowledge Of” a specified entity or any similar term shall mean to the
actual knowledge of the officers of the specified entity having operating
responsibility for the business of such entity.


 






† Represents material which has been
redacted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended.


 


7

















 


“Trademarks”
shall mean the trademarks registered by GSK or its Affiliates for the marketing
of the Product in all or any part of the Territory, as more fully set forth on Exhibit 1.01
B attached hereto. For sake of clarity and avoidance of doubt, the
Trademarks do not include any of the names (or variants thereof) of Glaxo
Wellcome Inc., Glaxo Wellcome plc, SmithKline Beecham Corporation, Glaxo
SmithKline or any of their respective Affiliates, or any marks customarily
associated with such names.


 


“Tube
Sample” shall mean either the 1.5 gram tube presentation of Zovirax® Ointment
or the 0.8 gram tube presentation of Zovirax® Cream not intended or approved
for commercial sale, but intended and approved for use exclusively in the
detailing and promotion of the Product


 


“Variable
Additional Rights Payment” shall have the meaning set forth in Section 5.01(b)(ii).


 


“Variable
Annual Minimum Purchase Requirement” and “Variable Annual Minimum Purchase
Requirements” shall have the meaning set forth in Section 5.02(c)(ii).


 


“Wellbutrin®
XL” shall mean any once daily formulation of buproprion hydrochloride.


 


“Zovirax®
Cream” shall mean 5% acyclovir in a prescription modified aqueous cream
formulation.


 


“Zovirax®
Cream NDA” shall have the meaning set forth in Section 4.05.


 


“Zovirax®
Cream Sample Product” shall mean the Sachet Sample of Zovirax® Cream and the
Tube Sample of Zovirax® Cream.


 


“Zovirax®
Ointment” shall mean 5% acyclovir in a prescription ointment formulation.


 


“Zovirax®
Price Allowance” shall mean the sum of:


 


(i)                                     {***}† plus


 


(ii)                                  the amount of
each Supplemental Allowance Payment made by Biovail to GSK; minus


 


(iii)                               the aggregate
value of Product purchased by Biovail at the {***}† calculated by multiplying the
actual quantities of such Product so purchased by the {***}† for such purchases.


 


1.02         Terms Generally.  All references herein to Articles, Sections,
paragraphs, clauses, Exhibits and Schedules shall be deemed references to
Articles, Sections, paragraphs and clauses of this Agreement and Exhibits and
Schedules to this Agreement unless the context shall otherwise require.


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


8

















 


ARTICLE 2.




APPOINTMENT OF DISTRIBUTOR; RIGHTS AND LIMITATIONS


 


2.01         Grant of Exclusive Rx
Distribution Rights.


 


(a)           Subject to the terms
and conditions of this Agreement, GSK appoints Biovail as GSK’s exclusive
distributor of the Products as prescription drugs in the Territory, and in
connection therewith, grants to Biovail the exclusive right to market, promote,
advertise, detail, sell and distribute the Products as prescription drugs in
the Territory. The appointment made in the preceding sentence shall commence as
of the Distributorship Commencement Date and shall continue until the
expiration or termination of the Term and, unless otherwise renewed in
accordance with the terms hereinbelow, shall not survive past the termination
or expiration of the Term. The foregoing notwithstanding, the Parties hereby
acknowledge and agree that with respect to Zovirax® Cream only, the
distributorship rights granted to Biovail under this Section 2.01(a) shall
not be effective until the effective date of approval of the Zovirax® Cream NDA
by the FDA.


 


(b)           GSK shall retain the
right to ship the Products through its distribution channels in the Territory
if such shipment is solely in connection with providing Products to GSK
Affiliates for sale outside the Territory.


 


(c)           Biovail may assign,
sub-license, sub-contract or delegate to any Biovail Affiliate all or part of
the rights and obligations of Biovail under this Agreement but no such
assignment, sub-licensing, sub-contracting or delegation shall relieve Biovail
of its liabilities or obligations to GSK under this Agreement. GSK acknowledges
that the promotional, marketing and, selling activities that Biovail is
obligated and/or authorized to perform in the Territory shall be performed by
an Affiliate of Biovail in strict compliance with the terms of this Agreement.
Biovail expressly acknowledges and agrees that Biovail shall remain fully and
unconditionally obligated and responsible for the full and complete performance
of all Biovail obligations under the terms and conditions of this Agreement.


 


2.02         Territorial
Limitation.  Biovail shall restrict its
marketing, promotion, advertising, selling, detailing and distribution of the
Products solely to the prescription drug market in the Territory, and Biovail
shall not sell or distribute the Products outside the Territory, and, other
than sales of Products to the United States government for subsequent resale on
United States military bases abroad, Biovail shall not knowingly self Products,
directly or indirectly to any Third Party in the Territory for resale outside
the Territory.


 


2.03         Restriction on
Sub-Distributors.  Without the prior
written consent of GSK, Biovail shall not grant to any Third Party any rights
to market, promote, advertise, or distribute the Product, and shall not enter
into any agreement or arrangement with any Third Party with respect to
promoting or co-promoting the Product The foregoing notwithstanding, for the
Calendar Years 2002 through 2004 Biovail may employ the services of a Third
Party in the detailing of the Products to healthcare professionals in the
Territory, so long as any sales representative deployed by such Third Party for
Biovail for such purpose shall at such time only detail Biovail products and
the Products to healthcare professionals in the Territory. Nothing in 


 


9

















 


the
foregoing restricts the ability of Biovail to enter into any agreements for the
receiving, warehousing and shipping of the Products for Biovail, or under which
agreements a Third Party will accept orders, generate invoices and collect and
manage receivables with respect to Biovail’s sales of the Products and Biovail’s
use of any Third Party in compliance with this Agreement for such functions is
not a violation of the terms of this Agreement.


 


2.04         Approval of
Reliant.  Notwithstanding the provisions
of Section 2.03 GSK hereby consents to the granting by Biovail of
co-promotion rights to Reliant Pharmaceuticals, LLC a limited liability company
with offices at 110 Allen Road, Liberty Corner, NJ 07938 (“Reliant”) pursuant
to Section 2.03 of the Distribution Agreement, provided that:


 


(a)           The consent granted
in this section is limited to Reliant only.


 


(b)           The consent granted
in this Section shall become effective upon February , 2003 and shall
remain in effect for a period of one (1) Calendar Year, and may be renewed
for additional one (1) year periods by mutual written agreement of the
Parties.


 


(c)           Biovail acknowledges
and agrees that despite GSK’s consent granted in Section 1 above, Biovail
remains obligated to perform all terms, obligations, covenants and agreement
ascribed to it in the Distribution Agreement.


 


(d)           Biovail acknowledges
and agrees that its indemnification obligations provided in Section 9.02
of the Distribution Agreement will be expanded to also include any GSK Claim
that arises out of, or is the result of, any act or omission by Reliant in
connection with the Product.


 


2.05         Reservation of OTC
Rights.  Notwithstanding anything in this
Agreement to the contrary, the Parties acknowledge and agree that no rights are
conveyed to Biovail under this Agreement with respect to distributing,
marketing, selling or promoting either of the Products as non-prescription
drugs in the over-the-counter market during the Term of this Agreement, and
Biovail further agrees that neither it nor any of its Affiliates shall engage
in any marketing, promotion, advertisement, sale or distribution of any Product
in the non-prescription over-the-counter market during the term of this
Agreement.


 


2.06         Compliance with
Product Registration; Resale in Same Packaging. 
Biovail shall not at any time do, cause to be done or permit any act on
its part, or that of its employees or agents, inconsistent with the Product Registration
for any Product in the Territory. In the event that any filings are required to
be made with, or approvals required to be obtained from, applicable regulatory
authorities in order to sell a Product to Biovail or for Biovail to initiate
distribution, marketing, sale or promotion of a Product in the Territory, the
Parties shall cooperate fully to ensure that such filings and approvals are
obtained or made as expeditiously as reasonably practicable. Except as
otherwise set forth in Section 3.03(e) Biovail shall not alter in any
manner any Product or its packaging as sold to it by GSK hereunder and shall
resell the Product without alteration in the form sold to it by GSK.


 


2.07         No Ownership Rights
Conveyed on Effective Date.  Except for
Biovail’s right to use the Trademarks pursuant to Section 3.03 hereof, no
right or license under any Trademark, or under any patent rights or know-how
owned or controlled by GSK or any of its Affiliates to


 


10














 


make
or have made any Product is granted to Biovail under this Agreement. Without
limiting the foregoing, the Parties acknowledge and agree that nothing in this
Agreement shall grant to Biovail any right or interest in any new Product,
dosage forms, or other presentations at any time derived or developed by GSK in
connection with the Product.


 


2.08         No Restriction on GSK
Business.  Nothing in this Agreement is
intended to limit or restrict GSK or its Affiliates in any way, expressly or
implicitly, from distributing, marketing, selling or promoting any topical
product containing an active drug substance other than acyclovir that is
competitive with either of the Products, provided that GSK notifies Biovail of
the launch of any such competing product, and does not identify said competing
product by any trademark substantially similar to or easily confused with the
Trademarks. Further, nothing in this Agreement is intended to limit or restrict
GSK or its Affiliates in any way, expressly or implicitly, from developing or
manufacturing any product that is competitive with either of the Products,
including without limitation any product containing any of the chemical
compounds present in either of the Products for commercial sale as an
over-the-counter product. The foregoing notwithstanding, during the Term of
this Agreement GSK will not make available in the Territory any
non-prescription over-the-counter versions of a Product prior to there being
made commercially available by Third Parties for delivery in the Territory two (2) generic
forms of said Product in finished goods form.


 


2.09         Development Rights and
Obligations.  Biovail acknowledges and
agrees that nothing in this Agreement shall grant to Biovail any right or
interest in any new formulations, indications, dosages, forms of administration
or other presentations of the Products, and Biovail further acknowledges that
the distribution rights granted herein relate only to the Products set forth on
Exhibit 1.01A.


 


2.10         No Restriction on
Biovail Business.  Nothing in this
Agreement is intended to limit or restrict Biovail or its Affiliates in any
way, expressly or implicitly, from distributing, marketing, selling or
promoting during the Term any product containing an active drug substance other
than acyclovir that is competitive with the Product. Further, nothing in this
Agreement is intended to limit or restrict Biovail or its Affiliates in any
way, expressly or implicitly, from developing during the Term of this Agreement
any product that is competitive with the Products, including without limitation
any product containing any of the chemical compounds present in the Products,
for commercial sale following expiration of the Term. If during the Term of
this Agreement either party or an Affiliate of either Party shall make,
manufacture, sell or supply a generic version of a Product in the Territory
then such Party shall, for the balance of the Term of this Agreement pay to the
other party {***}† of all compensation received by said party for such generic
version of the Product.


 






† Represents material which has been redacted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 


11

















 


ARTICLE 3.




BIOVAIL RESPONSABILITES


 


3.01         Distribution Diligence.


 


(a)           In fulfillment of its
obligations under this Agreement, during the Term Biovail shall:


 


(i)                                     maintain and
provide at its expense suitable storage and handling in accordance with the
labeling of each Product, and other appropriate facilities and services in
compliance with Good Manufacturing Practices, as needed for the storage and
continuous sale and distribution of the Products and Sample Product within the
Territory;


 


(ii)                                  maintain levels
of inventory of each Product no greater than is reasonable and consistent with
customary industry practice and Biovail’s historical sales patterns of the
products to its customers;


 


(iii)                               provide, at its
expense, an adequate Product traceability system reasonably satisfactory to
GSK;


 


(iv)                              ensure that all
sales force personnel only promote the Products in manner that is consistent
with the Product’s applicable Product Registration and labeling and that is
permitted by Applicable Laws.  If Biovail
becomes aware of any such activity in contravention of the immediately
foregoing standards, Biovail shall take prompt affirmative action to ensure
that such activity shall cease, and take addition remedial action to advise its
sales personnel concerning the activities described in this subsection;


 


(v)                                 use Commercially
Reasonable Efforts not to take any action which constitutes a violation of
Applicable Laws or breach of this Agreement and would have a material adverse
impact on:


 


(a)                                  the
commercialization of the Products in the Territory; or


 


(b)                                 the then existing
business of GSK, its Affiliates and licensees with respect to the Products
outside of the Territory;


 


(vi)                              obtain, as soon
as reasonably practicable following the Effective Date, at Biovail’s sole and
exclusive expense, any and all requisite NDCs in Biovail’s name for the
Products, and obtain any and all governmental approvals as are required for
Biovail to fulfill its obligations hereunder, and in conjunction with Biovail,
GSK shall cause the NDC number obtained by Biovail to appear on all Products
(other than Products consisting of current inventory of finished goods) sold by
GSK to Biovail as soon as reasonably practicable;


 


12

















 


(vii)                           maintain the
availability of the current package inserts with respect to the Products on any
website maintained by Biovail or its Affiliates, and at such other locations
where Biovail or its Affiliates make information regarding the Product
available;


 


(viii)                        sell, market,
detail, promote, advertise and distribute the Products in a manner that will
not have a material adverse effect on the Products;


 


3.02         Promotional Materials
and Activities.


 


(a)           Subject to the
provisions of Section 3.02(b) below, Biovail shall be solely
responsible, at its sole expense and under its sole control for conducting all
promotional activities and for designing, preparing and distributing all
materials, advertisements and activities used in the promotion, advertising and
marketing of the Products within the Territory. Biovail shall ensure that all
materials, advertisements and promotional activities comply with, and Biovail
shall be solely responsible and liable for any failure of such materials and
activities to comply with, the applicable labeling and Product Registration for
a given Product and with Applicable Laws and regulations, notwithstanding any
prior review or approval of such materials or activities by GSK and
notwithstanding that such materials or activities may have been previously
reviewed, used or conducted by GSK. Biovail shall be solely responsible for
fulfilling regulatory requirements pertaining to its promotional materials and
activities, including, without limitation, sole responsibility for submitting
to FDA all promotional and advertising materials prepared by or for Biovail at
the time of initial dissemination, by way of a Form FDA-2253, consistent
with 21 C.F.R. Part 314.81. To this effect, GSK shall, upon the Effective
Date, or as soon thereafter as is reasonably practicable, place a letter on
file with DDMAC with respect to the Products advising DDMAC that Biovail shall
be the sole marketer and promoter of the Products and requesting that DDMAC
address regulatory inquiries and concerns regarding Biovail’s promotional
activities solely with Biovail. Biovail shall promptly, but in no event less
than twenty-four (24) hours provide a copy to GSK of any correspondence from a
government agency including, but not limited to, the FDA, reflecting any
purported legal or regulatory violations or legal or regulatory action being
considered or taken by such government agency, including without limitation,
copies of FDA NOV’s and Warning Letters. Unless otherwise required, Biovail
shall not provide GSK with copies of any promotional materials or advertising
or notify GSK of any promotional activities unless pursuant to a written
request by GSK. Biovail shall absorb and be solely responsible for any and all
lost profits, lost revenues, damages, losses, expenses and costs incurred by
Biovail, its Affiliates, and any contract sales organization (“CSO”) retained
by Biovail pursuant to the terms of this Agreement, arising from the failure of
any promotional materials or advertising used, or activities conducted by,
Biovail to comply with the applicable labeling, the Product Registrations
and/or with Applicable Laws. Without limiting the rights GSK may have under the
indemnification provisions of this Agreement, Biovail shall promptly reimburse
GSK and its Affiliates for any and all damages, losses, expenses and costs
suffered or incurred by GSK and its Affiliates arising from (i) the
failure of any promotional materials or advertising used or activities
conducted by Biovail to comply with the applicable labeling, the applicable
Product Registrations, Applicable Laws, and/or any comments, guidance or
direction given by FDA or DDMAC in the Pre-Clearance Process pursuant to Section 3.02(b)(ii) or
(ii) the failure of Biovail or its representatives or any CSO selected
pursuant to the 


 


13

















 


terms
of this Agreement to promote the Products in compliance with the applicable
labeling, the applicable Product Registrations and/or with Applicable Laws. For
purposes of the preceding sentence, it is understood and agreed that the
losses, expenses and costs incurred by GSK shall include, without limitation,
the losses, expenses and costs incurred by GSK to mitigate or limit the effect
or impact of (i) or (ii) above, on GSK and its Affiliates products or
corporate image (including, but not limited to, the costs of any remedial
action undertaken by GSK to communicate with physicians or customers
(including, but not limited to so-called “dear doctor letters”).


 


(b)


 


(i)                                     If Biovail (or
GSK) shall receive a Warning Letter from FDA which relates to marketing,
promotion, advertisement, sale or distribution of the Products after the
Distributorship Commencement Date, or Biovail (or GSK) shall receive two (2) NOV’s
from the FDA which relate to marketing, promotion, advertisement, sale or
distribution of the Products after the Distributorship Commencement Date, GSK
shall have the right to call, and Biovail shall participate/or attend at their
own expense, a meeting of Biovail (which shall include senior level marketing
and sales management of Biovail) and GSK, to be held in Research Triangle Park,
N.C. The purpose of such meeting shall be to discuss the promotional pieces or
practices which led to the issuance of the Warning Letter or the NOV’s, as the
case may be, and to discuss appropriate corrective or remedial measures to
Biovail’s promotional review process. Subsequent to any such meeting or in lieu
of such meeting (if such meeting is not held as a result of the mutual
agreement of the Parties or as a result of Biovail’s failure or refusal to
attend), GSK may, in its sole and absolute discretion, at any time after the
issuance of a Warning Letter or a second NOV from FDA related to the Products
after the Distributorship Commencement Date, decide to invoke the promotional
review procedures set forth in Section 3.02(b)(ii) below by sending
written notice thereof to Biovail (hereinafter, a “Promotional Review Notice”).


 


(ii)                                  In the event that
GSK sends a Promotional Review Notice to Biovail, Biovail shall comply with the
procedures set forth in this Section 3.02(b)(ii). Biovail shall ensure
that all marketing and advertising materials and activities comply with the
applicable labeling and the applicable Product Registration for a given Product
and with Applicable Laws, including, without limitation, addressing any
concerns which were the subject of such FDA letter(s). For a period of twelve
(12) months after the Promotional Review Notice (the “Pre-Clearance Period”),
Biovail shall submit all of the following for review and approval by DDMAC (the
“Pre-Clearance Process”) prior to use or dissemination; any and all marketing,
advertising, promotional and related materials and activities (including,
without limitation, detail aids, letters, brochures, reprints and other printed
materials shown to or left with healthcare providers, letters, 


 


14

















 


brochures and other printed
materials intended for consumers, website content, materials for use in promotional
programs, and any print, television, radio, and other media advertising
materials intended for healthcare providers or consumers), labeling, press
materials, updates and corrections to the Physicians Desk Reference with
respect to the Products, speaker training materials (including slides and slide
kits), sales training materials and other materials and communications
originating from home offices, regional offices, local offices or hub offices
and sent to the sales force regarding promotional messages or strategies for
the Products. Biovail shall not use any materials or make any claims in
advertising, promoting or selling the Products which have not gone through the
Pre-Clearance Process and received specific and entire written approval by
DDMAC; provided, however, that in the case of materials not
accepted for review by DDMAC, Biovail shall ensure that all such materials and
the claims and promotional messages therein; (a) are consistent with the
materials and claims that have gone through the Pre-Clearance Process and
received written approval by DDMAC and (b) comply with all comments,
direction and guidance given by DDMAC during the Pre-Clearance Period. Biovail
shall ensure that all promotional programs and activities of all sales
representatives promoting the Products comply with any and all comments,
direction or guidance given by DDMAC during the Pre-Clearance Period. Upon
expiration of the Pre-Clearance Period, Biovail shall continue to promote,
detail, sell and advertise the Products in a manner consistent with, and in
full compliance with, all comments, directions and guidance received from
DDMAC. Biovail shall be solely responsible for submitting all promotional and
advertising materials prepared by or for it to the FDA by way of a Form 2253
or otherwise. GSK shall have the right to immediately terminate this Agreement
if; (i) Biovail shall fail to fully comply with the requirements of this Section 3.02(b)(ii) or
(iii) FDA issues a Warning Letter or NOV with respect to a Product at any
time during or after the Pre-Clearance Period.


 


(c)           Biovail and GSK
acknowledge that GSK has never promoted Zovirax® Cream in the Territory, and
the Parties further acknowledge that GSK is not currently actively promoting
Zovirax® Ointment in the Territory and has not done so for several years. Thus,
GSK does not have current materials designed for advertising or promoting the
Products in the Territory. GSK shall provide Biovail with copies of any
advertising, promotional or training materials in its possession and previously
used by GSK relating to the Products, and shall permit Biovail, subject to
compliance by Biovail with Applicable Laws, to update, adapt and use such
materials in the Territory in developing new promotional materials (subject to
any copyrights or other rights reserved to GSK, its Affiliates and to Third
Parties in such materials). GSK reserves and retains title and all rights,
including copyright rights, in and to all written, visual and electronic works
and other materials (including without limitation training materials, promotion
materials, brochures and other detail literature) provided by it to Biovail
under this Agreement. Subject to the foregoing, Biovail is granted the
nonexclusive right under this Section to use, copy, modify, and distribute
such materials only for the purposes of this Agreement and in furtherance of
the 


 


15

















 


rights
granted to Biovail hereunder, for the applicable Term for a given Product to
which such works and materials relate. Biovail shall ensure that all copyright
notices and this permission notice appear on all copies of the written
materials provided by GSK and all adaptations and derivative works thereof. Any
and all new promotional material developed by Biovail, including that which
adapts or utilizes materials supplied to Biovail by GSK, shall be filed with
FDA at the time of initial dissemination via Form FDA-2253.


 


(d)           Biovail shall have
strategic responsibility and sole authority and responsibility, at its sole
expense, for conducting independent and non-independent symposia, speaker
training and engagement programs, advisory board meetings and other consulting
arrangements, scientific exhibits and other types of scientific exchange, and
other such events or programs as needed with respect to the Products within the
Territory; provided, however, that any and all such events and
programs must comply in all respects with Applicable Laws and relevant FDA
policies, including without limitation, the FDA’s Guidance on Industry-Supported
Educational and Scientific Activities.


 


3.03         Use of Trademarks;
Trade Dress.  During the Term of this
Agreement, and subject to the terms and conditions of this Agreement:


 


(a)           Biovail shall use the
Trademarks, on a royalty-free basis, to promote, market, sell and distribute
the Products within the Territory. Biovail shall not identify the Products by
any designation other than the Trademarks for the Products. With respect to all
Products which bears Biovail’s NDC codes as provided in Sections 3.01(b)(iv) and
4.02(d), Biovail shall be identified as the distributor of such Products on the
Product label as the same may be required and specified under Applicable Law,
or if Applicable Law does not specify how the distributor shall be indicated on
a Product’s label, then as determined (including without limitation as to size
and placement) by GSK in consultation with Biovail. The use of the Trademarks
by Biovail shall be expressly subject to subparagraph (c) below.


 


(b)           Biovail shall permit
duly authorized representatives of GSK to inspect, on the premises of Biovail
or its subcontractors and agents, at reasonable times during normal business
hours and upon not less than ten (10) days prior written notice, Product
inventory, Biovail’s quality control records, and Biovail’s facilities used in
or relating to the storage, distribution or sale of the Products to ensure
compliance with quality control standards and with applicable terms of this
Agreement pertaining to the use of the Trademarks.


 


(c)           Whenever Biovail uses
the Trademarks in advertising or in any other manner in connection with the
Products, Biovail shall clearly indicate that the Trademarks are owned by the
GlaxoSmithKline group of companies. When using the Trademarks under this
Agreement, Biovail shall comply with all Applicable Laws pertaining to the
Trademarks in force at any time in the Territory. During the Term of this
Agreement, Biovail shall provide GSK with copies of such foregoing material on
a periodic basis, as requested by GSK, for approval of the use of the
Trademarks by Biovail. Biovail shall promptly take any and all actions directed
by GSK with respect to maintaining the value of the Trademarks and to assure
compliance with the provisions of this Section 3.03.


 


16

















 


(d)           Biovail acknowledges
and agrees that GSK and or its Affiliates, is, and will remain the owner of the
Trademarks. Biovail shall not at any time do, cause to be done, or permit any
of its employees, agents, contractors and subcontractors to commit any act
inconsistent with, contesting or in any way impairing, or tending to impair,
such ownership. Biovail agrees that all use of the Trademarks by Biovail shall
inure to the benefit of and be on behalf of GSK and/or its Affiliates. Biovail
acknowledges that nothing in this Agreement shall give Biovail any right, title
or interest in the Trademarks other than the right to use the Trademarks within
the Territory in accordance with this Agreement. Biovail agrees that it will
not challenge GSK’s or its Affiliates’ title to, or ownership of, the
Trademarks, or attack or contest the validity of the Trademarks. All goodwill
accruing to the Trademarks as a result of the use of the Trademarks in the
performance of this Agreement shall belong solely to GSK and/or its Affiliates.
In the event that Biovail acquires any rights in the Trademarks in connection
with Biovail’s activities pursuant to this Agreement, Biovail shall assign, and
hereby does assign, to GSK and/or its Affiliates all such rights, including any
related goodwill.


 


(e)           Until such time as
the Bupropion Product shall be launched in the Territory, the trade dress of
the Products will remain unchanged, with the exception of the appearance of
Biovail’s NDC number and labeler code and Biovail’s name, address and telephone
number as distributor, on Product packaging, provided that the foregoing shall
not be included on Product packaging until such time as GSK has fully exhausted
all packaging and components in GSK’s inventory on the Distributorship
Commencement Date. Subsequent to the launch of the Bupropion Product in the
Territory, Biovail may elect to use its own trade dress with respect to the
Product; provided, however, that GSK shall at all times have the
rights of review and final approval of Biovail trade dress for the purposes of
trademark integrity. Except to the extent required by Applicable Laws or
Governmental Authority, Biovail may make no more than an aggregate total of two
(2) changes per Calendar Year to the trade dress of the Products which
changes shall be limited to changes in color, graphics and text of Product
packaging.


 


3.04         Trademark Infringement
by Third Parties.  If either Party
becomes aware that a Third Party is infringing any Trademark used in connection
with the Product, such Party shall give written notice to the other Party
describing in detail the nature of such infringement. GSK and its Affiliates
shall have the sole right, but not the obligation, to enforce any such
Trademarks against such Third Party infringer to the extent deemed necessary or
appropriate by GSK or its Affiliates, in their reasonable discretion, and to
settle or compromise any such possible infringement by taking such action as
GSK or its Affiliates may determine in their sole and absolute discretion;
provided, however, that GSK shall not settle any such potential infringement in
a manner that materially adversely affects the rights granted to Biovail
hereunder, except with Biovail’s prior written consent (which consent shall not
be unreasonably withheld). Biovail shall provide GSK all reasonable assistance
(including, without limitation, making documents and records available for
review and copying, and making persons within its control available for
pertinent testimony), at GSK’s expense, in such enforcement.


 


3.05         Administrative
Functions; Third Party Contracts.


 


(a)           Effective as of the
Distributorship Commencement Date, GSK will, on behalf of Biovail, as provided
in this Section 3.06 and Section 6.05 at GSK’s own expense, process,
administer and provide reasonable support: (i) with respect to rebates
arising solely with respect 


 


17

















 


to
the Products dispensed for Medicaid bearing GSK’s NDCs, and (ii) until December 31,
2002 with respect to returns of Products bearing GSK’s NDCs. Any and all
payments due and owing from Biovail to GSK under this Section 3.05(a) shall
be payable by Biovail by not later than forty-five (45) days after Biovail’s
receipt of a detailed invoice therefor, and shall be made in accordance with
the terms of Article 7 hereinbelow. GSK’s processing of rebates and return
credits attributable to the Product on Biovail’s behalf shall conform to GSK’s
administrative processes and systems currently applicable to GSK’s processing
of rebates and return credits on its own account.


 


Effective
on the Distributorship Commencement Date, and effective at all times thereafter
during the Term of this Agreement, GSK shall have no responsibility for the
administration of, or other subsequent support for, chargebacks, rebates,
administrative service fees and other operational activities with respect to
the Products, except as otherwise provided in Sections 3.06 and 6.05.


 


(b)           Commencing as of
12:01 am. on December 25, 2001, and continuing thereafter until the
earlier of the termination or expiration of this Agreement, GSK shall not
accept orders for the Product within the Territory from wholesalers or other
direct purchasers, and will inform such current and potential direct-purchase
customers for the Product that the Product must be ordered from Biovail, using
such ordering information and requirements as Biovail may specify.


 


(c)           GSK shall use its
best efforts to notify all Third Party contract customers and all appropriate
government agencies of the foregoing arrangement.


 


(d)           The parties
acknowledge that it is Biovail’s intention to enter into, administer and be
bound by its own Third Party contracts on such terms as Biovail shall negotiate
with Third Party customers.


 


3.06         Rebates for
Products.  GSK shall be responsible for
processing all Medicaid rebates for Products bearing GSK’s NDCs through December 31,
2002. The foregoing notwithstanding, Biovail shall reimburse GSK for all
rebates GSK pays on Biovail’s behalf for product dispensed on or after the
Distributorship Commencement Date for purposes of rebates for outpatient
Medicaid utilization, such date of dispensing shall be deemed to be the date as
submitted by the respective states or the District of Columbia.


 


Any
and all payments due and owing under this Section 3.06 shall be paid in
accordance with the terms of Article 7 by not later than forty-five (45)
days following Biovail’s receipt of GSK’s invoice therefor, which invoice shall
include reasonable supporting documentation and shall specify: (i) each
rebate program to which the rebate is paid, (ii) the period covered by the
payment, and (iii) the specific amount of the rebate paid to any such
program. Biovail may, from time to time upon reasonable notice and request to
GSK, audit rebates charged to it by GSK, and GSK shall reasonably cooperate
with any such audit or inquiry by Biovail with respect to the amount or
validity of any rebate, subject to any confidentiality obligations to which GSK
is subjected.  The foregoing provisions
notwithstanding, Biovail shall at all times have sole and exclusive
responsibility for the processing and payment of any and all rebates arising
from or with respect to Product bearing Biovail’s NDC numbers.


 


18

















 


3.07         Medicaid
Information.  With respect to any Product
sold by Biovail after the Distributorship Commencement Date which bears an NDC
number of GSK or any of its Affiliates, Biovail will deliver to GSK, within
fifteen (15) days after the end of each Calendar Quarter, the following
information: (a) the “best price” (as defined under the Social Security
Act, 42 U.S.C. §1396r-8(c)(1)(C) for each Product identified by NDC
number, and (b) the “average manufacturer price” (as defined under the
Social Security Act, 42 U.S.C. §1396r-8(k)(1)) and the number of sales units
and dollars for each Product, each identified by NDC number. Biovail agrees to
provide to GSK any additional data or other information regarding sales or
pricing of the Product by Biovail which GSK requests as necessary for the
calculation of the rebates contemplated in Section 3.06 above. Biovail
agrees that GSK may use all information described in this Section 3.07 in
GSK’s reporting to the Health Care Financing Administration. GSK shall provide
to Biovail the base date average manufacturer price and any assumptions with
respect to the calculation thereof for the Products.


 


3.08         Shipping and
Distribution Obligations.  From and after
the Distributorship Commencement Date, Biovail shall have the sole and
exclusive responsibility, at its sole cost and expense, for (i) shipping
and distribution of the Products to its customers, (ii) warehousing of
Products, (iii) invoicing and billing of purchasers of the Products, (iv) order
confirmation (if any) in accordance with Biovail’s customary practices, and (v) the
collection of receivables resulting from sales of the Products. Biovail agrees
and confirms that no Product will be shipped, sold, distributed or released
prior to receipt of a certificate of analysis for said Product as required
under Section 6.02 hereinbelow.


 


3.09         Pricing.  From and after the Distributorship
Commencement Date, Biovail shall have the sole authority to determine the
prices of Products sold by it during the Term and to establish its own pricing
policy for the Products within the Territory, including price increases or
decreases and the timing thereof as determined by Biovail. Biovail will provide
not less than five (5) days notice of any such price changes.


 


3.10         Puerto Rico Sales
Information.  From and after the
Distributorship Commencement Date, Biovail shall by the twentieth (20th) day of each
Calendar Month provide to GSK the total units sold and Gross Sales of each
Product to Biovail’s customers in Puerto Rico during the immediately preceding
Calendar Month.


 


3.11         Sample
Accountability.  Biovail shall cause, and
shall maintain written procedures to ensure that, all of its sales
representatives (and those of any CSO utilized by Biovail) comply with all
Applicable Laws relating to the distribution of, and accountability for, Sample
Products, including but not limited to the Prescription Drug Marketing Act (“PDMA”).
Biovail shall notify GSK within forty-eight (48) hours of learning of any
instances of theft or significant loss, or upon Biovail having reason to
believe there has been a diversion or falsification of a sample record, or
other instances of non-compliance with the PDMA and Applicable Laws regarding
Sample Products. Any and all records, reports or other documentation with
respect to Sample Products generated from compliance reports, sample
accountability cards and the like produced by Biovail shall be maintained by
Biovail for a period of not less than three (3) years.  Biovail agrees to fully cooperate with GSK in
the production and delivery of any such documentation as may be requested or
required by FDA and/or any other Governmental Authority.


 


19

















 


3.12         Federal Government
Pricing Programs.  Promptly after the
Distributorship Commencement Date, GSK shall notify the Health Care Financing
Administration, the United States Department of Defense, the Office of Drug
Pricing and the Veteran’s Affairs National Acquisition Center (the foregoing
being hereinafter collectively referred to as the “Federal Programs”) of
Biovail’s distribution rights with respect to the Products, and that as of the
Distributorship Commencement Date that GSK will no longer support or sell the
Products under any contracts in place with said Federal Programs. Biovail shall
establish its own contractual relationships with the Federal Programs as soon
as commercially reasonable.


 


3.13         Sales Force.


 


(a)           Biovail shall be
solely responsible for the costs and expenses of establishing and maintaining
its sales force and marketing functions for the Products, and for conducting
its other activities under this Agreement, and, subject to the foregoing, shall
have sole authority to control its sales force and direct the activities of its
sales force.


 


(b)           All members of
Biovail’s sales force (including management and representatives), and CSO sales
force personnel, if any, shall complete a Product-related training program
conducted by Biovail at its cost and expense. In connection with Biovail’s
Product-related training program, GSK shall, to the extent available and in GSK’s
possession provide Biovail with copies of any training materials previously
used in training sales representatives in the Territory on Zovirax® Ointment,
to the extent such materials are existing and available. Biovail shall have the
sole responsibility for updating any such materials and for preparing
additional and new materials for the Products for sales training purposes as
needed. Ongoing training of Biovail’s sales representatives and other personnel
shall be the responsibility of Biovail at its cost and expense. The contents of
any training provided by Biovail that relates to the Products shall be
developed and coordinated by Biovail, and Biovail shall be solely responsible
for training its sales force (including management and sales representatives)
and CSO sales force personnel, if any, with regard to Applicable Laws and
directing such sales force and sales force personnel to be compliant with
Applicable Laws, regardless or whether Biovail utilized GSK provided materials
for training.


 


3.14         Promotional Spend
Requirement.  In each Calendar Year
during the Term of this Agreement, Biovail shall, commit, allocate and spend,
at a minimum funds in the amounts set forth below for Promotional Support for
each Product (each a “Promotional Spend Requirement, collectively the “Promotional
Spend Requirements”):


 


(i)                                     Calendar Years
{***}† — {***}† of Gross Sales of each Product during the immediately
preceding Calendar Year;


 


(ii)                                  Calendar Years
{***}†  —  {***}† of
Gross Sales of each Product during the immediately preceding Calendar Year; and


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


20














 


(iii)                             Calendar Years
{***}† — {***}† of Gross Sales of each Product during the
immediately preceding Calendar Year.


 


In
the event of Generic Entry with respect to a Product, the Promotional Spend
Requirement for that Product for the period of {***}† calendar months following the date of Generic Entry shall be {***}† of the then applicable percentage rates set forth immediately above,
and, upon expiration of said {***}†
month period, shall thereafter be zero.


 


In
each Calendar Year, Biovail shall allocate not less than {***}† of the applicable Promotional Spend Requirement to personal field
selling activities for the Products in the Territory.


 


ARTICLE 4.


 


GSK
RESPONSIBILITIES


 


4.01                           Supply of
Product.  In order to ensure the quality
of the Products to be sold by Biovail under the Trademarks, Biovail shall
purchase exclusively from GSK, and GSK shall supply to Biovail, pursuant to
Articles 5 and 6 hereof, and subject to the other terms and conditions as set
forth in this Agreement, Biovail’s entire requirements of the Products for
marketing, sale and distribution by Biovail in the Territory during the Term.
It is expressly acknowledged and agreed by Biovail that GSK’s obligation to
supply Zovirax® Cream under this Section 4.01 shall not become effective
until sixty (60) days following FDA’s approval of Zovirax® Cream NDA.


 


4.02                           Retention of
Product Registrations.


 


(a)                                  GSK shall retain
all rights, title and interests in and to the Product Registrations for the
Products in the Territory. GSK shall provide to Biovail, within thirty (30)
days after the Effective Date, the clinical section of the NDA for Zovirax®
Ointment, and the clinical section of the Zovirax® Cream NDA by March 30,
2002. GSK shall also provide to Biovail the results of any clinical studies
conducted with respect to any Product after approval of the Product’s NDA.


 


(b)                                 GSK shall have
sole responsibility for maintaining, and shall maintain, the Product
Registrations in the Territory at its expense, including without limitation
filing IND and NDA Annual Reports, as applicable. GSK shall inform Biovail on a
timely basis as to any developments that would have a material adverse effect
on a Product Registration. Biovail shall cooperate with GSK with respect to
obtaining and/or maintaining the Product Registrations, and shall execute,
acknowledge and deliver such further instruments at GSK’s request and expense,
and do all such other acts, as promptly as possible, which may be necessary or
appropriate to maintain the Product Registrations in the Territory. Biovail
shall, provide to GSK all information that Biovail has from time to time during
the Term that GSK does not have and requests from 


 






† Represents material which has been
redacted and filed separately with the Securities and Exchange Commission pursuant
to a request for confidential treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.


 


21

















 


Biovail
that is reasonably necessary and relevant to GSK’s obligations hereunder to
fulfill such Product Registration maintenance requirements (including, but not
limited to, providing sales distribution information concerning the Product).
GSK shall have the final decision-making authority in every case on whether and
how to supplement, amend or otherwise alter the Product Registrations and with
respect to any other issues in connection with such Product Registrations and
on whether and how to communicate with the FDA and other applicable
governmental agencies or authorities in connection with such Product
Registrations, but shall not take any steps to supplement, amend or otherwise
alter the Product Registrations that would have a material adverse impact on
Biovail’s ability to market the Products, without the written consent of Biovail,
which consent shall not be unreasonably withheld.


 


(c)                                  GSK and Biovail
(and, to the extent possible and/or permissible, such of their respective
contractors and/or subcontractors providing services with respect to the
Products) shall each make their respective facilities available at reasonable
times during business hours for inspection by representatives of governmental
agencies. GSK and Biovail each shall notify the other within twenty-four (24)
hours (or, if such twenty-four (24) hour period ends on a non-Business Day,
then prior to Noon on the next following Business Day) of receipt of, and
provide a copy of, any notice of any FDA, or other governmental agency,
inspection, investigation or other inquiry, or other material governmental
notice or communication, relating to the sale, marketing, promotion,
manufacture, distribution, or use of the Products within the Territory. Biovail
and GSK shall cooperate with each other during any such inspection,
investigation or other inquiry. Biovail and GSK shall discuss any response to
observations or notifications received in connection with any such inspection,
investigation or other inquiry and each shall give the other an opportunity to
comment upon any proposed response before it is made; provided, however,
that Biovail shall be solely responsible for responding to regulatory inquiry
and actions from government agencies relating to promotional materials and
activities as contemplated by Section 3.02, and, provided further that GSK
will not be required to discuss with Biovail any material issues specific to
the manufacture of the Products, except those related specifically to such
inquiry, (but only to the extent that no GSK trade secrets, intellectual
property or manufacturing know-how shall be divulged or compromised), or to
obtain the consent or agreement of Biovail with respect to issues related
thereto. In the event of disagreement concerning the form or content of such
response, however, GSK shall be responsible for deciding the appropriate form
and content of any response with respect to any of its cited activities and
Biovail alone shall be responsible for deciding the appropriate form and
content of any response with respect to any of its cited activities. Biovail
will provide GSK with copies of all correspondence received by it from, or
filed by it with, any federal, state or local regulatory authority to the
extent pertaining to the Products or its distribution, promotion, advertising,
marketing, or sale of the Product in the Territory; provided, however,
that Biovail shall not provide copies of promotional materials or Product
advertising for the Product, unless requested in writing by GSK or required
under Section 3.02 (d).


 


(d)                                 GSK shall control
all package inserts and labeling (and any changes or supplements thereto) for
the Product, and shall have the responsibility at its expense for securing any
approvals required by FDA to any such changes or supplements thereto except to
the extent such changes or supplements shall be requested by Biovail. Any such
requested changes by Biovail shall be submitted in writing to GSK through the
GSK change control process, and shall 


 


22

















 


require
a lead-time of not less than four (4) calendar months and the consent and
approval of GSK. Any such changes requested by Biovail and consented to by GSK
shall be made at the sole and exclusive cost and expense of Biovail, which
shall include the cost of any inventory of Product or components rendered
obsolete by such changes, and the expenses of disposing of same. Biovail shall
not at any time do, cause to be done or permit, any act by Biovail, its
employees, agents, contractors or subcontractors, inconsistent with the then
existing package inserts and labeling for any Product in the Territory. In the
event that any filings are required to be made with or approvals required to be
obtained from applicable regulatory authorities in order to change or
supplement the package inserts and labeling, GSK shall have the sole right and
discretion on how to effect such changes, which, unless the result of changes
requested by Biovail, shall be made at GSK’s expense. GSK shall consult with
Biovail with respect to any such changes or supplements to the label for any
Product, and Biovail shall cooperate fully with GSK with respect to any actions
or decisions taken or made by GSK with respect thereto.


 


4.03                           Prosecution and
Maintenance of Trademarks and Patents. 
During the Term of this Agreement:


 


(a)                                  GSK shall
register and maintain, or cause to be registered and maintained, at its cost
and expense, the Trademarks in the Territory during the Term. If Biovail learns
of any unauthorized use of the Trademarks by others in the Territory, Biovail
agrees to promptly notify GSK of such unauthorized use in accordance with Section 3.04.


 


(b)                                 Notwithstanding
any other provision of this Agreement to the contrary, GSK and its Affiliates
shall have the sole right, but not the obligation, in their reasonable
discretion and at their expense, to prosecute, maintain, enforce, defend or
abandon any patent rights and know-how owned or controlled by GSK in the
Territory with respect to the composition, manufacture, formulation and use of
the Products. GSK shall not abandon any patent right or know-how owned or controlled
by GSK with respect to the Product in the Territory without giving sixty (60)
days prior written notice to Biovail and permitting Biovail at its sole and
exclusive expense to take reasonable and customary actions to maintain or
preserve such patent right or know-how. In the event that GSK shall, in its
discretion, elect not to defend any patent rights with respect to a Product
controlled by GSK in the Territory, GSK shall provide timely notice of such
election to Biovail and give Biovail the opportunity to defend said Product
patents at Biovail’s sole and exclusive expense, and GSK will provide
reasonable cooperation and assistance to Biovail in such defense.


 


(c)                                  Notwithstanding
any provision of this Agreement to the contrary, GSK shall have the sole right,
but not the obligation, at its sole discretion and expense, to maintain and
enforce any contract entered into by GSK covering the supply of any compounds,
intermediates, biomaterials, packaging components, containers and other
materials used in the manufacture of the Products, provided that GSK’s election
as to such enforcement or non-enforcement shall not materially compromise GSK’s
ability to fulfill its supply obligations hereunder.


 


4.04                           No Obligation to
Develop New Formulations.  Excluding
Sample Products, and subject to the obligations of GSK to develop New Products
under Section 5.14, GSK shall have no obligation, express or implied, to
develop new, different or additional formulations, presentations, dosages,
forms of administration, or preparations for the Products.


 


23

















 


4.05                           Zovirax® Cream
NDA Filing; Subsequent Support.  No later
than sixty (60) days after the Distributorship Commencement Date GSK shall
submit to FDA a letter requesting the reinstatement of the previously filed,
and subsequently withdrawn, NDA for prescription sales of Zovirax® Cream in the
Territory (the “Zovirax® Cream NDA”). GSK shall use Commercially Reasonable
Efforts to secure approval of the Zovirax® Cream NDA and will provide Biovail
with status reports of significant events with respect thereto. GSK shall have
the sole responsibility for, and control over the content of, any
communications with FDA, and additional regulatory filings, needed to support
the Zovirax® Cream NDA Biovail hereby expressly acknowledges and agrees that
except for the Phase IV Clinical Study, Biovail shall be solely responsible for
any and all costs of any new or further studies, of any kind, required to
obtain FDA approval of the Zovirax® Cream NDA Any fee required under 21 U.S.C.
§379h(a)(1) shall be borne and paid by GSK.


 


4.06                           Phase IV Clinical
Study.  Upon approval of the Zovirax®
Cream NDA, GSK shall conduct, at its expense, the Phase IV Study, and shall as
promptly as practicable, review and analyze the results of said study. GSK
shall provide a copy of the study, and its results as soon as reasonably
practicable.


 


4.07                           Continuation of
Customary Practices.  For the period
beginning on the Effective Date and ending on December 24, 2001, GSK will
continue with its customary business practices with respect to Zovirax®
Ointment; provided, however that any and all decisions with
respect to Zovirax® Ointment shall rest solely with GSK, and nothing herein
shall be construed to grant to Biovail any rights of review or approval with
respect to the business practices or decisions of GSK. From the Effective Date
through December 24, 2001 GSK shall not offer sales incentives for the
Products to its customers or undertake any affirmative action resulting in speculative
purchasing of the Products by wholesalers.


 


ARTICLE 5.


 


PURCHASE AND
SALE OF PRODUCTS AND DISTRIBUTION RIGHTS PAYMENT


 


5.01                           Distribution
Rights Payment; Additional Rights Payment; Supplemental Allowance Payment;
Extension Period.


 


(a)                                  Distribution
Rights Payment - For and in consideration of the rights granted by
GSK to Biovail under this Agreement, and as an unconditional and non-refundable
(in whole or in part) payment, Biovail shall, on January 2, 2002, pay to
GSK a lump sum payment in the amount of One Hundred Thirty-Three Million U.S.
Dollars (U.S.$133,000,000.00) (the “Distribution Rights Payment”). The
Distribution Rights Payment shall be paid in United States currency in
immediately available funds in accordance with the terms of Section 7.01
hereinbelow.


 


(b)                                 Extension of Term - In
consideration for extending the Original Agreement through the Extension
Period, Biovail shall pay to GSK the sum of forty million U.S. dollars (US
$40,000,000), on or before March 31, 2003. Once paid, such amount shall
not be refundable for any reason.


 


24

















 


(c)                                  Additional Rights
Payment and Additional Rights Lump Sum Payment— If during the Term of this
Agreement the Development Agreement shall be terminated by either Party for any
reason whatsoever, then, as an additional payment to the Distribution Rights
Payment set out in Section 5.01(a), Biovail shall make the following
payments to GSK:


 


(i)                                    For each of
Calendar years 2002 through 2006, Biovail shall pay to GSK an additional amount
of Twenty-Two Million U.S. Dollars (U.S.$22,000,000.00) per year (each an “Additional
Rights Payment”, collectively, the “Additional Rights Payments”), provided,
however, that the aggregate cumulative total of all Additional Rights
Payments shall not exceed {***}†. In the event
of termination of the Development Agreement by GSK only, the Additional Rights
Payment for the Calendar Year in which such termination occurs shall be
pro-rated to the effective date of termination. There will be no such proration
if the Development Agreement is terminated by Biovail. If Biovail does not
prepay all Additional Rights Payments as specified in 5.01(b)(iii) below,
then the first Additional Rights Payment shall be paid by not later than
forty-five (45) days following the effective date of termination of the
Development Agreement. Thereafter, each Additional Rights Payment shall be paid
on the first Business Day of each succeeding Calendar Year for which such a
payment shall be due.


 


(ii)                                 For each of the
Calendar Years 2007 through 2011, Biovail shall pay to GSK an additional
payment in an amount equal to {***}† of Biovail’s aggregate Gross Sales of the
Products during the immediately preceding Calendar Year (each a “Variable
Additional Rights Payment”, collectively, the “Variable Additional Rights
Payments”). Such payment shall be made to GSK by not later than forty-five (45)
days from December 31 of the Calendar Year for which such Variable
Additional Rights Payment is due. The foregoing notwithstanding, commencing
with the first full Calendar Year subsequent to the point in time at which a
Generic Entry shall have occurred with respect to a Product, and continuing
thereafter for the balance of the Term, no Variable Additional Rights Payments
shall be paid by Biovail with respect to Biovail’s Gross Sales of that Product.


 


(iii)                              In the event of
termination of the Development Agreement and a consequent obligation of Biovail
to make the Additional Rights Payments Amounts as described in Section 5.02(b)(i),
Biovail may, at its option, within forty-five (45) days after the effective
date of termination of the Development Agreement, pay and deliver to GSK, an
unconditional, nonrefundable (in whole or in part) lump sum payment in the
dollar amount 


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


25

















 


equal to the Additional Rights
Payment Cash Flow, discounted at a rate of {***}† (the “Additional Rights
Lump Sum Payment”).


 


(d)                                 Effect of Generic
Entry on Additional Rights Payments — In the event of Generic
Entry with respect to a Product, the Additional Rights Payments (only if
Biovail shall not have made the Additional Rights Lump Sum Payment permitted
under Section 5.01(b)(ii) above) shall be adjusted as follows:


 


(i)                                    If Generic Entry
with respect to Zovirax® Ointment shall occur prior to January 1, 2005,
then the Additional Rights Payment Amounts for the Calendar Years 2002, 2003
and 2004, only, shall be as set forth on Exhibit 5.01(c)(i) attached
hereto. Biovail expressly acknowledges and agrees that there will be no changes
to the Additional Rights Payment Amounts for the Calendar Years 2005 and 2006
if Generic Entry with respect to Zovirax® Ointment occurs on or after January 1,
2005.


 


(ii)                                 In the event that
the Zovirax® Cream NDA is not approved before July 1, 2003 and there shall
have occurred Generic Entry with respect to Zovirax® Ointment, then the
Additional Rights Payment Amounts for the Calendar Years 2003 through 2006
shall be as set forth on Exhibit 5.01(c)(ii) attached hereto.


 


(e)                                  On March 31
of each of the Calendar Years of 2004, 2005, 2006 and 2007, respectively,
Biovail shall pay to GSK the Supplemental Allowance Payment. Each Supplemental
Allowance Payment paid to GSK by Biovail shall not be refundable for any
reason.


 


(f)                                    In the event that
regulatory approval of Wellbutrin® XL is not granted by the FDA in the USA on
or before December 31, 2003, the Additional Rights Payment specified in Section 5.01(b)(1) for
the Calendar Year 2004 (twenty-two million U.S. dollars (US $22,000,000) shall
be increased by the Adjustment Amount, and the aggregate cumulative total of
all Additional Rights Payments shall correspondingly be increased by the
Adjustment Amount.


 


5.02                           Purchase of
Product; Annual Minimum Purchase Requirements.


 


(a)                                  Purchase of
Product — Subject to the terms and conditions of this Agreement, GSK agrees to
supply and sell to Biovail, and Biovail shall purchase from GSK, Biovail’s
entire requirements of the Products during the Term of this Agreement at the
applicable transfer prices specified in Section 5.06 and, in the case of
Sample Products, Section 5.13.


 


(b)                                 Minimum Purchase
Requirements — Except as otherwise provided in Section 5.02(c) hereinbelow
there will be no minimum purchase requirements under this Agreement.


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


26

















 


(c)                                  Annual Minimum
Purchase Requirement — If during the Term of this Agreement the
Development Agreement shall be terminated by either Party for any reason
whatsoever, then Biovail shall in each Calendar Year during the balance of the
Term purchase Products from GSK in the aggregate total dollar amounts as
follows (each an “Annual Minimum Purchase Requirement”, collectively the “Annual
Minimum Purchase Requirements”):


 


(i)                                    Fixed Annual
Minimum Purchase Requirement — For each of Calendar Years {***}†, the Annual Minimum Purchase
Requirement shall be {***}† per year (each a “Fixed Annual Minimum
Purchase Requirement”, collectively, the “Fixed Annual Minimum Purchase
Requirements”) which shall be made at the transfer prices specified in Section 5.06;
provided, however that in no event shall such requirement take
effect before {***}†, In the event of termination of the
Development Agreement by GSK only, the Fixed Annual Minimum Purchase
Requirement for the Calendar Year in which such termination occurs shall be
pro-rated to the effective date of termination. There will be no such proration
if the Development Agreement is terminated by Biovail.


 


(ii)                                 Variable Annual
Minimum Purchase Requirement — For each of the Calendar Years {***}†, the Annual
Minimum Purchase Requirement shall be {***}† of Biovail’s aggregate Gross
Sales of the Products during the immediately preceding Calendar Year (each a “Variable
Annual Minimum Purchase Requirement”, collectively, the “Variable Annual
Minimum Purchase Requirements”). The purchase price to be paid by Biovail for
such Products shall be {***}† of the Product’s Net Wholesale Price charged
by Biovail as of the issue date of GSK’s invoice to Biovail for the Products.


 


(d)                                 Effect of Generic
Entry on Annual Minimum Purchase Requirements — In the event of Generic
Entry with respect to one or both of the Products, the Fixed Annual Minimum
Purchase Requirement and the Variable Annual Minimum Purchase Requirement (for
the Calendar Years {***}† only) shall be adjusted as follows:


 


(i)                                     If Generic Entry
with respect to Zovirax® Ointment shall occur prior to January 1, {***}†, then the Fixed
Annual Minimum Purchase Requirements for the Calendar Years {***}†, only, shall be as set forth
on Exhibit 5.02(e)(i) attached hereto. Biovail expressly acknowledges
and agrees that there will be no changes to the Fixed Annual Minimum Purchase
Requirements for the Calendar Years {***}† if Generic Entry with respect
to Zovirax® Ointment occurs on or after January 1, {***}†.


 


(ii)                                  In the event that
the Zovirax® Cream NDA is not approved before July 1, 2003 and there shall
have occurred Generic Entry with respect to 


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


27

















 


Zovirax® Ointment, then the
Fixed Annual Minimum Purchase Requirements for the Calendar Years {***}† shall be as set forth on
Exhibit 5.02(e)(ii) attached hereto.


 


(iii)                              In the event of
Generic Entry with respect to a Product on or after January 1, {***}†, the Variable
Annual Minimum Purchase Requirement for the Calendar Year in which such Generic
Entry occurs shall be determined in accordance with the following formula;


 


Variable Annual Minimum Purchase Requirement = A-G
Where:


 


A = The Variable Annual
Minimum Purchase Requirement then applicable for the Calendar Year in which
Generic Entry with respect to a Product occurs; and


 


G = {***}† (the result of which
operation shall, for purposes of this Section 5.02(e)(iii) be
referred to as the “Generic Impact”); and


 


B = The immediately preceding
Calendar Year’s Gross Sales for the Product with respect to which Generic Entry
has occurred; and


 


C = The immediately preceding
Calendar Year’s total aggregate Gross Sales for both Products; and


 


X = The numbers of months of
generic competition in the applicable Calendar Year; and


 


Y=12.


 


In the event that Generic
Entry shall occur with respect to both Products in the same Calendar Year on or
after January 1, {***}†, the applicable Variable Annual
Minimum Purchase Requirement for the Calendar Year in which such dual Generic
Entry shall occur shall be reduced by an amount equal to the sum of the Generic
Impact for Zovirax® Ointment plus the Generic Impact for Zovirax® Cream.


 


For each of the Calendar Years
remaining in the Term subsequent to a Generic Entry as discussed in this Section 5.02(e)(iii),
the Variable Annual Minimum Purchase Requirement shall be {***}†  of the immediately preceding Calendar Year’s Gross
Sales of the Product not subject to generic competition. No Variable Annual
Minimum Purchase Requirement will be in effect for any full Calendar Year
following Generic Entry with respect to both Products.


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


28

















 


5.03                           Product Supply
Schedule; Purchase Orders.


 


(a)                                  On or prior to
the twentieth (20th) day of each calendar month following the Distributorship
Commencement Date, Biovail shall deliver to GSK a new rolling {***}† month Product supply forecast
signed by an authorized Biovail representative indicating approval of such
Monthly Product Supply Schedule (each a “Monthly Product Supply Schedule”)
setting forth the quantities of Product to be supplied by GSK to Biovail, on a
monthly basis, for the following {***}† calendar months, or, if
shorter, for the remainder of the Term. The quantities covered by the first
{***}† calendar months
of each such Monthly Product Supply Schedule shall constitute a commitment by
Biovail to purchase those quantities set forth in such months and such Monthly
Product Supply Schedule shall be accompanied by a valid purchase order (“Purchase
Order”) for the quantities covered by the third month of that first {***}†. The forecast for any month
other than the first {***}† months shall constitute Biovail’s good faith
forecasts of Product orders for those months and may be varied only within the
limits set out in Sections 5.03 and 5.04. The forecast for any of months {***}† through {***}† identified in each Monthly
Product Supply Schedule cannot differ in the aggregate by greater than {***}† from the forecast for the
same calendar month when that month was the {***}† in the Monthly Product Supply
Schedule delivered by Biovail, and the forecast for any of months {***}† in each such Monthly Product
Supply Schedule cannot differ by greater than {***}†  from the forecast
for that calendar month when that month was the {***}† calendar month in the Monthly
Product Supply Schedule delivered by Biovail.


 


(b)                                 GSK has the
express right to review each Monthly Product Supply Schedule and to approve or
reject the requested volumes for months {***}† of each Monthly Product
Supply Schedule, and in the event in GSK’s determination it cannot fulfill the
Product volumes requested by Biovail in a Monthly Product Supply Schedule, GSK
shall provide to Biovail an estimate of the volume of each Product GSK can
deliver based on GSK’s then current capacities which estimates shall be the
basis for determining a mutually acceptable forecast quantity for each Product
for such {***}† month period, which for each Product shall in no event be less {***}† times the average monthly
forecast quantity for each Product for months {***}† of said Monthly Product
Supply Schedule for such {***}† month period.


 


(c)                                  Biovail shall,
for forty-five (45) days following the date of Generic Entry, have the right to
submit one (1) Monthly Product Supply Schedule in substitution of the then
operative Monthly Product Supply Schedule as of the date of Generic Entry, in
which changes in the forecast quantities of the Product impacted by Generic
Entry, only, for months {***}† may exceed the permitted variance percentages
set forth in Section 5.03(a).


 


5.04                           Additional Supply
Schedule and Purchase Order Terms.


 


(a)                                  Each Purchase
Order (which shall be separate Purchase Orders for trade Product and Sample
Products), shall specify the date of delivery to Biovail (the “Delivery Date”)
and shall be issued at least ninety (90) days before the Delivery Date. In the
event that Biovail submits a Purchase Order which exceeds the quantity of
Product specified for the corresponding period as set forth in the applicable
Monthly Product Supply Schedule or which changes the 


 






† Represents material
which has been redacted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


29

















 


Delivery
Date specified on a previously submitted Purchase Order for the same period,
GSK shall have no obligation to supply to Biovail the amount of any such excess
or to allow any such change in Delivery Date.


 


(b)                                 In the event that
Biovail fails to deliver to GSK a Monthly Product Supply Schedule, or any
Purchase Orders related thereto, on or prior to the end of a calendar month as
required in Section 5.03(a) above, the forecast quantities and the
terms, including Delivery Date, applicable thereto, for the next applicable
calendar month as set forth for such calendar month in the immediately
preceding applicable Monthly Product Supply Schedule delivered to GSK by
Biovail shall apply.


 


(c)                                  Quantities of
Products actually shipped by GSK may vary from the quantities specified in a
Purchase Order by up to {***}†  and still be deemed to be in
compliance with such Purchase Order; provided, however, that
Biovail shall only be invoiced for the quantities that GSK actually ships to
Biovail (the “Actual Shipment Quantity”).


 


5.05                           Order
Quantities.  All Product must be ordered
in the minimum quantity, or in the minimum quantity plus whole multiples of the
incremental order amounts, as set forth on Exhibit 5.05 attached
hereto (the “Order Quantities”) and no partial Order Quantities may be ordered
by Biovail. Any partial Order Quantities shall be rounded down to the nearest
whole Order Quantity. Each Monthly Product Supply Schedule and all Purchase
Orders related thereto, shall be stated in Order Quantities when specifying
quantities of Product. With respect to order quantities for Zovirax® Ointment
three (3) gram tubes and Zovirax® Cream two (2) gram tubes , Biovail
shall have the option of a single split of a batch order into two (2) separate
shipments, each in such quantity as Biovail may elect, with the first shipment
to be delivered by the Delivery Date stated on the Purchase Order therefor, and
the second shipment to be delivered and accepted by not later than one hundred
twenty (120) days from the Delivery Date of the first shipment.


 


5.06                           Prices for
Products.


 


(a)                                  Zovirax® Ointment
Prices


 


(i)                                    Calendar Years
2002-2005 — for each of the Calendar Years 2002 through 2005, the purchase
prices to be paid by Biovail for Zovirax® Ointment shall be {***}†  of the Product’s Net Wholesale Price charged by
Biovail as of the issue date of GSK’s invoice to Biovail for the Product.


 


(ii)                                 Calendar Years
2006-2009 — for each of Calendar Years 2006 through 2009, the purchase prices
to be paid by Biovail for Zovirax® Ointment shall be {***}† of the Net Wholesale Price
charged for the Product by Biovail as of the issue date of GSK’s invoice
therefor.


 






† Represents material
which has been redacted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


30














 


(iii)                             Calendar Years
2010-2011 —For each of the Calendar Years 2010 and 2011, the purchase price to
be paid by Biovail for Zovirax® Ointment shall be  {***}† of the Net Wholesale Price
charged for the Product by Biovail as of the issue date of GSK’s invoice to
Biovail therefor.


 


Notwithstanding
the foregoing, in no event shall the Net Wholesale Price charged by Biovail for
Zovirax® Ointment be less than {***}†  of
the prices for the Product set forth on Exhibit 7.02 attached
hereto.


 


(b)                                 Zovirax® Cream
Prices


 


(i)                                   Calendar Years
2002-2005 — For each of the Calendar Years 2002 through 2005 (as applicable
based upon the date of FDA approval of the Zovirax® Cream NDA), the purchase
prices to be paid by Biovail for Zovirax® Cream shall be {***}† of the Product’s Net
Wholesale Price charged by Biovail as of the issue date of GSK’s invoice to
Biovail for the Product.


 


(ii)                                Calendar Years
2006-2009 — For each of the Calendar Years 2006 through 2009 (as applicable
based upon the date of FDA approval of the Zovirax® Cream NDA), the purchase
prices to be paid by Biovail for Zovirax® Cream shall be {***}† of the Product’s Net
Wholesale Price charged by Biovail as of the issue date of GSK’s invoice to
Biovail therefor.


 


(iii)                             Calendar Years
2010-2011 — For each of the Calendar Years 2010 and 2011, the purchase price to
be paid by Biovail for Zovirax® Cream shall be {***}† of the Net Wholesale Price
charged by Biovail for the Product as of the issue date of GSK’s invoice to
Biovail for the Product.


 


The
foregoing notwithstanding, in no event shall the Net Wholesale Price charged by
Biovail, calculated on a per-gram basis, for Zovirax® Cream be less than {***}† of the per-gram price for the three (3) gram presentation of
Zovirax® Ointment (GSK NDC #00173-099341) set forth on Exhibit 7.02
attached hereto.


 


(c)                                  Limited Price
Reductions - Zovirax® Price Allowance.  Notwithstanding the purchase prices set forth
in Section 5.06(a) and (b), the purchase prices to be paid by Biovail
for each of the Products during a limited period of time commencing on October 1,
2002, and continuing for so long as the Zovirax® Price Allowance is greater
than {***}†  shall be the Reduced Zovirax® Price for that Product
When the Zovirax® Price Allowance has been reduced to an amount equal to or
less than {***}†, the purchase prices for each of the Products shall
revert back to the purchase prices specified in Sections 5.06(a) and (b);


 


(d)                                 Impact of
Regulatory Events.  In the event
that regulatory approval of Wellbutrin® XL is not granted by the FDA in the USA
on or before September 30, 2003, and notwithstanding the amount of the
Zovirax® Price Allowance, the purchase prices for each of the 


 






† Represents material which has been redacted
and filed separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.


 


31

















 


Products
shall immediately revert back to the purchase prices specified in Sections 5.06(a) and
(b); provided, however, that in the event that regulatory approval of
Wellbutrin® XL is granted by the FDA in the USA after September 30, 2003,
but before December 31, 2003, then the purchase prices for each of the
Products ordered and shipped after the date of such approval shall be the
Reduced Zovirax® Price for that Product, subject to the provisions of Section 5.06(c).
For the avoidance of doubt, any Product purchased at the Reduced Zovirax® Price
following the grant of such regulatory approval will reduce the amount of the
Zovirax® Price Allowance (as defined above).


 


(e)                                  Speculative
Buying - Increase in Biovail Prices.  With respect to any Product for which the
transfer price charged by GSK to Biovail is determined as a percentage of Net
Wholesale Price charged by Biovail for such Product, if the quantity of Product
in a valid Purchase Order received by GSK within thirty (30) days prior to an
increase of the Net Wholesale Price charged by Biovail for such Product exceeds
the prior {***}† calendar months’ average order quantities for such Product by an excess
of {***}†, then the order
will be invoiced to Biovail based upon the newly increased Net Wholesale Price
charged by Biovail.


 


(f)                                    Speculative
Buying - increase in Transfer Prices — With respect to any Product
for which the transfer price charged by GSK to Biovail is determined as a
percentage of the Net Wholesale Price charged by Biovail for such Product, if
the quantity of Product in valid Purchase Orders received by GSK within ninety
(90) days prior to an increase of the transfer price charged by GSK to Biovail
for such Product exceeds the prior {***}† calendar quarters’ average
quarterly order quantities for such Product by an excess of {***}†, then the order
will be invoiced to Biovail based upon the new transfer price.


 


5.07                           Delivery.  GSK shall deliver all Products to Biovail
F.O.B. GSK’s manufacturing facilities (or those of its Affiliates or its
subcontractors, if any), freight collect, during normal business hours. The quantities
of Product for each calendar month set forth in the Quarterly Product Supply
Schedules shall be delivered within fifteen (15) days of the Delivery Date set
forth in the Purchase Order applicable to such quantities and GSK shall provide
notice to Biovail of any such change in the Delivery Date. Notwithstanding
anything herein to the contrary, in the event delivery within the times
specified above is not possible due to normal constraints associated with
manufacturing, scheduling, or delivery of the Product, GSK may request (in
writing or by electronic mail) an alternate Delivery Date and Biovail shall not
unreasonably withhold its consent to such alternate Delivery Date (which
consent shall be in writing or by electronic mail).


 


5.08                           Invoicing; Payment.


 


(a)                                  All Product
manufactured under this Agreement shall be invoiced by GSK to Biovail upon
domestic shipment thereof. Each such invoice shall state (i) Biovail’s
then effective per-unit purchase price for Products included in the applicable
shipment (the “Per-Unit Purchase Price”); (ii) the Actual Shipment
Quantity of Products included in the applicable shipment; (iii) 


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


32

















 


Biovail’s
aggregate purchase price for each Products included in the applicable shipment
(the “Aggregate Unit Purchase Price”), which shall be calculated by multiplying
the Per-Unit Purchase Price for such Products by the Actual Shipment Quantity
of such Products included in the applicable shipment; and (iv) Biovail’s
aggregate purchase price for all Products included in the applicable shipment
(the “Purchase Price”), which shall be calculated by adding all Aggregate Unit
Purchase Prices for Products included in the applicable shipment. Biovail shall
be responsible, for all freight and insurance, any and all customs fees,
duties, value-added taxes or levies imposed with respect to the shipment and
importation of the Products, and all sales, use, excise and other taxes imposed
or levied by any United States federal, state, or local governmental authority
(the actual amount of which shall be included in the applicable invoice and
paid by Biovail) with respect to the purchase of the Products. In the event GSK
initially pays any such taxes applicable to the purchase of the Products, such
amounts paid by GSK shall be invoiced by GSK to Biovail and shall be paid by
Biovail in accordance with Section 5.08(b).


 


(b)                                 Payments for the
amounts due and owing as set forth in Section 5.08(a) shall be due
and payable to GSK on or before the forty-fifth (45th) day after the date of
such invoice, in accordance with Section 7.01. In the event that any such
payment is not received by GSK on or before the forty-fifth (45th) day
following the date of the related invoice, the unpaid portion of such payment
shall accrue interest at the rate specified for late payments in Section 7.03
until such unpaid portion is paid to GSK in full, and Biovail shall be
responsible for reasonable attorneys’ fees and expenses incurred by GSK in
connection with the collection thereof; provided, however, that
in the event that two (2) or more consecutive payments are not received by
the due dates for such payments, GSK shall have the right to require payment in
advance for all future orders of Products beginning with the payment next due
immediately following the second (2nd) of such consecutive late payments. Under
no circumstances shall Biovail make any payment deductions from any invoice
amounts due to GSK unless a credit memorandum from GSK authorizing such
deduction has been issued by GSK to Biovail.


 


5.09                           Subcontracts.  GSK may subcontract all or any part of the
manufacturing process of the Products without the consent of Biovail and in
such event GSK will give Biovail written notice that it intends to enter into
such subcontract, and no such subcontract shall release GSK of any of its
obligations hereunder. Biovail acknowledges that GSK is currently
subcontracting part or all of the manufacturing process of the Products to
certain of its Affiliates and subcontractors. GSK will provide Biovail with
notice of such contracting.


 


5.10                           Forms.  In ordering and delivering the Products, as
the case may be, Biovail and GSK may use their respective standard forms,
provided that nothing in those forms shall be construed to modify or amend the
terms and conditions of this Agreement, and, in the case of any conflict
herewith, the terms and conditions of this Agreement shall control.


 


5.11                           Quantitative
Deficiencies.  Biovail shall notify GSK
in writing of any claim relating to quantitative deficiencies in any shipment
of Products which Biovail considers to have been caused prior to shipment
hereunder within fifteen (15) days following receipt of any such shipment. Any
claim for a quantitative deficiency which is not made within such fifteen (15)
days shall be deemed to have been waived by Biovail, and Biovail shall be
obligated to make payment for such Product in accordance with Sections 5.07 and
5.09 above. In the event Biovail determines there is a quantitative deficiency
from the applicable shipping documentation, the 


 


33

















 


parties
shall investigate such deficiency and, if the parties agree that such
deficiency occurred prior to shipment, the Actual Shipment Quantity shall be
adjusted to reflect the parties’ agreement; provided, however,
that GSK shall have the option of rectifying any such deficiency that occurred
prior to shipment by promptly shipping the appropriate quantities of Product,
as the case may be, to Biovail, in which case the Actual Shipment Quantity shall
be readjusted to include such shipment. Biovail’s exclusive remedy for any
quantitative deficiencies shall be to pay only for actual quantities shipped
or, at GSK’s option, receive the appropriate quantities, as provided herein.


 


5.12                           Delivery of Existing
Inventory.  In order to facilitate
Biovail’s staging of Product inventory in anticipation of the commencement of
its distributorship rights hereunder, on or prior to December 17, 2001,
GSK shall deliver approximately {***}† of the total Existing Inventory
to Biovail, F.O.B. GSK’s distribution center, freight collect.  Biovail shall segregate, or shall cause its
warehousing services provider to segregate, the initial shipment of Existing
Inventory from any and all other goods or products warehoused by Biovail or
such warehousing services provider, and will hold, or cause to be held, the
initial shipment of Existing Inventory in quarantine until the Distributorship
Commencement Date. Biovail expressly acknowledges and agrees that GSK retains
full legal title to the initial shipment of Existing Inventory until the
Distributorship Commencement, and that until the Distributorship Commencement
Date GSK shall for accounting purposes treat the Existing Inventory as
consignment inventory in the possession of a distribution services provider. As
such, Biovail will not formally record its receipt of the initial shipment of
Existing Inventory into its books and inventory records prior to GSK’s issuance
of invoices for the Existing Inventory. Notwithstanding GSK’s retention of
legal title to the Existing Inventory, in consideration of GSK’s delivery of
the Existing Inventory in advance of the Distributorship Commencement Date,
Biovail hereby undertakes and accepts all risk of loss with respect to the
initial shipment of Existing Inventory upon delivery to Biovail, and further
agrees to indemnify GSK for any loss or damage GSK may incur as a result of
theft of, or casualty to, the initial shipment of Existing Inventory. The
remaining balance of the Existing Inventory shall be delivered to Biovail
F.O.B. GSK’s manufacturing facilities (or those of its Affiliates or
subcontractors, if any), freight collect on or about January 7, 2002.
Payment for Biovail’s purchase of the Existing Inventory shall be made in
accordance with Article 7. All Existing Inventory delivered to Biovail
shall have an expiration of not less than {***}† from the date of delivery by
GSK.


 


5.13                           Sample Products.


 


(a)                                  Subject to the
terms and conditions of, and during the entire Term of, this Agreement, GSK
agrees to supply and sell to Biovail, and Biovail agrees to purchase from GSK,
Sample Products at the Sample Product prices set forth on in Section 5.13(b) below,
which prices will not be subject to any discounts or price concessions or
adjustments. With the exception of any pricing discounts applicable to the
Products, the shipping terms, forecasting requirements, quality requirements,
payment and other terms with respect to the Sample Products shall be as
provided in Sections 5.03, 5.04, 5.05, 5.07, 5.08, 5.10 and 5.11 for Products
ordered for sale in the trade. It is expressly acknowledged and agreed by
Biovail that Biovail’s purchases of Sample Products shall not be counted
towards Biovail’s satisfaction of the Annual Minimum Purchase Requirement for
any Calendar Year during the Term of this Agreement, nor shall any payment 


 






† Represents material
which has been redacted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended.


 


34

















 


due
and owing from Biovail for Sample Product be offset against, or deducted from,
any Annual Credit. With the exception of Sample Product damaged prior to or at
the time of delivery to Biovail, or which falls to meet the requirements of Section 6.01,
GSK will neither accept, nor issue any credit or refund for, any Sample
Products returned by Biovail. Biovail acknowledges that GSK has not sampled Zovirax®
Ointment since 1996 and that Sample Product for Zovirax® Ointment will not be
available until completion of development, stability testing and approval of
Sample Product for Zovirax® Ointment. GSK will fund all regulatory filing and
development costs in connection with obtaining FDA approvals required for
Sample Product for Zovirax® Ointment . GSK shall commence and complete the
development, testing and application for approval of Sample Products as soon as
reasonably practicable after the Distributorship Commencement Date.


 


(b)                                 Upon the Sachet
Sample Availability Date for Zovirax® Cream or Zovirax® Ointment, as
appropriate, and thereafter, the purchase price for the Sachet Sample, as
appropriate, shall be {***}† per Sachet Sample unit {***}†, subject to an annual
increase in March of every Calendar Year of {***}† of the then current purchase
price, rounded to the nearest whole cent. By way of example, the price
effective March 31, 2004 will be {***}†  and the price
effective March 31, 2005 will be {***}†, etc


 


(c)                                  From October 1,
2002 until the Sachet Sample Availability Date for ointment or cream, as
appropriate, the purchase price for the Tube Sample of each of Zovirax®
Ointment and Zovirax® Cream shall be {***}† per tube unit {***}†.


 


5.14                           Development of
New Products.  The provisions of this Section 5.14
shall be effective April 1, 2003.


 


(a)                                  Collaboration.  GSK and Biovail shall work collaboratively in
the development, supply, and distribution of the New Products. GSK agrees to
complete any development work in accordance with Milestone Tables attached to
this Agreement as Exhibit 5.14, as those Milestone Tables may be amended
from time to time in accordance with the terms of this Agreement.


 


(b)                                 Development of
Developed Cream Trade Product, Zovirax® Cream Sachet Sample, and Zovirax® Cream
Tube Sample.  GSK shall use
Commercially Reasonable Efforts to develop the Developed Cream Trade Product
for marketing and sale in the Territory. GSK shall use commercially reasonably
efforts to develop the Zovirax® Cream Sample Products for use in the Territory
exclusively for promotional purposes as physician samples. GSK shall produce
validation batches, conduct stability studies, and prepare information
necessary for the initial submission to the FDA of the respective filings for
each of the New Products. GSK will use commercially reasonable efforts to
obtain FDA approval of the New Products, but does not guarantee such approval.


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


35

















 


(c)                                  Payment Terms for
the Development of the Developed Cream Trade Product, the Zovirax® Cream Sachet
Sample, and the Zovirax® Cream Tube Sample.  Biovail shall pay GSK the following for the
development work described herein:


 


	
  (i)

  	
  Development Costs

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ·

  	
  Developed Cream Trade Product

  	
  {***}†

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ·

  	
  Zovirax® Cream Sachet Sample

  	
  {***}†

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ·

  	
  Zovirax® Cream Tube Sample

  	
  {***}†

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ·

  	
  Total

  	
  {***}†

  
					



 


	
  The development total cost represents the total
  amount due to GSK related to the development work conducted by GSK as
  expressly outlined in this Agreement. Any costs related to regulatory filing
  fees or additional work beyond the scope of this Agreement are in addition to
  this total and shall be subject to additional terms and conditions.

  
	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
  Milestone Payments for each New Product

  
	
   

  	
   

  
	
  ·

  	
  Milestone 1 - {***}† of total due for a New Product upon project start-up for that New
  Product.

  
	
   

  	
   

  
	
  ·

  	
  Milestone 2 - {***}†  of total due for a New Product upon the successful production of the
  first validation batch of the New Product.

  
	
   

  	
   

  
	
  ·

  	
  Milestone 3 - {***}† of total due for a New Product upon the FDA’s acceptance for filing
  of the respective SNDA for that New Product.

  
	
   

  	
   

  
	
  (iii)

  	
  Documentation of Completion of Milestones.  GSK shall provide written
  documentation as described below, to Biovail evidencing the completion of
  Milestones 2 and 3 for each New Product. 
  For Milestone 2, GSK shall provide a certificate of analysis
  indicating that the first validation batch of the New Product meets all
  current New Product specifications as contained in the SNDA for the New Product,
  and for Milestone 3, GSK shall provide the FDA approval letter (redacted to
  protect GSK Confidential Information).

  
	
   

  	
   

  
	
  (iv)

  	
  Payment
  Terms. 
  Payment for the development costs due from Biovail to GSK herein shall
  be due and payable upon the receipt by Biovail of GSK’s invoice to Biovail
  and the documentation for that New Product as described above, if requested
  by Biovail.

  



 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


36

















 


(d)                                 Milestone Tables.  The timelines for the development work
described hereunder for the New Products, and the timelines for development
work performed under the terms of the Original Agreement related to the
development of Zovirax® Cream 2 gram trade product and Zovirax® Ointment Sachet
Sample (“Milestone Tables”) are attached as Exhibit 5.14 hereto and
incorporated herein. Biovail acknowledges that GSK’s ability to meet the
delivery dates set forth in the Milestone Tables is conditioned upon a number
of assumptions, as outlined in the Milestone Tables. In the event the
assumptions change, the Milestone Tables will be revised to reflect the new
delivery dates and the revisions shall be acknowledged in writing by GSK and
Biovail. in the event of a delay due to a change in the assumptions, GSK shall
use its Commercially Reasonable Efforts to minimize the impact on the delivery
schedule.


 


5.15                           Risk
Manufacturing.


 


(a)                                  Biovail
acknowledges that the Milestone Tables are based upon the assumption that GSK
will begin production of the New Products, the Zovirax® Cream 2 gram trade
product and the Sachet Sample of Zovirax® Ointment (collectively “Zovirax®
Products”) prior to FDA approval of the respective SNDA’s and; accordingly, GSK
is manufacturing the Zovirax® Products at risk.


 


(b)                                 Biovail
Discretion.  Biovail shall
have the right to direct GSK in writing not to manufacture any one or more of
the Products at risk. In such event, GSK shall adjust the Milestone Tables only
to the extent necessary to reflect any additional time required to meet the
respective launch date, and Biovail will provide written acknowledgement of
such adjustment.


 


(c)                                  Costs Related to
Risk Manufacturing.  Biovail shall
be responsible for any losses associated with any of the Zovirax® Products
manufactured at risk that are not commercially viable, except to the extent
such losses are due to GSK’s failure to manufacture that Zovirax® Product
according to current good manufacturing practices. Notwithstanding the
foregoing, Biovail agrees to be responsible for any such losses due to an FDA
change of specifications related to the graphics for that Zovirax® Product.


 


5.16                           Completion of GSK’s
Obligation to Develop Sample Presentations. 
Notwithstanding Sections 4.04, 5.13 and 5.14, Biovail hereby
acknowledges that GSK’s obligation to develop the Sample Products shall have
been fulfilled upon GSK’s completion of the development of the Sachet Sample of
Zovirax® Ointment and the Sachet Sample of Zovirax® Cream. Biovail acknowledges
that, other than the Zovirax® Cream Sample Products and the Sachet Sample of
Zovirax Ointment , GSK shall have no further obligation to develop any other
presentations of the Products for use as physician samples for Biovail, except
upon the written agreement of GSK and Biovail.


 


5.17                           Discontinuance of
Sample Products.  From and after the
dates that Sachet Sample of Zovirax® Ointment and the Sachet Sample of Zovirax®
Cream have received regulatory approval are available for shipment to Biovail
and for distribution in the Territory, respectively, GSK shall have no
obligation to provide to Biovail any Sample Products other than the Sachet
Samples, except that GSK shall be required to fill all orders in the then
current Firm Zone for Sample Products delivered pursuant to Section 5.04(b) for
the other Sample Products, unless 


 


37

















 


otherwise
agreed to by GSK and Biovail in writing, and GSK may discontinue, at its sole
discretion, the production of any other Sample Products.


 


5.18                           DISCLAIMER OF
WARRANTIES.  EXCEPT AS EXPRESSLY PROVIDED
IN THIS AGREEMENT, THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, MADE OR GIVEN BY EITHER PARTY HEREUNDER, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE OF ANY PRODUCT.


 


ARTICLE 6.


 


MANUFACTURE OF
PRODUCT;

ADVERSE REACTION REPORTING AND PRODUCT COMPLAINTS;

MEDICAL INFORMATION SERVICES;

PRODUCT RETURNS;

COMPLIANCE WITH APPLICABLE LAW; COMPLIANCE AUDITS


 


6.01                           Manufacture of
Product.  GSK shall cause the Products to
be manufactured in accordance with Good Manufacturing Practices, except for
such non-material noncompliance which exists on the date of this Agreement and
which does not preclude the release and marketing of the Products in accordance
with Applicable Laws in the Territory. All Products shipped to Biovail for sale
to the trade shall have product dating of not less than eighteen (18) months.
GSK shall provide timely prior written notice of proposed material changes with
respect to the manufacture of Product, of which GSK shall have been notified
and which would adversely impact GSK’s ability to meet its supply obligations
hereunder.


 


6.02                           Certificate of
Analysis.  GSK shall cause to be provided
to Biovail a certificate of analysis for each shipment of Products indicating
that each lot of Product in said shipment meets all current Product
specifications as contained in the NDA for the Product.


 


6.03                           Rejection of
Product; Biovail Remedies.


 


(a)                                  Biovail shall
notify GSK in writing of any rejection of shipment of any Product within
fifteen (15) days after delivery of such Product to Biovail and shall set forth
in such written notification the reason for such rejection, including any
inspection results. Failure to so notify GSK of, or to identify the basis under
this Agreement for, rejection of any Product within such rejection period shall
constitute acceptance of such Product and, thereafter, Biovail shall be
obligated to make payment for such Product in accordance with Sections 5.07 and
5.09 above. If the Parties disagree as to whether any Product conforms with
applicable labeling or the Product Registration for the Product, then samples
and/or batch records, as appropriate, from the batch which is in dispute shall
promptly be provided by both parties as required and submitted for testing and
evaluation to an independent Third Party as shall be agreed to in writing by
both Parties. The determination of such Third Party as to whether the Product
conforms to applicable labeling or the Product Registration for the Product
will be final and binding. Except as provided in Section 6.03(b) below,
the cost of the testing and evaluation by the Third Party shall be borne by
Biovail if the Third Party determines that the Product conforms with applicable
labeling or 


 


38

















 


the
Product Registration for the Product, and by GSK if the Third Party determines
that it does not.


 


(b)                                 If, pursuant to Section 6.03(a) above,
any Product is found not to conform with the labeling or the Product
Registration for the Product as a result of a cause occurring prior to
placement thereof with the carrier, and Biovail either returns such
non-conforming Product to GSK, or following receipt of GSK’s prior written
authorization to destroy such rejected Product, in accordance with Applicable
Laws, GSK shall reimburse Biovail for all reasonable costs and expenses in
connection therewith and, at GSK’s option, GSK shall, (i) credit Biovail
for the Invoiced Amount paid by Biovail to GSK for such rejected Product, or (ii) replace
such rejected Product as promptly as reasonably practicable, but in no event
later than forty-five (45) days following receipt of written notice of such
rejection, at no additional cost to Biovail. Biovail’s exclusive remedy for any
non-conforming Product shall be to receive a credit or replacement of Product
as provided herein.


 


6.04                           Medical
Information Services.  Commencing as of
12:01 a.m. EST on January 2, 2002, Biovail shall assume, and shall,
at its expense, have sole and exclusive responsibility for, all medical
information services for the Product. In fulfillment of its obligations under
this Section 6.04, Biovail shall develop and implement written procedures
for the administration of, and response to, all medical inquiries concerning
the Products received from consumers, physicians, pharmacists and other health
care professionals. GSK shall provide to Biovail photocopies of any applicable
medical letters or electronic copies of same. Any use or modification of any
medical information letters database, or any other related material, provided by
GSK at the request of Biovail shall be the sole and exclusive liability of
Biovail.


 


6.05                           Product Returns.


 


(a)                                  For the period
from the Distributorship Commencement Date through December 31, 2002, GSK
will, at its sole cost and expense, process and issue credits (or render
payment in such other form as GSK may in its sole discretion determine) for all
returned Products bearing GSK’s NDC numbers. Such handling of returned Product
by GSK, and the issuance of any credits or other form of reimbursement in connection
therewith, shall be in accordance with GSK’s then current returned goods
policy. GSK will deliver to Biovail, at Biovail’s sole cost and expense, any
returned Product received by GSK which bears the Biovail Product NDCs. The
foregoing notwithstanding, Biovail will process, and be solely responsible and
liable for reimbursements with respect to, Product returns arising with respect
to, or resulting from, shipping errors, damage in transit and shortages
relating to Biovail sales of Product after the Distributorship Commencement
Date.


 


(b)                                 Biovail agrees
and acknowledges that GSK’s maximum liability for credits or other
reimbursement for returned Product under this Section 6.05 shall be {***}†  (the “Maximum Returns Credit Amount”). For purposes of
this Section 6.05, the dollar value of returned Product processed by GSK,
and the amount of any credit or other reimbursement issued 


 






†
Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 


39

















 


therefor by GSK,
shall be determined in accordance with GSK’s then current returned goods
policy.


 


(c)                                  Upon GSK’s
issuance of credits or other reimbursement for returned Product bearing GSK’s
NDCs, in an aggregate dollar amount equal to the Maximum Returns Credit Amount,
any such credits or other reimbursement issued thereafter by GSK shall be the
exclusive liability and obligation of Biovail, for which Biovail will be
invoiced by GSK on a monthly basis according to the provisions of Articles 5
and 7.  Each such invoice shall set forth
the number of units processed for each GSK Product NDC, together with such
other information as shall be necessary to support the invoice. Biovail shall,
within thirty (30) days of its receipt of an invoice, pay to GSK the full
invoiced amount, in accordance with the terms of Articles 5 and 7 hereinbelow.


 


(d)                                 Effective as of January 1,
2003, Biovail shall be solely and exclusively responsible for processing any
and all returned Product (including all returned Product bearing GSK’s NDCs),
and for the issuance of any and all credits or other reimbursement therefor.
Any and all returned Product bearing GSK’s NDCs received by GSK after December 31,
2002 will be destroyed by GSK, and GSK will, after such destruction, forward to
Biovail any accompanying documentation to determine any appropriate credit.
Except as otherwise provided herein, Biovail and GSK will not bill one another
for costs incurred in processing returned Product GSK and Biovail will use
Commercially Reasonable Efforts in requesting that customers direct all Product
returns after December 31, 2002 to Biovail.


 


6.06                           Product
Recall.  If either Biovail or GSK obtains
information that any Product or any portion thereof is alleged or proven not to
conform with the labeling or the Product Registration for such Product in the
Territory, such Party shall notify the other Party immediately and shall
disclose to the other Party all material facts relative exclusively to the
Product recall, however, that no disclosure of information will be
required where any trade secrets, proprietary information, intellectual property
or know-how of a Party would be disclosed, divulged, or in any way compromised.
Both Parties shall cooperate fully regarding the investigation and disposition
of any such matter. GSK and Biovail shall each maintain such traceability
records as are sufficient and as may be necessary to permit a recall or field
correction of any Product.  Each Party
shall give telephonic notice (to be subsequently confirmed in writing) to the
other within twenty-four (24) hours of learning that (a) any applicable
regulatory authority in the Territory has issued a request, directive or order
that a Product be recalled, or (b) a court of competent jurisdiction has
ordered such a recall, or (c) GSK determines after consultation with
Biovail that any Product already in interstate commerce in the Territory
presents a risk of injury or gross deception, or is otherwise defective, and
that recall of such Product is appropriate (a “Recall”). GSK shall have sole
responsibility for determining all corrective action to be taken and for
implementing any Recall. Biovail will provide full cooperation and assistance
to GSK in connection therewith as may be requested by GSK. GSK shall be
responsible for all expenses of effecting any such Recall (including any
reasonable out-of-pocket expenses incurred by Biovail in connection with such
cooperation), except to the extent such Recall is attributable to any
negligence or act or omission on the part of Biovail, its employees, agents,
contractors or subcontractors, or any material breach by Biovail of its
obligations under this Agreement or any other agreement then in force and
effect between Biovail and GSK, in which event Biovail will


 


40














 


reimburse GSK for its
reasonable costs and expenses incurred that are so attributable to such act or
omission Biovail.


 


6.07        Complaints.


 


(a)           Biovail shall
maintain complaint files for Product in accordance with Good Manufacturing
Practices.


 


(b)           GSK and Biovail
shall promptly provide to the other copies of any complaints received by GSK
with respect to the Product.  Biovail
shall have responsibility for responding to all such complaints, and for
promptly providing GSK with a copy of any responses to complaints, including,
without limitation, competitor complaints regarding Biovail’s promotional
activities. GSK shall provide Biovail with such assistance as is reasonably
required for that purpose. The foregoing notwithstanding, GSK expressly
reserves the right, at its election, to respond to, and/or consult on any
response to, any complaint which raises a safety issue with respect to the
Product. GSK shall have responsibility for reporting any complaints relating to
the Product to the FDA and any other Governmental Authority, including, but not
limited to, complaints relating to the manufacture of the Product as well as
adverse drug experience reports.


 


6.08        Additional
Covenants of Biovail.  Biovail shall (a) not
give any Third Party purchaser of the Products any guarantee or warranty on
behalf of GSK, (b) enter into all sale contracts for the Products as a
principal, (c) follow up and investigate customer and tampering complaints
related to the Products, and keep GSK informed, as appropriate, as to the
nature, status and resolution of such complaints on a timely and regular basis
and provide sufficient information to GSK to investigate such complaints, and (d) upon
receipt by Biovail of the Products, handle, use and store pending use, the
Products in compliance with Good Manufacturing Practices, Applicable Laws, rules and
regulations.


 


6.09        Adverse
Events.  With respect to the Products,
Biovail agrees to notify GSK concerning reported Serious Adverse Events and
Adverse Events within the respective time periods and in accordance with the
procedures set forth on Exhibit 6.09. In accordance with Exhibit 6.09,
GSK will provide to Biovail copies of all periodic reports and periodic safety
update reports submitted to FDA at the time of regulatory submission. Biovail
acknowledges and agrees that GSK shall have all rights to access and utilize
all information with respect to Serious Adverse Events and Adverse Events
reported to Biovail with respect to the Products during the term of this
Agreement.


 


6.10        Compliance with Applicable
Law.  Each Party shall maintain in full
force and effect all necessary licenses, permits and other authorizations
required by Applicable Law to carry out its duties and obligations under this
Agreement. Each Party shall comply with all Applicable Laws, provided, that
Biovail shall be solely responsible for compliance with those Applicable Laws
pertaining to the activities conducted by it hereunder (including, without
limitation, those Applicable Laws that apply to documentation and records retention
pertaining to the distribution and use of Product within the Territory).
Biovail shall store and distribute the Products and trade forms in compliance
with all Applicable Laws. Each Party will cooperate with the other to provide
such letters, documentation and other information on a timely basis as the
other Party may reasonably require to fulfill its reporting and other
obligations under 


 


41

















 


Applicable Laws to
applicable regulatory authorities. Except for such amounts as are expressly
required to be paid by a Party to the other under this Agreement, each Party
shall be solely responsible for any costs incurred by it to comply with its
obligations under Applicable Laws.


 


6.11        Reasonable
Cooperation.  GSK and Biovail each shall
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or proper to make effective the transactions contemplated by
this Agreement, including such actions as may be reasonably necessary to obtain
approvals and consents of Governmental Authorities and other Persons
(including, without limitation, all NDA notifications to the FDA identifying
Biovail as a distributor of the Products).


 


6.12        Compliance
Audits.


 


(a)           From time to time
as GSK may elect during the Term (but no more than once each Calendar Year),
during normal business hours and upon reasonable notice from GSK (but not less
than 10 days notice), Biovail shall permit, and shall cause its subcontractors
(as provide services with respect to the Product) to permit, duly authorized
representatives of GSK to review and inspect the premises, facilities, Product
inventories, records and documentation maintained by Biovail and its
subcontractors for the purpose of determining compliance by Biovail with its
obligations under this Agreement.


 


(b)           From time to time
as Biovail may elect during the Term (but no more than once each Calendar
Year), during normal business hours and upon reasonable advance notice from
Biovail (but not less than ten (10) days notice), GSK shall permit and, to
the extent possible, cause such of its subcontractors as shall provide services
with respect to the Products to permit authorized representatives of Biovail to
inspect, on the premises of GSK or its relevant subcontractors each
manufacturing facility for the Products and on the premises of GSK where such
records and inventory are kept, Product inventory, Manufacturing Documentation
and GSK’s quality control records relating to the storage of the Products to
ensure compliance with Good Manufacturing Practices, quality control standards
and the packaging and labeling for the Products, and with applicable terms of
this Agreement pertaining to the use of the Trademarks; provided, however,
that except as otherwise provided herein, nothing in the foregoing shall allow
or be construed to allow Biovail to have access to any confidential
manufacturing know-how or trade secrets of GSK or any records containing or
pertaining to same.  If GSK can not
require a subcontractor to submit to such inspection by Biovail, GSK shall
conduct any such inspections on Biovail’s behalf, and will report any results
of such inspection to Biovail within sixty (60) days of completing the
inspection.


 


ARTICLE 7.


 


PAYMENTS


 


7.01        Manner of
Payment.  All payments to be made by
Biovail to GSK pursuant to this Agreement shall be by wire transfer to the
designated account of GSK in accordance with the following wire instructions,
or such other account and instructions as may from time to time be designated
in writing by an officer of GSK:


 


42

















 


Bank:  {***}†


Routing Number: {***}†


Account Number: {***}†


 


7.02        Payment for
Purchase of Existing Inventory.  Biovail
shall purchase the Existing Inventory from GSK at a per-unit Product price that
is {***}† of GSK’s Net
Wholesale Price for the Product as of December 1, 2001 set forth on Exhibit 7.02
in accordance with the terms of Article 5 above. By not later than January 7,
2002, GSK shall deliver to Biovail a detailed invoice setting forth all Product
contained in the Existing Inventory by NDC, the Product Prices payable
therefor, and stating the total aggregate purchase price due and owing. 


 


7.03        Late
Payments.  In the event that any payment
due under this Agreement is not made when due, said payment shall accrue
interest from the date due at a rate of ten percent (10%) per annum. The
payment of such interest shall not limit GSK from exercising any other rights
it may have as a consequence of the delinquency of any Payment.


 


ARTICLE 8.


 


REPRESENTATIONS
AND WARRANTIES


 


8.01        Representations
and Warranties of Both Parties.  Each
Party hereby represents and warrants to the other Party that, as of the
Effective Date:


 


(a)           Good Standing.  Such Party is duly organized, validly existing
and in good standing under the Applicable Laws of the state, country or
jurisdiction of its incorporation, is duly qualified to transact the business
in which it is engaged in each jurisdiction where failure to be so qualified
would have a material adverse effect upon its business as currently conducted,
and has full corporate power and authority to enter into this Agreement and to
carry out the provisions of this Agreement.


 


(b)           Power and
Authority.  Such Party
has the requisite power and authority and the legal right to enter into this
Agreement, and to perform its obligations hereunder, and has taken all
necessary corporate action on its part to authorize the execution and delivery
of the Agreement and the performance of its obligations hereunder. All persons
who have executed this Agreement on behalf of such Party, or who will execute
on behalf of such Party any agreement or instrument contemplated hereby, have
been duly authorized to do so by all necessary corporate action.


 


(c)           Binding
Obligation.  This
Agreement has been duly executed and delivered on behalf of the Party and
(assuming the due execution and delivery hereof by the other Party) such
agreement is a legal and valid obligation binding upon it and is enforceable in
accordance with its terms, except that:


 






†
Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 


43

















 


(i)            such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar Applicable Laws now or hereafter in effect relating to creditors rights
generally, and


 


(ii)           such enforcement
may be limited by equitable principles and Applicable Law.


 


8.02        Representations
and Warranties of GSK.  GSK hereby
represents and warrants to Biovail that:


 


(a)           No Violation of
Instruments or Contracts.  The
execution and the delivery of this Agreement and GSK’s consummation of the
transactions contemplated hereby will not:


 


(i)            violate the
Certificate of Incorporation or By-Laws of any of the GSK Entities;


 


(ii)           To The Knowledge
Of GSK, materially conflict with or result in a material breach of any of the
material terms, conditions or provisions of, or constitute an express event of
default under, any material instrument, agreement, mortgage, judgment, order,
award, or decree specifically relating to the manufacturing, distribution or sale
of the Product to which any GSK Entity is a party or by which it is bound and
which would have a material adverse effect upon the distribution or sale of the
Product as currently conducted by such GSK Entity, or


 


(iii)          To The Knowledge
Of GSK, require the affirmative approval, consent, authorization or other order
or action of any court, Governmental Authority or regulatory body or of any
creditor of any of the GSK Entities, or


 


(iv)          To The Knowledge
Of GSK, conflict with or result in a violation of Applicable Laws.


 


(b)           Compliance with
Applicable Law.  Each GSK
Entity is in compliance with all requirements of Applicable Law within the
Territory, except to the extent that any noncompliance would not have a
material adverse effect on the conduct of the manufacture, distribution or sale
of the Products as currently conducted by such GSK Entity and would not
materially and adversely affect GSK’s ability to perform its obligations under
this Agreement.


 


(c)           Litigation and
Claims.  There is no litigation, arbitration,
claim, governmental or other proceeding (formal or informal), or, To The
Knowledge of GSK, governmental investigation pending or threatened in writing
within the Territory relating to the Products (it being understood that this
sentence does not relate in any way to the subject matter of Section 8.02(e) of
this Agreement), which, if adversely determined, would have a material adverse
effect upon GSK’s ability to perform its obligations under this Agreement. GSK
and its Affiliates are not in violation of, or in default with respect to, any
Applicable Law, rule, regulation, order, judgment or decree, which violation or
default would have a material adverse effect upon GSK’s 


 


44

















 


ability to perform
its obligations under this Agreement; nor is GSK or any of its Affiliates
required to take any action outside of the ordinary course of business in order
to avoid such violation or default.


 


(d)           Regulatory
Filings.  GSK is the lawful holder of all
rights under each of the NDA. GSK has complied in all material respects with
all Applicable Laws and regulations in connection with the preparation and
submission to the FDA of the NDA for Zovirax® Cream, and the NDA has been
approved by the FDA.


 


(e)           Trademarks.


 


(i)            BW USA, a
wholly-owned subsidiary of GSK, is the owner or exclusive licensee of the
Trademarks in the Territory and such Trademarks are all the issued and
registered trademarks for the Product in the Territory.


 


(ii)           The Trademarks
are in full force and effect and have been maintained to date in the Territory.


 


(iii)          To The Knowledge
GSK, none of the Trademarks infringes upon any trademark or other proprietary
rights of any other Third Party in the Territory. There is no action, suit or
proceeding pending or, To The Knowledge of GSK, that has been threatened in
writing by any Third Party in the Territory against GSK or its Affiliates,
which if adversely determined, would have a material adverse effect upon the
ability of GSK or its Affiliates to use the Trademarks in connection with the
marketing or sale of the Products in the Territory as currently conducted by
GSK.


 


(f)            Patents.


 


(i)            GSK makes no
representations or warranties that the claims of the patents of GSK are valid
and/or enforceable or will be held valid and enforceable in the Territory.
Further, GSK makes no representations or warranties that Biovail’s exercise of
its rights under the Agreement will not infringe the patent rights of Third
Parties.


 


(ii)           GSK represents
and warrants that To The Knowledge of GSK, as of the Effective Date, there is
no action, suit, proceeding, alternative dispute resolution, mediation or
investigation pending against GSK relating to GSK’s patents for the Products in
the Territory. GSK further represents and warrants that To The Knowledge of
GSK, as of the Effective Date, GSK has not received notice of any material
claim or counterclaim that GSK infringes or violates any patent rights of Third
Parties in the Territory, or that any of GSK’s patents are invalid and/or
unenforceable in the Territory.


 


8.03        Representations
and Warranties of Biovail.  Biovail
hereby represents and warrants to GSK that:


 


45

















 


(a)           No Violation of
Instruments or Contracts.  The
execution and the delivery of this Agreement and the consummation of the
transactions contemplated hereby by Biovail will not:


 


(i)            violate the
Certificate of Incorporation or By-Laws of Biovail;


 


(ii)           To The Knowledge
Of Biovail, materially conflict with or result in a material breach of any of
the material terms, conditions or provisions of, or constitute an express event
of default under, any material instrument, agreement, mortgage, judgment,
order, award, or decree to which Biovail is a party or by which it is bound and
that would have a material adverse effect upon the ability of either Biovail to
perform its respective obligations under this Agreement; or


 


(iii)          To The Knowledge
Of Biovail, require the affirmative approval, consent, authorization or other
order or action of any court, governmental authority or regulatory body or of
any creditor of Biovail or any of their respective Affiliates.


 


(iv)          To the Knowledge
of Biovail, conflict with or result in a violation of Applicable Laws.


 


(b)           Compliance with
Applicable Law.  Biovail, its
Affiliates and the Designated Biovail Affiliate are in compliance with all
requirements of Applicable Law within the Territory, except to the extent that
any noncompliance would not have a material adverse affect upon its ability to
perform its obligations under this Agreement.


 


(c)           Litigation and
Claims.  There is no litigation,
arbitration, claim, governmental or other proceeding (formal or informal), or,
To The Knowledge of Biovail, governmental investigation pending or threatened
in writing within the Territory against Biovail or any of its Affiliates where
an adverse outcome would have a material adverse affect upon Biovail’s ability
to perform its obligations under this Agreement. Biovail and its Affiliates are
not in violation of, or in default with respect to, any Applicable Law, rule,
regulation, order, judgment, or decree, which violation or default would have a
material adverse effect upon Biovail’s ability to perform its obligations under
this Agreement; nor is Biovail or any of its Affiliates required to take any
action outside of the ordinary course of business in order to avoid such
violation or default.


 


8.04        No Reliance by
Third Parties.  The representations and
warranties of a Party set forth in this Agreement are intended for the sole and
exclusive benefit of the other Party hereto, and may not be relied upon by any
Third Party.


 


ARTICLE 9.


 


INDEMNIFICATION
AND INSURANCE


 


9.01        GSK
Indemnity.  GSK shall indemnify and hold
Biovail, its Affiliates, and its and their employees, agents, officers, and
directors (individually and/or collectively referred to herein as an “Biovail
Party”) harmless from and against any and all losses, liabilities, damages 


 


46

















 


(exclusive of special
or consequential losses or damages), fees (including, until such time as GSK
has notified Biovail in writing that it will assume control of a given Biovail
Claim (as defined below), reasonable attorneys fees and costs of litigation
pertaining to such Biovail Claim), and expenses paid or payable by an Biovail
Party to a Third Party that result from or arise in connection with a claim,
suit or other proceeding made or brought by such Third Party against an Biovail
Party (a “Biovail Claim”) based on;


 


(i)            the breach of any
obligation, covenant, agreement, representation or warranty of GSK contained in
this Agreement, or


 


(ii)           any Third Party
litigation, arbitration, claim, governmental or other proceeding (formal or
informal) or investigation arising out of or based upon the distribution,
marketing, advertisement, promotion or sale of the Products by GSK prior to the
Distributorship Commencement Date, or


 


(iii)          infringement of a
Third Party’s patents, trademarks or service marks by reason of Biovail’s
purchase of a Product under this Agreement which was manufactured by or for GSK
and the Product’s sale by Biovail under the Patents, Trademarks or service
marks for the Product in accordance with the provisions of this Agreement; or


 


(iv)          Third Party
litigation, arbitration, claims, governmental or other proceeding (formal or
informal) or investigation arising out of or based upon the manufacture of the
Products by GSK or its Affiliates, and any use of any Product, whether prior to
or after, the Distributorship Commencement Date;


 


provided, however,
that GSK shall not be obligated to indemnify a Biovail Party under (i), (ii), (iii) or
(iv) above for any loss, liability, damages, fees or expenses incurred by
such Biovail Party to the extent arising out of or attributable to (a) a
breach by Biovail of any obligation, covenant, agreement, representation or
warranty of Biovail contained in this Agreement, or (b) any act or
omission by Biovail or a Biovail Party which renders a Product defective and
unreasonably dangerous or which constitutes negligence, recklessness, gross
negligence, or willful misconduct on the part of Biovail or a Biovail Party, or
(c) any overpromotion of a Product or dilution of a Product’s labeling or
warnings by Biovail or a Biovail Party.


 


9.02        Biovail
Indemnity.  Biovail shall indemnify and
hold GSK, its Affiliates, and its and their employees, agents, officers, and
directors (individually and/or collectively referred to hereinafter as a “GSK
Party”) harmless from and against any and all losses, liabilities, damages
(exclusive of consequential or special losses or damages), fees (including,
attorneys fees and costs of litigation pertaining to a GSK Claim (as defined
below)), and expenses paid or payable by a GSK Party to a Third Party that
result from or arise in connection with a claim, suit or other proceeding made
or brought by a Third Party against a GSK Party (a “GSK Claim”) based on,
resulting from, or arising in connection with,


 


47

















 


(i)            the breach of any
obligation, covenant, agreement, representation or warranty of Biovail, its
Affiliates or the Designated Biovail Affiliate contained in this Agreement;


 


(ii)           any Third Party
litigation, arbitration, claim, governmental or other proceeding (formal or
informal) or investigation arising out of or based upon the, distribution,
marketing promotion, detailing or sale of a Product by Biovail or the
Designated Biovail Affiliate;


 


(iii)          infringement of a
Third Party’s trademarks by reason of the use of “Biovail”, or any variant
thereof, on the labeling for a Product or in any materials used in promoting,
detailing or advertising a Product; or


 


(iv)          any act or
omission rendering a Product defective and unreasonably dangerous or
constituting negligence, recklessness, gross negligence or willful misconduct
on the part of Biovail, the Designated Biovail Affiliate or any other Biovail
Party; any failure of promotional materials developed by Biovail or the
Designated Biovail Affiliate to comply with applicable labeling and Product
Registrations and with applicable law and regulations; as well as any
overpromotion of a Product or dilution of a Product’s labeling or warnings by
Biovail, the Designated Biovail Party or any other Biovail Party;


 


provided, however,
that Biovail shall not be obligated to indemnify a GSK Party for any loss,
liability, damages, fees or expenses incurred by such GSK Party to the extent
arising out of, or attributable to, (a) a breach of any obligation,
covenant, agreement, representation or warranty of GSK contained in this
Agreement, (b) any act or omission by GSK or a GSK Party rendering a
Product defective or unreasonably dangerous or constituting negligence,
recklessness, gross negligence, or willful misconduct on the part of GSK or a
GSK Party, including any failure by GSK to comply with relevant FDA and other
applicable regulations or any negligent failure by GSK to supply relevant
information about a Product to Biovail.


 


9.03        Control of Proceedings.  Each indemnified Party shall:


 


(a)           give the indemnifying
Party written notice of any GSK Claim or Biovail Claim, as the case may be for
purposes of this Section 9.03, (a GSK Claim or Biovail Claim being
referred to as a “Claim”) or any potential Claim promptly after the indemnified
Party receives notice of any such Claim or potential Claim. The Indemnifying
Party shall notify the indemnified Party of its intentions as to defense of the
Claim or potential Claim in writing promptly after receipt of notice of the
Claim. Notices under this subsection 9.03(a) shall be provided in
accordance with Section 13.13 below, with a copy by overnight courier or
facsimile to: in the case of GSK: Carol Ashe, Vice President and General
Counsel, Worldwide Business Development Transactions, R & D Legal
Operations, GSK, Five Moore Drive, Research Triangle Park, NC 27709; in the
case of Biovail to: Ken Cancellara, Senior VP and General Counsel, Biovail
Corporation, 2488 Dunwin Drive, Mississauga, Ontario, L5L 1J9; and


 


48

















 


(b)           allow the
indemnifying Party to assume exclusive control of the defense and settlement
(including all decisions relating to litigation, defense and appeal) of any
such Claim (so long as it has confirmed its indemnification obligation
responsibility to such indemnified Party under this Section 9.03(a) with
respect to a given Claim); provided, however, that the
indemnifying Party may not settle such Claim in any manner that would require
payment by the indemnified Party, or would materially adversely affect the rights
granted to the indemnified Party hereunder, or would materially conflict with
the terms of this Agreement, without first obtaining the indemnified Party’s
prior written consent, which consent shall not be unreasonably withheld; and


 


(c)           reasonably cooperate
with the indemnifying Party in its defense of the Claim (including, without
limitation, making documents and records available for review and copying and
making persons within its control available for pertinent testimony). If the
indemnifying Party assumes defense of the Claim, an indemnified Party may
participate in, but not control, the defense of such Claim using attorneys of
its choice and at its sole cost and expense. An indemnifying Party shall have
no obligation or liability under this Article 9 as to any Claim for which
settlement or compromise of such claim or an offer of settlement or compromise
of such Claim is made by an indemnified Party without the prior written consent
of the indemnifying Party, which consent shall not be unreasonably withheld. If
an indemnifying Party notifies the indemnified Party in writing that it will
not defend the indemnified Party against such a Claim asserted against the
indemnifying Party, or if the indemnifying Party assumes the defense of the
Claim in accordance with Section 9.03(a) yet fails to defend or take
other reasonable, timely action, in response to such Claim asserted against the
indemnified Party, the indemnified Party shall have the right to defend or take
other reasonable action to defend its interests in such proceedings, and shall
have the right to litigate, settle or otherwise dispose of any such Claim; provided,
however, that no Party shall have the right to settle a Claim in a
manner that would adversely affect the rights granted to the other Party
hereunder, or would materially conflict with this Agreement, or would require a
payment by the Party, without the prior written consent of the Party entitled
to control the defense of such Claim.


 


9.04        Limitation of Liability.


 


(a)           EXCEPT AS
OTHERWISE SET FORTH IN SECTION 9.04(C), IN NO EVENT SHALL EITHER GSK OR
BIOVAIL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL
OR INDIRECT DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ARISING FROM
THE LOSS OF BUSINESS, DATA, PROFITS OR GOODWILL OR THE COST OF PROCUREMENT OF
SUBSTITUTE GOODS, SERVICES OR TECHNOLOGY) INCURRED OR SUFFERED BY THE OTHER
PARTY WITH RESPECT TO EITHER PARTY’S PERFORMANCE OR FAILURE TO PERFORM UNDER
THIS AGREEMENT, OR FOR ANY OTHER REASON, EVEN IF APPRISED OF THE LIKELIHOOD OF
SUCH DAMAGES.


 


(b)           The limitation of
liability expressed in Section 9.04(a) above shall not affect or
otherwise limit the obligation of each Party hereunder to indemnify each other
(in accordance with the provisions of Section 9.01, 9.02 and 9.03 as
applicable) for claims which are brought by Third Parties.


 


49

















 


(c)           Section 9.04(a) above
notwithstanding, in the event that GSK fails to supply Products to Biovail
within the timeframes specified in Article 5, Biovail may recover
from GSK any consequential damages reasonably and proximately resulting from
such failure-to-supply, subject to the following limitations and conditions: (i) GSK
shall have no liability to Biovail for any such failure-to-supply arising from
or caused by a Force Majeure event as provided in Article 10; (ii) the
aggregate total amount of consequential damages for which GSK may be liable is
limited to {***}†, regardless of whether losses giving rise to consequential damages are
incurred on one or many occasions and regardless of whether the losses that
would give rise to consequential damages reasonably and proximately suffered by
Biovail as a result of such failure-to-supply exceed the limit of {***}†, (iii) once GSK has paid
Biovail the total aggregate sum of {***}†, in consequential damages for
failure-to-supply, it shall have no further liability of any kind to Biovail
for consequential damages; and (iv) GSK shall have no liability to Biovail
for any consequential damages that could have been avoided, reduced or
mitigated by the reasonable efforts or actions of Biovail.


 


9.05        Insurance.  Biovail shall maintain at all times during
the Term, and thereafter for ten (10) years, comprehensive general
liability insurance, with endorsements for contractual liability and product
liability with coverage limits of not less than {***}† per occurrence or claim, and
an annual aggregate limit of liability of {***}†. Notwithstanding the
foregoing, within sixty (60) days after the Effective Date, Biovail shall
commence and complete a good faith review, in conjunction with Biovail’s
insurance brokers and risk management consultants, of Biovail’s total insurance
needs in light of Biovail’s current and prospective business activities
including, without limitation, product liability coverage, business
interruption insurance, and advertiser’s liability insurance to ensure that
such coverage is reasonable and customary in the United States pharmaceutical
industry for companies of comparable size, activities and product portfolio.
Biovail shall present such review to GSK together with Biovail’s plans to
update its insurance coverages. Prior to the Effective Date (and thereafter
upon each anniversary thereof), Biovail shall furnish to GSK a certificate of
insurance evidencing such coverage as of the Effective Date (and each
anniversary thereof) and upon request by GSK at any time hereafter. Each such
certificate of insurance shall include a provision whereby sixty (60) days’
written notice must be received by GSK prior to any material coverage
modification or cancellation by either Biovail or the insurer. In addition to
the foregoing, Biovail shall obtain and maintain property insurance on all
Products and Sample Products delivered to Biovail and/or its agents, and shall
provide GSK with certificates of such coverage, which certificates shall
include a provision whereby sixty (60) days written notice must be received by
GSK prior to any material coverage modification, or any cancellation, by either
Biovail or the insurer.


 


ARTICLE 10.


 


FORCE
MAJEURE


 


10.01      Force Majeure.  Any delays in performance by
any Party under this Agreement, other than the payment of money, shall not be
considered a breach of this Agreement if, and to


 






† Represents material which has been redacted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 


50














 


the
extent, caused by occurrences beyond the reasonable control of the Party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, materials shortages or failure of any supplier (where such
shortage or failure is attributable to a supplier’s breach of its agreement
with GSK or with a Third Party subcontractor or to an event of force majeure
suffered by such supplier), fire, flood, explosion, earthquake, hurricanes,
storms, tornadoes, riots, wars, civil disorder, failure of public utilities or
common carriers, labor disturbances, rebellion or sabotage. The Party suffering
such occurrence shall immediately notify the other Party of such inability and
of the period for which such inability is expected to continue, and any time
for performance hereunder shall be extended by the actual time of delay caused
by the occurrence; provided, however, that the Party suffering such occurrence
uses Commercially Reasonable Efforts to mitigate any damages incurred by the
other Party. The Party giving such notice shall thereupon be excused from such
of its obligations under this Agreement as it is thereby disabled from
performing, and shall have no liability for such non-performance, for so long
as it is so disabled and for the 30 days thereafter following the cessation of
such performance disability.


 


ARTICLE
11.


 


CONFIDENTIALITY 11.01


 


11.01                     Confidentiality.


 


(a)                                  No Party shall
disclose, or permit any of its Affiliates to disclose, any Confidential
Information (as defined below) to any Third Party, except, in the case of a
disclosure by GSK or any of its Affiliates, with the prior written consent of
Biovail, or, in the case of a disclosure by Biovail or any of its Affiliates,
with the prior written consent of GSK. No Party shall use any Confidential
Information for any purposes other than the purposes for which such information
was disclosed or obtained. Each Party may disclose Confidential Information to
its employees, representatives, consultants, professional advisors and agents
who require access to such information in performing activities consistent with
the purposes for which such information was disclosed or obtained provided that
each Party shall be fully responsible for any breach of this Article 11 by
its employees, representatives, consultants, professional advisors or agents.
All Confidential Information shall be held in strict confidence by each Party
and shall be protected with the same standard of care that such Party uses in
protecting its own confidential information of a similar nature, but in no
event shall such Party use less than a reasonable standard of care. For
purposes of this Agreement, “Confidential Information” shall mean any and all
information (i) regarding the terms of this Agreement or (ii) disclosed
to or obtained by a Party pursuant to or in connection with the negotiation,
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby. This Article 11 shall not apply to
any Confidential Information (1) to the extent that the Confidential
Information is publicly available or generally known other than by breach of
the provisions of this Agreement or is lawfully disclosed by a Third Party
which Third Party is not in breach of an obligation of confidentiality or otherwise
prohibited from disclosing such Confidential Information; (2) to the
extent disclosure is necessary to comply with the requirements of the United
States Securities and Exchange Commission, the London Stock Exchange Limited,
or any other Governmental Authority, in which event the Party making such
disclosure shall notify the other Party as promptly as practicable (and, if
possible, prior to making such disclosure), shall consult with the 


 


51

















 


other
Party so as to minimize the necessity of disclosure and shall seek confidential
treatment of such information by the relevant Governmental Authority, including
without limitation the United States Securities and Exchange Commission or the
London Stock Exchange Limited; (3) disclosed by GSK to a Third Party
subcontractor to the extent of, and pursuant to, an effective confidentiality
agreement with such Third Party subcontractor which agreement contains
confidentiality provisions substantially similar to those contained herein, or (4) disclosure
of which is reasonably necessary in connection with (and strictly limited to)
enforcement of such Party’s rights hereunder. The provisions of this Article 11
shall survive the expiration or termination of this Agreement and shall expire
on the date ten (10) years from the date hereof.


 


(b)                                 The
confidentiality obligations set forth in this Article 11 shall supersede
the Confidential Disclosure Agreement between the Parties, in existence as of
the Effective Date (“Confidentiality Agreement”), shall govern any and all
information disclosed by either Party to the other pursuant thereto, and shall
be retroactively effective to the date of such Confidential Disclosure
Agreement.


 


11.02                     Use of
Information.  Each Party shall use, and
cause each of its Affiliates to use, any Confidential Information obtained by
it from the other Party or their respective Affiliates, pursuant to this
Agreement or otherwise, solely in connection with the transactions contemplated
hereby.


 


11.03                     Relief.  Each Party shall be entitled, in addition to
any other right or remedy it may have, at Applicable Law or in equity, to an
injunction, without the posting of any bond or other security, enjoining or
restraining any other Party from any violation or threatened violation of this Article 11.


 


ARTICLE
12.


 


TERMINATION


 


12.01                     Term.  This Agreement shall become effective as of
the Effective Date and, unless sooner terminated as provided herein, shall
expire at 11:59 p.m. PST on December 31, 2021.


 


12.02                     Breach.  Failure by either Party to comply with any of
the material obligations contained in this Agreement shall constitute an event
of default under this Agreement, and shall entitle the other Party, if it is
not in material default hereunder and subject to any cure provisions provided
hereinbelow, to give written notice specifying the nature of the default and to
exercise the rights of termination provided hereinbelow.  If such default is with respect to (i) any
payment required to be made by Biovail pursuant to Articles 5 or 7 and is not
cured within ten (10) Business Days after receipt of such notice, or (ii) is
with respect to any other obligation of either Party and is not cured within
ninety (90) days after the receipt of such notice (or, if such default cannot
be cured within such 90-day period, if the Party in default does not, commence
and diligently continue substantive actions to cure such default and thereafter
effect full cure of such default within one hundred twenty (120) days after
receipt of the foregoing notice of default), the notifying Party shall be
entitled, without prejudice to any of its other rights conferred on it by this
Agreement and in addition to any other remedies available to it by Applicable
Law or in 


 


52

















 


equity,
to terminate this Agreement by giving written notice, said termination to take
effect immediately upon delivery of such notice.


 


12.03                     Insolvency or
Bankruptcy.  In the event that a Party
shall (i) commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order of relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts; or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for any substantial
part of its assets, or the Party shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against a Party
any case, proceeding or other action of a nature referred to in clause (i) above
that (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of one hundred and twenty (120) days; or (iii) there
shall be commenced against the Party any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, restraint or similar
process against all or any substantial part of its assets that results in the
entry of an order for any such relief that shall not have been vacated,
discharged, or stayed or bonded pending appeal, within one hundred and twenty
(120) days from the entry thereof; or (iv) the Party shall take any action
in furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clauses (i), (ii), or (iii) above; or (v) the
Party shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; then, (A) upon the
occurrence of the events described in clauses (i) or (ii), above, in
addition to any other remedies available to the other Party by Applicable Law
or in equity, this Agreement immediately shall terminate and all amounts owing
under this Agreement shall immediately become due and payable, and (B) upon
the occurrence of the events described in clauses (iii), (iv), or (v) above,
in addition to any other remedies available to the other Party by Applicable
Law or in equity, the other Party may terminate this Agreement, in whole or in
part as the terminating Party may determine, by giving written notice, which
shall be effective immediately upon delivery of such notice.


 


12.04                     Other Termination
Situations.


 


(a)                                  GSK may (without
prejudice to any of its other rights conferred on it by this Agreement or by
Applicable Law) terminate this Agreement effective immediately by giving
written notice to such effect to Biovail in the event that


 


(i)                                     Biovail engages
in illegal activities or illegal conduct which materially and adversely damages
the market or potential market for the Product; or


 


(ii)                                  GSK withdraws
Product from the U.S. market for safety reasons in connection with a withdrawal
of Product from its markets worldwide generally for such reasons (in which
event the termination shall be limited to such Product only) which withdrawal
continues uninterrupted for a period in excess of twelve (12) consecutive
calendar months.


 


53

















 


(b)                                 If Biovail shall,
at any time subsequent to the provisions of Section 3.02(b)(ii) becoming
operative, fail to submit the enumerated items and materials to DDMAC for its
pre-clearance review and approval or otherwise fail to meet its obligations
under Section 3.02(b)(ii), or if Biovail shall receive a Warning Letter or
NOV during or after the Pre-Clearance Period, GSK may (without prejudice to any
of its other rights conferred on it herein or by Applicable Laws) terminate
this Agreement by written notice to Biovail, with said termination to be
immediately effective.


 


(c)                                  If GSK is unable
to supply at least {***}†  of the amount of Products
required to fulfill Purchase Orders, delivered against accepted forecasts of
Biovail’s requirements of Products, for a period in excess of ninety (90)
consecutive days, Biovail may terminate this Agreement upon thirty (30) days
written notice. If GSK’s failure to supply is the result of a force majeure
event as specified in Article 10, no further liability shall attach or
accrue to either Party upon termination of this Agreement pursuant to this Section 12.05(c).


 


12.05                     Effect of
Termination.


 


(a)                                  Upon expiration
of this Agreement or upon termination of this Agreement by either Party Biovail
shall promptly:


 


(i)                                     return to GSK all
relevant records, materials or confidential information relating to the Product
in its (or any Affiliates or contractors’) possession or control;


 


(ii)                                  cease all
marketing, sale, promotion, advertising, and distribution of the Product, and


 


(iii)                               discontinue use
of the Trademarks, destroy all advertising or other printed materials bearing
the Trademarks, and Biovail’s right to use the Trademarks for the Product in
the Territory shall terminate.


 


(b)                                 Any acceptance by
GSK of any order from Biovail on the sale of any Product by GSK to Biovail
after the expiration or termination of this Agreement shall not be construed as
a renewal or extension of this Agreement or as a waiver of termination thereof.


 


(c)                                  Upon termination
of this Agreement by either Party prior to the expiration of the Term, all
rights granted to Biovail under Article 2 hereof with respect to the
Product shall terminate and revert solely in GSK.


 


(d)                                 Upon termination
of this Agreement by GSK under Sections 12.02, 12.03 or 12.04(a)(i) above
GSK may, in its sole discretion, elect to repurchase Products from Biovail, in
such quantity as GSK shall determine, up to an aggregate dollar amount equal to
two (2) months of Product inventory (as determined based upon Biovail’s
aggregate monthly purchases of Products from GSK for the immediately preceding
twelve (12) calendar months). All Product so 


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


54

















 


repurchased
by GSK shall be sold to GSK at the per-unit purchase price originally paid for
such Product by Biovail to GSK. In making any repurchase of Products, GSK shall
have the right to select which units of Product shall be repurchased from
Biovail’s Product inventory. The remaining balance of Product inventory not
selected for repurchase by GSK may thereafter be sold for a period of ninety
(90) days following the completion of GSK’s selection process at a price per
unit that is not less than  {***}† of the Net Wholesale Price
charged by Biovail for such Products as of the date of Termination of the
Development Agreement. Upon the expiration of said 90-day period any Product
remaining in Biovail’s inventory shall be destroyed.


 


(e)                                  Upon termination
of this Agreement by Biovail under Sections 12.02 and 12.03, GSK shall
repurchase from Biovail’s entire inventory of unexpired Products then on hand,
at the per-unit prices paid by Biovail for such Product.


 


(f)                                    Biovail expressly
acknowledges that each of the Distribution Rights Payment and the Additional
Rights Payments are unconditional and non-refundable (in whole or in part) and
further, expressly agrees that in the event of termination of this Agreement,
for any reason whatsoever, there will be no return or refund by GSK of any
portion of the Distribution Rights Payment or the Additional Rights Payments.


 


12.06                     Accrued Rights;
Surviving Obligations.


 


(a)                                  Termination,
relinquishment or expiration of this Agreement for any reason shall be without
prejudice to any rights, which shall have accrued to the benefit of either
Party prior to such termination, relinquishment or expiration. Such
termination, relinquishment or expiration shall not relieve either Party from
obligations, which are expressly indicated to survive termination or expiration
of this Agreement.


 


(b)                                 All of the
Parties’ rights and obligations under Articles 9 and 11 and Sections 5.01(a) and
12.05 shall survive expiration or termination of this Agreement.


 


ARTICLE
13.


 


MISCELLANEOUS PROVISIONS


 


13.01                     Assignment.  Neither Party shall assign or otherwise
transfer this Agreement or any interest herein or right hereunder without the
prior written consent of the other Party, and any such purported assignment,
transfer or attempt to assign or transfer any interest herein or right
hereunder shall be void and of no effect; except that each Party, unless
otherwise prohibited by this Agreement may assign its rights and obligations
hereunder to an Affiliate without the prior consent of the other Party
(although, in such event, the assigning Party shall remain primarily
responsible for all of its obligations and agreements set forth herein,
notwithstanding such assignment). In addition, GSK may assign its rights and
obligations to a successor (whether by merger, consolidation, reorganization or
other similar event) of GSK’s business or to a 


 






† Represents
material which has been redacted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


 


55

















 


purchaser
of all or substantially all of its business assets. Furthermore, Biovail may
assign its rights and obligations to a successor (whether by merger,
consolidation, reorganization or other similar event) of Biovail’s business or
to a purchaser of all or substantially all of its business assets provided
Biovail has first obtained GSK’s consent which shall be withheld only in the
event that GSK determines, using its reasonable business discretion, that such
successor is not capable of fulfilling Biovail’s obligations under this
Agreement with respect to the distribution of the Products as prescription
drugs in the Territory.


 


13.02                     Non-Waiver.  Any failure on the part of a Party to enforce
at any time, or for any period of time, any of the provisions of this Agreement
shall not be deemed or construed to be a waiver of such provisions or of any
right of such Party thereafter to enforce each and every such provision on any
succeeding occasion or breach thereof.


 


13.03                     Dispute
Resolution; Venue.


 


(a)                                  In the event of
any dispute, controversy or claim arising out of or relating to this Agreement
(hereinafter collectively referred to as a “Dispute”), the Parties shall
attempt to settle any such dispute, in good faith, by the Dispute to
appropriate senior management representatives of each Party in an effort to
effect a mutually acceptable resolution thereof. In the event no mutually
acceptable resolution of such Dispute is achieved in accordance with this Section 13.03(a) within
a reasonable period of time, any dispute, controversy or claim that arises
under, out of, or in connection with, or relating to this Agreement, or any
breach, termination or alleged invalidity of this Agreement, shall be resolved
by the courts of law of the State of New York.


 


(b)                                 Venue.  Any court proceeding instituted by one Party
against the other with respect to this Agreement shall be commenced in the
United States District Court for the Eastern District of New York; provided,
however, that if a court proceeding is brought as a Third Party action
as part of a proceeding pending in a different venue, either Party may initiate
such Third Party action against the other Party in such venue.


 


13.04                     Entirety of
Agreement; Amendments.


 


(a)                                  This Agreement,
the Exhibits attached hereto, and any related agreements where herein
referenced, contain the entire understanding of the Parties with respect to the
subject matter hereof and thereof and supersede all previous and
contemporaneous verbal and written agreements, representations and warranties
with respect to such subject matter. This Agreement shall not be strictly
construed against either Party hereto.


 


(b)                                 This Agreement
may be waived, amended, supplemented or modified only by a written agreement
executed by each of the parties hereto.


 


13.05                     Public
Announcements.  The form and content of
any public announcement to be made by one Party regarding this Agreement, or
the terms hereof, shall be subject to the prior written consent of the other
Party (which consent may not be unreasonably withheld), except as may be
required by Applicable Law (including, without limitation, disclosure
requirements of the SEC, NASDAQ, or any other stock exchange) in which event
the other Party shall use 


 


56

















 


Commercially
Reasonable Efforts to give the other Party reasonable advance notice and
reasonable opportunity to review any such disclosure.


 


13.06                     Governing
Law.  This Agreement shall be governed by
and construed in accordance with the laws of the state of New York, without
regard to its conflicts of laws principles.


 


13.07                     Relationship of
the Parties.  In making and performing
this Agreement, the Parties are acting, and intend to be treated, as
independent entities and nothing contained in this Agreement shall be construed
or implied to create an agency, partnership, joint venture, or employer and
employee relationship between GSK and Biovail. Except as otherwise provided
herein, neither Party may make any representation, warranty or commitment,
whether express or implied, on behalf of or incur any charges or expenses for
or in the name of the other Party. No Party shall be liable for the act of any
other Party unless such act is expressly authorized in writing by both Parties
hereto.


 


13.08                     Counterparts.  This Agreement shall become binding when any
one or more counterparts hereof, individually or taken together, shall bear the
signatures of each of the Parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against
the Party whose signature appears thereon, but all of which taken together
shall constitute but one and the same instrument.


 


13.09                     Severability.  If any part of this Agreement is declared
invalid by any legally governing authority having jurisdiction over either
Party, then such declaration shall not affect the remainder of the Agreement
and the Parties shall revise the invalidated part in a manner that will render
such provision valid without impairing the Parties’ original intent.


 


13.10                     Cumulative
Rights.  Except as herein expressly
provided, the rights, powers and remedies hereunder shall be in addition to,
and not in limitation of, all rights, powers and remedies provided at
Applicable Law or in equity, or under any other agreement between the Parties,
and all of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.


 


13.11                     No Other
Rights.  No rights or licenses in or to
either Party’s patent rights, know-how, copyrights or trademarks are granted by
a Party to the other, or shall be created or implied hereunder, except those
licenses and rights that are expressly granted in this Agreement.


 


13.12                     Expenses.  Except as may be otherwise provided herein,
GSK and Biovail shall each bear their own direct and indirect expenses incurred
in connection with the negotiation and preparation of this Agreement and any
related agreements and, except as set forth in this Agreement or any related
agreements, the performance of the obligations contemplated hereby and thereby


 


13.13                     Notices.  Unless otherwise explicitly set forth herein,
any notice required or permitted to be given hereunder shall be in writing and
shall be delivered personally by hand, or sent by reputable overnight courier,
signature required upon delivery, to the addresses of each Party set forth
below or to such other address or addresses as shall be designated in writing
in the 


 


57

















 


same
manner: (a) If to GSK: David Stout, President — U.S. Pharmaceuticals, Five
Moore Drive, Research Triangle Park, NC 27709, with a copy to Carol Ashe, Vice
President and General Counsel, Worldwide Business Development Transactions, R &
D Legal Operations, 2301 Renaissance Blvd, King of Prussia, PA, 19406; (b) If
to Biovail: Biovail Laboratories Incorporated, Chelston Park, Building 2,
Collymore Rock, St. Michael BH1, Barbados, West Indies, Attention: Eugene
Melnyk, President with a copy to Biovail Corporation, 7150 Mississauga Road,
Mississauga, Ontario L5N 8M5, Attention: Chief Legal Officer. All notices shall
be deemed given when received by the addressee.


 


13.14                     Relief From
Marketing Obligations.  In the event that
GSK shall be unable to supply a Product to Biovail for a period of three (3) consecutive
calendar months, and Biovail shall deplete its inventory of such Product for
sale to the trade, then Biovail may, until such time as GSK resumes shipment of
the Product, temporarily suspend its marketing and promotion of the
Product.  Such temporary suspension shall
not be deemed to be a breach of this Agreement. Immediately upon GSK’s
resumption of shipments of the Product, Biovail shall resume marketing and
promotion of the Product.


 


13.15                     No Benefits
Obligations.  Each of Biovail and GSK
acknowledges and agrees that the other Party is not, and shall not be,
responsible to the other Party, its employees, agents or representatives, or to
any governmental entity for any compensation or benefits (including without
limitation, vacation and holiday remuneration, health care coverage or
insurance, life insurance, pension or profit-sharing benefits and disability
benefits), pay-roll related taxes or withholdings, or any governmental charges
or benefits (including, without limitation, unemployment and disability
insurance contributions or benefits and worker’s compensation contributions and
benefits) that may be payable to, imposed upon, or be related to the
performance of this Agreement by such Party’s employees, agents, contractors or
representatives.  Each Party acknowledges
and agrees that any such individual employees, agents, representatives,
contractors or other persons used by such Party to perform its obligations
under this Agreement are not employees of the other Party or any of its
Affiliates, and that such Persons are not eligible to participate in any “employee
benefits plans”, as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, that are sponsored
by the other Party or any of its Affiliates.


 


13.16                     Audit
Rights.  Biovail shall, for a period of
three (3) years from the end of each Calendar Year during the Term,
maintain complete and accurate records of sales, pricing and all other
information necessary for GSK to accurately calculate Gross Sales of Products,
Net Wholesale Prices charged for Products and satisfaction of Promotional Spend
Requirements. GSK shall, upon reasonable advanced written notice, have the
right through its employees or an independent, certified public accountant to
audit such records at the place or places of business where such records are
customarily kept in order to verify the accuracy of the foregoing items. GSK
shall bear the full costs of any such audit unless such audit discloses a
variance of more than five percent (5%) from the amounts of any Variable
Adjustment, Fixed Adjustment or Promotional Spend Requirement calculated in
accordance with the terms of this Agreement, in which event, Biovail shall bear
the full cost of such audit.


 


13.17                     Condition
Precedent.  The consummation of the
transaction contemplated herein, and rights and obligations of the Parties
hereunder, are expressly subject to, and contingent upon, 


 


58

















 


the
execution of the Development Agreement by the Parties and the Parties obtaining
any and all required Governmental Authority approvals for the consummation of
the transactions contemplated by the Development Agreement, including, without
limitation, any and all approvals required under the Hart-Scott-Rodino
Antitrust Improvements Act.


 


13.18                     No Reliance.  The Parties expressly acknowledge and agree
that each Party has full, complete and clear understanding of; (i) the
transactions contemplated by this Agreement; (ii) its rights, obligations
and liabilities under this Agreement and (iii) all issues and risks
associated with the transactions contemplated herein, as uncovered in the
course of its due diligence. The Parties further acknowledge and agree that
each Party has made a fully informed decision to proceed with the execution of
this Agreement and the consummation of the transactions contemplated herein.
Each of the Parties further acknowledges and agrees that it is entering into
this Agreement in reliance solely and exclusively upon its own due diligence,
analysis, forecasts and conclusions, and upon the analysis and opinions of its
own outside consultants and advisers (including, without limitation, auditors,
accountants and legal counsel), and not as a result of any forecasts, analysis
or opinions of the other Party.


 


IN
WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in multiple counterparts by its duly authorized representative.


 


SEPARATE
SIGNATURE PAGES FOLLOW


 


59

















 


(Stamped)


 


Separate
Signature Page


to


Distribution
Rights Agreement


by
and among


SmithKline
Beecham Corporation and


Biovail
Laboratories Incorporated


Dated                                


 


 


	
   

  	
  SMITHKLINE BEECHAM CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald F. Parman

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Donald F. Parman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President & Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BIOVAIL LABORATORIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene Melnyk

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Eugene Melnyk

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  



 


60






 










 


INDEX
OF EXHIBITS


 


	
  EXHIBIT

  	
  1.01A

  	
  Product

  
	
  EXHIBIT

  	
  1.01 B

  	
  Intellectual Property and Trademarks

  
	
  EXHIBIT

  	
  5.01(c)(i)

  	
  Additional Rights Payments Upon Generic Entry

  
	
  EXHIBIT

  	
  5.01(c)(ii)

  	
  Additional Rights Payments Following Generic Entry

  
	
  EXHIBIT

  	
  5.02(e)(i)

  	
  Annual Minimum Purchase Requirements

  
	
  EXHIBIT

  	
  5.02(e)(ii)

  	
  Annual Minimum Purchase Requirements (if Zoviraxo Cream NDA not approved by June 30, 2003)

  
	
  EXHIBIT

  	
  5.05

  	
  Order Quantities

  
	
  EXHIBIT

  	
  5.14

  	
  Milestone Tables

  
	
  EXHIBIT

  	
  6.09

  	
  Adverse Events

  
	
  EXHIBIT

  	
  7.02

  	
  Product
  Net Wholesale Prices (as of 12/31/01)

  



 


61

















 


Exhibit 1.01A


 


Zovirax
Distribution Agreement


 


Product


 


	
  Trade Product (tubes)

  	
   

  	
  GSK NDC

  	
   

  	
  Pkg Size

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Zovirax Ointment 3G

  	
   

  	
  0173099341

  	
   

  	
  discontinued

  
	
  Zovirax Ointment 15G

  	
   

  	
  0173099394

  	
   

  	
  1 tube

  
	
  Zovirax Cream 2G

  	
   

  	
  0173070001

  	
   

  	
  1 tube

  
	
  Zovirax Cream 5G

  	
   

  	
  0173010053

  	
   

  	
  1 tube

  



 


	
  Sample Product

  	
   

  	
  GSK NDC

  	
   

  	
  Pkg Size

  
	
  Zovirax Ointment 1.5G Tube

  	
   

  	
  0173099321

  	
   

  	
  discontinued

  
	
  Zovirax Ointment 0.9G Sachet

  	
   

  	
  0173099320

  	
   

  	
  10 Sachets

  
	
  Zovirax Cream 0.8G Tube

  	
   

  	
  0173059941

  	
   

  	
  discontinued

  
	
  Zovirax Cream 0.9G Sachet

  	
   

  	
  0173070020

  	
   

  	
  10 Sachets

  



 

















 


Exhibit 1.01
B


 


Zovirax
Distribution Agreement


 


Intellectual
Property


 


Trademarks


 


ZOVIRAX
PRESCRIPTION OINTMENT AND CREAM U.S. MARKS


 


	
  Mark:

  	
   

  	
  Reg.: No.

  	
   

  	
  Reg. Date

  	
   

  	
  Status

  	
   

  	
  Current Owner

  
	
  ZOVIRAX

  	
   

  	
  1,141,502

  	
   

  	
  November 18, 1980

  	
   

  	
  Renewed

  	
   

  	
  BW USA Inc.

  
	
  ZOVIRAX 200

  	
   

  	
  2,046,330

  	
   

  	
  March 18, 1997

  	
   

  	
  Registered

  	
   

  	
  BW USA Inc.

  
	
  ZOVIRAX (Stylized)

  	
   

  	
  2,223,200

  	
   

  	
  February 9, 1999

  	
   

  	
  Registered

  	
   

  	
  BW USA Inc.

  



 


Patents
in Effect


 


	
   

  	
  Patent No.

  	
   

  	
  Expiry

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4,963,555

  	
   

  	
  Oct. 16,
  2007

  	
   

  



 

















 


Exhibit 5.01(c)(i)


 


Zovirax
Distribution Agreement

Additional Rights Payments (millions of dollars)

when Generic Entry for Ointment

precedes January 1, 2005


 




	
   

  	
   

  	
  Additional 

  Rights  

  Payment ($millions)

  	
   

  
	
   

  	
   

  	
  Calendar

  Year

  	
   

  
	
   

  	
   

  	
  2002

  	
   

  	
  2003

  	
   

  	
  2004

  	
   

  
	
  Year of Generic Entry for
  Ointment

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2002

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  
	
  2003

  	
   

  	
   

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  
	
  2004

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  {***}†

  	
   

  






 






† Represents material which has been redacted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 

















 


Exhibit 5.01(c)(ii)


 


Zovirax
Distribution Agreement


 


New
Additional Rights Payments (millions of dollars)

beginning with Calendar Year 2003


 


1.                                       Zovirax Cream has not received Product Registration on or before June 30,
2003


 


2.                                       Generic Entry with respect to Zovirax Ointment has occurred


 


	
   

  	
   

  	
  Additional Rights Payment
  ($millions)

  	
   

  
	
   

  	
   

  	
  Calendar Year

  	
   

  
	
   

  	
   

  	
  2003

  	
   

  	
  2004

  	
   

  	
  2005

  	
   

  	
  2006

  	
   

  
	
  Date of  Zovirax  Cream  Launch

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  After  6/30/03

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  
	
  After  6/30/04

  	
   

  	
   

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  
	
  After  6/30/05

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  {***}†

  	
   

  	
  {***}†

  	
   

  
	
  After  6/30/06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  {***}†

  	
   

  



 






† Represents material which has been redacted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 

















 


Exhibit 5.02
(e)(i)


 


Zovirax
Distribution Agreement


 


Fixed
Annual Minimum Purchase Requirement (millions of dollars)

when Generic Entry for Ointment

precedes January 1, 2005


 


{***}†


 






† Represents material which has been redacted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 

















 


Exhibit 5.02
(e)(ii)


 


Zovirax
Distribution Agreement


 


Fixed
Annual Minimum Purchase Requirement (millions of dollars)

beginning with Calendar Year 2003


 


1.                                       Zovirax Cream has
not received Product Registration on or before June 30, 2003


 


2.                                       Generic Entry
with respect to Zovirax Ointment has occurred


 


{***}†


 






† Represents material which has been redacted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 

















 


Exhibit 5.05


 


Zovirax
Distribution Agreement


 


Batch
Order Quantities


 


	
  Zovirax Ointment

  	
   

  	
  Minimum Order Quantity

  	
   

  
	
  3 gram Tube

  	
   

  	
  {***}†

  	
   

  
	
  15 gram Tube

  	
   

  	
  {***}†

  	
   

  
	
  1.5 gram Tube Sample

  	
   

  	
  {***}†

  	
   

  
	
  0.9 gram Sachet Sample

  	
   

  	
  {***}†

  	
   

  



 


	
  Zovirax Cream

  	
   

  	
  Minimum Order Quantity

  	
   

  
	
  2 gram Tube

  	
   

  	
  {***}†

  	
   

  
	
  5 gram Tube

  	
   

  	
  {***}†

  	
   

  
	
  0.8 gram Tube Sample

  	
   

  	
  {***}†

  	
   

  
	
  0.9 gram Sachet Sample

  	
   

  	
  {***}†

  	
   

  



 






†
Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.




















 


Exhibit 5.14


 


Projected
Milestones for Launch

Zovirax Ointment - .9g Sachet


 


	
  REGULATORY

  	
   

  	
   

  
	
  ·

  	
  Submit
  printed labeling to FDA

  	
   

  	
  6
  Mar 03

  
	
  ·

  	
  30
  days elapsed labeling review

  	
   

  	
  6
  Apr 03

  
	
  ·

  	
  Submit
  CBE-30 with 1 batch release data

  	
   

  	
  6
  Apr 03

  
	
  ·

  	
  Submit
  release data from 2 additional batches

  	
   

  	
  30
  Apr 03

  
	
  ·

  	
  30
  days elapsed on CBE-30

  	
   

  	
  6
  May 03

  
	
  MANUFACTURING

  	
   

  	
   

  
	
  ·

  	
  Primary
  installation of sachet filling equipment

  	
   

  	
  Complete

  
	
  ·

  	
  Equipment
  qualification and line trials

  	
   

  	
  Complete

  
	
  ·

  	
  Manufacture/filling
  of pilot batch to provide first batch release data with CBE-30

  	
   

  	
  Complete

  
	
  ·

  	
  Manufacture
  two validation/commercial batches

  	
   

  	
  3-5
  Mar 03

  
	
  PRIMARY PACKAGING (FILLING)

  	
   

  	
   

  
	
  ·

  	
  Receive
  / release sachet material

  	
   

  	
  28
  Feb 03

  
	
  ·

  	
  Fill
  two validation/commercial batches (yield ~205,000 sachets each)

  	
   

  	
  4-6
  Mar 03

  
	
  ·

  	
  QA
  release data on two batches available

  	
   

  	
  27
  Mar 03

  
	
  ·

  	
  Validation
  documentation completed

  	
   

  	
  3
  Apr 03

  
	
  SECONDARY PACKAGING

  	
   

  	
   

  
	
  ·

  	
  Receive
  / release (conditional) printed folders and trays

  	
   

  	
  31
  Mar 03

  
	
  ·

  	
  Pack
  batch #1 (yield ~20,500 units)

  	
   

  	
  1-14
  Apr 03

  
	
  SHIPMENT

  	
   

  	
   

  
	
  ·

  	
  Final
  release of batch #1 for shipment

  	
   

  	
  21
  May 03

  
	
  ·

  	
  Ship
  date to DDN (Biovail)

  	
   

  	
  26
  May 03

  



 


Assumptions:


 


	
  ·

  	
  No
  further stability issues arise.

  
	
  ·

  	
  FDA
  reviews proposed labeling within 4 weeks and makes no changes.

  
	
  ·

  	
  Vendors
  of printed components deliver on promise dates.

  
	
  ·

  	
  No
  significant manufacturing, filling, or analytical testing issues arise during
  the validation process.

  
	
  ·

  	
  FDA
  has no objections to the CBE-30 filing.

  
	
  ·

  	
  DMF for Vin Plastics is
  acceptable to the FDA.

  



 


Planned at risk:


 


	
  ·

  	
  Purchase printed foil,
  folders, and trays

  
	
  ·

  	
  Fill two batches of ointment
  sachets

  
	
  ·

  	
  Package one batch of
  ointment sachets

  



 

















 


Projected
Milestones for Launch

Zovirax Cream - 2g Trade and .8g Samples


 


	
  MANUFACTURING

  	
   

  
	
  ·

  	
  Receive
  / release (conditional) raw materials for manufacture

  	
  20-Feb-03

  
	
  ·

  	
  Experimental
  batch and line trials

  	
  21-Feb
  – 3-Mar-03

  
	
  ·

  	
  Manufacture
  validation/commercial batch #1

  	
  10-Mar-03

  
	
  ·

  	
  Manufacture
  validation/commercial batches #2 and #3 (needed for validation of
  manufacturing process)

  	
  11
  – 12-Mar-03

  
	
  PRIMARY PACKAGING (FILLING)

  	
   

  
	
  ·

  	
  Receive
  / release (conditional) 2g/.8g tubes

  	
  7-Mar-03

  
	
  ·

  	
  Fill
  batch #1 - 2g tubes (yield ~198,000)

  	
  13
  – 14-Mar-03

  
	
  ·

  	
  Receive/IQ/OQ
  .8g change parts

  	
  14
  Mar 03

  
	
  ·

  	
  Fill
  batch #2 - .8g tubes (yield ~470,000)

  	
  15
  – 20-Mar-03

  
	
  SECONDARY
  PACKAGING

  	
   

  
	
  ·

  	
  Receive
  / release 2g/.8g cartons, cases, PI’s

  	
  29-Mar-03

  
	
  ·

  	
  Pack
  partial batch #1 – 50,000 2g tubes

  	
  2
  – 7-Apr-03

  
	
  ·

  	
  Pack
  partial batch #2 – 200,000 .8g tubes

  	
  8
  - 24-Apr

  
	
  SHIPMENT

  	
   

  
	
  ·

  	
  Final
  QA release of 2g product (50,000 units)

  	
  18-Apr-03

  
	
  ·

  	
  Ex-factory
  date – 2g

  	
  23-Apr-03

  
	
  ·

  	
  Final
  QA release of .8g product (200,000)

  	
  1
  May 03

  
	
  ·

  	
  Ex-factory
  date – .8g

  	
  6
  May 03

  



 


Assumptions:


 


	
  ·

  	
  Vendors
  of tubes, cartons, trays, cases and PI’s deliver on promise dates.

  
	
  ·

  	
  Components
  and product used with QA “conditional release” are ultimately found to be
  within specification.

  
	
  ·

  	
  All
  batches are filled within validated bulk hold time.

  
	
  ·

  	
  No significant
  manufacturing, filling, or analytical testing issues arise during the
  validation process.

  
	
   

  	
   

  
	
  Planned at risk:

  
	
   

  	
   

  
	
  ·

  	
  Filling two batches before
  stability results known

  



 

















 


Projected
Milestones for Launch

Zovirax Cream - 5g Trade


 


	
  STABILITY BATCHES

  	
   

  	
   

  	 

	
  ·

  	
  Receive
  / Release blank tubes

  	
   

  	
  25-Feb-03

  
	
  ·

  	
  Manufacture
  and fill 500 tubes from pilot scale (50kg) batch

  	
   

  	
  26-Feb
  - 6-Mar-03

  
	
  ·

  	
  Put
  batch up on stability — Time zero

  	
   

  	
  12-Mar-03

  
	
  VALIDATION / COMMERCIAL BATCH

  	
   

  	
   

  
	
  ·

  	
  Approve
  artwork for 16mm tube

  	
   

  	
  28-Mar-03

  
	
  ·

  	
  Receive
  / release (conditional) printed tubes

  	
   

  	
  20-May-03

  
	
  ·

  	
  Manufacture
  validation/commercial batch

  	
   

  	
  21-May-03

  
	
  ·

  	
  Primary
  packaging (filling)

  	
   

  	
  6
  – 8-May-03

  
	
  ·

  	
  Receive
  / release printed components

  	
   

  	
  2-May-03

  
	
  ·

  	
  Secondary
  packaging

  	
   

  	
  30-May –
  11-Jun-03

  
	
  CBE-0

  	
   

  	
   

  
	
  ·

  	
  Submit
  printed labeling to FDA

  	
   

  	
  31-Mar-03

  
	
  ·

  	
  30
  days elapsed labeling review

  	
   

  	
  30-Apr-03

  
	
  ·

  	
  3-month
  pull date — stability batch

  	
   

  	
  13-Jun-03

  
	
  ·

  	
  Complete
  QA testing

  	
   

  	
  27-Jun-03

  
	
  ·

  	
  Submit
  CBE-0 to FDA

  	
   

  	
  8-Jul-03

  
	
  SHIPMENT

  	
   

  	
   

  
	
  ·

  	
  Final
  QA release of 5g product

  	
   

  	
  10-Jul-03

  
	
  ·

  	
  Ex-factory
  date

  	
   

  	
  16-Jul-03

  
						



 


	
  Assumptions:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ·

  	
  4g/single
  fold tubes have no stability failures and are acceptable to the FDA

  
	
  ·

  	
  New
  specifications and artwork for 16mm tubes can be turned around in time for
  the tube vendor’s next 16mm production run.

  
	
  ·

  	
  FDA
  reviews proposed labeling within 4 weeks and makes no changes.

  
	
  ·

  	
  Vendors
  of printed components deliver on their promise dates.

  
	
  ·

  	
  No
  significant manufacturing, filling, or analytical testing issues arise during
  the validation process.

  
	
   

  	
   

  
	
  Planned at risk:

  
	
   

  
	
  ·

  	
  Purchase
  printed tubes and cartons

  
	
  ·

  	
  Fill
  one batch before stability results known

  
	
  ·

  	
  Package one batch before
  filled intermediate is released

  
				



 

















 


Projected
Milestones for Launch 

Zovirax Cream — .9g Sample Sachet


 


	
  STABILITY BATCH

  	
   

  	
   

  
	
  ·

  	
  Pull
  50kq from first 2g/.8g validation/commercial batch

  	
   

  	
  10-Mar-03

  
	
  ·

  	
  Fill
  1500 sachets

  	
   

  	
  21-Mar-03

  
	
  ·

  	
  Put
  batches up on stability — Time zero

  	
   

  	
  28-Mar-03

  
	
  VALIDATION / COMMERCIAL BATCH

  	
   

  	
   

  
	
  ·

  	
  Receive
  / release printed foil,

  	
   

  	
  17-Apr-03

  
	
  ·

  	
  Manufacture
  validation/commercial batch

  	
   

  	
  5-May-03

  
	
  ·

  	
  Primary
  packaging (filling)

  	
   

  	
  6
  - 8-May-03

  
	
  ·

  	
  Receive
  / release printed components

  	
   

  	
  16-Apr-03

  
	
  ·

  	
  Secondary
  packaging

  	
   

  	
  30-May –
  12-Jun-03

  
	
  CBE-30

  	
   

  	
   

  
	
  ·

  	
  Submit
  printed labeling to FDA

  	
   

  	
  31-Mar-03

  
	
  ·

  	
  30
  days elapsed labeling review

  	
   

  	
  30-Apr-03

  
	
  ·

  	
  3-month
  pull date — stability batch

  	
   

  	
  1-Jul-03

  
	
  ·

  	
  Complete
  QA testing

  	
   

  	
  9-Jul-03

  
	
  ·

  	
  Submit
  CBE-30 to FDA

  	
   

  	
  18-Jul-03

  
	
  ·

  	
  30
  days elapsed on CBE-3

  	
   

  	
  18-Aug-03

  
	
  SHIPMENT

  	
   

  	
   

  
	
  ·

  	
  Final
  QA release of product

  	
   

  	
  20-Aug-03

  
	
  ·

  	
  Ex-factory
  date

  	
   

  	
  25-Aug-03

  



 


	
  Assumptions:

  
	
   

  
	
  ·

  	
  Newly
  designed filling nozzle performs well with cream product.

  
	
  ·

  	
  There
  are no stability failures.

  
	
  ·

  	
  FDA
  reviews proposed labeling within 4 weeks and makes no changes.

  
	
  ·

  	
  Vendors
  of printed components deliver on their promise dates.

  
	
  ·

  	
  No
  significant manufacturing, filling, or analytical testing issues arise during
  the validation process.

  
	
  ·

  	
  FDA
  has no objections to the CBE-30 filing.

  
	
   

  	
   

  
	
  Planned at risk:

  
	
   

  
	
  ·

  	
  Purchase
  printed foil, folders, and trays

  
	
  ·

  	
  Fill
  two batches of ointment sachets

  
	
  ·

  	
  Package
  one batch of ointment sachets

  

  



 






 










 


Exhibit 6.09


 


Adverse
Events


 


Between

Biovail Pharmaceuticals, Inc. (Biovail)

(as a designate for Biovail Laboratories Incorporated)

and

GlaxoSmithKline (GSK)

for

the following products:


 


Zovirax
®(Acyclovir) Cream, 0.05%

Zovirax ©(Acyclovir) Ointment, 0.05%


 


I.                                         Introduction


 


GSK
will retain the NDA and complete regulatory responsibilities for the above
products as specified in the Code of Federal Regulations (CFR). These
regulatory responsibilities include submitting adverse event reports to the FDA
as described under CFR 314.80 (c), which includes 15-day reports for serious
adverse events, and filing a periodic drug experience report on an annual
basis. GSK will continue submitting all other postmarking reports as described
under CFR 314.81 including field alerts and annual reports.


 


2.                                       Definitions


 


Serious
Adverse Event: Any event which: (a) is
fatal, (b) is life-threatening, (c) is disabling or incapacitating, (d) requires
or prolongs in-patient hospitalization, (e) is a congenital anomaly or (f) is
any event which, though not included in (a) through (e) above, may
jeopardise the patient or may require intervention to prevent one of the
outcomes listed above.


 


Spontaneous
Report: A spontaneous report concerns an individual
patient who has experienced an adverse event in the course of routine clinical
practice with the use of a marketed product (i.e., not a patient enrolled in a
clinical trial) . The report is unsolicited.


 


Spontaneous
reports include reports from any source (e.g., health professional, consumer,
patient, lawyer, company sales representative, relative, etc.) regardless of
how well documented. This includes all reports, not just those that meet the
definition of serious. A causal relationship does not need to be established.


 


3.                                       Compliance


 


Obligations
under this Safety Data Exchange will be performed in accordance with all
applicable federal, state and local laws and regulations including, but not
limited to, the US Federal Food Drug and Cosmetic Act.


 

















 


4.                                       Exchange of Safety Data


 


4.1                                 Clock Start Date


 


Biovail
will forward reports of adverse events and pregnancy exposures to GSK according
to the following timelines. The clock start date for reporting to GSK begins
immediately when any employee or agent of Biovail first receives or is notified
of an adverse event or pregnancy report.


 


4.2                                 Timelines for Forwarding Spontaneous Reports from Any Source


 


4.2.1                        Procedure During Working Hours


 


·                                            During Biovail working hours 8:30 AM until 5:00 PM, Biovail will
transfer all Zovirax product-related calls to a central phone number within
Biovail, staffed by a trained medically-qualified Biovail employee (i.e., this
phone number will not be answered by voice mail during working hours).


 


·                                            If an adverse event is involved, Biovail will complete a GSK-designed
phone form. (See Appendix A) Any necessary follow-up calls to complete this
form will be the responsibility of Biovail.


 


·                                            If the call involves a serious adverse event, the report will be sent by
fax to GSK at 919-483-5404 within one business day of receipt by Biovail.
Non-serious reports will be forwarded by fax to GSK within five business days


 


·                                            GSK will train the Biovail staff that will be managing the Zovirax
product calls, to ensure that they have basic knowledge of adverse events and
AE-related procedures.


 


4.2.2                        Procedure After Hours


 


After
the Biovail telephone switchboard closes, 5:00 PM on Monday-Friday and all day
Saturday and Sunday), instructions on the main number should instruct callers
how they may reach an appropriate Biovail person to report their adverse event
Biovail will insure that a mechanism is in place to handle after-hour emergency
phone calls regarding adverse events involving the Zovirax products. Serious
reports received by Biovail after normal business hours will be sent by fax to
GSK at 919-483-5404 within one business day of receipt by Biovail. Non-serious
reports received by Biovail after normal business hours will be forwarded by
fax to GSK within five business days.


 


4.2.3                        Written Reports


 


Biovail
will send a copy of any written correspondence describing an AE to GSK
(including the envelope in which the correspondence was received). These
reports will be sent by fax (919-483-5404) within one working day of receipt.
Biovail will retain the original written correspondence in accord with existing
Biovail retention policies.


 

















 


4.2.4                        Reports Received via Biovail Field Staff


 


Biovail
will employ sales representatives or other field staff who may learn of AEs
during the course of their interactions with practicing health care
professionals. These AEs must be reported by telephone to Biovail immediately
in order to ensure the reporting obligation outlined in Section 4.2.1 is met.
Biovail will ensure that all field staff are aware of and are trained on this
policy.


 


4.2.5                        Literature Reports


 


GSK
will scan scientific/medical literature for AE’s with the Zovirax products.
However, if Biovail becomes aware of any publication from the scientific
literature in which any of the Zovirax products is a suspect drug, Biovail will
forward that publication to GSK by fax within one business day.


 


5                                          Follow-Up


 


GSK
is responsible for appropriate follow-up of AE’s reports.


 


6                                          Data Dissemination


 


·                                          GSK shall hold and maintain a Zovirax products database of AE’s.


 


·                                          GSK shall compile and maintain the Periodic Reports [or Periodic Safety
Update Reports (PSURs) when applicable] for the Zovirax products and will
provide Biovail with a copy of each of the Periodic Reports (or PSUR) at the
time of regulatory submission.


 


·                                          Biovail will inform GSK of any regulatory inquiries involving safety
issues with any of the Zovirax products as soon as possible.


 


7                                          Key Contacts


 


GSK:


 


Procedural
inquiries should be sent to:


 


Sandra
Bettenhausen, RPh, MBA


Director,
Quality Management Group, RTP


Global
Clinical Safety and Pharmacovigilance


(919)
483-5069


 


Biovail
Pharmaceuticals, Inc.


 


All
Correspondence and Inquiries shall be sent to:


 


Ben
Sarafpour


Senior
Director, Medical Affairs


908-927-1851


 

















 


The
responsible contacts for surveillance are:


 


	
  GSK

  	
   

  	
  Biovail Pharmaceuticals

  
	
   

  	
   

  	
   

  
	
  Sandra
  Bettenhausen, RPh, MBA

  Director,
  Case Management Group, RTP

  919-483-5069

  	
   

  	
  Ben
  Sarafpour

  Senior
  Director, Medical Affairs

  908-927-1851

  
	
   

  	
   

  	
   

  
	
  Karen
  Dillinger, RN, BSN

  Director,
  Spontaneous Reports Group

  919-483-5065

  	
   

  	
   

  



 


8                                          Reviews and Revisions


 


This
agreement will be reviewed every two years and revised as necessary by
agreement between the companies.


 

















 


Appendix
A


 


GSK/Biovail
AE Telephone Memo


 


To:                                                                              North American Product Surveillance (NAPS)


 


From(Name):                                                                                                                                                                                                                            Phone Extension


 


Date:                                                                    Time:


 


Subject:                                                     Zovirax AE


 





 

















 


Exhibit 7.02


 


Zovirax
Distribution Agreement


 


	
  Product

  	
   

  	
  Current GS NDÇ

  	
   

  	
  Prices

  
	
  Zovirax Ointment 3gm

  	
   

  	
  00173-099341

  	
   

  	
  {***}†

  
	
  Zovirax Ointment 15gm

  	
   

  	
  00173-099394

  	
   

  	
  {***}†

  



 






† Represents material which has been redacted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 1.

  	
  DEFINED TERMS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  1.01

  	
  Defined Terms

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  1.02

  	
  Terms Generally

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2.

  	
  APPOINTMENT OF
  DISTRIBUTOR; RIGHTS AND LIMITATIONS

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  2.01

  	
  Grant of Exclusive Rx Distribution Rights

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  2.02

  	
  Territorial Limitation

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  2.03

  	
  Restriction on Sub-Distributors

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  2.04

  	
  Approval of Reliant

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  2.05

  	
  Reservation of OTC Rights

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  2.06

  	
  Compliance with Product Registration; Resale in Same
  Packaging

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  2.07

  	
  No Ownership Rights Conveyed on Effective Date

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  2.08

  	
  No Restriction on GSK Business

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  2.09

  	
  Development Rights and Obligations

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  2.10

  	
  No Restriction on Biovail Business

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3.

  	
  BIOVAIL
  RESPONSABILITES

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  3.01

  	
  Distribution Diligence

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  3.02

  	
  Promotional Materials and Activities

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  3.03

  	
  Use of Trademarks; Trade Dress

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  3.04

  	
  Trademark Infringement by Third Parties

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  3.05

  	
  Administrative Functions; Third Party Contracts

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  3.06

  	
  Rebates for Products

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  3.07

  	
  Medicaid Information

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.08

  	
  Shipping and Distribution Obligations

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.09

  	
  Pricing

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.10

  	
  Puerto Rico Sales Information

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.11

  	
  Sample Accountability

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.12

  	
  Federal Government Pricing Programs

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  3.13

  	
  Sales Force

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  3.14

  	
  Promotional Spend Requirement

  	
   

  	
  20

  



 


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  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4.

  	
  GSK RESPONSIBILITIES

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  4.01

  	
  Supply of Product

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  4.02

  	
  Retention of Product Registrations

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  4.03

  	
  Prosecution and Maintenance of Trademarks and
  Patents

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  4.04

  	
  No Obligation to Develop New Formulations

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  4.05

  	
  Zovirax® Cream NDA Filing; Subsequent Support

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  4.06

  	
  Phase IV Clinical Study

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  4.07

  	
  Continuation of Customary Practices

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5.

  	
  PURCHASE AND SALE OF
  PRODUCTS AND DISTRIBUTION RIGHTS PAYMENT

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  5.01

  	
  Distribution Rights Payment; Additional Rights
  Payment; Supplemental Allowance Payment; Extension Period

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  5.02

  	
  Purchase of Product; Annual Minimum Purchase
  Requirements

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  5.03

  	
  Product Supply Schedule; Purchase Orders

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  5.04

  	
  Additional Supply Schedule and Purchase Order Terms

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  5.05

  	
  Order Quantities

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  5.06

  	
  Prices for Products

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  5.07

  	
  Delivery

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  5.08

  	
  Invoicing; Payment

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  5.09

  	
  Subcontracts

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  5.10

  	
  Forms

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  5.11

  	
  Quantitative Deficiencies

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  5.12

  	
  Delivery of Existing Inventory

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  5.13

  	
  Sample Products

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  5.14

  	
  Development of New Products

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  5.15

  	
  Risk Manufacturing

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  5.16

  	
  Completion of GSK’s Obligation to Develop Sample
  Presentations

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  5.17

  	
  Discontinuance of Sample Products

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  5.18

  	
  DISCLAIMER OF WARRANTIES

  	
   

  	
  38

  



 


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  ARTICLE 6.

  	
  MANUFACTURE OF PRODUCT; ADVERSE REACTION
  REPORTING AND PRODUCT COMPLAINTS’ MEDICAL INFORMATION SERVICES; PRODUCT
  RETURNS; COMPLIANCE WITH APPLICABLE LAW. COMPLIANCE AUDITS

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  6.01

  	
  Manufacture of Product

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  6.02

  	
  Certificate of Analysis

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  6.03

  	
  Rejection of Product; Biovail Remedies

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  6.04

  	
  Medical Information Services

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  6.05

  	
  Product Returns

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  6.06

  	
  Product Recall

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  6.07

  	
  Complaints

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.08

  	
  Additional Covenants of Biovail

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.09

  	
  Adverse Events

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.10

  	
  Compliance with Applicable Law

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.11

  	
  Reasonable Cooperation

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  6.12

  	
  Compliance Audits

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7.

  	
  PAYMENTS

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  7.01

  	
  Manner of Payment

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  7.02

  	
  Payment for Purchase of Existing Inventory

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  7.03

  	
  Late Payments

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  8.01

  	
  Representations and Warranties of Both Parties

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  8.02

  	
  Representations and Warranties of GSK

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  8.03

  	
  Representations and Warranties of Biovail

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  8.04

  	
  No Reliance by Third Parties

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9.

  	
  INDEMNIFICATION AND
  INSURANCE

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  9.01

  	
  GSK Indemnity

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  9.02

  	
  Biovail Indemnity

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  9.03

  	
  Control of Proceedings

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  9.04

  	
  Limitation of Liability

  	
   

  	
  49

  



 


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  9.05

  	
  Insurance

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10.

  	
  FORCE MAJEURE

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  10.01

  	
  Force Majeure

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11.

  	
  CONFIDENTIALITY 11.01
  CONFIDENTIALITY

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  11.02

  	
  Use of Information

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  11.03

  	
  Relief

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12.

  	
  TERMINATION

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  12.01

  	
  Term

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  12.02

  	
  Breach

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  12.03

  	
  Insolvency or Bankruptcy

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  12.04

  	
  Other Termination Situations

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  12.05

  	
  Effect of Termination

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  12.06

  	
  Accrued Rights; Surviving Obligations

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13.

  	
  MISCELLANEOUS PROVISIONS

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  13.01

  	
  Assignment

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  13.02

  	
  Non-Waiver

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  13.03

  	
  Dispute Resolution; Venue

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  13.04

  	
  Entirety of Agreement; Amendments

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  13.05

  	
  Public Announcements

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  13.06

  	
  Governing Law

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.07

  	
  Relationship of the Parties

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.08

  	
  Counterparts

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.09

  	
  Severability

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.10

  	
  Cumulative Rights

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.11

  	
  No Other Rights

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.12

  	
  Expenses

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.13

  	
  Notices

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  13.14

  	
  Relief From Marketing Obligations

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  13.15

  	
  No Benefits Obligations

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  13.16

  	
  Audit Rights

  	
   

  	
  58

  



 


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  13.17

  	
  Condition Precedent

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  13.18

  	
  No Reliance

  	
   

  	
  59

  



 


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