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Exhibit 10.22
[XXXXXX XXXXXXX LETTERHEAD]
October 31, 1997
CONFIDENTIAL
Xx. Xxxx X.X. Xxxxxxx
Executive Vice President & General Counsel
King Pharmaceuticals, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Re: Proposed Acquisition of the Parkedale Facility and Certain Products
Dear Xx. Xxxxxxx;
1. This letter sets forth the preliminary understanding among King
Pharmaceuticals, Inc. (hereinafter, "King"), Xxxxxx-Xxxxxxx Company
(hereinafter, "X-X") and Xxxxx, Xxxxx & Company (hereinafter "PD") relating to
the proposed acquisition of certain of X-X's and/or PD's or their affliates'
rights in and to the following assets (all of the following are hereinafter
collectively referred to as the "Assets");
(a) To the extent assignable, rights to commercialize in the United
States all prescription pharmaceutical products, including all
formulations, dosage forms andd strengths, sold under the Ketalar(R),
Aplisol(R), Chlormycetin(R), Coly-Mycin(R) Coly-Mycin(R)-S Otic,
Coly-Mycin(R)-M Parenteral, Adrenalin(R), Vira-A(R), Pitocin(R),
Pitressin(R), Histoplasmin(R), Fluogen(R), Anusol(R)-HC(R), Procan(R),
Procanbid(R) and Humatin(R) trademarks (collectively hereinafter, the
"Products"), provided, however that such rights shall not include the
rights to sell over-the-counter under any such trademarks, those
pharmaceutical products or any formulations, dosage forms or strengths
thereof which X-X currently sells over-the-counter under any such
trademarks. Fluogen(R), Aplisol(R) and Aplitest (R) may also be sold
outside of the UInited States. The Products subject to these
restrictions shall be identified in the definitive purchase agreements
contemplated herein;
(b) Certain rights (either as owner or licensee, as mutually agreed by
the parties) in such tradedress, trademarks, patents, trade secrets and
other forms or formats of intellectual property directly related to the
Products and necessary to make, have made, use, offer for sale and sell
the Products in the United States (collectively hereinafter, the
"Intellectual Property"). The parties acknowledge that certain
trademarks owned or controlled by X-X are used for the sale of the
Products as well as for the over-the-counter sale of other products and
that King shall only acquire a license to use the Intellectual Property
for the manufacture and sale of such Products;
(c) Rights to such regulatory filings, applications, licenses,
approvals, supplements, permits and reports directly related to the
Products which may be necessary to make, have made, use, offer for sale
and sell the Products in the United States (collectively hereinafter,
the "Regulatory Property"):
(d) All goodwill associated solely with the Products (collectively
hereinafter, the "Goodwill");
(e) All the real property (being 82 acres more or less), appurtenances
thereto, the buildings and to the extent owned by Xxxxxx-Xxxxxxx all
equipment and support systems necessary to
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manufacture the products and fixtures at the site commonly referred to
as the Xxxxx-Xxxxx plant at 000 Xxxxxxxxx Xxxx xx Xxxxxxxxx, Xxxxxxxx
(collectively hereinafter, the "Parkedale Facility");
(f) To the extent assignable, the rights and obligations of X-X under
certain contracts exclusively relating to (I) the manufacture,
packaging, testing, distribution, marketing, or sale of any of the
Products or (II) the manufacture, packaging, testing, marketing or
distribution of other pharmaceutical drug products or drug substances
for or on behalf of all third-parties performed at or from the
Parkedale Facility (collectively hereinafter, the "Contractual
Rights").
(g) All information concerning all accounts receivable, pending
purchase orders, sales data, customer lists, target lists, sampling
lists, physician lists, distribution agreements, co-promotion
agreements, volume prescriber lists, discount arrangements, marketing
strategies, marketing summaries, advertising data, and advertisements
related to the Products in any form or fashion in and outside the
United States, together with all internal and external correspondence,
historical records, and copies (whether hard copies or electronically
archived) of all of the foregoing (collectively, hereinafter the "Sales
Data").
2. In consideration of the acquisition by King of the Assets, King
shall pay to X-X and/or PD or their designated affiliates the sum of One
Hundred Twenty-five Million Dollars ($125,000,000.00) (the "Purchase Price").
The Purchase Price will be paid as follows: (a) the sum of Ninety Million
Dollars ($90,000,000.00) to be paid on the date of execution of: (I) definitive
asset purchase agreements for the Assets, and (II) other definitive agreements
and the closing of the transactions contemplated herein (the "Closing Date") by
wire transfer to accounts designated by X-X and PD; and (b) the remaining sum
of Thirty-five Million Dollars ($35,000,000.00) to be paid pursuant to the
terms of a promissory note payable to X-X and PD in three (3) equal annual
installments of principal with the first such principal payment due on the
first anniversary of the Closing Date and the remaining principal payments to
be due on the second and third anniversaries of the Closing Date, respectively,
together with semi-annual interest payments on the outstanding balance at a per
annum rate of seven percent (7%). King shall have the right to prepay all or
any portion of the outstanding principal amount of the note (plus accrued
interest) at any time without penalty. Such note shall be secured by
appropriate collateral valued at no less than 110% of the principal amount of
the promissory note, as negotiated by the parties.
3. On and as of the Closing Date, X-X may have an inventory of raw
materials, components, in-process goods and finished goods on hand relating to
the production of the Products or products produced pursuant to the Contractual
Rights. X-X and Xxxx will negotiate in good faith the terms on which King may
acquire at book value such finished inventory and will memorialize same in the
definitive agreements contemplated herein.
4. Consummation of the transactions contemplated herein is contingent
upon the fulfillment of all of the following conditions to the satisfaction of
the parties: (a) the negotiation of mutually acceptable definitive purchase
agreements and other definitive agreements related thereto; (b) receipt by
Xxxx, X-X and PD of all required internal approvals and board of directors
approvals; (c) receipt of any required approvals from relevant regulatory
authorities or governmental agencies; (d) completion of a due diligence
investigation by King and/or its agents of all matters surrounding each and all
of the Assets; (e) a resolution of all legal and equitable matters relating to
a transfer or continuation of labor at the Parkedale Facility; (f) negotiation
and execution of a mutually acceptable manufacture and supply agreement,
substantially on the terms outlined in paragraph 5 below, for those certain
products not presently manufactured at the Parkedale Facility (collectively
hereinafter, the "Non-Parkedale Products"); (g) negotiation and execution of a
mutually acceptable manufacture and supply agreement, substantially on the
terms outlined in paragraph 6 below, for those certain products presently
manufactured at the Parkedale Facility which are not Assets (collectively
hereinafter, the "X-X Retained Products"); and (h) negotiation of a
transitional services agreement governing the transfer of operations at the
Parkedale Facility from X-X to Xxxx.
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5. The manufacture and supply agreement for the Non-Parkedale
Products would be for a term of two (2) years. In the manufacture and supply
agreement, King would agree to purchase all of its requirements for the
Non-Parkedale Products exclusively from X-X and X-X would agree to manufacture
for U.S. the Non-Parkedale Products exclusively for King. Xxxx would pay a
transfer price for each unit of Non-Parkedale Products equal to the "Direct
Manufacturing Costs" plus fifty percent (50%). Direct Manufacturing Costs to
be defined to include the actual cost of labor (manufacturing, packaging and
release testing), material components and packaging components. X-X would
warrant the Non-Parkedale Products to have been manufactured in compliance with
cGMP standards and in accordance with mutually agreed upon specifications. X-X
would conduct and maintain routine stability testing for the Non-Parkedale
Products and report and results of same to King on at least an annual basis.
6. The manufacture and supply agreement for the X-X Retained
Products would be for a term of five (5) years. In the manufacture and supply
agreement, X-X would agree to purchase all of its requirements for the X-X
Retained Products exclusively from King and King would agree to manufacture the
X-X Retained Products exclusively for X-X. X-X would pay a transfer price for
each unit of Retained X-X Products equal to the "Direct Manufacturing Costs"
plus fifty percent (50%). Direct Manufacturing Costs to be defined as the
actual cost of labor (manufacturing, packaging and release testing), material
components and packaging components. King would warrant the X-X Retained
Products to have been manufactured in the compliance with cGMP standards and in
accordance with specifications provided by X-X. Xxxx would conduct and
maintain routine stability testing for the X-X Retained Products and report
the results of same to X-X on at least an annual basis.
7. The definitive agreements to be executed by X-X Xxxx relating to
the transactions contemplated herein will contain terms, conditions, warranties
and representations usual and customary in transactions of this type in the
pharmaceutical industry, including, but not limited to, indemnification
provisions applicable to both parties, an appropriate non-competition agreement
with respect to the Products, the Retained Products, the Intellectual Property
and the Regulatory Property, and such other terms and conditions as may be
mutually agreed to by the parties.
8. Each party represents to the other that there is no basis for a
claim against the other party for brokers' commissions, finders' fees or
similar compensation in connection with the transactions described herein based
on arrangements made by the representing party. Each party shall be
responsible for the payment of its respective costs and expenses incurred in
connection with the negotiations, drafting and closing of the agreements and
transactions contemplated herein.
9. The parties agree that the subject matter described herein and
the fact that negotiations with respect to such subject matter are taking place
or have taken place between the parties will be kept confidential until the
contents and timing of a public announcement are mutually agreed, except if
required by applicable law, in which case the party required to make a public
disclosure agrees to inform the other party prior to any disclosure, provide
the other party with a copy of such disclosure and allow the other party a
chance to review and comment on such disclosure and to minimize the information
released insofar as possible. Disclosures relating to any proposed public sale
of either party's shares of stock shall not be deemed to be required by
applicable law and any such disclosures must be mutually agreed to by the
parties.
10. This letter shall be deemed to have been made in, and shall be
construed in accordance with the laws of, the State of New York, exclusive of
choice of law rules.
11. This letter expresses the present intention of the parties with
respect to the Assets and except for the provisions of paragraphs 8, 9, 10 and
11 hereof, notwithstanding any words of agreement or other language used
herein, this letter is not intended to create a binding legal obligation on the
part of any party nor shall it be deemed to be a contract to contract. Binding
legal obligations shall be created solely upon execution of, and in accordance
with, the terms of the definitive agreements between the parties.
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If the foregoing accurately reflects your understanding of the present
intentions of the parties, please execute both copies of this letter in the
space provided below and return one original to the undersigned.
Very truly yours,
XXXXXX-XXXXXXX COMPANY
BY: /s/ Xx. Xxxxxxx X. Xxxx
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NAME: Xx. Xxxxxxx X. Xxxx
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TITLE: President Pharmaceutical Sector
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PARKE, DAVIS & COMPANY
BY: /s/ Xx. Xxxxxxx X. Xxxx
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NAME: Xx. Xxxxxxx X. Xxxx
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TITLE: President Pharmaceutical Sector
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AGREED TO AND ACCEPTED:
KING PHARMACEUTICALS, INC.
By: /s/ Xxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxxxx
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Title: CEO
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Date: 10/31/97
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