EXECUTION COPY
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Stock Purchase Agreement
By and among
PHARMACEUTICAL RESOURCES, INC.,
KALI LABORATORIES, INC.,
VGS HOLDINGS, INC.
AND
THE SHAREHOLDERS OF
KALI LABORATORIES, INC.
Dated as of: April 2, 2004
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TABLE OF CONTENTS
1. DEFINITIONS; INTERPRETATIONS............................................1
1.1. DEFINITIONS.........................................................1
1.2. INTERPRETATIONS....................................................12
2. THE TERMS OF THE ACQUISITION...........................................12
2.1. THE PURCHASE AND SALE OF THE KALI SHARES...........................12
2.2. PAYMENT OF PURCHASE PRICE; ALLOCATION; CASH
PURCHASE PRICE ADJUSTMENT....................................13
2.3. CLOSING............................................................16
2.4. PURCHASE PRICE ADJUSTMENT..........................................16
2.5. SECTION 338 MAKE-WHOLE AMOUNT......................................18
3. REPRESENTATIONS AND WARRANTIES RELATING TO KALI........................19
3.1. ORGANIZATION AND QUALIFICATION.....................................19
3.2. DUE AUTHORIZATION; ENFORCEABILITY..................................19
3.3. CAPITALIZATION; OPTIONS; SHAREHOLDER RIGHTS........................20
3.4. KALI ORGANIZATIONAL DOCUMENTS......................................20
3.5. NON-CONTRAVENTION..................................................20
3.6. CONSENTS...........................................................21
3.7. FINANCIAL STATEMENTS; RECEIVABLES AND PAYABLES;
UNDISCLOSED LIABILITIES......................................21
3.8. BOOKS AND RECORDS..................................................22
3.9. ABSENCE OF CHANGES.................................................22
3.10. PERMITS........................................................... 23
3.11. LEGAL COMPLIANCE...................................................23
3.12. EMPLOYEES AND EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS..............25
3.13. TAX MATTERS........................................................27
3.14. ENVIRONMENTAL MATTERS..............................................28
3.15. LITIGATION; CLAIMS.................................................29
3.16. MATERIAL AGREEMENTS................................................29
3.17. REAL ESTATE........................................................30
3.18. INTELLECTUAL PROPERTY..............................................32
3.19. DOMAIN NAMES.......................................................33
3.20. BANK ACCOUNTS; CREDIT CARDS; CORPORATE ACCOUNTS; POWERS
OF ATTORNEY..................................................33
3.21. TITLE TO PROPERTIES AND ASSETS; INVENTORY..........................33
3.22. PRODUCTS...........................................................34
3.23. CERTAIN BUSINESS MATTERS...........................................34
3.24. CUSTOMERS..........................................................34
3.25. INSURANCE..........................................................35
3.26. TRANSACTIONS WITH RELATED PARTIES..................................35
3.27. BROKERS............................................................35
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4. REPRESENTATIONS AND WARRANTIES OF THE KALI SHAREHOLDERS................35
4.1. AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS; ENFORCEABILITY........35
4.2. TITLE TO KALI SHARES...............................................36
4.3. LITIGATION.........................................................36
4.4. INVESTMENT INTENT..................................................36
4.5. INFORMATION........................................................36
4.6. ACCREDITATION......................................................36
4.7. ELIGIBLE S CORPORATION SHAREHOLDER.................................37
5. REPRESENTATIONS AND WARRANTIES RELATING TO PRI.........................37
5.1. ORGANIZATION AND DUE AUTHORIZATION.................................37
5.2. NO VIOLATION; CONSENTS AND APPROVALS...............................37
5.3. INVESTMENT INTENT..................................................37
5.4. LITIGATION.........................................................37
5.5. BROKERS............................................................37
5.6. SECURITIES LAW FILINGS.............................................38
6. COVENANTS AND AGREEMENTS...............................................38
6.1. CONDUCT OF THE BUSINESS............................................38
6.2. PRE-CLOSING ACCESS.................................................39
6.3. COMMERCIALLY REASONABLE EFFORTS; ANTI-TRUST FILINGS;
FURTHER ASSURANCES...........................................40
6.4. NON-COMPETITION....................................................41
6.5. BIOSTUDIES PRODUCTION..............................................43
6.6. PUBLIC ANNOUNCEMENTS...............................................44
6.7. EMPLOYEES..........................................................44
6.8. RESIGNATIONS; REVOCATIONS; RELEASES................................44
6.9. CONFIDENTIALITY....................................................44
6.10. NON-SOLICITATION...................................................45
6.11. FINANCIAL STATEMENTS AND OTHER INFORMATION.........................45
6.12. USE OF LEASED REAL PROPERTY........................................45
6.13. ISRA/ENVIRONMENTAL COMPLIANCE......................................46
6.14. EXCLUSIVE DEALINGS.................................................47
6.15. COMMERCIALLY REASONABLE EFFORTS TO CLOSE...........................48
6.16. FURTHER ASSURANCES; PERRIGO CLAIM..................................48
6.17. SUPPLEMENTAL DISCLOSURE............................................49
6.18. LEASES.............................................................49
6.19. VGS LOAN...........................................................49
6.20. CONDUCT OF KALI BUSINESS POST-CLOSING..............................49
7. CERTAIN TAX MATTERS....................................................50
7.1. TAX INDEMNIFICATION................................................50
7.2. STRADDLE PERIOD....................................................50
7.3. SECTION 338(H)(10) ELECTION........................................50
7.4. ALLOCATIONS OF PURCHASE PRICE......................................51
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7.5. S CORPORATION STATUS...............................................52
7.6. TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE...................52
7.7. COOPERATION ON TAX MATTERS.........................................52
7.8. CERTAIN TAXES......................................................53
8. CONDITIONS TO OBLIGATION OF PRI TO CLOSE...............................53
8.1. AGREEMENTS AND CONDITIONS..........................................53
8.2. REPRESENTATIONS AND WARRANTIES.....................................53
8.3. NO LEGAL PROCEEDINGS...............................................53
8.4. KALI SHAREHOLDERS' AND OFFICERS' CERTIFICATE.......................54
8.5. PERRIGO RESOLUTION.................................................54
8.6. DEATH OR DISABILITY OF XX. XXXXXXXXXXX.............................54
8.7. ISRA CLEARANCE.....................................................54
8.8. GOVERNMENTAL APPROVALS.............................................54
8.9. SECRETARY'S CERTIFICATE............................................54
8.10. CERTIFICATE OF STATUS..............................................54
8.11. CLOSING DELIVERIES.................................................54
8.12. IP RELEASES; EMPLOYMENT REAFFIRMATIONS.............................54
9. CONDITIONS TO OBLIGATIONS OF KALI AND THE KALI SHAREHOLDERS TO CLOSE...55
9.1. AGREEMENTS AND CONDITIONS..........................................55
9.2. REPRESENTATIONS AND WARRANTIES.....................................55
9.3. NO LEGAL PROCEEDINGS...............................................55
9.4. OFFICER'S CERTIFICATE..............................................55
9.5. GOVERNMENTAL APPROVALS.............................................55
9.6. CLOSING DELIVERIES.................................................55
10. TERMINATION............................................................55
10.1. TERMINATION........................................................55
10.2. EFFECT OF TERMINATION..............................................56
10.3. LIQUIDATED DAMAGES AND EXPENSES....................................56
11. SURVIVAL; INDEMNIFICATION..............................................58
11.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS..............58
11.2. INDEMNIFICATION....................................................59
11.3. PROCEDURES FOR INDEMNIFICATION.....................................60
11.4. LIMITATIONS........................................................61
11.5. RELATIONSHIP WITH CASH PURCHASE PRICE ADJUSTMENTS..................62
11.6. INDEMNIFICATION WAIVER.............................................62
11.7. ORDER OF INDEMNIFICATION...........................................62
11.8. RESTRICTION ON TRANSFER............................................63
12. MISCELLANEOUS..........................................................63
12.1. FEES AND EXPENSES..................................................63
12.2. FURTHER ASSURANCES; COOPERATION....................................63
12.3. NOTICES............................................................63
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12.4. ENTIRE AGREEMENT...................................................64
12.5. SEVERABILITY.......................................................64
12.6. BINDING EFFECT; ASSIGNMENT.........................................65
12.7. NO THIRD-PARTY BENEFICIARIES.......................................65
12.8. COUNTERPARTS.......................................................65
12.9. GOVERNING LAW......................................................65
12.10. AMENDMENTS; WAIVERS...............................................65
12.11. APPOINTMENT AND DUTIES OF THE KALI SHAREHOLDERS' REP..............65
EXHIBITS:
Exhibit A Subramanian Employment Agreement
Exhibit B Warrant Agreement
Exhibit C Facility Lease and Additional Terms
Exhibit D VGS Note
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SCHEDULES:
Schedule 2.1 Number of Shares Owned
Schedule 2.2(b) Allocation of Purchase Price
Schedule 3.1 Business Qualifications
Schedule 3.3(c) Capitalization
Schedule 3.3(d) Subscription Rights
Schedule 3.3(e) Shareholder Rights
Schedule 3.5 Non-contravention
Schedule 3.6 Consents
Schedule 3.7(a) Kali Financial Statements
Schedule 3.7(d) Absence of Undisclosed Liabilities
Schedule 3.9 Absence of Certain Changes
Schedule 3.10 Permits
Schedule 3.11 Legal Compliance
Schedule 3.12(a)Employees
Schedule 3.12(b)Employment/Severance Agreements
Schedule 3.12(c)Kali Benefit Plans
Schedule 3.14(a)Environmental Laws
Schedule 3.14(d)Environmental Claims
Schedule 3.14(e)Environmental Notices
Schedule 3.14(f)Underground Storage Tanks
Schedule 3.14(g)Environmental Permits
Schedule 3.15 Litigation; Claims
Schedule 3.16(a)Kali Material Agreements
Schedule 3.16(b)Breaches; Consents
Schedule 3.17(a)Leased Real Property
Schedule 3.17(b)Real Property Leases
Schedule 3.17(c)Occupancy
Schedule 3.17(d)Lawful Operation
Schedule 3.18(a)Intellectual Property Rights
Schedule 3.18(c)Intellectual Property Claims
Schedule 3.18(d)Patents
Schedule 3.19 Domain Names
Schedule 3.20 Bank Accounts; Credit Cards; Corporate Accounts; Powers of
Attorney
Schedule 3.21 Title to Properties
Schedule 3.22 Products
Schedule 3.23 Certain Business Matters
Schedule 3.24 Customers
Schedule 3.25 Insurance
Schedule 3.26(a)Affiliated Transactions
Schedule 4.2 Title to Kali Shares
Schedule 6.1(a) Exceptions to Conduct of Business Covenant
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of April 2,
2004 (the "Effective Date"), by and among Pharmaceutical Resources, Inc., a
Delaware corporation ("PRI"), Kali Laboratories, Inc., a New Jersey corporation
("Kali"), VGS Holdings, Inc., a New Jersey corporation ("VGS"), and the Kali
Shareholders (as defined below). Each of PRI, Xxxx and the Kali Shareholders is
referred to herein individually, as a "Party" and collectively, as the
"Parties."
W I T N E S S E T H:
WHEREAS, Xxxxxxxxx X. Xxxxxxxxxxx, Ph.D. ("Xx. Xxxxxxxxxxx"),
Xxxxxxxxxxx X. Xxxxxxxxxxx, M.D. ("Xx. Xxxxxxxxxxx"), The Xxx Xxxxxxxxxxx
Irrevocable Trust (the "AS Trust") and The Xxxxxx Xxxxxxxxxxx Irrevocable Trust
(the "IS Trust" and, together with Xx. Xxxxxxxxxxx, Xx. Xxxxxxxxxxx and the AS
Trust, the "Kali Shareholders") own all of the issued and outstanding shares of
capital stock of Kali (the "Kali Shares"); and
WHEREAS, PRI desires to acquire from the Kali Shareholders, and the
Kali Shareholders desire to sell to PRI, on the terms and subject to the
conditions set forth herein, the Kali Shares.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties, covenants and agreements contained herein, the
Parties, intending to be legally bound hereby, agree as follows:
1. DEFINITIONS; INTERPRETATIONS.
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1.1. DEFINITIONS. The following terms shall have the meanings set
forth below:
"505(B)(2) APPLICATION" means the filing of an NDA with the FDA
under Section 505(b)(2) of the FDCA.
"AAA PAYMENTS" shall have the meaning set forth in Section 2.2(d)
hereof.
"ACCOUNTANT ARBITRATOR" shall have the meaning set forth in Section
2.4(c) hereof.
"ACCUMULATED ADJUSTMENTS ACCOUNT" means with respect to each Kali
Shareholder, the allocable amount of profit of Kali that such Kali Shareholder
has previously included within such Shareholder's taxable income for any year
but as to which such Shareholder has not received such allocable amount.
"ADDITIONAL AMOUNT" shall have the meaning set forth in Section
2.5(a) hereof.
"ADDITIONAL LOAN" shall have the meaning set forth in 10.3(a)(iii)
hereof.
"AFFILIATE" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by, or under direct or indirect common
control with, such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
Following the Closing, Xxxx shall be deemed to be an "Affiliate" of PRI for
purposes hereof.
"AGREEMENT" shall have the meaning set forth in the preamble hereof.
"ANDA" means an abbreviated new drug application, as more fully
defined in 21 U.S.C. Section 355.
"ASSET ALLOCATION STATEMENT UNDER SECTION 338" shall have the
meaning set forth in Section 7.4 hereof.
"AS TRUST" shall have the meaning set forth in the recitals hereof.
"ASSOCIATE" shall have the meaning set forth in Rule 405 promulgated
under the Securities Act.
"BANKRUPTCY AND EQUITY EXCEPTION" shall have the meaning set forth
in Section 3.2 hereof.
"BIOSTUDY" means a set of analytical studies, including
pharmacokinetic (PK) studies, and clinical trials or other tests that are
reasonably designed to meet FDA procedures and requirements for bioequivalence
of an applicable product to the branded version thereof.
"BOOKS AND RECORDS" means all books and records of Kali of any and
every kind, including compact disks, compact disk lists, ledgers, files,
reports, plans, drawings and operating records, held or maintained by, or under
the control of, Kali, pertaining to its properties and assets, customers,
suppliers, distributors or personnel (including directors, officers and
employees), disk or tape files, printouts, runs or other computer-prepared
information and its interests in all computer programs required to obtain access
to, and the equipment containing, all such computer-based information, product,
business and marketing plans and sales, maintenance and production records.
"BUSINESS DAY" means any day other than a Saturday, Sunday, Federal
holiday or other day that banks in the State of New York are required by Law to
be closed.
"BUSINESS INTERRUPTION EVENT" means the occurrence and continuation
for a period of thirty (30) or more consecutive days at any time during the
thirty (30) month-period commencing immediately after the Closing Date of one or
more of the following events: (a) the failure of PRI to provide Xxxx, with
reasonably adequate funding (including research & development or Biostudies
funding), facility maintenance, equipment, personnel, executive management, in
each case, reasonably necessary to permit Xxxx to conduct the business of Kali
in a manner consistent with the manner in which the Kali Business was conducted
immediately prior to the Closing (provided, that the employment of Xx.
Xxxxxxxxxxx as President of Kali shall be prima facie evidence of the provision
of adequate executive management), other than any failure that is a direct
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result of an act or omission of Xx. Xxxxxxxxxxx; (b) the FDA or any other
Governmental Authority prohibiting or materially restricting the operation of
the business of Kali; or (c) the relocation of Kali's principal facility in
Somerset, New Jersey to a facility that is not fully qualified pursuant to all
Laws (including FDA regulations) applicable to the development, manufacturing,
packaging and shipping of Kali's products. For the avoidance of doubt, the
termination of the employment of Xx. Xxxxxxxxxxx by Par or PRI (for any reason)
shall not, in and of itself, constitute a Business Interruption Event.
"CASH PURCHASE PRICE" shall have the meaning set forth in Section
2.2(a)(i) hereof.
"CLAIMS LIMITATION" shall have the meaning set forth in Section
11.4(a) hereof.
"CLOSING" shall have the meaning set forth in Section 2.3(a) hereof.
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
2.4(b) hereof.
"CLOSING BONUSES" shall have the meaning set forth in Section 2.2(d)
hereof.
"CLOSING CERTIFICATE" shall have the meaning set forth in Section
2.4(b) hereof.
"CLOSING DATE" shall have the meaning set forth in Section 2.3(a)
hereof.
"CLOSING PRICE" shall have the meaning set forth in Section
2.2(a)(iv) hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPETE" shall have the meaning set forth in Section 6.4(a)(i)
hereof.
"CONSENT" shall have the meaning set forth in Section 3.6 hereof.
"CORPORATE ACCOUNTS AND POWERS" shall have the meaning set forth in
Section 3.20 hereof.
"CONTINUING EMPLOYEES" shall have the meaning set forth in Section
6.7 hereof.
"CONTROLS" shall have the meaning set forth in Section 6.13(g)
hereof.
"CSA" means the Controlled Substances Import and Export Act, 21
U.S.C. Section 951 ET SEQ.
"CURRENT GOOD MANUFACTURING PRACTICE REGULATIONS" means the current
good manufacturing practice regulations set forth in 21 C.F.R. Parts 210 and
211.
"DEA" means the U.S. Drug Enforcement Administration, or any
successor Governmental Authority.
"DEDUCTIBLE" shall have the meaning set forth in Section 11.4(a)
hereof.
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"DEFINITIVE PRODUCT LIST" shall have the meaning set forth in
Section 6.4(a)(ii) hereof.
"DETERMINATION DATE" shall have the meaning set forth in Section
6.4(a)(ii) hereof.
"DISPUTED ITEMS" shall have the meaning set forth in Section 2.4(c)
hereof.
"DISRUPTION DAMAGES" shall have the meaning set forth in Section 6.5
hereof.
"DMFS" shall have the meaning set forth in Section 3.11(e) hereof.
"EFFECTIVE DATE" shall have the meaning set forth in the preamble
hereof.
"EMPLOYMENT REAFFIRMATIONS" means the reaffirmations of the
employment agreements entered into between Kali and each of Xxxxxxxxx Xxxxxxxxx
and Xxxx Xxxxxx.
"ENVIRONMENTAL CLAIMS" means any and all liabilities, damages,
obligations, suits, investigations, proceedings, fines, penalties, judgments,
claims or other losses relating to or arising under any (i) Environmental Laws
and (ii) Environmental Matters, including any liabilities, damages, obligations,
suits, proceedings, fines, penalties, judgments, claims or other losses arising
from any actual or alleged breach of Section 3.14 hereof.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local,
municipal or foreign laws, rules, orders, regulations, statutes, ordinances,
codes, guidelines, policies or requirements of any Governmental Authority
regulating or imposing standards of liability or standards of conduct concerning
air, water, solid waste, hazardous waste, Hazardous Materials, worker and
community right-to-know, hazard communication, noise, radioactive material,
resource protection, health protection, and similar environmental health and
safety concerns (including the Clean Water Act, the Toxic Substances Control
Act, the Clean Air Act, the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act, the
Solid Waste Disposal Act, the Occupational Safety and Health Act, the New Jersey
Spill Compensation and Control Act and the New Jersey Industrial Site Recovery
Act), and the laws, rules, regulations, common law, orders or directives
relating to (i) the protection of the environment or the public health and
welfare from actual or potential exposure (or the effects of such exposure) to
any actual or potential release, discharge, disposal or emission (whether past
or present) of any Hazardous Substance, (ii) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Substance or (iii) environmental nuisance.
"ENVIRONMENTAL MATTERS" means any matters arising out of or relating
to pollution, contamination and any other matter relating to emissions,
discharges, dissemination, releases or threatened releases of Hazardous
Substances on or into the air, surface water, groundwater, soil, land surface or
subsurface, buildings or facilities or otherwise arising out of or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations and rules promulgated thereunder.
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"ESTIMATED CLOSING CERTIFICATE" shall have the meaning set forth in
Section 2.4(a) hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXECUTION CASH" shall have the meaning set forth in Section 2.2(d)
hereof.
"FACILITY" means the real property occupied by Kali and located in
Somerset, New Jersey, including all land, buildings, structures, improvements,
fixtures, easements, licenses, appurtenances and privileges thereon or relating
thereto, as more particularly described on SCHEDULE 3.17(A) hereto.
"FAILURE TO COMPLETE BIOSTUDIES" shall have the meaning set forth in
Section 6.5 hereof.
"FDA" means the U.S. Food and Drug Administration, or any successor
Governmental Authority.
"FDCA" means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C.
Section 301 ET SEQ.
"FORCE MAJEURE EVENT" means a cause beyond a Party's reasonable
control, including, without limitation, an act of God, an act of the public
enemy or terrorists, strikes, fire, flood, storm, explosion or acts of war.
"GAAP" means generally accepted accounting principles in the U.S.,
as in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any U.S. Federal, state, foreign or
local government or any court, tribunal, administrative agency or commission or
other governmental or regulatory authority, body or agency, including any
self-regulatory organization.
"GROSS-UP" shall have the meaning as set forth in Section 2.5(b)
hereof.
"HAZARDOUS SUBSTANCES" means all chemicals, substances, wastes,
contaminants, pollutants and materials (1) defined, identified or designated as
hazardous, dangerous or toxic, or any similar term, pursuant to or under any
applicable Environmental Law, (2) the use, discharge or release of which is
regulated pursuant to or under any applicable Environmental Law and (3) that
could pose a hazard to human health or the environment, including asbestos and
asbestos-containing materials, oil, radioactive materials, lead-based paint,
polychlorinated biphenyls ("PCBs") and petroleum or petroleum related
by-products.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"IMPROVEMENTS" shall have the meaning set forth in Section 3.17(c)
hereof.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
11.3(a) hereof.
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"INDEMNITEE" shall have the meaning set forth in Section 11.3(a)
hereof.
"INITIAL ANDA PAYMENT" shall have the meaning set forth in Section
2.2(a)(ii) hereof.
"INITIAL ANDA THRESHOLD" means the filing (irrespective of whether
accepted for filing by the FDA), in good faith, with the FDA by Xxxx, PRI (or
any of its Affiliates) or any Kali Development Partner, in each case, with
respect to a drug technology substantially developed by Xxxx, of at least ten
(10) ANDAs during the period from January 1, 2004 through the date that is
thirty (30) months from the Closing Date.
"INTELLECTUAL PROPERTY RIGHTS" means patents, patent rights and
patent applications, know-how, unpatented inventions, trade secrets and other
similar confidential or proprietary information, service marks, trademarks,
tradenames, trade dress, trade designations, copyrights, pending or issued
registrations for any such copyrights, computer programs, and rights in
processes, formulas and methods, technology, information, tapes, disks, flow
charts, diagrams, object codes, source codes, source listings, documentation,
manuals or developments; claims for infringement of U.S. and foreign patents,
trademarks, service marks, trade names or copyrights and for the
misappropriation of trade secrets; and rights in invention assignments and
license agreements.
"IP RELEASE" means the irrevocable release and assignment to Xxxx
(and PRI) by each of the Kali Shareholders of all intellectual property
(including inventions, ideas and discoveries, patentable or unpatentable, trade
secrets and copyrightable works) that shall have been made, developed, conceived
or reduced to practice by such Shareholder, either solely or jointly with
others, resulting from or arising out of work performed at the Facility or with
Xxxx's facilities, equipment and supplies, or that results from his use or
knowledge of confidential or trade secret information of Kali.
"IRS" shall have the meaning set forth in Section 3.12(g) hereof.
"IS TRUST" shall have the meaning set forth in the recitals hereof.
"ISRA" shall have the meaning set forth in Section 3.14(h) hereof.
"ISRA CLEARANCE" shall have the meaning set forth in Section 6.13(b)
hereof.
"ISRA FILINGS" shall have the meaning set forth in Section 6.13(b)
hereof.
"KALI" shall have the meaning set forth in the preamble hereof.
"KALI BENEFIT PLANS" shall have the meaning set forth in Section
3.12(c) hereof.
"KALI BUSINESS" means the business of manufacturing, marketing,
distributing, packaging, labeling and developing, researching and selling any of
the Pharmaceutical Products currently or formerly manufactured, packaged,
labeled, developed, researched and sold by Kali, including those products set
forth on SCHEDULE 3.22 hereto.
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"KALI COMMON STOCK" shall have the meaning set forth in Section
3.3(a) hereof.
"KALI DEVELOPMENT PARTNER" means a pharmaceutical company with which
Xxxx has, or shall in the future, enter into a drug development agreement,
including Perrigo and Eon Labs Inc.
"KALI EMPLOYEES" shall have the meaning set forth in Section 3.12(a)
hereof.
"KALI FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.7(a) hereof.
"KALI INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth
in Section 3.18(a) hereof.
"KALI MATERIAL AGREEMENTS" shall have the meaning set forth in
Section 3.16(a) hereof.
"KALI ORGANIZATIONAL DOCUMENTS" shall have the meaning set forth in
Section 3.4 hereof.
"KALI SHARES" shall have the meaning set forth in the recitals
hereof.
"KALI SHAREHOLDERS" shall have the meaning set forth in the recitals
hereof.
"KALI SHAREHOLDERS' REP" means Xx. Xxxxxxxxxxx or his executor, as
the case may be.
"KALI TRANSACTION COSTS" shall have the meaning set forth in Section
2.2(d)(v) hereof.
"KALI'S KNOWLEDGE" or "TO THE KNOWLEDGE OF KALI" means, to the
extent that Xxxx represents and warrants itself to have knowledge as to any
event, fact, condition or other matter set forth in this Agreement, the best
knowledge of any of the Kali Shareholders, including Xx. Xxxxxxxxxxx as the sole
executive officer of Xxxx.
"LAWS" shall have the meaning set forth in Section 3.11(a) hereof.
"LEASED REAL PROPERTY" shall have the meaning set forth in Section
3.17(a) hereof.
"LETTER AGREEMENT" means that certain letter agreement, dated as of
January 20, 2004, by and among PRI, Xxxx, VGS, the Kali Shareholders and the VGS
Shareholders, which was subsequently revoked.
"LIABILITIES" means any debts, liabilities or obligations, whether
absolute or contingent, asserted or unasserted, accrued or unaccrued, known or
unknown, due or to become due, or fixed or unfixed.
"LIEN(S)" means any lien, pledge, hypothecation, mortgage, security
interest, claim, lease, charge, option, right of first refusal or first offer,
easement, servitude, transfer restriction, voting requirement or any other
7
encumbrance, restriction or limitation, other than any purported right(s) of
Perrigo under the Option Agreement and any Lien securing the PRI Loan.
"LOSSES" shall have the meaning set forth in Section 7.1 hereof.
"MARKET PRICE PAYMENT(S)" shall have the meaning set forth in
Section 2.2(a)(iii)(B)(y) hereof.
"MARKET VALUE" means (i) the closing price of the PRI Common Stock,
as quoted on the New York Stock Exchange (or, if applicable, the Nasdaq Stock
Market), for each trading day during any five (5) consecutive trading-day period
or (ii) the average of the closing prices of the PRI Common Stock, as quoted on
the New York Stock Exchange (or, if applicable, the Nasdaq Stock Market), for
any twenty (20) consecutive trading-day period.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, assets or financial condition of Kali.
"XX. XXXXXXXXXXX" shall have the meaning set forth in the recitals
hereof.
"XX. XXXXXXXXXXX" shall have the meaning set forth in the recitals
hereof.
"NDA" means a new drug application filed with, and seeking the
approval of any pharmaceutical product of, the FDA.
"NEW HIRES" shall have the meaning set forth in Section 3.9(n)
hereof.
"NEW JERSEY CORPORATE TAX REIMBURSEMENT" shall have the meaning set
forth in Section 2.5 hereof
"NFA" shall have the meaning set forth in Section 6.13(b) hereof.
"NJDEP" shall have the meaning set forth in Section 6.13(b) hereof.
"NON-COMPETITION PERIOD" shall have the meaning set forth in Section
6.4(a)(i) hereof.
"NON-SOLICITATION PERIOD" shall have the meaning set forth in
Section 6.10 hereof.
"OFF-SITE LOCATION" means any location other than (i) the Facility
or (ii) a location impacted by migration from the Facility.
"OPTION AGREEMENT" means that certain Option Agreement, dated August
15, 2003, by and between Xxxx, VGS, the Kali Shareholders, the VGS Shareholders
and Perrigo.
"PAR" means PRI's wholly owned subsidiary, Par Pharmaceutical, Inc.
"PARTY" or "PARTIES" shall have the meaning set forth in the
preamble hereof.
"PAYEE" shall have the meaning set forth in Section 10.3(b) hereof.
8
"PAYOR" shall have the meaning set forth in Section 10.3(c) hereof.
"PERCENTAGE AMOUNT" shall have the meaning set forth in Section
10.3(a)(iv) hereof.
"PERMITS" means licenses, permits, registrations, consents,
authorizations and approvals of Governmental Authorities.
"PERMITTED CAPITAL EXPENDITURES" shall have the meaning set forth in
Section 3.9(n) hereof.
"PERMITTED LIENS" means (i) liens for Taxes that are not yet due;
(ii) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like liens arising in the ordinary course of business, payments in respect of
which are not yet due; and (iii) easements, rights of way, zoning restrictions
and other imperfections of title or similar matters that do not adversely affect
the Improvements, restrict or interfere in any material respect with the
ordinary conduct of the business of Xxxx (as presently conducted or as presently
contemplated to be conducted), affect the condition or transferability of the
properties or assets of Kali or grant to any Person any option or right to
acquire, lease or occupy any portion of the Leased Real Property.
"PERRIGO" means Perrigo Generics Company and any of its Affiliates.
"PERRIGO OFFER" means that certain letter, dated January 28, 2004,
from Perrigo to Kali purporting to offer to purchase (via merger) Kali.
"PERRIGO WAIVER" shall have the meaning set forth in Section 6.3(a)
hereof.
"PERSON" means a natural person, partnership (general or limited),
corporation, joint venture, business trust, limited liability company,
cooperative, association or other form of business organization (whether or not
regarded as a business entity under applicable Law), trust, estate or any other
entity, other than a Governmental Authority.
"PHARMACEUTICAL PRODUCTS" means all products subject to the FDCA,
the CSA or to any similar state, local or foreign Law and to the jurisdiction of
the FDA, the DEA or of any analogous state, local or foreign public health
agency, board of health or similar Governmental Authority that are or have been
manufactured, developed, researched, tested, labeled, packaged, distributed,
marketed or sold by Kali.
"POST-EFFECTIVE DATE VGS LOAN" shall have the meaning set forth in
Section 2.2(d)(vi) hereof.
"PRE-CLOSING TAX PERIOD" shall have the meaning set forth in Section
7.1 hereof.
"PRE-OCCUPANCY LOSSES" shall have the meaning set forth in Section
11.2(a) hereof.
"PRI" shall have the meaning set forth in the preamble hereof.
9
"PRI COMMON STOCK" means the common stock of PRI, par value $0.01
per share.
"PRI LOAN" means that certain secured loan in the principal amount
of $10,000,000 made by PRI to Kali on March 30, 2004.
"PRODUCT LIST" shall have the meaning set forth in Section 6.4(a)
hereof.
"PROPERTY(IES)" means real, personal or mixed property, tangible or
intangible.
"PROPOSED DEFINITIVE PRODUCT LIST" shall have the meaning set forth
in Section 6.4(a)(ii) hereof.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.2(a)
hereof.
"REAL PROPERTY LEASES" shall have the meaning set forth in Section
3.17(b) hereof.
"REDUCTION AMOUNT" shall have the meaning set forth in Section
2.2(d) hereof.
"REMEDIATION AGREEMENT" shall have the meaning set forth in Section
6.13(b) hereof.
"SEC" means the U.S. Securities and Exchange Commission.
"SECOND ANDA PAYMENT" shall have the meaning set forth in Section
2.2(a)(ii) hereof.
"SECOND ANDA THRESHOLD" means the filing (irrespective of whether
accepted for filing by the FDA), in good faith, with the FDA by Xxxx, PRI (or
any of its affiliates) or any Kali Development Partner, in each case, with
respect to a drug technology substantially developed by Xxxx, of at least twenty
(20) ANDAs during the period from January 1, 2004 through the date that is
thirty (30) months from the Closing Date; PROVIDED, HOWEVER, that if at least
seventeen (17) of such ANDAs have been filed with the FDA prior to the date that
is thirty (30) months from the Closing Date, any new drug product that Xxxx has
completed, or is actively conducting, a Biostudy in respect thereof as of such
time shall count as an ANDA filed with the FDA if such new drug product is in
fact later filed with the FDA on or prior to the later of (i) thirty-six (36)
month-anniversary of the Closing Date or (ii) the Subramanian Termination Date.
"SECOND LEVEL GROSS-UP" shall have the meaning set forth in Section
2.5(c) hereof.
"SECTION 338(H)(10) ELECTION" shall have the meaning set forth in
Section 7.3 hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEPARATOR" shall have the meaning set forth in Section 6.3(b)
hereof.
10
"SEPARATOR EXPENSES" means reasonable expenses incurred by Xxxx to
install the Separator.
"STRADDLE PERIOD" shall have the meaning set forth in Section 7.2
hereof.
"SUBRAMANIAN EMPLOYMENT AGREEMENT" means the employment agreement to
be entered into at the Closing by and between Xx. Xxxxxxxxxxx and Par
substantially in the form of EXHIBIT A hereto.
"SUBRAMANIAN TERMINATION DATE" means the date of termination of Xx.
Xxxxxxxxxxx'x employment under the Subramanian Employment Agreement, whether by
PRI, Par or Xx. Xxxxxxxxxxx, or as a result of his death or disability.
"TAX AUTHORITY" shall have the meaning set forth in Section 3.13(b)
hereof.
"TAXES" (or "TAX" where the context requires) means all Federal,
state, county, local, foreign and other taxes (including income, profits,
premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad
valorem, severance, capital, production, transfer, withholding, employment,
unemployment compensation, payroll-related and property taxes, and other
governmental charges and assessments), whether or not measured in whole or in
part by net income, and including all deficiencies, interest, additions to tax
or interest, and penalties with respect thereto.
"TAX RETURNS" means all written returns, declarations, reports,
forms, estimates, information returns and statements filed in respect of any
Taxes and supplied to any Governmental Authority in connection with or relating
to any Taxes.
"TERMINATION DATE" shall have the meaning set forth in Section 10.1
hereof.
"TRANSFER TAX REIMBURSEMENT" shall have the meaning set forth in
Section 2.5(b) hereof.
"TREASURY REGULATIONS" means the rules and regulations promulgated
by the U.S. Treasury Department under the Code.
"U.S." means the United States of America.
"VGS" shall have the meaning set forth in the preamble hereof.
"VGS NOTE" shall have the meaning set forth in Section 2.5(d)
hereof.
"VGS SHAREHOLDERS" means Xx. Xxxxxxxxxxx and Xx. Xxxxxxxxxxx.
"WARRANT AGREEMENT" means the warrant agreement to be entered into
at the Closing by and between PRI and the Kali Shareholders substantially in the
form of EXHIBIT B hereto.
"WARRANTS" shall have the meaning set forth in Section 2.2(a)(iv)
hereof.
11
1.2. INTERPRETATIONS.
----------------
(a) When the context in which words are used in this Agreement
indicates that such is the intent, words used in the singular shall have a
comparable meaning when used in the plural, and vice versa; pronouns stated in
the masculine, feminine or neuter shall include each other gender.
(b) Section and Schedule references are to this Agreement, unless
otherwise specified.
(c) The Section headings contained in this Agreement are solely
for the purpose of reference, are not part of the agreement of the Parties and
shall not in any way affect the meaning or interpretation of this Agreement.
(d) The term "including" is not limiting and means "including,
without limitation."
(e) Unless the context clearly requires otherwise, the term "and"
is not limiting and means "and/or."
(f) In the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means "to
and including."
(g) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of this Agreement, and (ii) references to any statute or regulation
shall be construed as including all statutory and regulatory provisions
amending, replacing, supplementing or interpreting such statute or regulation.
(h) This Agreement and the other agreements contemplated by this
Agreement are the result of negotiations among, and have been reviewed by
counsel to, the Parties hereto and are the products of all the Parties.
Accordingly, they shall not be construed against any Party hereto merely because
of the nature or extent of such Party's involvement in their preparation.
(i) "Dollars" or "$" means the currency of the U.S. that, as at
the time of payment, is legal tender for the payment of public and private
debts.
(j) The words "hereto," "herewith," "hereof," "hereby," "herein"
and "hereunder" refer to this Agreement.
2. THE TERMS OF THE ACQUISITION.
----------------------------
2.1. THE PURCHASE AND SALE OF THE KALI SHARES. Subject to the terms
and conditions of this Agreement, on the Closing Date, each Kali Shareholder
12
shall sell, transfer, convey, assign and deliver to PRI, and PRI shall purchase,
acquire and accept from each Kali Shareholder, all right, title and interest of
such Kali Shareholder, legal and equitable, beneficial and of record, in and to
the number of Kali Shares set forth opposite such Kali Shareholder's name on
SCHEDULE 2.1 hereto under the caption "Number of Shares Owned." The originally
issued certificates evidencing the Kali Shares shall be delivered at the Closing
by the Kali Shareholders to PRI, free and clear of all Liens and accompanied by
duly executed stock powers (endorsed in blank) and with any necessary stock
transfer tax stamps affixed thereto.
2.2. PAYMENT OF PURCHASE PRICE; ALLOCATION; CASH PURCHASE PRICE
ADJUSTMENT.
--------------------------------------------------------------
(a) PURCHASE PRICE. As full payment of the purchase price for all
of the Kali Shares (the "Purchase Price"), PRI shall:
(i) pay to the Kali Shareholders the aggregate sum of
$129,447,000 in cash (the "Cash Purchase Price"), subject to adjustment as
provided in Sections 2.2(d) and 2.4 hereof;
(ii) pay to the Kali Shareholders $2,500,000 in cash (the
"Initial ANDA Payment") if, following the Closing, Kali shall achieve the
Initial ANDA Threshold and pay to the Kali Shareholders an additional $2,500,000
in cash (the "Second ANDA Payment") if, following the Closing, Kali shall
achieve the Second ANDA Threshold;
(iii) pay to the Kali Shareholders up to an aggregate of
$5,000,000 as follows:
(A) (x) $1,750,000 if, at any time following the Closing Date
and on or prior to the first anniversary thereof, the Market Value shall be
equal to at least 110% of the Closing Price; plus
(y) $750,000 if, at any time following the Closing Date
and on or prior to the first anniversary thereof, the Market Value shall be
equal to at least 115% of the Closing Price; AND
(B) (x) $4,000,000 (less any payments made pursuant to clauses
(iii)(A)(x) and (y) above) if, at any time following the first anniversary of
the Closing Date and prior to the last day of the thirtieth (30th) month
following the Closing Date, the Market Value shall be equal to at least 120% of
the Closing Price; plus
(y) $1,000,000 if, at any time following the first
anniversary of the Closing Date and prior to the last day of the thirtieth
(30th) month following the Closing Date, the Market Value shall be equal to at
least 133.3% of the Closing Price (each of the payments pursuant to clauses
(A)(x) and (y) and (B)(x) and (y) above, a "Market Price Payment" and
collectively, the "Market Price Payments"); and
(iv) execute and deliver the Warrant Agreement to the Kali
Shareholders providing for the issuance of warrants (the "Warrants") to purchase
the aggregate of 150,000 shares of PRI Common Stock, at an exercise price of
$57.92 per share (as adjusted for any stock dividend, stock distribution,
subdivision, stock split, reverse split, stock combination, reclassification or
similar event occurring after the Effective Date, the "Closing Price").
13
(b) ALLOCATION. The Cash Purchase Price, as such may be adjusted
pursuant to Sections 2.2(d) and 2.4 hereof, the Warrants, the Initial ANDA
Payment (if any), the Second ANDA Payment (if any) and the Market Price Payments
(if any) shall be allocated among the Kali Shareholders in the manner set forth
on SCHEDULE 2.2(B) hereto. Each of the Kali Shareholders hereby unconditionally
acknowledges such allocation and agrees that it is fair and equitable.
(c) CASH PURCHASE PRICE. At the Closing, the Cash Purchase Price,
as such may be adjusted pursuant to Section 2.4(a) hereof based on the Estimated
Closing Certificate, shall be paid by PRI via wire transfer of immediately
available funds to accounts of the Kali Shareholders designated in writing by
the Kali Shareholders' Rep prior to the Closing.
(d) ADJUSTMENT TO CASH PURCHASE PRICE. Following the Closing and
in accordance with Section 2.4 hereof, the Cash Purchase Price shall be reduced
based on the amount by which any of $6,790,000, representing the cash and cash
equivalents of Kali as of December 31, 2003 (the "Execution Cash"), has been
expended by Xxxx from December 31, 2003 until the Closing Date outside of the
ordinary course of business (other than the expenditures described in clauses
(ii) through (ix) below). The amount, if any, by which the Cash Purchase Price
shall be reduced (the "Reduction Amount") shall be the amount remaining after
subtracting from the Execution Cash the following amounts:
(i) all cash and cash equivalents of Kali as of the Closing
Date;
(ii) all expenditures made from December 31, 2003 through the
Closing Date by Xxxx in connection with the New Hires;
(iii) all expenditures made from December 31, 2003 through the
Closing Date by Xxxx in connection with the Permitted Capital
Expenditures;
(iv) all expenditures made from December 31, 2003 through the
Closing Date by Kali in connection with purchase orders for
equipment in fiscal year 2003 but for which payment has not yet been
made (which amount shall not exceed $500,000);
(v) all reasonable expenditures made from December 31, 2003
through the Closing Date by Xxxx to professional advisors (including
attorneys, accountants and environmental consultants) engaged or
retained by Xxxx and/or the Kali Shareholders in connection with (I)
the negotiation, execution and delivery of this Agreement and the
other agreements and documents contemplated hereby and the Letter
Agreement or (II) compliance with the HSR Act, ISRA or any other Law
pursuant to which Kali or any Kali Shareholder is required to obtain
a waiver, consent, approval, authorization or release in connection
herewith, up to $400,000 (collectively, the "Kali Transaction
Costs");
14
(vi) the provision of a loan by Xxxx to VGS, in the aggregate
principal amount of $553,189 (the "Post-Effective Date VGS Loan");
(vii) the Separator Expenses;
(viii) the purchase of certain drugs from Xxxx Laboratories
for an estimated aggregate purchase price of $450,000, the terms of
which are being negotiated;
(ix) the payment of unpaid interest on the Perrigo credit
facility, which amount, as of the date of its payment, equaled
$68,755.56; and
(x) all other expenditures made from December 31, 2003 through
the Closing Date by Xxxx for obligations incurred by Xxxx in the
ordinary course of business.
For the avoidance of doubt, the Reduction Amount, as determined above, shall not
be below zero and shall include and be increased by (i) the aggregate amount of
any payments made after December 31, 2003 but prior to the Closing Date to the
Kali Shareholders on account of their respective Accumulated Adjustments
Accounts (the "AAA Payments"), (ii) any payments made to any employees of Xxxx,
contingent on the Closing, that are outside the ordinary course of business of
Kali or pursuant to any agreement existing prior to the Effective Date (all such
payments to employees, the "Closing Bonuses"), (iii) all payments of rent (and
related amounts) since December 31, 2003 by Xxxx to VGS for the Facility and the
warehouse owned by VGS and located in Piscataway, New Jersey and (iv) the
payment to the Kali Shareholders of distributions to cover Tax liabilities in
the aggregate amount of $90,000, as set forth in Items 4-7 of Schedule 3.9(d)
hereto. Subject to the procedures set forth in Section 2.4 hereof, the Cash
Purchase Price shall be reduced $1.00 for each $1.00 of the Reduction Amount, as
increased above.
(e) ANDA PAYMENTS; MARKET PRICE PAYMENTS. The Initial ANDA Payment
shall be paid by wire transfer to the Kali Shareholders within ten (10) Business
Days of, and subject to, the achievement of the Initial ANDA Threshold. The
Second ANDA Payment (if any) shall be paid by wire transfer to the Kali
Shareholders within ten (10) Business Days of, and subject to, the satisfaction
of the Second ANDA Threshold. Any Market Price Payment(s) shall be paid by wire
transfer to the Kali Shareholders within ten (10) Business Days of, and subject
to, the achievement of the applicable Market Value condition(s) set forth in
Section 2.2(a)(iv) hereof. Notwithstanding the foregoing, neither the Initial
ANDA Payment nor the Second ANDA Payment nor any Market Price Payments shall be
due and payable if, at or prior to the time that the applicable condition to
such payment shall have otherwise been achieved or satisfied, a material breach
under Sections 6.4, 6.5, 6.9 or 6.10 hereof shall have occurred.
(f) RESERVATION OF RIGHTS. Subject to the limitations set forth in
Section 11 hereof, PRI shall retain all rights and remedies with respect to any
breach(es) of any representation(s) and warranty(ies) contained in this
Agreement by the Kali Shareholders, notwithstanding the existence of any
reduction of the Cash Purchase Price effected in accordance with Sections 2.2(d)
and 2.4 hereof.
15
2.3. CLOSING.
--------
(a) CLOSING DATE. The closing of the purchase and sale of the Kali
Shares (the "Closing") shall take place at the offices of Xxxxxxxxxxx & Xxxxxxxx
LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and is expected to occur at
10:00 a.m., local time, as soon as is practicable after the satisfaction and, if
permitted, waiver of the conditions set forth in Sections 8 and 9 hereof and, in
no event later than two (2) Business Days after such satisfaction and waiver, or
at such other date, time and place as the Parties shall mutually agree (the
"Closing Date").
(b) PRI'S DELIVERY OF OTHER AGREEMENTS. Subject to the terms and
conditions hereof, and in addition to the deliveries set forth in Section
2.2(a)(i) hereof and provided for elsewhere herein, at the Closing, PRI shall
duly execute and deliver the following documents:
(i) the Warrant Agreement;
(ii) the Subramanian Employment Agreement; and
(iii) a completed IRS Form 8023 (the "Election Under Section
338 for Corporations Making Qualified Stock Purchases") duly executed by an
authorized officer of PRI and countersigned by each of the Kali Shareholders,
whereby PRI elects to treat the purchase of the Kali Shares as an asset
acquisition under Code Section 338(h)(10).
(c) THE KALI SHAREHOLDERS' DELIVERIES OF OTHER AGREEMENTS.
Subject to the terms and conditions hereof, and in addition to the deliveries
set forth in Section 2.1 hereof and provided for elsewhere herein, at the
Closing, the Kali Shareholders shall, as applicable, duly execute and deliver
(i) the documents set forth in Section 2.3(b) above and (ii) certificates of
Non-Foreign Status certifying that such Shareholders are not foreign Persons
subject to withholding under Code Section 1445. In the case of the AS Trust and
the IS Trust, the Form 8023 and certificates of Non-Foreign Status shall be
executed and delivered by Xxx Xxxxxxxxxxx and Xxxxxx Xxxxxxxxxxx, individually
as Shareholders, in view of the fact that each of the AS Trust and the IS Trust
are grantor trusts as to them for income tax purposes. The completed IRS Form
8023, duly executed by PRI and each of the Kali Shareholders, shall be filed by
PRI with the IRS promptly after the Closing.
2.4. PURCHASE PRICE ADJUSTMENT.
--------------------------
(a) On or prior to the Closing Date, the Kali Shareholders and
Xxxx shall deliver to PRI a certificate of the Chief Executive Officer of Xxxx
(the "Estimated Closing Certificate") accurately reflecting (on an estimated
basis) all cash expenditures and distributions made by Xxxx from December 31,
2003 through the Closing Date and the estimated Reduction Amount. The Cash
Purchase Price payable at the Closing shall be reduced in accordance with
Section 2.2(d) hereof, based on the estimated determination of the Reduction
Amount prior to the Closing, and the portion of such Cash Purchase Price
allocable to each Kali Shareholder shall be so reduced as agreed upon by the
Kali Shareholders.
(b) Within sixty (60) days after the Closing Date, PRI shall
deliver to the Kali Shareholders' Rep (i) a certificate of the Chief Financial
Officer of PRI (the "Closing Certificate") setting forth such Officer's
determination of the Reduction Amount and (ii) a balance sheet of Xxxx (the
16
"Closing Balance Sheet"), which shall be audited by PRI's regular independent
auditors and prepared in accordance with GAAP and shall fairly present, in all
material respects, the financial position of Xxxx as of the Closing Date.
(c) The Kali Shareholders' Rep shall have sixty (60) days from the
date on which the Closing Certificate shall have been delivered by PRI to the
Kali Shareholders' Rep to raise any objection(s) to the Closing Certificate, but
only as it relates to the determination of the Reduction Amount, by delivery of
written notice to PRI setting forth such objection(s) in reasonable detail (the
"Disputed Items"). In the event that the Kali Shareholders' Rep shall fail to so
deliver such written objection(s) with respect to the Closing Certificate within
such sixty- (60) day period, then the Closing Certificate shall be deemed final
for purposes of this Section 2.4. In the event that any such objection(s) are so
delivered, the Closing Certificate shall be deemed not final and PRI and the
Kali Shareholders' Rep shall attempt, in good faith, to resolve the Disputed
Items and, if they are unable to resolve all of the Disputed Items within
fifteen (15) Business Days of delivery of such notice, shall, within ten (10)
Business Days thereafter (or such earlier date as mutually agreed), designate a
nationally recognized firm of independent public accountants, mutually agreeable
to PRI and the Kali Shareholders' Rep (the "Accountant Arbitrator"). In the
event that PRI and the Kali Shareholders' Rep are unable to agree on the
Accountant Arbitrator within such ten- (10) Business Day period, the Accountant
Arbitrator shall be designated jointly by the independent accountants of PRI and
the Kali Shareholders' Rep (which may be Xxxx's former independent accountants)
within ten (10) Business Days thereafter. The Accountant Arbitrator shall
resolve all remaining Disputed Items in accordance herewith within twenty (20)
Business Days from the date of its designation. In connection with the
foregoing, the Accountant Arbitrator shall be instructed to, and shall, (i)
limit its determination(s) only to the remaining Disputed Items and the
determination of the Reduction Amount, (ii) make its determination(s) as to each
remaining Disputed Item based upon Section 2.2(d) hereof and (iii) not assign a
value to any remaining Disputed Item greater than the higher value for such
Disputed Item claimed by either PRI or the Kali Shareholders' Rep or less than
the lower value for such Disputed Item claimed by either PRI or the Kali
Shareholders' Rep. All determinations by the Accountant Arbitrator shall be
final and binding upon PRI and the Kali Shareholders for purposes of this
Section 2.4. The fees and expenses of the Accountant Arbitrator shall borne by
PRI unless the Accountant Arbitrator shall provide otherwise.
(d) At such time as the Closing Certificate shall become final in
accordance with Section 2.4(c) hereof, the Cash Purchase Price shall be adjusted
in accordance with Section 2.2(d) hereof based on the Closing Certificate, as
finally determined pursuant to Section 2.4(c) hereof. In the event that the Cash
Purchase Price paid at the Closing pursuant to Sections 2.2(a)(i) hereof shall
be more than the Cash Purchase Price as determined and adjusted pursuant to this
Section 2.4(d), the amount of such excess (which under no circumstances shall be
greater than the Execution Cash amount (x) less the cash and cash equivalents of
Kali as of the Closing Date (which amount may not be below zero) plus (y) the
amounts actually paid by Xxxx with respect to the items described in clauses (i)
through (iv) of the final paragraph of Section 2.2(d) hereof) shall be paid to
PRI by the Kali Shareholders. Any payment to be made pursuant to this Section
2.4(d) shall be made, within five (5) Business Days from the date that the
Closing Certificate is finally determined pursuant to Section 2.4(c) hereof, by
the Kali Shareholders to PRI via wire transfer of immediately available funds,
to an account of PRI designated in writing to the Kali Shareholders' Rep. Any
amount determined to be due under this Section 2.4(d), in accordance with the
procedures set forth in this Section 2.4, shall be subject to offset by the Kali
17
Shareholders against any amounts owing to any Kali Shareholder under Section 2.5
hereof.
2.5 SECTION 338 MAKE-WHOLE AMOUNT. (a) If, as a result of the
making of the Section 338(h)(10) Election and the allocation of the Cash
Purchase Price among the assets of Kali in accordance with Section 7.4 hereof,
Xxxx realizes ordinary income (rather than capital gains) on the deemed sale of
its assets that, in turn, passes-through to the Kali Shareholders, PRI shall pay
to the Kali Shareholders' Rep, for the benefit of the Kali Shareholders' Rep, in
his capacity as a Kali Shareholder, and for the other Kali Shareholders, an
additional amount (the "Additional Amount"), which Additional Amount shall be
determined as follows: (i) the Cash Purchase Price shall be allocated among the
assets of Xxxx as provided in Section 7.4 hereof; (ii) the independent public
accountants of PRI shall determine the gain realized by Xxxx with respect to its
Classes of Assets (as set forth in IRS Form 8883); and (iii) the amount of such
gains that are treated for tax purposes as ordinary gains shall be multiplied by
twenty (20%) percent.
(b) In addition, PRI shall provide the Kali Shareholders' Rep with
sufficient funds (the "New Jersey Corporate Tax Reimbursement"), so as to enable
the Kali Shareholders, on behalf of Xxxx, to pay any New Jersey Business
Corporation Tax imposed upon Kali resulting from the deemed sales of its assets
upon the making of the Section 338(h)(10) Election, which New Jersey Corporate
Tax Reimbursement shall be calculated and determined by the independent public
accountants of PRI. The Parties hereby agree that, in determining the amount
realized for purposes of computing the New Jersey Corporate Tax Reimbursement,
each of the Initial ANDA Payment, the Second ANDA Payment and the Market Price
Payments shall be valued at zero. PRI shall also reimburse the Kali Shareholders
for all transfer, real property transfer, sales, stamp, registration and similar
Taxes and fees that would not have been incurred but for the making of the
Section 338(h)(10) Elections (the "Transfer Tax Reimbursement"). The Additional
Amount, the New Jersey Corporate Tax Reimbursement and the Transfer Tax
Reimbursement are hereinafter collectively referred to as the "Gross-Up".
(c) PRI shall also pay the Kali Shareholders an amount (the
"Second Level Gross-Up") equal to twenty-five (25%) of the amount of the
Gross-Up, so as to make the Kali Shareholders whole for any additional Federal
or New Jersey State personal income taxes, and to reimburse them for any
additional New Jersey Business Corporation Taxes, resulting from the payment of
the Gross-Up. Both the Gross-Up and the Second Level Gross-Up shall be allocated
in accordance with Section 7.4 hereof. The Additional Amount and the Transfer
Tax Reimbursement, together with the Second Level Gross-Up attributable to the
Additional Amount and the Transfer Tax Reimbursement, shall be payable by PRI to
the Kali Shareholders' Rep (on behalf of the Kali Shareholders) within five (5)
Business Day following such time as the Closing Certificate becomes final under
Section 2.4 hereof. Although the independent public accountants of PRI shall
calculate the New Jersey Corporate Tax Reimbursement and the Second Level
Gross-Up attributable thereto and present such calculations at such time as the
Closing Certificate becomes final in accordance with Section 2.4 hereof, PRI
shall not be required to pay to the Kali Shareholders' Rep, for the benefit of
the Kali Shareholders' Rep in his capacity as a Kali Shareholder and for the
other Kali Shareholders, the New Jersey Corporate Tax Reimbursement and the
Second Level Gross-Up attributable thereto until five (5) Business Days after
the Kali Shareholders' Rep has presented to PRI a final New Jersey corporate
income tax return for Xxxx, as filed with the State of New Jersey, showing the
payment of all New Jersey corporate income taxes due for the taxable year
18
commencing on January 1, 2004 through the Closing Date (including the amount of
the New Jersey Corporate Tax Reimbursement), and has provided PRI with such
additional documentation, as PRI shall reasonably request, evidencing the
payment by Xxxx of all New Jersey corporate income taxes due for such taxable
year.
(d) PRI shall have the right to offset against the amount of any
Gross-Up or Second Level Gross-Up payable to the Kali Shareholders under this
Section 2.5 the then outstanding principal amount and accrued interest thereon
of that certain secured Promissory Note dated as of the Closing Date to be
issued by VGS to Kali in the initial principal amount of $2,688,189 (the "VGS
Note"), a copy of which is attached hereto as Exhibit D, as evidence of VGS's
indebtedness to Xxxx as of the Closing. The Kali Shareholders hereby agree that,
to the extent that PRI exercises, in its sole and absolute discretion, such
right of offset at such time(s) as the amount of any Gross-Up or Second Level
Gross-Up would otherwise be payable under this Section 2.5, such offset shall
constitute payment of the Gross-Up and the Second Level Gross-Up at such time(s)
to the extent thereof.
3. REPRESENTATIONS AND WARRANTIES RELATING TO KALI.
-------------------------------------------------
Kali and the Kali Shareholders hereby represent and warrant to PRI as follows:
3.1 ORGANIZATION AND QUALIFICATION. Kali is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. Kali has no subsidiaries and does not own or hold, directly or
indirectly, any equity or economic interest in any other Person. Kali has the
power and authority to own, lease and operate its assets and properties and to
carry on its business as presently conducted. Xxxx is duly qualified to transact
business and is in good standing in each jurisdiction in which the nature of its
business and the location of its property requires such qualification, except
where the failure to be so could not reasonably be expected to have a Material
Adverse Effect. Xxxx is presently qualified to do business in the jurisdiction
set forth on SCHEDULE 3.1 hereto.
3.2 DUE AUTHORIZATION; ENFORCEABILITY. Xxxx has the requisite
corporate power and authority to execute and deliver this Agreement and the
other agreements contemplated hereby to which it is (or will be) a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the other agreements contemplated hereby to which
Xxxx is (or will be) a party and the performance and consummation of the
transactions contemplated hereby and thereby by Xxxx have been duly authorized
by all necessary corporate action on the part of Xxxx. This Agreement and the
other agreements contemplated hereby to which Xxxx is (or will be) a party have
been duly executed and delivered by Xxxx and, subject to the due authorization,
execution and delivery of such agreements by the other parties thereto, this
Agreement and such other agreements contemplated hereby constitute (or will
constitute when executed subsequent to the Effective Date) valid and binding
obligations of Xxxx, enforceable against Kali in accordance with their
respective terms, except as such enforcement may be affected by bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditor's
rights generally and except for general principles of equity (the "Bankruptcy
and Equity Exception").
19
3.3 CAPITALIZATION; OPTIONS; SHAREHOLDER RIGHTS.
-------------------------------------------
(a) The authorized capital stock of Kali consists solely of 10,000
shares of common stock, no par value (the "Kali Common Stock"), of which 100
shares are designated as voting, and 9,900 shares are designated as non-voting,
common stock.
(b) There are, and on the Closing Date there will be, 10,000
shares of Kali Common Stock issued and outstanding, and there are not, and will
not be on such Date, any other shares of capital stock of Kali issued or
outstanding.
(c) All of the issued and outstanding shares of Kali Common Stock
have been duly authorized and are validly issued, fully paid and non-assessable.
All outstanding shares of Kali Common Stock are owned, beneficially and of
record, in the respective amounts set forth opposite the names of the holders
thereof on SCHEDULE 3.3(c) hereto.
(d) Except as set forth on SCHEDULE 3.3(d) hereto, there are, and
on the Closing Date there will be, no outstanding obligations, options,
warrants, convertible or exchangeable securities, subscriptions or other
commitments or rights (matured or contingent) of any nature to acquire or
subscribe for any shares of capital stock or other equity interest of or in
Kali.
(e) There are, and on the Closing Date there will be, no bonds,
debentures, notes or other indebtedness of Xxxx having the right to vote (or
convertible into or exchangeable for, securities having the right to vote) on
any matter on which the shareholders of Kali may vote. Except as set forth on
SCHEDULE 3.3(e) hereto, there are, and on the Closing Date there will be, no
preemptive rights, rights of first refusal or first offer, change of control or
similar rights, anti-dilution protections, accelerated vesting rights or other
rights that any shareholder, officer, employee or director of Xxxx or any other
Person would be entitled to exercise or invoke as a result of, or in connection
with, the transactions contemplated hereby or otherwise.
(f) At the Closing, PRI shall acquire, and the Kali Shareholders
shall transfer and convey, good and marketable title to the Kali Shares, free
and clear of all Liens.
3.4 KALI ORGANIZATIONAL DOCUMENTS. True and complete copies of
Xxxx's Certificate of Incorporation and By-laws, as in effect on the Effective
Date (collectively, the "Kali Organizational Documents"), have been delivered to
PRI. True and complete copies of the minute books, stock books and stock
transfer records of Xxxx shall be provided to PRI or its counsel on or prior to
the Closing, in substantially the substance and form as they have been provided
to PRI and its counsel prior to the Effective Date.
3.5 NON-CONTRAVENTION. Except as set forth on SCHEDULE 3.5 hereto,
the execution and delivery of this Agreement and the other agreements
contemplated hereby do not (or will not when executed subsequent to the
Effective Date), and the consummation of the transactions contemplated hereby
and thereby will not, (i) conflict with, or result in any violation or breach of
any provision of the Kali Organizational Documents, (ii) assuming receipt of the
Consents referred to in Section 3.6 hereof (including the exceptions therein),
conflict with or violate any Law applicable to Kali or any of its assets or
operations or any Permit applicable to Kali or (iii) assuming receipt of the
Consents referred to in Section 3.6 hereof (including the exceptions therein),
result in (x) any violation or breach of, constitute (with or without notice or
20
lapse of time or both) a default under or conflict with (or give rise to a right
of termination, amendment, cancellation or acceleration of any material
obligation or loss of any benefit under) the provisions of any lease, contract
or other agreement to which Kali is a party or by which it or any of its
properties or assets is otherwise bound or (y) the imposition of any Lien on any
of the properties or assets of Kali.
3.6 CONSENTS. Except for any filings (and the lapse of any waiting
period) under the HSR Act, obtaining ISRA Clearance and any blue-sky or other
securities Law filings, except as set forth on SCHEDULE 3.6 hereto, no consent,
approval or authorization of, or declaration or filing with, any Governmental
Authority or Person (a "Consent") is required on the part of Kali in connection
with its execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. Except as set forth on
SCHEDULE 3.6, there are no payments, Liabilities or obligations under or
pursuant to any Law or any contract or other agreement to which Kali is a party
or is otherwise bound by that are required to be made, incurred or performed by
Xxxx (or its successors) arising out of or as a result of the transactions
contemplated by this Agreement.
3.7 FINANCIAL STATEMENTS; RECEIVABLES AND PAYABLES; UNDISCLOSED
LIABILITIES.
--------------------------------------------------------------
(a) (x) The unaudited balance sheets and related statements of
income and retained earnings, shareholders' equity and cash flows for Kali as
at, and for the fiscal years ended on, December 31, 2002 and 2001 and (y) the
audited balance sheet and related statements of income and retained earnings,
shareholders' equity and cash flows for Kali as at, and for the fiscal year
ended on, December 31, 2003 (collectively, the "Kali Financial Statements"),
true and complete copies of which have been previously delivered to PRI, are
attached hereto as SCHEDULE 3.7(a).
(b) The Kali Financial Statements were prepared in accordance with
GAAP consistently applied (except that no footnotes have been prepared for the
unaudited financial statements referred to in Section 3.7(a) hereof) during the
periods presented and fairly present, in all material respects, the financial
position of Xxxx and the results of operations of Xxxx as at the respective
dates shown and for the respective fiscal years covered thereby.
(c) All accounts and notes receivable reflected on the latest
balance sheet contained in the Kali Financial Statements have arisen from BONA
FIDE transactions in the ordinary course of business and are good and fully
collectible in the ordinary course of business at the aggregate recorded amounts
thereof, net of any reserves in respect thereto set forth on the Kali Financial
Statements. All accounts and notes receivable of Kali that arose after December
31, 2003 through the Effective Date and that will arise after the Effective Date
through the Closing Date are the result of BONA FIDE transactions in the
ordinary course of business and are good and fully collectible in the ordinary
course of business at the aggregate recorded amounts thereof, net of any
reserves in respect thereto set forth, consistent with past practice, on the
financial books and records of Xxxx. There are no recoupments, set-offs or
counterclaims in respect of any such receivables. All accounts payable of Xxxx,
as reflected on the Kali Financial Statements or arising after December 31,
2003, are the result of BONA FIDE transactions in the ordinary course of
business consistent with past practice. Xxxx has repaid in full that certain
21
loan in the principal amount of $10,000,000 previously owed to Perrigo,
including all accrued and unpaid interest thereon.
(d) Xxxx does not have any material Liabilities, including
guarantees or indemnities by Xxxx of the Liabilities of any other Person, other
than (i) Liabilities as and to the extent reflected on the December 31, 2003
balance sheet of Kali contained in the Kali Financial Statements; (ii)
Liabilities incurred by Xxxx since December 31, 2003 (none of which is a
material Liability for breach of contract or warranty, tort, infringement,
violation of Law, claim or lawsuit) in the ordinary course of business
consistent with past practice and adequately reflected on the financial books
and records of Xxxx; (iii) obligations of Kali under the express terms of any
existing contracts and agreements; and (iv) as set forth on SCHEDULE 3.7(d)
hereto.
3.8 BOOKS AND RECORDS. Xxxx has, and has maintained since January
1, 2002, Books and Records that, in reasonable detail, accurately reflect the
transactions and business affairs of Xxxx in all material respects.
3.9 ABSENCE OF CHANGES. Except as set forth on SCHEDULE 3.9 hereto
and for any AAA Payments made after the Effective Date, since December 31, 2003
(or, in respect of clauses (d), (e) and (g) below, since September 30, 2003),
there has not been (except as expressly contemplated by this Agreement):
(a) any material adverse change in the operations, assets or
financial condition of Kali;
(b) the repayment of any indebtedness or any borrowing of (or
agreement to borrow) any money or any Liabilities incurred by Xxxx, other than
current liabilities incurred in the ordinary course of business;
(c) the waiver of any valuable right of Kali or the cancellation
or reduction of any material debt or claim held by Xxxx;
(d) any declaration or payment of dividends on, or other
distributions (Tax-related or otherwise) with respect to, or any direct or
indirect redemption or repurchase of, any shares of the capital stock of Kali;
(e) any disbursement, payment or transfer of assets or property by
Xxxx to any of its officers or directors or to any of the Kali Shareholders or
any family member, Affiliate or Associate thereof or related Person thereto,
other than ordinary compensation paid to Xx. Xxxxxxxxxxx or Xx. Xxxxxxxxxxx and
BONA FIDE reimbursements in the ordinary course of business consistent with past
practice;
(f) the issuance of any capital stock or other securities of Kali
or of any options, warrants or rights or agreements or commitments to purchase
or issue such securities;
(g) any mortgage, pledge, sale, assignment, licensing or transfer
of any material tangible, or of any intangible assets, of Kali, except sales of
tangible assets effected in the ordinary course of business to Persons not
related to Xxxx;
22
(h) any loan or similar payment by Xxxx to any officer, director,
employee of Kali or to any Kali Shareholder or any Affiliate or Associate
thereof or the removal or relocation of any material tangible assets from the
Facility;
(i) any material damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets, property or business of
Kali;
(j) any material increase, direct or indirect, in the compensation
(or rate thereof) paid or payable to any officer, director, employee or agent of
Xxxx (it being agreed that any increase at the rate of $10,000 or more per annum
for such a Person or at the rate of $100,000 or more per annum for all such
Persons shall be deemed material, other than the Closing Bonuses);
(k) other than the Permitted Capital Expenditures, any purchase or
other acquisition of assets or property other than in the ordinary course of
business;
(l) any significant increase in the disposition or write-off of
inventory not consistent with past practice;
(m) any significant change in the accounting methods, principles
or practices followed or applied by Xxxx for book or Tax purposes;
(n) any operation of the business of Xxxx outside of the ordinary
course of business or inconsistent with past practice, other than (i) payment of
the Closing Bonuses and the Post-Effective Date VGS Loan, (ii) the hiring of up
to twenty (20) new, unrelated employees, whose average annual salary does not
exceed $45,000 (the "New Hires"), three (3) of whom have been hired as of the
Effective Date, (iii) capital expenditures to purchase additional equipment for
the business of Kali, not to exceed $750,000 (the "Permitted Capital
Expenditures"), (iv) capital expenditure expenses, in the aggregate amount of
$500,000, incurred by Kali prior to December 31, 2003 in connection with
equipment purchases that had not been paid for by December 31, 2003, (v) the
Separator Expenses, (vi) subject to Section 2.2(d)(v) hereof, the incurrence of
professional expenses in connection with the proposed sale of Kali and (vii) the
additional items set forth on SCHEDULE 6.1(a); or
(o) any commitment or agreement (contingent or otherwise) to do
any of the foregoing.
3.10..PERMITS. SCHEDULE 3.10 hereto sets forth a true and complete
list of all material Permits held by Kali that are required for the operation of
its business. Each of such material Permits is in full force and effect. None of
the transactions contemplated hereby will cause, or result in, a termination,
limitation or suspension of any such material Permits.
3.11. LEGAL COMPLIANCE. Except as set forth on SCHEDULE 3.11 hereto:
(a) Kali and all of the Pharmaceutical Products, including all
manufacturing, warehousing, distributing and testing operations relating to the
Pharmaceutical Products, are (and have been) in the past three (3) years in
compliance in all material respects with all applicable foreign, Federal, state
and local statutes, judgments, decrees, laws, ordinances, rules, regulations,
23
injunctions and orders (collectively, "Laws") of Governmental Authorities (other
than Environmental Laws, which are covered by Section 3.14 hereof), including
all applicable requirements of Current Good Manufacturing Practice Regulations.
(b) No oral or written communication has been received by Xxxx,
and no investigation, regulatory enforcement action (including seizure,
injunction, civil penalty or criminal action) or any related Governmental
Authority review is or, in respect of any Pharmaceutical Product, was at any
time in the past three (3) years pending or, to the knowledge of Kali, is
threatened by any Governmental Authority with respect to (i) any alleged or
actual violation by Xxxx, or by any Pharmaceutical Product, of any Permit, Law
or other requirement of any Governmental Authority relating to the operations
conducted by Xxxx or (ii) any alleged or actual failure to have or maintain in
effect all Permits required in connection with the operations conducted by Xxxx.
(c) Kali has not received within the past three (3) years from the
FDA, the DEA or any similar state, local or foreign Governmental Authority any
written notice (i) regarding the approvability or approval of any of the
Pharmaceutical Products (other than the written notices and other correspondence
of Xxxx as to which PRI was provided access, and were reasonably identified as
such, at the Facility and those subsequently provided to PRI), (ii) regarding
the labeling of any of the Pharmaceutical Products (other than the written
notices and other correspondence of Xxxx as to which PRI was provided access,
and were reasonably identified as such, at the Facility and those subsequently
provided to PRI) or (iii) alleging any violation by Xxxx of any Law relating to
any of the Pharmaceutical Products.
(d) No Pharmaceutical Product has been withdrawn, suspended or
discontinued by Kali as a result of any action by the FDA, the DEA or any
similar state, local or foreign Governmental Authority, either within or outside
the U.S. (whether voluntarily or otherwise), within the past three (3) years. No
proceeding within or outside the U.S. seeking the recall, withdrawal, suspension
or seizure of any of the Pharmaceutical Products is pending against Kali nor was
any such proceeding pending at any time during the past three (3) years.
(e) Each of Kali's Drug Master Files ("DMFs"), as defined in 21
C.F.R. Section 314.420, in the possession of the FDA and each similar file in
the possession of any state, local or foreign Governmental Authority is
complete, accurate and up to date, in all material respects, and the subject of
each such DMF and similar file can be effectively, efficiently and legally
manufactured or utilized in compliance with the pertinent DMF or similar file.
Each Pharmaceutical Product manufactured and tested by Kali for use in a product
whose regulatory submission references a DMF or similar file is being
manufactured and tested in compliance with the current version of such
applicable file.
(f) No Pharmaceutical Product manufactured and distributed by Kali
has been (i) adulterated within the meaning of 21 U.S.C. Section 351 (or any
similar Law); (ii) misbranded within the meaning of 21 U.S.C. Section 352 (or
any similar Law); or (iii) a product in violation of 21 U.S.C. Section 355 (or
any similar Law).
(g) Neither Xx. Xxxxxxxxxxx nor, to the knowledge of Xxxx, any
other officer, employee or agent of Xxxx has made any untrue statement of a
material fact or a fraudulent statement to the FDA, the DEA or any similar
24
state, local or foreign Governmental Authority, failed to disclose any material
fact required to be disclosed to the FDA, the DEA or any similar state, local or
foreign Governmental Authority, or committed an act, made a statement or failed
to make a statement that, at the time such act, statement or omission was made,
could reasonably be expected to provide a basis for the FDA, the DEA or any
similar state, local or foreign Governmental Authority to invoke the FDA's
policy respecting "Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities" set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any
similar policy, nor has any director, officer, employee or agent of Xxxx been
convicted of any crime or engaged in any conduct for which debarment is mandated
by 21 U.S.C. Section 335a(a) (or any similar Law) or authorized by 21 U.S.C.
Section 335a(b) (or any similar Law).
(h) Kali has not received any written notice within the past three
(3) years that the FDA, the DEA or any similar state, local or foreign
Governmental Authority has commenced, or overtly threatened to initiate, any
action to withdraw its approval, registration or licensure of any finished
Pharmaceutical Product manufactured by Kali or has commenced or, to the
knowledge of Kali, threatened to initiate, any action to seize or enjoin
production of any Pharmaceutical Product.
(i) Kali is duly authorized to sell the Pharmaceutical Products
sold by it in each of the states and countries in which Kali is currently
selling Pharmaceutical Products. To the extent that any unapproved
Pharmaceutical Product is intended for export from the U.S., Kali is in
compliance, in all material respects, with the applicable requirements of 21
U.S.C. Sections 381(e) or 382, as applicable, and of the CSA.
(j) Kali has provided access (and reasonably identified) to PRI
all material documents in its possession or control (i) concerning
communications to or from the FDA, the DEA and any similar state, local or
foreign Governmental Authority with respect to any Pharmaceutical Product; or
(ii) prepared by the FDA, the DEA or any similar state, local or foreign
Governmental Authority with respect to a Pharmaceutical Product, in each case
that bears, in any material respect, on compliance with the requirements of the
FDA, the DEA or of any similar state, local or foreign Governmental Authority
regarding any Pharmaceutical Product, including any regulatory inspection
observation, deficiency letter, warning letter, non-approvable letter/order,
withdrawal letter/order, objection to Pharmaceutical Product promotion or
similar document.
3.12. EMPLOYEES AND EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS.
-----------------------------------------------------
(a) SCHEDULE 3.12(a) hereto sets forth a true and complete list of
all current employees of Xxxx, which list will be promptly updated prior to the
Closing to include the New Hires and any other employees permitted hereby to be
hired by Xxxx after the Effective Date and before the Closing (collectively, the
"Kali Employees"), and their respective positions, dates of hire and current
rates of compensation. Each Kali Employee who is not a U.S. citizen is, and has
been during his/her employment with Xxxx, legally authorized to work in the U.S.
for Kali, has had all documentation required for such non-U.S. citizen Xxxx
Employee to work in the U.S. for Xxxx completed and is available as required,
and all such non-U.S. citizen employees have worked, and through the Closing
25
Date will work, in compliance, in all material respects, with all applicable
Laws.
(b) SCHEDULE 3.12(b) hereto sets forth a true and complete list of
(i) each employment agreement or contract, individually or collectively, with
Kali Employees and (ii) the name of each Kali Employee that Xxxx has entered
into an agreement or contract with providing for retention or severance
payments. No union or other collective bargaining representative has been
certified or recognized by Xxxx as representing any of the Kali Employees and
none of the Kali Employees participates in or contributes to (or been required
to participate or contribute to) or incurred any liability with respect to any
"multiemployer" plan (within the meaning of Section 3(37) of ERISA). There is no
existing or, to the knowledge of Kali, any threatened strike, slowdown,
picketing, work stoppage or material employee grievance process.
(c) SCHEDULE 3.12(c) hereto sets forth a true and complete list of
each pension, profit-sharing, bonus, vacation, life, health, incentive, welfare,
severance, equity, stock option, stock award or phantom stock plan, retiree
medical or other employee benefit plan, program or arrangement maintained,
sponsored or contributed to by Kali or any of its Affiliates (or to which any of
them have an obligation to maintain, sponsor or contribute to) that benefit any
Kali Employee or former employee, shareholder, director or consultant of Kali
(such plans, programs and arrangements and related trusts, insurance and annuity
contracts, funding media, and related agreements and arrangements hereinafter
referred to, collectively, as the "Kali Benefit Plans"). For purposes of this
Section, any reference to the term "Kali and its Affiliates" shall be deemed to
refer also to any Person that is under common control or affiliated with Kali or
any of its Affiliates within the meaning of Section 4001 of ERISA and the
Regulations thereunder and Code Sections 414(b), (c), (m) or (o) and the rules
and regulations promulgated thereunder. Xxxx has furnished to PRI true and
complete copies of all material documents relating to the Kali Benefit Plans,
including each plan document (as amended), trust or funding agreement, summary
plan description, employee communications, any annual reports (including all
schedules or accounts opinions), actuarial reports and financial statements with
respect to such Kali Benefit Plans for all periods during the last two years.
(d) All Kali Benefit Plans in which the Kali Employees participate
comply in all material respects with ERISA, the Code and all other applicable
Laws and with the terms thereof. Each fiduciary as to a Kali Benefit Plan has
complied, in all material respects, with all applicable Laws in respect of each
such Plan. Each Kali Benefit Plan has at all times been administered in
accordance with its terms.
(e) All required employer contributions, premiums and Taxes under
or with respect to the Kali Benefit Plans due to be made or paid have been made
or paid, and the respective fund or funds established under the Kali Benefit
Plans have been funded in accordance with all applicable Laws.
(f) Other than claims in the ordinary course for benefits with
respect to the Kali Benefit Plans, there are no actions, suits, grievances or
material claims pending against or with respect to any Kali Benefit Plan or, to
the knowledge of Xxxx, any circumstances that could reasonably be expected to
give rise to any such action, suit, grievance or claim.
26
(g) Each of the Kali Benefit Plans that is intended to meet the
requirements of Code Section 401(a), now meets, and since its inception has met,
the requirements for qualification under Code Section 401(a) and nothing has
occurred that would adversely affect the qualified status of any such Kali
Benefit Plan. The Internal Revenue Service ("IRS") has issued a favorable
determination letter with respect to the qualification under the Code of each
such Plan. Xxxx does not maintain or contribute to, and has never maintained or
been obligated to contribute to, a defined benefit plan or a multiple employer
welfare arrangement (as those terms are defined in ERISA Sections 3(35) and
3(40)) or a plan or program that is subject to Code Sections 412 or 501(c)(9).
Except with respect to any contribution that has accrued but is not yet due,
Kali does not have any Liability (direct or indirect) with respect to any Kali
Benefit Plan and each Kali Benefit Plan may be amended or terminated, without
limitation.
3.13. TAX MATTERS. (a) Kali has (i) properly completed and timely
filed all Tax Returns required to be filed by it and all such Tax Returns are
true and complete and (ii) duly paid in full all Taxes that were due and payable
for all periods ending on or before the Effective Date. Xxxx maintains and has
maintained adequate accruals, as reflected in its financial books and records,
for all Taxes accrued but not yet due. Xxxx has no material Liability for unpaid
Taxes accruing after December 31, 2003.
(b) There is no (i) material claim for Taxes that is a Lien
against any of the properties or assets of Kali or that is being asserted
against Kali other than liens for Taxes not yet due and payable; (ii) audit,
administrative proceeding or court proceeding with respect to any Taxes or Tax
Returns of Kali that is being conducted or is pending and no Governmental
Authority that is responsible for the imposition of any Tax (a "Tax Authority")
has asserted against Kali any deficiency or claim for Taxes; (iii) extension of
the statute of limitations on the assessment of any Taxes granted by Xxxx
currently in effect; or (iv) agreement, contract or arrangement to which Xxxx is
a party that may result in the payment of any amount that would not be
deductible by reason of Code Section 162(m), 280G or 404.
(c) No claim or notice has been submitted or given by any Tax
Authority in a jurisdiction where Xxxx has not filed Tax Returns that it is or
may be subject to taxation by that jurisdiction.
(d) Within the past five (5) years, Xxxx has not filed or made any
material Tax election or has changed its overall method of accounting or its
methods of accounting with respect to specific items of income and deduction,
including the determination of its cost of goods sold, for Tax purposes.
(e) Xxxx is not a party to any Tax sharing, Tax indemnity or Tax
allocation agreement, and Xxxx does not have any Liability or potential
Liability to another Person under any such agreement, and has not incurred any
Liability for the Taxes of any Person under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law), as a transferee or
successor, by contract or otherwise.
(f) Kali has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any of its
employees, independent contractors, creditors, shareholders or other Persons.
27
(g) No power of attorney has been granted by Xxxx with respect to
any matters relating to Taxes that is currently in effect.
(h) Kali has not settled any claim, audit or administrative or
court proceeding with respect to any Taxes.
(i) Kali has not filed any disclosure under Code Section 6662 or
any analogous provision of state, local or foreign Law to prevent the imposition
of penalties with respect to any Tax reporting position taken on any Tax Return.
(j) Kali is not nor has it ever been a member of a consolidated,
combined or unitary group of which Xxxx was not the ultimate parent corporation.
(k) Xxxx is not nor has it ever been a "personal holding company"
within the meaning of Code Section 542.
(l) Since its inception, Kali has qualified as an S corporation
within the meaning of, and has made a proper and timely election to be taxed
under, Code Sections 1361 and 1362 and, where applicable, comparable elections
for state and local income tax purposes. Xxxx will continue to qualify as an S
corporation from the Effective Date through the Closing Date and shall take no
actions, and shall cause its shareholders to take no actions, that would cause
it to fail to qualify as an S corporation for Federal income Tax purposes and,
where applicable, for state and local income Tax purposes, including the
revocation or termination of its elections to be treated as an S corporation or
the transfer of any of its shares to a Person that is not an eligible
shareholder under Code Section 1361.
3.14. ENVIRONMENTAL MATTERS.
---------------------
(a) Except as set forth on SCHEDULE 3.14(a) hereto: (i) Kali is in
compliance with all applicable Environmental Laws and all Permits issued in
connection therewith; and (ii) Xxxx has not received any notice alleging or
investigating any pending and unresolved violation by Xxxx of any Environmental
Law.
(b) Except as, and only to the extent, authorized by any valid
Permit issued pursuant to an Environmental Law, there has been no Hazardous
Substances disposed of, discharged or released by Kali or VGS or, to the actual
knowledge of Xxxx, by any other Person prior to the Closing on, into or beneath
the Facility or migrating from the Facility.
(c) Neither Kali nor VGS has disposed of, discharged or released
any Hazardous Substances on, at or beneath any Off-site Location or, to the
actual knowledge of Kali, has any other Person disposed of, discharged or
released Hazardous Substances on, at or beneath any Off-site Location, or
migrating from any Off-site Location, in each case, in a manner that would give
rise to any Liabilities under any Environmental Law, including at any Off-Site
Location, against Kali or VGS.
(d) Except as set forth on SCHEDULE 3.14(d) hereto, neither Kali
nor VGS has treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled or released any substance, including any Hazardous
Substance, or owned or operated any property or facility, including the
28
Facility, in a manner that has given or reasonably could give rise to
Environmental Claims against VGS or Xxxx (or their successors).
(e) Except as set forth on SCHEDULE 3.14(e) hereto, neither Kali
nor VGS has received any oral or written notice, order or other information from
any Governmental Authority or Person advising Kali or VGS that it is responsible
for any Environmental Claims or is a potentially responsible party for
remediation or for paying the cost of investigation or remediation of any
Hazardous Substance at any Off-site Location, and neither VGS nor Kali has
entered into any agreement pertaining thereto. No Liens have arisen under or
pursuant to any Environmental Law on any site or facility owned, operated or
leased by Xxxx during Kali's occupancy of such site or facility and, to the
actual knowledge of Kali, no action (i) has been taken during Xxxx's occupancy
of such site or facility or (ii) is in the process of being taken by any
Governmental Authority that could subject any such site or facility to such
Liens, and Kali is not required to place any notice or restriction relating to
the presence of Hazardous Substances at any such site or facility in any deed or
contract or other agreement relating to the real property on which such site or
facility is located.
(f) Except as set forth on SCHEDULE 3.14(f) hereto, to the
knowledge of Kali, the Facility does not contain any underground storage tanks,
underground injection xxxxx, septic tanks in which process water or wastewater
has been disposed or any equipment using PCBs and no such tanks or xxxxx have
been abandoned in place or removed during Kali's occupancy of such site or
facility, except in compliance with Environmental Laws.
(g) Xxxx has delivered to PRI true and complete copies of all
material environmental studies, analyses or reports in the possession or control
of Kali relating to the Facility and its business. SCHEDULE 3.14(g) hereto sets
forth a true and complete list of all environmental-related Permits held by Kali
or any Affiliates.
(h) The Facility constitutes an Industrial Establishment, as defined
under the New Jersey Industrial Site Recovery Act, N.J.S.A. 13K:1-6 ET SEQ.
("ISRA").
3.15. LITIGATION; CLAIMS. Except as set forth on SCHEDULE 3.15
hereto, there are no suits or actions, administrative, arbitration or other
proceedings, or governmental investigations pending or, to the knowledge of
Kali, threatened against or affecting Kali or any of its properties or assets.
No Person has in the past three (3) years notified Kali of any material claim
against Xxxx alleging any personal property or economic injury, loss or damage
incurred as a result of or relating to the use of any products sold by or on
behalf of, or services rendered by, Xxxx. There is no judgment, order,
injunction, decree, writ or award against Kali that is not satisfied and remains
outstanding, except in respect of the Paragraph IV Litigations set forth on
SCHEDULE 3.15 that may be entered or made after the Effective Date and prior to
the Closing Date.
3.16. MATERIAL AGREEMENTS.
-------------------
(a) SCHEDULE 3.16(a) hereto sets forth a true and complete list of
each contract or other agreement to which Kali is a party or by or to which any
property of Xxxx is otherwise bound or subject that: (i) requires payments or
performance during its term involving an amount in excess of $50,000; (ii) has
29
not been made in the ordinary course of business; (iii) is an employment,
consulting, non-competition, indemnification (other than indemnification
provisions contained in licenses, leases and other contracts entered into in the
ordinary course of business) or contribution agreement; (iv) is a franchise,
distributorship, manufacturing, licensing, development, supply or sales agency
agreement (whether or not exclusive); (v) is an agreement providing for the
sale, acquisition or lease of any of the properties of Kali having a value
greater than $50,000 other than in the ordinary course of business; (vi) is a
mortgage, pledge, security agreement or other similar agreement with respect to
any of the tangible or intangible property of Xxxx; (vii) is a loan agreement,
credit agreement, promissory note, guaranty, letter of credit or similar
agreement; (viii) is a retainer agreement with attorneys, accountants,
investment bankers or other professional advisers; (ix) is an agreement with any
Governmental Authority; (x) is an agreement (other than standard confidentiality
or non-disclosure agreements or customer contracts) relating to any of the Kali
Intellectual Property Rights; (xi) is an agreement referred to in Section 3.24
hereof; (xii) is an agreement otherwise material to the operations, business or
financial condition of Kali; (xiii) is an agreement providing for the purchase
of any of the capital stock or material assets of any other Person; or (xiv) is
a binding commitment or agreement to enter into any of the foregoing
(collectively, the "Kali Material Agreements"). True and complete copies of all
Kali Material Agreements have been previously delivered to PRI.
(b) Except as set forth on SCHEDULE 3.16(b) hereto, each of the
Kali Material Agreements is valid, binding and in full force and effect, and
enforceable by Xxxx, in accordance with its respective terms (subject to the
Bankruptcy and Equity Exception). No Person (other than Kali) that is a party to
any Kali Material Agreement or is otherwise bound thereby is, to the knowledge
of Kali, in default or breach thereof and, to Xxxx's knowledge, no event,
condition or act exists that, with the giving of notice or the lapse of time or
both, would give rise to such a default or breach thereof or a right of
cancellation by Kali thereunder. Except as set forth on SCHEDULE 3.16(b), Kali
is not in default or breach of any of the Kali Material Agreements and no event,
condition or act exists that, with the giving of notice or the lapse of time or
both, would give rise to a default or breach by Xxxx thereof or a right of
cancellation thereunder by any other party thereto. Except as set forth on
SCHEDULE 3.16(b), no Consent of any Person is necessary in order to transfer to
PRI at the Closing all rights and interests of Kali in and to the Kali Material
Agreements. Kali is not in default or breach of any of its contracts or other
agreements (including the Kali Material Agreements), except where all such
breaches or defaults could not reasonably be expected to have a Material Adverse
Effect.
3.17. REAL ESTATE.
-----------
(a) SCHEDULE 3.17(a) hereto sets forth a true and complete list
and an accurate summary description of all real property leased by Xxxx (the
"Leased Real Property). Other than the Leased Real Property, Xxxx does not own
or lease, and has never owned or leased, any real property. Except as set forth
on SCHEDULE 3.17(a), no portion of any of the Leased Real Property is located in
a flood plain, flood hazard area or designated wetlands area. To the knowledge
of Xxxx, there is no uninsured physical damage to any Leased Real Property in
excess of $50,000.
(b) SCHEDULE 3.17(b) hereto contains a true and complete list of
all real property leases (including all amendments and supplements thereto)
pursuant to which Kali leases any Leased Real Property (the "Real Property
Leases"). Kali has good and valid interest in, and right to quiet enjoyment of,
30
the leasehold estates leased to it under each of the Real Property Leases, free
and clear of all Liens, rights of occupancy or use for all or any portion of the
Leased Real Property, options, covenants, conditions, rights of way,
encroachments (onto or by improvements on such Leased Real Property) and any
other matters affecting title, other than Permitted Liens. With respect to each
Real Property Lease where Xxxx is the lessee or sublessee, Xxxx is in exclusive
possession of the property described under such Lease. Kali is not in default
under any such Real Property Lease. To the knowledge of Xxxx, Xxxx does not owe
any brokerage or leasing commission in respect of any Real Property Lease.
(c) Except as set forth on SCHEDULE 3.17(c) hereto, all
certificates of occupancy (continued or other), variances, special use permits
and other Permits required for the occupancy and use of the Leased Real Property
and the operation of Kali's business thereon (as presently conducted as a
pharmaceutical manufacturer or otherwise) have been obtained and are in full
force and effect, and no other Permits, Consents or variances of any
Governmental Authorities (whether Federal, state or local) are required for such
use, occupancy and operation thereof, and no certificates of the local board of
fire underwriters (or other body exercising similar functions) have been issued
or are required for any buildings or structures comprising the improvements with
respect to the Leased Real Property (the "Improvements").
(d) Except as set forth on SCHEDULE 3.17(d) hereto, Xxxx has not
received any written notice from any Federal, state or local Governmental
Authority or board of fire underwriters (or any other body exercising similar
functions) that the conditions, continued maintenance, operation or use of any
and all Improvements (for their current or any contemplated purpose) violates
any zoning, safety, fire, seismic design, conservation, parking, architectural
barriers to the handicapped, building or similar Law. Xxxx has not received any
written or oral notice from any Governmental or quasi-Governmental Authority or
board of fire underwriters (or any other body exercising similar functions) with
respect to any portion of the Leased Real Property or any Improvements thereon
that (i) claims any material defect or material deficiency with respect to any
of the Leased Real Property or any Improvements thereon or (ii) requires or
requests the performance of any material repairs, alterations or other work to
or in respect of any of the Leased Real Property.
(e) To the knowledge of Kali, (i) no portion of the Leased Real
Property is subject to or affected by any special assessment, whether or not
there is presently a Lien thereon, and (ii) no such assessment has been pending
or threatened.
(f) To the knowledge of Kali, there is no planned or threatened
taking, condemnation or expropriation proceeding for any public or quasi-public
purpose or use by a Governmental or quasi-Governmental Authority, or by any
right of eminent domain, of all or any portion of the Leased Real Property.
(g) All public utilities (including water, gas, electric, storm
and sanitary sewage, and telephone utilities) required to operate Xxxx's
business on the Leased Real Property (as presently conducted or as presently
contemplated to be conducted) are reasonably available to such Leased Real
Property, and, to the knowledge of Kali, such utilities enter the boundaries of
such Leased Real Property through adjoining public streets, easements or
rights-of-way of record in favor of Kali. Such public utilities are all
connected in accordance with valid Permits, are all in satisfactory working
31
order and repair and are reasonably adequate to service the operations of Xxxx's
business on the Leased Real Property as currently conducted and permit full
compliance with all requirements of applicable Law. Xxxx has not received any
written notice of any proposed, planned or actual curtailment of service of any
utility supplied to any portion of the Leased Real Property. Each Leased Real
Property is an independent unit that does not rely on any facilities located on
any property not included in such Leased Real Property or any adjacent Leased
Real Property to fulfill any applicable Laws or for the furnishing to such
Leased Real Property of any essential building systems or utilities, other than
facilities provided to such Leased Real Property pursuant to one or more valid
easements.
(h) Xxxx has provided PRI with true and complete copies of all of
the following documents in Xxxx's possession or control: (i) title insurance
policies, title insurance commitments, mortgages, deeds, restrictive covenants,
easements and other recorded agreements, surveys, certificates of occupancy,
other certificates, permits, licenses and approvals, as-built plans and
specifications, architectural agreements and other documents and instruments
pertaining to the Leased Real Property and (ii) the Real Property Leases,
including all amendments, extensions and modifications thereto, and all
subordination, non-disturbance and attornment agreements, guarantees and similar
agreements relating to any of the Real Property Leases.
(i) The Leased Real Property and the use thereof by Xxxx in
connection with the conduct of the Kali Business comply, in all material
respects, with all covenants, easements and restrictions of record affecting the
Leased Real Property.
3.18. INTELLECTUAL PROPERTY.
---------------------
(a) SCHEDULE 3.18(a) hereto sets forth a true and complete list
(or description) of all material Intellectual Property Rights owned, licensed or
used in connection with the businesses of Kali, other than "off-the-shelf" or
standard software products (the "Kali Intellectual Property Rights"). The Kali
Intellectual Property Rights include all material Intellectual Property Rights
in, to and under which Xxxx has any right, title or interest, whether by
ownership or license or otherwise, other than "off-the-shelf" or standard
software products.
(b) None of the Kali Shareholders nor any officer, director or
employee of Kali, or any of their respective Affiliates (other than Xxxx) or
Associates (other than Xxxx), has any ownership, royalty or other right to or
interest in any of the Kali Intellectual Property Rights.
(c) Except as set forth on SCHEDULE 3.18(c) hereto, Xxxx has
either good title to, or valid and enforceable rights under contract to use, all
of the Intellectual Property Rights material to, or necessary to conduct, the
Kali Business as it is presently conducted, free and clear of all Liens. There
are no material restrictions on the direct or indirect transfer of any contract
or other agreement, or any interest therein, held by Xxxx in respect of any of
the Intellectual Property Rights owned by Xxxx. Kali is not in default (or, with
the giving of notice or lapse of time or both, would be in default) under any
contract or other agreement to use any of the Intellectual Property Rights
required to be set forth on SCHEDULE 3.18(a) hereto. Except as set forth on
SCHEDULE 3.18(c), (i) to the actual knowledge of Xxxx, without independent
investigation, none of the know-how, unpatented inventions, trade secrets or
rights in processes, formulas or methods comprising a part of the Kali
32
Intellectual Property Rights, and (ii) none of the other Kali Intellectual
Property Rights of Kali, infringes or conflicts with, and neither Kali nor any
of the Kali Shareholders has received any notice of infringement of, or conflict
with, any license, patent, copyright, trademark, service mark or other
intellectual property right of any other Person and, to the knowledge of Kali,
there is no infringement or unauthorized use by any Person of any of the Kali
Intellectual Property Rights. Except as set forth on SCHEDULE 3.18(c), the
validity or enforceability of any of the Kali Intellectual Property Rights owned
by Xxxx or the title of Kali thereto has not been questioned in any litigation,
governmental inquiry or proceeding to which Xxxx is a party and, to the
knowledge of Kali, no such litigation, governmental inquiry or proceeding is
threatened.
(d) SCHEDULE 3.18(d) hereto sets forth a true and complete list of
all of the patents and patent applications owned, individually or jointly, by
Xxxx. Each such patent is valid and enforceable. Xxxx has complied with its duty
of disclosure to the U.S. Patent and Trademark Office regarding each of such
patents.
(e) Xxxx has taken all reasonable actions necessary or appropriate
to preserve the confidentiality of all trade secrets, proprietary and other
confidential information material to the business and operations of Xxxx.
3.19. DOMAIN NAMES. SCHEDULE 3.19 hereto sets forth a true and
complete list of all domain names owned or used by Xxxx in the conduct of its
business. None of the Kali Shareholders and no officer, director or employee of
Kali or any of their respective family members, Affiliates or Associates has any
ownership or other interest in the domain names. None of the domain names
infringes or conflicts with any trademarks, trademark rights, trade names, trade
name rights, service marks or other rights of any Person. Xxxx has not obtained
right or interest to any domain name in violation of any Law, including the
Anticybersquatting Consumer Protection Act.
3.20. BANK ACCOUNTS; CREDIT CARDS; CORPORATE ACCOUNTS; POWERS OF
ATTORNEY. SCHEDULE 3.20 hereto sets forth a true and complete list of all: (i)
banks in which the Kali has an account or safe deposit box and the names of all
Persons authorized to draw thereon and who have access thereto; (ii) credit card
issuers with which Xxxx has an account and the names of all Persons authorized
to use such accounts or who have access thereto; (iii) cellular telephone, phone
card or other corporate accounts with which Xxxx has an account and the names of
all Persons authorized to use such accounts or who have access thereto; and (iv)
Persons holding powers of attorney from Xxxx (clauses (i) through (iv)
collectively, the "Corporate Accounts and Powers"). There are no automatic,
periodic or scheduled withdrawals or debits with respect to any of the bank or
corporate accounts required to be set forth on SCHEDULE 3.20.
3.21. TITLE TO PROPERTIES AND ASSETS; INVENTORY. Except as set forth
on SCHEDULE 3.21 hereto, Kali has good and marketable title to all of (x) the
properties and assets owned or purported to be owned by it that are reflected as
assets on the most recent balance sheet contained in the Kali Financial
Statements and (y) those properties and assets acquired by Xxxx since the date
of such balance sheet (except for inventory or other assets disposed of in the
ordinary course of business consistent with past practice since the date of such
balance sheet), free and clear of all Liens, except Permitted Liens. All of the
tangible properties and assets owned or purported to be owned by Kali are in all
33
material respects in satisfactory operating condition and free from any material
defects. Immediately following the Closing, PRI shall have obtained title to, or
the enforceable right to use, all properties, assets and rights necessary to
conduct the business of Kali, on a stand-alone, independent basis as it is
currently conducted. Kali has good and valid title to all inventory that it
purports to own, free and clear of all Liens, except for Permitted Liens, and no
such inventory is subject to recall. All items of inventory reflected on the
most recent balance sheet contained in the Kali Financial Statements or acquired
by Xxxx since December 31, 2003 consist of a quantity and quality suitable and
commercially usable and saleable in the ordinary course of business for the
purposes for which they are intended, except for obsolete, slow-moving or
defective items, all of which have been written down to net realizable value or
have been adequately reserved against on the books and records of Xxxx (and on
the Kali Financial Statements, to the extent applicable) in accordance with
GAAP, consistently applied in accordance with Xxxx's past practices.
3.22. PRODUCTS. SCHEDULE 3.22 hereto sets forth a true and complete
list of all of the products currently or formerly manufactured, developed,
researched, packaged, labeled, distributed or sold by Kali at or from the
Facility or that certain facility owned by VGS and located in Piscataway, New
Jersey. In respect of each of such products, SCHEDULE 3.22 sets forth (i) a
description of the regulatory status thereof (as of the Effective Date),
including information regarding any applications (including NDAs and ANDAs)
filed with the FDA or any other Governmental Authority in connection with the
safety, efficacy, sale, distribution or use of each such product; and (ii)
whether the particular regulatory status has been presented to the FDA or other
Governmental Authority under the name of Kali or under the name of another
Person.
3.23. CERTAIN BUSINESS MATTERS. Except as set forth on SCHEDULE 3.23
hereto, (i) Kali does not have any sole-source supplier of significant goods or
services (other than utilities) with respect to which practical alternative
sources are not available on equivalent terms and conditions; (ii) Kali has not
received any written indication that any material supplier to Kali will
terminate, materially increase the cost of or materially change other terms with
respect to supplying materials, products or services to, Kali (whether as a
result of the consummation of the transactions contemplated hereby or
otherwise); (iii) Kali neither gives nor is bound by any express warranties
relating to its products and, to the knowledge of Kali, since January 1, 2002,
there has been no assertion(s) of any breaches of warranty or product liability;
(iv) to the knowledge of Kali, there have been no material workmanship or
service problems or, since January 1, 2002, any material claims made against
Kali with respect to any product sold or services provided by Xxxx; (v) Xxxx is
capable of performing the Kali Material Agreements to which it is a party in
accordance with all material terms thereof; and (vi) Kali is not a party to or
otherwise bound by any agreement or arrangement that limits its freedom to
compete in any line of business or any geographic area or with any Person or
that requires it to transact business exclusively with any Person.
3.24. CUSTOMERS. Except as set forth on SCHEDULE 3.24(a) hereto,
neither Xxxx nor any of the Kali Shareholders has received notice that any
material customer of Kali intends to terminate, suspend or materially change the
terms of its agreement(s) or arrangement(s) with Xxxx as a result of or
following the transactions contemplated hereby or otherwise. Except as set forth
on SCHEDULE 3.24(b), Kali does not have any agreements or arrangements with any
of its customers with respect to guaranteed or fixed pricing, order cancellation
price reductions, discounts or rights to return or reject any products sold by
Xxxx, except as expressly provided in any applicable Kali Material Agreements.
34
3.25. INSURANCE. SCHEDULE 3.25 hereto sets forth a true, correct and
complete list and general description of all policies or binders of fire,
liability, product liability, workers' compensation, vehicular, business
interruption or other insurance held by or on behalf of Kali specifying the
insurer, the policy number or covering note number with respect to binders, and
describing any pending claim(s) thereunder. All of such policies and binders are
in full force and effect. Kali is in not default with respect to any material
provision contained in any such policy or binder. Xxxx has not received or given
a written notice of cancellation or non-renewal with respect to any such policy
or binder. Xxxx holds the type and amount of insurance required by the
applicable Kali Material Agreements in respect of the products set forth on
SCHEDULE 3.22 hereto.
3.26. TRANSACTIONS WITH RELATED PARTIES. Except as set forth on
SCHEDULE 3.26 hereto, no director, officer or Affiliate of Xxxx, none of the
Kali Shareholders and no immediate family member, Affiliate or Associate
thereof: (i) has borrowed money from or loaned money to Xxxx that has not been
repaid; (ii) has any contractual, tort or other claim, express or implied,
against Xxxx; (iii) has or has had, since January 1, 2001, any right or interest
in or to any property, rights or assets owned or used by Xxxx in its business or
activities; or (iv) is party to any contract, transaction or other arrangement
with Kali or its Affiliates, other than (x) any employment agreements or (y) any
contracts between Kali and VGS that involve (or could involve if all
contingencies were met) consideration of less than $50,000. SCHEDULE 3.26 sets
forth a true and complete list (or, as applicable, description) of each accounts
receivable, accounts payable and/or loan or similar arrangements between Kali
and VGS.
3.27. BROKERS. In connection with the transactions contemplated by
this Agreement or by the other agreements contemplated hereby, neither Xxxx nor
any of the Kali Shareholders is a party to any agreement, arrangement or
understanding with any Person that will result in the obligation of PRI, Kali or
any of their respective Affiliates to pay any finders' fee, brokerage
commission, investment advisory fee or similar payment.
4. REPRESENTATIONS AND WARRANTIES OF THE KALI SHAREHOLDERS.
--------------------------------------------------------
Each Kali Shareholder hereby represents and warrants to PRI as follows:
4.1 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS; ENFORCEABILITY.
Such Kali Shareholder has the legal capacity or authority to enter into, execute
and deliver this Agreement, the Warrant Agreement and the other agreements
contemplated hereby to which it/he is (or will be) a party and to perform such
Kali Shareholder's obligations hereunder and thereunder. This Agreement has
been, and the Warrant Agreement and the other agreements contemplated hereby
will be, duly executed and delivered by such Kali Shareholder and, subject to
the due authorization, execution and delivery of such agreements by the other
Parties thereto, this Agreement, the Warrant Agreement and the other agreements
contemplated hereby constitute (or will constitute when executed subsequent to
the Effective Date) valid and binding obligations of such Kali Shareholder,
enforceable against such Kali Shareholder in accordance with their respective
terms, except as such enforcement may be affected by the Bankruptcy and Equity
Exception. The execution and delivery of this Agreement, the Warrant Agreement
and the other agreements contemplated hereby and the performance by such Xxxx
35
Shareholder of its/his obligations under this Agreement, the Warrant Agreement
and the other agreements contemplated hereby do not (or will not when executed
subsequent to the Effective Date) (a) assuming receipt of the Consents referred
to in Section 3.6 hereof (including the exceptions therein), require the Consent
of any Governmental Authority or Person; (b) conflict with, or otherwise result
in the breach or violation of, or constitute (or, with notice or the lapse of
time or both, would constitute) a default under, any Law applicable to such Kali
Shareholder or any contract or other agreement to which such Kali Shareholder is
a party or by or to which such Shareholder is otherwise bound or subject; or (c)
result in the imposition of any Lien against any of the assets or properties of
such Kali Shareholder, other than in favor of PRI.
4.2 TITLE TO KALI SHARES. Such Kali Shareholder solely owns,
beneficially and of record, the Kali Shares set forth opposite such Kali
Shareholder's name on SCHEDULE 3.3(c) hereto. Except as set forth on SCHEDULE
4.2 hereto, upon delivery of the Purchase Price by PRI at the Closing, and such
Kali Shareholder transferring to PRI his/its Kali Shares, PRI shall acquire good
and marketable title to such Kali Shares, free and clear of all Liens. Except as
set forth on SCHEDULE 4.2, other than pursuant to this Agreement, none of such
Kali Shares is subject to any voting trust, proxy or other contract, agreement
or arrangement, including any such contract, agreement or arrangement relating
to the voting, dividend rights or disposition of any of such Shares.
4.3 LITIGATION. There are no claims, actions, suits or other
proceedings pending or, to the knowledge of such Kali Shareholder, threatened
against such Kali Shareholder in, before or by any Governmental Authority
relating to the transactions contemplated by this Agreement.
4.4 INVESTMENT INTENT. Such Kali Shareholder acknowledges that
none of the Warrants or the shares of PRI Common Stock underlying the Warrants
has been registered under the Securities Act or any state securities Laws. The
Warrants and shares of PRI Common Stock underlying the Warrants will be acquired
by such Kali Shareholder for investment purposes only and not with a present
view to the distribution thereof. Such Kali Shareholder has no present intention
to resell or otherwise dispose of any of the Warrants or the shares of PRI
Common Stock underlying the Warrants.
4.5 INFORMATION. Such Kali Shareholder (or, in respect of clauses
(i), (iii) and (iv) below, if such Kali Shareholder is a trust, the trustee(s)
of such trust) (i) has such knowledge and experience in financial and business
affairs so that it is capable of evaluating the merits and risks involved in
purchasing the Warrants and the shares of PRI Common Stock underlying the
Warrants; (ii) is able to bear the economic risks involved in purchasing the
Warrants and the shares of PRI Common Stock underlying the Warrants; (iii) has
had the opportunity to ask questions of, and receive answers from, PRI and
Persons acting on PRI's behalf concerning PRI, the terms of the Warrants and the
shares of PRI Common Stock and to obtain any additional information in
connection therewith; and (iv) is a resident of the State New Jersey.
4.6 ACCREDITATION. Such Kali Shareholder is an "accredited
investor" within the meaning of Regulation D of the Securities Act.
36
4.7 ELIGIBLE S CORPORATION SHAREHOLDER. Such Kali Shareholder has
always been, and through the Closing will continue to be, a Person eligible to
be a shareholder of an S corporation under Code Section 1361, and has not taken
(or has not failed to take) such actions, and has caused Kali to have taken (or
to have not failed to take) such actions as were (or will be) necessary for Kali
to continue to maintain its legal status as an S corporation from its inception
through the Closing.
5. REPRESENTATIONS AND WARRANTIES RELATING TO PRI. PRI hereby
represents and warrants to Xxxx and the Kali Shareholders as follows.
5.1. ORGANIZATION AND DUE AUTHORIZATION. PRI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. PRI has the requisite corporate power and authority to execute and
deliver this Agreement, the Warrant Agreement and the other agreements
contemplated hereby to which it is (or will be) a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement, the Warrant Agreement and the other agreements contemplated hereby to
which PRI is (or will be) a party and the performance and consummation of the
transactions contemplated hereby and thereby by PRI have been duly authorized by
all necessary corporate action on the part of PRI. This Agreement, the Warrant
Agreement and the other agreements contemplated hereby to which PRI is (or will
be) a party have been (or will be when executed subsequent to the Effective
Date) duly executed and delivered by PRI and, subject to the due authorization,
execution and delivery of such agreements by the other Parties thereto, this
Agreement, the Warrant Agreement and the other agreements contemplated hereby
constitute (or will constitute when executed subsequent to the Effective Date)
valid and binding obligations of PRI, enforceable against PRI in accordance with
their respective terms, except as such enforcement may be affected by the
Bankruptcy and Equity Exception.
5.2. NO VIOLATION; CONSENTS AND APPROVALS. The execution and
delivery of this Agreement, the Warrant Agreement and the other agreements
contemplated hereby and the performance by PRI of its obligations under this
Agreement, the Warrant Agreement and such other agreements do not (or will not
when executed subsequent to the Effective Date) (i) conflict with or result in
any violation of any provision of the certificate of incorporation or bylaws of
PRI; (ii) except in connection with the HSR Act, obtaining ISRA Clearance and
any applicable Federal or state securities or "blue sky" Law filings, require
the Consent of any Governmental Authority; or (iii) conflict with or violate, or
result in a breach of, or constitute a default under, any Law or any agreement
to which PRI is a party or by which PRI is otherwise bound.
5.3. INVESTMENT INTENT. The Kali Shares to be acquired pursuant to
this Agreement will be acquired by PRI for investment and not with a view to the
distribution thereof in contravention of any applicable securities Laws.
5.4. LITIGATION. There are no claims, actions, suits or other
proceedings pending or, to the knowledge of PRI, threatened against PRI in,
before or by any Governmental Authority relating to the transactions
contemplated by this Agreement.
5.5. BROKERS. Except pursuant to PRI's agreement with Bear Xxxxxxx
& Co., Inc., whose fees and expenses shall be paid solely by it, PRI is not
party to any agreement, arrangement or understanding with any Person that will
37
result in the obligation of PRI, Kali or any of the Kali Shareholders to pay any
finders' fee, brokerage commission, investment advisory fee or similar payment
in connection with the transactions contemplated by this Agreement or the other
agreements contemplated hereby.
5.6. SECURITIES LAW FILINGS. (a) During the one- (1) year period
immediately preceding the Effective Date, PRI has timely filed all reports,
proxy statements, registration statements and documents that PRI was required to
file with the SEC under the Securities Act and the Exchange Act, all of which
complied as to form in all material respects with all applicable requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations adopted thereunder. As of their respective filing dates, each such
report, proxy statement, registration statement or other document did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(b) The financial statements of PRI contained in its most recent
filing with the SEC on Form 10-K fairly present, in all material respects, the
financial position of PRI and its consolidated subsidiaries and the results of
operations of PRI and its consolidated subsidiaries as at the end of and for the
fiscal year covered thereby. Since the date of such Form 10-K, there has not
been any material adverse change in the business, assets or financial condition
of PRI and its consolidated subsidiaries, taken as a whole, that would adversely
affect PRI's ability to perform its obligations hereunder.
6. COVENANTS AND AGREEMENTS.
------------------------
6.1. CONDUCT OF THE BUSINESS.
(a) From and after the Effective Date and until the earlier of (x)
the Closing and (y) the Termination Date, except (1) with the prior written
consent of PRI or (2) as may be expressly permitted by this Agreement (including
SCHEDULE 6.1(a) hereto), the Kali Shareholders shall cause Kali to, and Kali
shall:
(i) conduct its business in the ordinary and usual course
consistent with past practice, including paying expenses and accounts payables
and manufacturing, supplying, packaging and distributing any of the products
covered by the Kali Material Agreements in accordance with the terms thereof;
(ii) use commercially reasonable efforts to preserve intact
its relationships with those persons having material business dealings with it;
(iii) not amend in any material respect, or terminate, any of
the Kali Material Agreements, or enter into a material agreement (x) with
respect to any of the Leased Real Property or (y) that would, if in effect as of
the Effective Date, constitute a Kali Material Agreement;
38
(iv) not take (without duplication of any of the other
restrictions contained in this Section 6.1(a)) any of the actions referred to in
subsections (a) through (o) of Section 3.9 hereof;
(v) not (A) repeal, alter or adopt any amendment to any of the
Kali Organizational Documents; (B) adopt a plan of liquidation or dissolution;
(C) enter into any merger, consolidation or similar business combination with or
into any Person or any agreement therefor; (D) repurchase or redeem any shares
of its capital stock; (E) pay any dividends on, or make any distribution with
respect to, any of its shares of capital stock; (F) issue or authorize the
issuance of, or agree to issue or sell, any shares of their capital stock of any
class (whether through a direct issuance or granting of options, warrants,
commitments, convertible securities, subscriptions, rights to purchase or
otherwise); (G) incur, guarantee or assume any indebtedness for borrowed money;
(H) hire any employees, except for the New Hires; or (I) make or commit to make
(x) any investment in, or purchase any equity securities of or, except in the
ordinary course of business, a material portion of the assets of any Person or
(y) capital expenditures, other than Permitted Capital Expenditures;
(vi) not sell, transfer or otherwise dispose of, or subject to
or permit any Lien (other than Permitted Liens) on, any of (x) the Kali
Intellectual Property Rights or (y) the other properties or assets of Kali other
than in the ordinary course of business;
(vii) not commence or settle any lawsuit or litigation, other
than in the ordinary course of business;
(viii) use commercially reasonable efforts to maintain and
repair, or cause to be maintained and repaired, all Leased Real Property
(including all Improvements thereon) and equipment, in each instance in adequate
condition and repair as reasonably necessary in connection with the operation of
Kali's businesses and shall promptly notify PRI of any material casualty or
damage to any portion of the Leased Real Property or any material portion of
Kali's equipment or inventory;
(ix) timely pay any Taxes that may become due; and
(x) not take (or omit to take) any action that would cause any
of the conditions set forth in Sections 8 or 9 of this Agreement not to be
satisfied.
(b) From and after the Effective Date and until the earlier of (x)
the Closing and (y) the Termination Date, except as may be agreed to in writing
by Xxxx, PRI shall not, and shall not permit any of its Affiliates to, take any
action or agree to take (or omit to take) any action that would cause any of the
conditions set forth in Sections 8 or 9 of this Agreement not to be satisfied.
6.2 PRE-CLOSING ACCESS. From and after the Effective Date through
the earlier of (x) the Closing and (y) the Termination Date, Kali shall provide
PRI and its employees, counsel, accountants and other representatives reasonable
access, during normal business hours and following reasonable prior notice, to
the Facility and to such of its customers and suppliers, properties, Tax
Returns, Books and Records and employees as PRI deems necessary or advisable in
connection with the transactions contemplated hereby. PRI and its employees and
39
representatives shall be entitled to conduct such environmental studies,
analyses and inspections with respect to Xxxx's assets and properties as PRI may
reasonably require. Kali and the Kali Shareholders shall timely furnish PRI with
such financial and operating data and other information regarding Kali and its
businesses and operations as PRI may from time to time reasonably request. All
information disclosed to PRI in connection with the transactions contemplated
hereby shall be subject to the provisions of that certain confidentiality
agreement executed by PRI and Xxxx on or about January 16, 2004. None of the
investigations or reviews conducted by PRI shall in any way affect or limit
Kali's or the Kali Shareholders' representations, warranties, covenants or
agreements contained herein.
6.3 COMMERCIALLY REASONABLE EFFORTS; ANTI-TRUST FILINGS; FURTHER
ASSURANCES.
(a) Each of the Parties shall act in good faith and use
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary or advisable to consummate the
transactions contemplated by this Agreement as soon as reasonably practicable.
Without limiting the generality of the foregoing, the Parties shall, and shall
cause their respective Affiliates to, use commercially reasonable efforts to (i)
obtain, on or prior to the Closing, all Consents and waivers (including the
waiver of any right of first refusal held by any Person, including the right
purported to be held by Perrigo pursuant to the Option Agreement (the "Perrigo
Waiver")) and provide all notices to, and make all filings with and all
applications and submissions to, any Governmental Authority or Person required
for the consummation of the transactions contemplated by this Agreement as
promptly as reasonably practicable; provided, HOWEVER, that to the extent that
any of such Consents are not obtained by the Closing Date, the Kali Shareholders
and PRI shall continue to use commercially reasonable efforts thereafter to
obtain them; (ii) provide all such information concerning such Party and its
officers, directors, employees, trustees and Affiliates as may be necessary or
reasonably requested by another Party in connection with the foregoing; and
(iii) avoid the entry of, or have vacated or terminated, any injunction, decree,
order or judgment that would restrain, prevent or materially delay the
consummation of the transactions contemplated by this Agreement, including
defending through litigation any claim asserted in any court by any Governmental
Authority or Person.
(b) Each of the Parties shall take any and all reasonable steps
necessary to avoid or eliminate any impediment(s) under any antitrust,
competition or trade regulation Law that is asserted by any Governmental
Authority with respect to the consummation of the transactions contemplated by
this Agreement so as to enable the consummation of such transactions as
expeditiously as possible. Without limiting the generality of the foregoing, the
Parties shall make, or cause to be made on their behalf, appropriate filings
under the HSR Act with respect to the transactions contemplated hereby on or
before the fifth (5th) Business Day after the Effective Date. The Parties shall
each file or cause to be filed as promptly as practicable with the U.S. Federal
Trade Commission and the U.S. Department of Justice any supplemental information
that may be requested pursuant to the HSR Act. All such filings shall comply
with the requirements of the HSR Act. Prior to making any application to, or
filing with, a Governmental Authority in connection with this Agreement each
Party shall provide the other Party with drafts thereof and afford the other
Party a reasonable opportunity to review and comment on such drafts; PROVIDED,
HOWEVER, that the Parties shall be required to share drafts of the
transaction-specific portions of such filings only. Furthermore, each Party
shall (i) not extend any waiting period under the HSR Act or any other
40
applicable antitrust or competition Laws or enter into any agreement with any
Governmental Authorities not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of the other Party(ies); (ii)
promptly notify the other Party(ies) of any written communication to that Party
or its Affiliates from any Governmental Authority regarding the transactions
contemplated by this Agreement and, subject to applicable Law, permit the other
Party(ies) to review in advance any proposed written communication in response
to any of the foregoing; (iii) not participate, or to permit any of its
Affiliates to participate, in any substantive meeting or discussion with any
Governmental Authority in respect of any filings, investigations or inquiries
concerning this Agreement unless it consults with the other Party(ies)
reasonably in advance thereof and, to the extent permitted by such Governmental
Authority, gives the other Party(ies) the opportunity to attend and participate
in such meeting; and (iv) promptly furnish the other Party(ies) with copies of
all correspondence, filings and communications (and memoranda setting forth the
substance thereof) between it and its Affiliates and their respective
representatives, on the one hand, and any Governmental Authority(ies) or the
members of their respective staffs, on the other hand, with respect to this
Agreement. Additionally, Xxxx shall take any and all commercially reasonable
steps to install, as soon as possible, a separator to the existing sanitary
sewer line to the Facility (the "Separator").
6.4. NON-COMPETITION.
----------------
(a) In consideration of PRI's payment of the Purchase Price, each
of the Kali Shareholders and its Affiliates and Associates shall not:
(i) directly or indirectly, for a period commencing on the
Closing Date and ending thirty (30) months after the Closing Date (the
"Non-Competition Period"), by ownership of securities or otherwise (except as a
holder of less than five (5%) percent of any class of equity securities of any
other Person, which class of securities shall have been registered under Section
12 of the Exchange Act), manage, control, finance, consult with, engage or
participate in any manner in any business or activity (collectively, "Compete")
anywhere in the world that is competitive with any portion of the Kali Business
or any other business of PRI (or any of its Affiliates); PROVIDED, HOWEVER, that
in respect of Xx. Xxxxxxxxxxx, the Non-Competition Period shall terminate on the
later of (A) the termination or expiration of Xx. Xxxxxxxxxxx'x employment with
Par pursuant to the Subramanian Employment Agreement and (B) thirty (30) months
after the Closing Date (unless Xx. Xxxxxxxxxxx'x employment shall have been
terminated pursuant to Sections 3.2.4 or 3.2.5 of the Subramanian Employment
Agreement), in which case the Non-Competition Period shall terminate twenty-four
(24) months after the Closing Date); and
(ii) directly or indirectly, at any time after the Closing
Date, Compete anywhere in the world with or in respect of (A) any products as to
which PRI (or any of its Affiliates), or any co-development partner of PRI (or
any of its Affiliates), shall have filed (irrespective of whether accepted for
filing by the FDA) in good faith an ANDA or NDA (including 505(b)(2)
Applications) with the FDA, in each case, with respect to a drug technology
substantially developed by PRI (or any of its Affiliates), as of the
Determination Date; (B) any products that PRI (or any of its Affiliates) is
manufacturing, supplying, distributing or selling, either by itself or together
with any other Person (including any product marketed through any authorized
41
generic product agreement), as of the Closing Date; (C) any products that PRI
(or any of its Affiliates) shall manufacture or shall have developed or
co-developed and either supply, distribute or sell, either by itself or together
with any Person, at any time from the Effective Date through the later of the
Subramanian Termination Date and date that is thirty (30) months from the
Closing Date; or (D) any products that are marketed or distributed through any
brand authorized generic product agreement at any time from the Effective Date
through the later of the Subramanian Termination Date and date that is thirty
(30) months from the Closing Date. As used herein, the term "Determination Date"
shall mean the later of (x) forty-two (42) months from the Closing Date and (y)
twelve (12) months from the Subramanian Termination Date, other than a
termination pursuant to Sections 3.2.4 or 3.2.5 of the Subramanian Employment
Agreement, in which case the Determination Date shall be twelve (12) months from
the date of such termination (irrespective of clause (x) above). Notwithstanding
the foregoing, with respect to the products described in clause (A) above, if
the Subramanian Termination Date is on or after the thirtieth (30th) month after
the Closing Date or Xx. Xxxxxxxxxxx'x employment is terminated pursuant to
Sections 3.2.4 or 3.2.5 of the Subramanian Employment Agreement, this Section
6.4(a)(ii) shall apply to all ANDAs or NDAs (including 505(b)(2) Applications)
filed before such Subramanian Termination Date and after such Subramanian
Termination Date only as to which material development efforts relating to such
product shall have occurred prior to the Subramanian Termination Date.
PRI (or Par, on PRI's behalf) shall deliver to Xx. Xxxxxxxxxxx
(i) at the Closing a then current list of all products included in clauses (A)
through (D) above, including a list of ANDAs and NDAs (including 505(b)(2)
Applications) that PRI (or any of its Affiliates) has filed (irrespective of
whether accepted for filing by the FDA), and then presently expects to file,
with the FDA within twelve (12) months of delivery of the list (the "Product
List") and (ii) an update of the Product List monthly thereafter during the term
of Xx. Xxxxxxxxxxx'x employment with Par or PRI and (iii) a proposed final
Product List within twenty (20) Business Days of the Subramanian Termination
Date (the "Proposed Definitive Product List"). In addition, within twenty (20)
Business Days of the Determination Date, PRI (or Par, on PRI's behalf) shall
provide to Xx. Xxxxxxxxxxx an updated version of the Proposed Definitive Product
List, which revised list shall be the definitive Product List setting forth the
products with which the Kali Shareholders shall not Compete in accordance with
Section 6.4(a)(ii) hereof (the "Definitive Product List"). For the avoidance of
doubt, if the Subramanian Termination Date is on or after the thirtieth (30th)
month after the Closing Date or Xx. Xxxxxxxxxxx'x employment is terminated
pursuant to Sections 3.2.4 or 3.2.5 of the Subramanian Employment Agreement, the
Definitive Product List shall not contain any products (x) that were not set
forth on the Proposed Definitive Product List and (y) as to which no material
development efforts occurred prior to the Subramanian Termination Date. PRI's
right to enforce this Section 6.4(a)(ii) shall be conditioned upon its delivery
to Xx. Xxxxxxxxxxx of both the Proposed Definitive Product List and the
Definitive Product List. If requested by the Kali Shareholders' Rep in writing,
PRI (or Par, on PRI's behalf) shall provide reasonably satisfactory written
evidence (x) of the filing of each ANDA or NDA with the FDA and (y) that
material development efforts shall have been performed prior to the Subramanian
Termination Date, in each case, with respect to each product set forth on the
Definitive Product List and, if reasonably satisfactory written evidence of such
filing is not delivered to Xx. Xxxxxxxxxxx within thirty (30) days of such
request, such product shall be deemed deleted from the Definitive Product List.
This Section 6.4(a)(ii) shall not be violated by any Kali Shareholder (or any of
their respective Affiliates and Associates) owning less than five (5%) percent
42
of any class of equity securities of any other Person (which class of securities
shall have been registered under Section 12 of the Exchange Act), that Competes
with any of the products on the Product List.
(b) The Kali Shareholders acknowledge that a violation or
threatened violation of any of the provisions of this Section 6.4, Section 6.9
or Section 6.10 hereof may result in PRI and its Affiliates sustaining
irreparable harm, which result may not be adequately redressed by the payment of
damages to PRI and its Affiliates and, therefore, in addition to any other
remedies that PRI and its Affiliates may have under this Agreement or otherwise,
PRI and its Affiliates shall be entitled to apply to any court of competent
jurisdiction, at law or in equity, for an injunction, without providing any
bond, enjoining or restraining any such violation, including the rescission of
any violative transaction to the extent permissible under applicable Law. If,
for any reason, a court of competent jurisdiction shall find any of the
provisions of this Section 6.4, Section 6.9 or Section 6.10 hereof unreasonable
in duration, geographic scope or otherwise, the prohibitions contained herein
shall be restricted to such time and geographic area as such court determines to
be reasonable and that reflect the intention of the Parties to the fullest
extent permissible. Such restriction shall apply only with respect to the
operation of such provisions in the particular jurisdiction in which such
adjudication is made.
(c) The Parties hereby acknowledge that this Section 6.4 and
Sections 6.5, 6.9 and 6.10 hereof are essential terms of this Agreement.
6.5. BIOSTUDIES PRODUCTION. If, for any reason, following the
Closing, Kali shall fail to complete a Biostudy (irrespective of the outcome of
any such Biostudy) in respect of at least one (1) new product during each of the
four successive six- (6) month periods immediately following the Closing Date
(PROVIDED, that, with respect to the last of such six- (6) month periods, Kali
must complete or be actively conducting a Biostudy during the last three (3)
months of such period), any such failure (the "Failure to Complete Biostudies")
shall constitute a material breach by the Kali Shareholders of this Agreement.
Upon such a breach, the Kali Shareholders shall be jointly and severally liable
to PRI for their PRO RATA share of liquidated damages in an aggregate amount of
$30,000,000 (the "Disruption Damages"). Each Kali Shareholder's PRO RATA share
of the Disruption Damages shall be equal to such Kali Shareholder's PRO RATA
share of the Cash Purchase Price received by such Kali Shareholder pursuant to
Section 2.2(c) hereof. Notwithstanding the foregoing, the Kali Shareholders
shall not be liable for non-performance of Xxxx's obligations pursuant to this
Section 6.5 if and to the extent any such non-performance is directly due to a
Force Majeure Event or a Business Interruption Event. Such non-performance will
be excused for as long (but only for as long) as such event shall be continuing;
PROVIDED, HOWEVER, that the Kali Shareholders' Rep shall give prompt written
notice to PRI of the Force Majeure Event or Business Interruption Event. PRI and
the Kali Shareholders' Rep shall exercise commercially reasonable efforts to
eliminate the Force Majeure Event or Business Interruption Event and to resume
performance of Xxxx's affected obligations as soon as practicable. The
occurrence of any Force Majeure Event or Business Interruption Event in any
particular six (6)-month period shall not excuse or diminish the obligation of
Kali to complete a Biostudy in any other periods or the Kali Shareholders'
obligations hereunder. PRI and the Kali Shareholders hereby agree that the
Disruption Damages are reasonable and shall not constitute a penalty. Payment of
the Disruption Damages shall be subject to Sections 10.3(b) and (c) hereof. Each
of the Kali Shareholders hereby acknowledges and agrees to the provisions of
43
this Section 6.5 and further acknowledges that such Kali Shareholder may be
required to pay a portion of the damages provided herein notwithstanding the
fact that he, she or it may or may not have been involved with the Failure to
Complete Biostudies. The Disruption Damages payable hereunder shall not affect
or diminish the provisions of the last sentence of Section 2.2(e) hereof.
6.6. PUBLIC ANNOUNCEMENTS. Except as reasonably determined to be
required by applicable Law or the rules of any applicable stock exchange,
neither PRI or Kali nor the Kali Shareholders shall, nor shall they permit any
of their respective Affiliates to, make any public announcement in respect of
this Agreement, the other agreements contemplated hereby or the transactions
contemplated hereby or thereby, without the prior written consent of the other
Party(ies) hereto (which consent shall not be unreasonably withheld or delayed).
6.7. EMPLOYEES. Xxxx and Xx. Xxxxxxxxxxx shall, subject to
applicable Law, support all efforts of PRI to retain all employees of Xxxx whom
PRI shall identify to Kali that it desires to employ to continue their
employment with Xxxx (the "Continuing Employees"). PRI shall use commercially
reasonable efforts to provide the Continuing Employees with such employee
benefit plans as are provided generally to employees of PRI and its Affiliates
who have equivalent responsibilities, salaries and years of service, including
any participation in applicable employee incentive equity ownership or stock
option plans. Notwithstanding the foregoing, the Continuing Employees are not
intended to, and shall not, be third-party beneficiaries of this or any other
provision of this Agreement.
6.8. RESIGNATIONS; REVOCATIONS; RELEASES. On or before the Closing
Date, Xxxx shall cause to be delivered to PRI (i) duly executed resignations,
effective immediately after the Closing, of those officers and directors of Xxxx
as shall be requested by PRI in a writing delivered to Xxxx on or before the
second (2nd) Business Day prior to the Closing; and (ii) duly executed
revocations, effective immediately after the Closing, of the Corporate Accounts
and Powers. Additionally, each of the Kali Shareholders, on its own behalf and
on behalf of any of its Affiliates and Associates, hereby irrevocably waives,
and transfers to PRI, subject to and effective upon the Closing, any and all
claims, rights or interests that such Kali Shareholder has or may have in, to or
in respect of the matters referred to in clauses (i) through (iv) of Section
3.26 hereof.
6.9. CONFIDENTIALITY. From and after the Closing Date, each of the
Kali Shareholders shall treat and hold as confidential all information relating
to the assets, operations and condition of Kali. Without limiting the foregoing,
each of the Kali Shareholders shall not, and shall cause each of its Affiliates
not to, disclose any such confidential information to any Person (except, as may
be necessary, to such Person's auditors, counsel or other professional advisors)
or make use of or exploit any such confidential information for its own purposes
or for the benefit of any other Person (other than Kali or PRI). In the event
that any of the Kali Shareholders or their Affiliates are required (by oral or
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process, or by
applicable Law) to disclose any such confidential information, then such Kali
Shareholder shall promptly notify PRI of the requirement so that PRI, at its
expense, may seek an appropriate protective order or waive compliance with this
Section 6.9. If, in the absence of a protective order or receipt of a waiver
hereunder, a Kali Shareholder or its Affiliate is, on the advice of counsel,
44
compelled to disclose such confidential information, the Kali Shareholder (or
such Affiliate) may so disclose the confidential information; PROVIDED, HOWEVER,
that the Kali Shareholder or such Affiliate, as the case may be, will use all
reasonable efforts to obtain reliable assurance that confidential treatment will
be afforded to such confidential information. The provisions of this Section 6.9
shall not be deemed to prohibit the disclosure by the Kali Shareholders of
confidential information relating to the operations or affairs of Kali to the
extent reasonably and directly required (i) to prepare or complete any required
Tax Returns or financial statements, (ii) in connection with any reports,
statements, testimony audits or other proceedings before or by a Governmental
Authority, (iii) to comply with any applicable Laws, (iv) to defend any suit,
claim or other litigation, or in response to any summons or subpoena, or (v) to
provide services to PRI in accordance with the terms of this Agreement or any
other agreement contemplated hereby. The provisions of this Section 6.9 shall
not apply to information that is or becomes (x) publicly available other than as
a result of a disclosure by any of the Kali Shareholders (or their respective
Affiliates) or (y) available to a Kali Shareholder or any of its Affiliates on a
non-confidential basis from a source that, to the knowledge of such Kali
Shareholder, is not prohibited from disclosing such information by any legal,
contractual or fiduciary obligation.
6.10. NON-SOLICITATION. From the Closing Date until the fourth (4th)
anniversary of the Closing Date (the "Non-Solicitation Period"), the Kali
Shareholders shall not, directly or indirectly, hire or recruit any employee of
PRI (or any of its Affiliates) or solicit or induce, or attempt to solicit or
induce, (i) any employee of PRI (or any of its Affiliates) to terminate his/her
employment with, or otherwise cease his/her relationship with PRI (or any of its
Affiliates) or (ii) any then current customer or client of PRI (or any of its
Affiliates) to materially alter, terminate or otherwise cease its relationship
with PRI (or any of its Affiliates). Notwithstanding the foregoing, the
Non-Solicitation Period in respect of Xx. Xxxxxxxxxxx shall terminate on the
later of (x) two (2) years after the termination or expiration of Xx.
Xxxxxxxxxxx'x employment with PRI pursuant to the Subramanian Employment
Agreement and (y) four (4) years after the Closing Date, except (A) in the case
of a termination of Xx. Xxxxxxxxxxx'x employment pursuant to Sections 3.2.4 or
3.2.5 of the Subramanian Employment Agreement, in which case the
Non-Solicitation Period in respect of Xx. Xxxxxxxxxxx as to customers and
clients of PRI (but not as to employees of PRI) shall, subject to Section 6.4
hereof, terminate twelve (12) months from the Subramanian Termination Date and
(B) that Xx. Xxxxxxxxxxx may employ Xx. Xxxxxxxxxxx without any violation or
breach of this Section 6.10.
6.11. FINANCIAL STATEMENTS AND OTHER INFORMATION. Promptly following
the Effective Date, and in no event later than five (5) Business Days prior to
the Closing Date, Xxxx and the Kali Shareholders shall provide to PRI copies of
all financial statements of Xxxx that would be required to be included in a Form
8-K (and any amendments thereto) to be filed pursuant to the Exchange Act in
connection with the transactions contemplated hereby. Such financial statements
shall comply in form and substance with the requirements of such Act and all
other applicable Federal securities Laws and regulations.
6.12. USE OF LEASED REAL PROPERTY.
---------------------------
(a) Prior to the Closing, without the prior written consent of
PRI, neither Xxxx nor the Kali Shareholders shall enter into any contract or
other agreement with respect to any portion of the Leased Real Property that
45
would survive the Closing or otherwise adversely affect the use, operation or
enjoyment of the Leased Real Property after the Closing, unless the same is
terminable upon no more than thirty- (30) days' prior written notice and without
any significant Liability.
(b) Upon PRI's reasonable request, Xxxx and the Kali Shareholders
shall cooperate with PRI, without their being required to incur any significant
monetary obligation, in obtaining any and all Permits or Consents of any
Governmental Authorities, including variance and site plan approvals, necessary
for PRI's planned operations at the Leased Real Property following the Closing;
PROVIDED, that Kali shall not be obligated to obtain any Permit, Consent or
variance required to permit PRI to conduct any business or activity after the
Closing other than in respect of the businesses of Xxxx as conducted on the
Closing Date.
6.13. ISRA/ENVIRONMENTAL COMPLIANCE.
-----------------------------
(a) ISRA COMPLIANCE. The Parties acknowledge that the transactions
contemplated hereby require compliance with ISRA. Notwithstanding anything to
the contrary contained in this Agreement, Xxxx shall assume, perform, satisfy
and discharge in full all of its obligations, responsibilities and liabilities
under ISRA in connection with the transactions contemplated hereby, as
specifically set forth below.
(b) ISRA CLEARANCE. Xxxx shall, as soon as practicable after the
Effective Date, make all filings and submissions required under ISRA, including
a General Information Notice in connection with the transactions contemplated
hereby (collectively, the "ISRA Filings"), and in good faith pursue ISRA
Clearance through a Remediation Agreement (a "Remediation Agreement"), a Letter
of Non-Applicability, Remediation in Progress Waiver, Expedited Review Approval,
a No Further Action/Covenant Not to Sue (an "NFA") or any other Authorization
Letter, as defined in N.J.A.C. 7:26B-1.4, issued by the New Jersey Department of
Environmental Protection ("NJDEP"), permitting the transactions contemplated
hereby to be consummated ("ISRA Clearance").
(c) REMEDIATION AGREEMENT. Xxxx shall, as soon as practicable,
seek to obtain ISRA Clearance via an Authorization Letter in respect of the
Facility. If the Parties shall reasonably determine that, without a Remediation
Agreement, it is unlikely that ISRA Clearance will be obtained to permit the
Closing to occur within forty-five (45) days of the Effective Date, then the
Parties shall execute a Remediation Agreement, pursuant to which neither VGS nor
the Kali Shareholders shall have any future monetary obligation; PROVIDED,
HOWEVER, that if the related Preliminary Assessment Report shall reasonably
estimate the costs in respect of such remediation to exceed $700,000 (including
the use of Controls), then PRI shall not be obligated to execute the Remediation
Agreement.
(d) COST OF ISRA CLEARANCE. PRI shall be solely responsible for
all costs and expenses required to obtain ISRA Clearance and all investigatory
and/or remediation costs, if any, relative to ISRA Clearance, including any
liability for natural resource damages that (i) are claimed by any Person during
such time following the Closing that Kali shall be the operator and/or owner of
the Facility or (ii) that are caused by PRI; provided, HOWEVER, that $6,000,
which amount is the full amount that has been incurred by Xxxx relative to ISRA
Clearance prior to the Effective Date, shall remain subject to Section 2.2(d)(v)
46
hereof. If, in the course of obtaining ISRA Clearance, environmental
investigations and/or remediation shall be required pursuant to applicable
Environmental Laws, PRI shall, at its sole cost and expense, diligently pursue
final environmental approvals for such investigations and/ or remediation
requirements, as applicable, including NJDEP's issuance of an NFA, subject to
the provisions of Section 6.13(g) hereof. With respect to any NFA issued in
connection with obtaining ISRA Clearance, PRI shall execute a covenant not to
sue.
(e) INDEMNITY. Notwithstanding the foregoing provisions of this
Section 6.13, the Kali Shareholders shall, jointly and severally, defend,
indemnify and hold harmless Kali, PRI and their respective directors, officers,
shareholders, agents, Affiliates, successors and permitted assigns, from and
against, and shall pay and reimburse the foregoing Persons for, any and all
Losses related to or resulting from Xxxx's failure to comply with, or any
violations by Xxxx of the requirements of, ISRA that may arise as a result of a
cessation of business or activity by Xxxx at a property other than the Facility
prior to the Effective Date; PROVIDED, HOWEVER, that the aggregate dollar amount
of the Kali Shareholders' indemnification obligation provided in this Section
6.13(e) shall not exceed fifty (50%) percent of any fines or other monetary
obligations imposed under Law or by any Governmental Authority as a result of
such failure or violation.
(f) STATUS AND ACCESS. PRI shall keep the Kali Shareholders fully
apprised of the status of any post-Closing investigation and/or remediation
actions undertaken at the Facilities, shall provide the Kali Shareholders with a
reasonable opportunity to review and comment on and consent to (which consent
shall not be unreasonably withheld, conditioned or delayed) reports and other
documents related to such actions prior to their submission to any Governmental
Authority or Person, and shall provide the Kali Shareholders with advance notice
of any meetings with Governmental Authorities regarding such actions, as to
which meetings the Kali Shareholders or their representatives shall have the
right to attend.
(g) INSTITUTIONAL CONTROLS/ENGINEERING CONTROLS. PRI shall not
propose to any Governmental Authority, or implement, any institutional control,
engineering control, or the like, including a Classification Exception Area
and/or Deed Notice (collectively, "Controls") without the express written
consent of the Kali Shareholders; PROVIDED, however, that, if the Kali
Shareholders shall withhold such consent, then the Kali Shareholders shall be
solely responsible for any and all additional costs and expenses required to
obtain an NFA from NJDEP without the use of Controls. Notwithstanding the
foregoing, in no event may PRI propose a Control that materially and adversely
affects the use of the Facility for commercial purposes.
(h) EFFECT ON REPRESENTATIONS, WARRANTIES, ETC. Nothing in this
Section 6.13 shall in any way alter or otherwise diminish the application, or
effect, of any of the representations and warranties contained in Section 3.14
hereof or the indemnity provisions of Section 11.2(a) hereof.
6.14. EXCLUSIVE DEALINGS. From the Effective Date through the
earlier of (x) the Closing Date and (y) the Termination Date, Kali and the Kali
Shareholders shall not, and shall cause Kali's directors, officers, employees,
agents and Affiliates not to, directly or indirectly, solicit or initiate the
submission of proposals from, or solicit, encourage, entertain or enter into any
arrangement, agreement, letter of intent or understanding with, or engage in any
negotiations with, or furnish any information to, any Person (including
47
Perrigo), other than PRI or any representative(s) or agent(s) thereof, with
respect to the direct or indirect acquisition of all or any material portion of
the business, operations or assets (including any of the Leased Real Property)
of Kali or any of its (issued or unissued) capital stock. If Xxxx, the Kali
Shareholders or any of their respective Affiliates, during such period, receive
any offer or inquiry relating to any such acquisition, or obtain information
that such an offer or inquiry is likely to be made, it/he will provide PRI with
immediate written notice thereof.
6.15. COMMERCIALLY REASONABLE EFFORTS TO CLOSE. Each of the Parties
shall use commercially reasonable efforts to satisfy, or to cause to be
satisfied, all conditions to such Party's obligation to close the transactions
contemplated hereby that are reasonably within the control of such Party. If all
of the conditions to a Party's obligation to close hereunder shall have been
satisfied, such Party shall diligently proceed to close.
6.16. FURTHER ASSURANCES; PERRIGO CLAIM. From time to time before
and after the Closing Date, Xxxx and the Kali Shareholders, as applicable, shall
each execute and deliver all such documents and instruments, and do all such
acts, as PRI may reasonably request in order to convey to PRI the Kali Shares,
free and clear of all Liens, and otherwise carry out the intent of the Parties
under this Agreement. Xxxx and the Kali Shareholders hereby represent that they
have delivered to PRI true and complete copies of all written correspondence and
provided true and accurate summaries of all oral communications with Perrigo in
respect of its purported first refusal right, the Option Agreement and the
Xxxxxxx Xxxxx. The Kali Shareholders and Kali shall provide PRI, and PRI shall
provide the Kali Shareholders' Rep, with prompt notice of any written or oral
communications with Perrigo regarding any claims or other assertions made by
Perrigo against any of them or any of their respective Affiliates and shall not,
without the prior written consent of PRI on the one hand, or the Kali
Shareholders' Rep, on the other hand, make any communications, written or oral,
to Perrigo regarding any matter relating to this Agreement, the Option
Agreement, the Perrigo Offer or Xxxxxxx'x purported first refusal right. Kali
and the Kali Shareholders and PRI shall cooperate, as and to the extent
reasonably requested by the other Party(ies), in connection with any claim,
litigation or other proceeding asserted by any third parties (including Perrigo)
that seeks to enjoin, delay or to recover monetary damages in respect of the
transactions contemplated by this Agreement, and each Party shall be entitled to
participate in any meetings with Perrigo in respect of any such claim,
litigation or other proceeding. The Kali Shareholders shall cooperate in the
defense or prosecution of any such third-party claims, litigation or other
proceeding and in good faith retain and furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested by PRI in connection therewith, and
assist generally with the establishment of any and all reasonable defenses to
any such third-party claim, litigation or proceeding. Prior to the Closing, each
of the Parties, subject to the other provisions of this Section 6.16, shall use
commercially reasonable efforts to settle or otherwise resolve any claims made
(or that may be made) in connection with Xxxxxxx'x purported first refusal right
or the Perrigo Offer or to otherwise enter into a reasonable arrangement with
Perrigo in connection therewith prior to the Closing, including, without
limitation, meeting its respective obligations as set forth in that certain
letter agreement, dated as of the Effective Date, executed and delivered by the
Parties; PROVIDED, HOWEVER, that PRI shall control any and all attempts and
efforts to settle or otherwise address any such claims, subject to the right of
the Kali Shareholders' Rep to fully participate. No settlement in respect
thereof shall be entered into without the full participation and express written
48
consent of PRI. Each of PRI, Xxxx and the Kali Shareholders' Rep believes that,
based on the facts and circumstances, including discussions with their legal
counsel, that the execution and delivery of this Agreement and the performance
of the Parties' obligations contemplated hereunder, will not violate Xxxxxxx'x
purported right of first refusal.
6.17. SUPPLEMENTAL DISCLOSURE. Each of the Parties hereby agrees
that, with respect to their respective representations and warranties contained
in this Agreement, each such Party shall have a continuing obligation to
promptly provide detailed disclosure to the other Parties with respect to any
matter hereafter arising or discovered that, if existing or known as of the
Effective Date, would have been required to be set forth on or described in the
schedules hereto; PROVIDED, HOWEVER, that none of such disclosure shall be
deemed to modify, amend or supplement any of the representations and warranties
of the disclosing Party or any of the schedules hereto as of the time such
representations and warranties were initially made, unless the Party to whom
such disclosure(s) are made shall have consented thereto in writing; and
PROVIDED, FURTHER, that such disclosure shall not, under any circumstances, be
permitted to cure any breaches existing at the time that such representations or
warranties were initially made.
6.18. LEASES. (a) The Kali Shareholders shall cause VGS to, and VGS
shall, enter into a lease agreement with PRI or Kali in respect of the Facility
(including the proposed additional terms thereto), in the form attached hereto
as Exhibit C, at the Closing, which lease shall be for a term of at least two
years and contain an immediately exercisable, irrevocable option for PRI to
purchase such Facility.
(b) Immediately prior to Closing, VGS and Kali shall terminate
that certain lease with respect to property located in Piscataway, New Jersey,
without further liability to Kali.
6.19. VGS LOAN. At the Closing, VGS shall execute and deliver the
VGS Note (which shall include the principal amount of the Post-Effective Date
VGS Loan) to PRI on behalf of Xxxx (which may be assigned to PRI) and execute
and deliver to the holder of the VGS Note a mortgage on the Facility to secure
the obligations under such Note.
6.20. CONDUCT OF KALI BUSINESS POST-CLOSING. PRI shall, during the
period after the Closing Date through the Subramanian Termination Date (or if
Xx. Xxxxxxxxxxx'x employment shall be terminated pursuant to Section 3.2.1,
3.2.2, 3.2.4 or 3.2.5 of the Subramanian Employment Agreement, through the date
that is thirty (30) months from the Closing Date), use commercially reasonable
efforts to conduct the business of Kali in a manner consistent with the manner
in which Xxxx conducted the Kali Business immediately prior to the Closing and
to use commercially reasonable efforts to (i) prevent the occurrence of any
Business Interruption Event, (ii) conduct Biostudies with respect to products
and proposed products as to which the conduct of Biostudies is reasonable under
the circumstances (it being hereby acknowledged by the Parties that the
continued (or non-continuance of) employment of Xx. Xxxxxxxxxxx is a relevant
factor in determining what shall be reasonable) and (iii) file with or submit to
the FDA ANDAs with respect to any products and proposed products as to which
such filing or submissions are reasonable under the circumstances; PROVIDED,
that in no event shall PRI be deemed to have breached this Section 6.20 if (and
to the extent) its actions or failure to act resulted from any act or omission
49
of Xx. Xxxxxxxxxxx. Xx. Xxxxxxxxxxx shall reasonably cooperate with PRI to
facilitate PRI's compliance with this Section 6.20.
7. CERTAIN TAX MATTERS.
-------------------
7.1 TAX INDEMNIFICATION. The Kali Shareholders hereby, jointly and
severally, agree to defend, indemnify and hold harmless Xxxx, PRI and their
respective directors, officers, shareholders, agents, Affiliates, successors and
permitted assigns, from and against, and shall pay and reimburse the foregoing
Persons for, any and all losses, liabilities, claims, obligations, penalties,
damages, costs and expenses (including all attorneys' fees and disbursements and
other costs reasonably incurred or sustained by an Indemnitee (as defined in
Section 11.3 hereof) in connection with the investigation, defense or
prosecution of any such claim or any action or proceeding between the Indemnitee
and the Indemnifying Party (as defined in Section 11.3 hereof) or between the
Indemnitee and any third party or otherwise), whether or not involving a
third-party claim (collectively, "Losses"), relating to or arising out of (i)
all Taxes of Kali due for all taxable periods ending on or prior to the Closing
Date and the portion of the taxable period through the end of the Closing Date
for any taxable period that includes (but does not end on) the Closing Date (the
"Pre-Closing Tax Period"); (ii) all Taxes of any member of an affiliated,
consolidated, combined or unitary group of which Kali (or any predecessor) is or
was a member on or prior to the Closing Date, including pursuant to Treasury
Regulation Section 1.1502-6 or any analogous or similar Law; and (iii) all Taxes
of any Person (other than Xxxx) imposed on Xxxx as a transferee or successor, by
contract or pursuant to Law. The Kali Shareholders shall, jointly and severally,
reimburse PRI for any Taxes of Kali that are the responsibility of the Kali
Shareholders pursuant to this Section 7.1 within fifteen (15) days after payment
of such Taxes by PRI or Kali.
7.2 STRADDLE PERIOD. In the case of any taxable period that
includes, but does not end on, the Closing Date (a "Straddle Period"), the
amount of any Taxes based on or measured by income or receipts of Kali,
including sales and use Taxes for the Pre-Closing Tax Period, shall be
determined based on an interim closing of the books as of the close of business
on the Closing Date and the amount of other Taxes of Xxxx, including real estate
Taxes, for a Straddle Period that relate to the Pre-Closing Tax Period shall be
deemed to be the amount of such Tax for the entire Straddle Period multiplied by
a fraction, the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the total number of
days in such Straddle Period.
7.3 SECTION 338(H)(10) ELECTION. Each of the Kali Shareholders
will join with PRI in taking or causing to be taken, and shall take or cause to
be taken, all actions necessary and appropriate to effect a timely and proper
election under Code Section 338(h)(10) and the Treasury Regulations promulgated
thereunder (and any corresponding election under state, local and foreign Tax
Laws) with respect to the purchase and sale of the Kali Shares hereunder (the
"Section 338(h)(10) Election"). In particular, and without limitation, each Kali
Shareholder will execute and deliver to PRI a Form 8023, countersigned by a duly
authorized officer of PRI (and any similar form required under state, local and
foreign Tax laws) on or prior to the Closing with respect to Xxxx in order to
make the Section 338(h)(10) Election, which Form 8023 will be filed by PRI
promptly after the Closing. The Kali Shareholders and Kali shall include all
income, gain, loss, deduction or other Tax item(s) resulting from the Section
338(h)(10) Election on their respective Tax Returns to the extent required by
50
applicable Law and in accordance with the allocations of Purchase Price as
determined pursuant to Section 7.4 hereof. Subject to reimbursement pursuant to
Section 2.5 hereof, the Kali Shareholders shall also pay any Tax imposed on Kali
attributable to the making of the Section 338(h)(10) Election, including (a) any
Tax imposed under Code Section 1374 and (b) any state, local or foreign Tax
imposed on Kali's income or gains, and the Kali Shareholders shall indemnify PRI
and Kali against, and pay or reimburse them for, all Losses arising out of any
failure timely to pay any such Taxes. Notwithstanding anything to the contrary
contained in the immediately preceding sentence, PRI shall pay, in accordance
with Section 2.5 hereof, to the Kali Shareholders' Rep (a) the New Jersey
Corporate Tax Reimbursement so as to enable the Kali Shareholders to pay on
behalf of Kali the amount of any New Jersey Business Corporation Tax imposed
upon Xxxx resulting from the deemed sales of its assets upon the making of the
Section 338(h)(10) Election, (b) the Transfer Tax Reimbursement, so as to enable
the Kali Shareholders to pay either on behalf of Xxxx, or on their own
collective behalf, the amount of such Taxes as are covered by such Reimbursement
and (c) the amount of the Second Level Gross-Up as that is attributable to the
New Jersey Corporate Tax Reimbursement and the Transfer Tax Reimbursement,
subject, however, to the right (as set forth in Section 2.5 hereof) of PRI to
pay the amounts described in clauses (a), (b) and (c) by offsetting against such
amounts when otherwise due an equivalent amount of the then outstanding
principal amount of and/or accrued interest the VGS Note.
7.4. ALLOCATIONS OF PURCHASE PRICE. The Parties hereby agree that
the Purchase Price shall be allocated first among the assets of Kali as follows:
(i) first, to equipment in an amount equal to $2,650,000, (ii) second, in an
amount equal to, and in accordance with, the tax adjusted bases (determined as
of the Closing Date) of Kali's remaining tangible assets and (iii) third, the
balance of the Purchase Price shall be treated as having been paid and shall be
allocated to assets that qualify as "amortizable section 197 intangibles,"
including "goodwill" and "going concern value," under Code Section 197 and that
are treated as capital assets under Code Section 1221; it being intended by the
Parties that, subject to confirmation with the independent certified public
accountant of PRI, the allocation of the Purchase Price among the respective
assets of Kali, as set forth in this Section 7.4, shall reflect the current fair
market values of Xxxx's assets as of the Closing Date. The Gross-Up and the
Second Level Gross-Up, as calculated under Section 2.5 hereof with respect to
Xxxx, shall be allocated to such assets of Xxxx as qualify as "amortizable
section 197 intangibles," including "goodwill" and "going concern value," under
Code Section 197 and that are treated as capital assets under Code Section 1221.
At such time as the Closing Certificate shall become final in accordance with
Section 2.4(c) hereof, the independent certified public accountant of PRI shall
provide to PRI and Kali a completed IRS Form 8883 (the "Asset Allocation
Statement Under Section 338"), reflecting the allocation of the Purchase Price,
including the Gross-Up and the Second Level Gross-Up, among the various Classes
of Assets (as set forth in such Form 8883) of Kali in accordance with the
principles set forth in this Section 7.4. In addition to receiving its own Form
8883 from the independent public accountant of PRI, Kali shall receive from such
accountant copies of the Form 8883 to be filed by PRI, and PRI shall receive
from such accountant copies of the Form 8883 to be filed by Xxxx. The allocation
of the Purchase Price among the assets of Xxxx, as set forth in the Form 8883
prepared by such accountant, shall be binding on the Parties hereto, and the
Parties shall not take a position inconsistent therewith for income tax
purposes. For purposes of determining the "aggregate deemed sales price" and
"adjusted grossed-up basis" for purposes of Code Section 338 and the Treasury
Regulations, the Purchase Price allocated to, and treated as the consideration
51
paid under, this Section 7.4 for the Kali Shares shall be grossed up to include
the respective Liabilities (as determined under Federal income tax principles)
of Xxxx as of the Closing Date; however, for purposes of allocation of Purchase
Price, the value of the Warrants shall be zero. PRI shall attach such Form 8883
to a timely-filed consolidated Federal income Tax Return (and, where applicable,
its state and local income tax returns) for its taxable year in which the sale
occurs, and Kali shall attach its respective Form 8883 to its respective timely
filed final Federal income tax return (I.E., IRS Forms 1120-S) and, where
applicable, its state and local income tax returns, for its taxable year ending
on the Closing Date. Any adjustments to the Purchase Price required hereunder,
including any adjustments under Sections 2.2(d) and 2.4 hereof with respect to
the Reduction Amount, shall be applied, on a "dollar-for-dollar" basis, to
decrease the amount of the Purchase Price allocated to and treated as paid for
Xxxx's "amortizable section 197 intangibles" that constitute capital assets as
described above. Any Initial ANDA Payment, Second ANDA payment or Market Price
Payment(s) shall be allocated to and treated as paid for Xxxx's "amortizable
section 197 intangibles" that constitute capital assets as described above,
except to the extent that any such Payments are required to be treated as
imputed interest under the Code, includible in the income of the Kali
Shareholders as interest income and deductible by PRI as interest expense in
accordance with the Code. If and to the extent that any amount allocated to any
asset is increased or decreased after the taxable year in which the sale occurs,
any affected Party shall file a supplemental Form 8883 to report such change in
accordance with the Treasury Regulations under Code Section 338 and the
instructions to such Form and shall attach such supplemental Form 8883 to a
timely filed Federal income tax return (and, where applicable, state and local
income tax returns) for which the increase or decrease is taken into account.
Prior to filing any such supplemental Form 8883, each Party shall provide the
other Parties hereto with a draft of such Form 8883 for their review and, upon
the filing of such supplemental Form 8883, each Party shall provide the other
Parties hereto with a copy of such Form, as filed.
7.5 S CORPORATION STATUS. Xxxx and the Kali Shareholders shall not
revoke Kali's election to be taxed as an S corporation within the meaning of
Code Sections 1361 and 1362. Kali and the Kali Shareholders shall not take or
allow any action to be taken (or fail to take any action) that would result in
the termination of Kali's status as a validly electing S corporation within the
meaning of Code Sections 1361 and 1362.
7.6 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. PRI shall
prepare or cause to be prepared and file all Straddle Period Tax Returns. PRI
shall obtain the prior written consent of the Kali Shareholders' Rep (which
consent shall not be unreasonably withheld or delayed) to each such Tax Return
described in the immediately preceding sentence prior to its filing.
7.7 COOPERATION ON TAX MATTERS.
---------------------------
(a) PRI, Xxxx and the Kali Shareholders shall cooperate fully, as
and to the extent requested by any other Party, in connection with the filing of
Tax Returns pursuant to this Section 7 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other Party's request) the provision of records and information
that are reasonably relevant to any such audit, litigation or other proceeding
and making employees or representatives available on a mutually convenient basis
to provide additional information and explanation of any materials provided
52
hereunder. PRI (after the Closing) agrees to (i) retain all books and records
with respect to Tax matters pertinent to Xxxx relating to any taxable period
beginning before the Closing Date until the expiration of the applicable statute
of limitations of the respective taxable periods and comply with all record
retention agreements entered into with any Taxing Authority and (ii) give the
Kali Shareholders' Rep reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the Kali
Shareholders' Rep so requests in writing, PRI or Kali shall allow the Kali
Shareholders' Rep to take possession of such books and records.
(b) PRI and the Kali Shareholders further agree, upon request of
the other Party(ies), to use their reasonable best efforts to obtain any
certificate or other document from any Governmental Authority or Person as may
be reasonably necessary to mitigate, reduce, defer or eliminate any Tax that
could otherwise be imposed (including with respect to the transactions
contemplated hereby).
7.8 CERTAIN TAXES. Subject to Section 2.5 hereof, all transfer,
documentary, real property transfer, sales, stamp, registration and similar
Taxes and fees (including any penalties and interest) incurred in connection
with this Agreement shall be paid by the Kali Shareholders when due, and the
Kali Shareholders will, at their own expense, timely prepare and file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other similar Taxes and fees.
If required by applicable Law, PRI will, and will cause its Affiliates to, join
in the execution of any such Tax Returns and other documentation.
8. CONDITIONS TO OBLIGATION OF PRI TO CLOSE. The obligation of
PRI to consummate the transactions under this Agreement is subject to the
satisfaction of each of the following conditions on or prior to the Closing
Date, any one or more of which (other than Sections 8.7 and 8.8 hereof) may be
waived in writing by PRI, in its sole discretion:
8.1 AGREEMENTS AND CONDITIONS. Kali and the Kali Shareholders
shall have complied with and performed in all material respects all agreements,
covenants and conditions on their parts to be complied with and performed in
connection with this Agreement on or before the Closing Date.
8.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Kali and the Kali Shareholders contained in this Agreement shall
be true and correct in all material respects, other than such representations
and warranties that contain materiality or knowledge standards of
qualifications, which representations and warranties shall be true and complete
in all respects and without regard to knowledge, on and as of the Closing Date,
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date.
8.3 NO LEGAL PROCEEDINGS. No suit, action or proceeding by or
before any Governmental Authority shall have been instituted or overtly
threatened to restrain or prohibit the transactions contemplated hereby and, as
of the Closing Date, there shall be no action by or before any Governmental
Authority or any suit, action or proceeding pending or threatened against or
53
affecting Xxxx that involves a demand for any judgment or Liability, whether or
not covered by insurance, that could reasonably be expected to have a Material
Adverse Effect; PROVIDED, that the Parties hereby acknowledge and agree that
those three (3) actual or threatened Paragraph IV Litigations set forth on
SCHEDULE 3.15 hereto shall be deemed to not be reasonably expected to have a
Material Adverse Effect.
8.4 KALI SHAREHOLDERS' AND OFFICERS' CERTIFICATE. PRI shall have
received a certificate, dated the Closing Date, executed by each of the Kali
Shareholders and an authorized executive officer of Xxxx to the effect that the
conditions set forth in Sections 8.1, 8.2 and 8.3 hereof shall have been
satisfied.
8.5 PERRIGO RESOLUTION. Following the performance of PRI's
obligations under Section 6.16 hereof, PRI shall be reasonably satisfied that
there is no significant risk of any material Liability to it, at or following
the Closing, relating to Xxxxxxx'x purported first refusal right or the Perrigo
Offer, which satisfaction may include a waiver or release by Perrigo, or any
appropriate declaratory or other judgment or order in respect thereof.
8.6 DEATH OR DISABILITY OF XX. XXXXXXXXXXX. Xx. Xxxxxxxxxxx shall
not have died or become permanently mentally or physically disabled.
8.7 ISRA CLEARANCE. Xxxx shall have delivered to PRI satisfactory
evidence that it has obtained ISRA Clearance.
8.8 GOVERNMENTAL APPROVALS. Any applicable waiting period required
in respect of the transactions contemplated hereby under the HSR Act shall have
expired or been terminated without adverse action by any Governmental Authority
with respect thereto; and no injunction or decree prohibiting or materially
restricting or delaying the consummation of the transactions contemplated hereby
shall have been issued by any Governmental Authority and remain in force.
8.9 SECRETARY'S CERTIFICATE. PRI shall have received a
certificate, dated the Closing Date, executed by the Secretary of Xxxx,
certifying the incumbency and signature of each officer of Xxxx, authorized to
act on behalf of Xxxx, in connection with the transactions contemplated hereby
and attaching and certifying as true and complete copies of the Kali
Organizational Documents, each as may have been amended up through the Closing
Date.
8.10. CERTIFICATE OF STATUS. PRI shall have received a certificate
from the Secretary of State of the State of New Jersey stating that Xxxx has
filed its most recent annual report, has not filed a certificate of dissolution
or withdrawal and is in good standing in such jurisdiction
8.11. CLOSING DELIVERIES. PRI shall have received, at or prior to
the Closing, all such agreements, instruments and certificates required pursuant
to Sections 2.1 and 2.3(c) hereof.
8.12. IP RELEASES; EMPLOYMENT REAFFIRMATIONS. PRI shall have
received the IP Releases and Employment Reaffirmations, duly executed by the
parties thereto.
54
9. CONDITIONS TO OBLIGATIONS OF KALI AND THE KALI SHAREHOLDERS TO
CLOSE. The obligations of Xxxx and the Kali Shareholders to consummate the
transactions under this Agreement are subject to the satisfaction of each of the
following conditions on or prior to the Closing Date, any one or more of which
(other than Section 9.5 hereof) may be waived in writing by the Kali
Shareholders' Rep, in his sole discretion:
9.1 AGREEMENTS AND CONDITIONS. PRI shall have complied with and
performed in all material respects all agreements, covenants and conditions on
its part to be complied with and performed in connection with this Agreement on
or before the Closing Date.
9.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of PRI contained in this Agreement shall be true and complete in all
material respects, other than such representations and warranties that contain
materiality or knowledge standards of qualifications, which representations and
warranties shall be true and correct in all respects and without regard to
knowledge, on and as of the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date.
9.3 NO LEGAL PROCEEDINGS. No suit, action or proceeding by or
before any Governmental Authority shall have been instituted or overtly
threatened to restrain or prohibit the transactions contemplated hereby;
PROVIDED, that Xxxx and the Kali Shareholders may not invoke this condition,
and, in the absence of any other such suit, action or proceeding, such condition
shall be deemed to be satisfied notwithstanding that Perrigo shall have
instituted or threatened a suit involving the Option Agreement and its purported
right of first refusal so long as PRI shall be performing its obligations under
Section 6.16 hereof.
9.4 OFFICER'S CERTIFICATE. The Kali Shareholders shall have
received a certificate, dated the Closing Date, executed by an authorized
executive officer of PRI to the effect that the conditions set forth in Sections
9.1, 9.2 and 9.3 hereof shall have been satisfied.
9.5 GOVERNMENTAL APPROVALS. Any applicable waiting period required
in respect of the transactions contemplated hereby under the HSR Act shall have
expired or been terminated without adverse action by any Governmental Authority
with respect thereto; and no injunction or decree prohibiting or materially
restricting the consummation of the transactions contemplated hereby shall have
been issued by any Governmental Authority and remain in force.
9.6 CLOSING DELIVERIES. The Kali Shareholders shall have received,
at or prior to the Closing, the Cash Purchase Price, the Warrant Agreement and
the other agreements and instruments required pursuant to Section 2.3(b) hereof.
10. TERMINATION.
10.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date (the "Termination Date") only as follows:
(a) by mutual written agreement of PRI and the Kali Shareholders'
Rep;
55
(b) by PRI (i) upon a breach of any representation, warranty,
covenant or agreement of Kali or the Kali Shareholders set forth in this
Agreement such that either (or both) of the conditions set forth in Sections 8.1
or 8.2 hereof would not be satisfied; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 10.1(b)(i) shall be available
to PRI only after Kali shall have received written notice of such breach and a
reasonable opportunity (of not less than twenty (20) Business Days) to cure (to
the extent curable) the same or (ii) subject to Section 10.3(a)(iii) hereof, not
earlier than April 30, 2004, upon not less than five (5) Business Days' prior
written notice to Xxxx that PRI believes that the condition to its obligation to
close set forth in Section 8.5 hereof may not be satisfied;
(c) by the Kali Shareholders' Rep upon a breach of any
representation, warranty, covenant or agreement of PRI set forth in this
Agreement such that either (or both) of the conditions set forth in Sections 9.1
or 9.2 hereof would not be satisfied; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 10.1(c) shall be available to
the Kali Shareholders' Rep only after PRI shall have received written notice of
such breach and a reasonable opportunity (of not less than twenty (20) Business
Days) to cure (to the extent curable) the same; or
(d) by the Kali Shareholders' Rep or PRI, at any time after July
31, 2004, if the Closing shall not have occurred on or before July 31, 2004;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to this
Section 10.1(d) shall not be available to PRI, in the case of a breach of this
Agreement by PRI, or to Kali, in the case of a breach of this Agreement by Xxxx,
where such breach has been a principal cause of, or resulted in, the failure of
the Closing to occur by such date.
10.2. EFFECT OF TERMINATION. In the event that this Agreement is
terminated pursuant to the provisions of Section 10.1 hereof, this Agreement
shall forthwith become void and of no force and effect and there shall be no
liability or obligation on the part of the Parties hereto (or any of their
respective officers, directors, employees, agents or Affiliates), except that
(x) the provisions of this Section 10.2, the provisions of Sections 6.6, 10.3,
11 and 12 hereof shall continue to apply following any such termination and (y)
subject to Section 10.3 hereof, nothing contained herein shall relieve any Party
from liability for the breach of any of his/its representations, warranties,
covenants or agreements contained in this Agreement prior to such termination;
provided, that the maximum liability of Kali and the Kali Shareholders for a
termination by PRI pursuant to Section 10.1(b)(i) hereof shall be $750,000 and
the maximum liability of PRI for a termination by the Kali Shareholders' Rep
pursuant to Section 10.1(c) hereof shall be $750,000.
10.3. LIQUIDATED DAMAGES AND EXPENSES.
-------------------------------
(a) LIQUIDATED DAMAGES AND PERCENTAGE AMOUNT.
----------------------------------------
(i) In the event that PRI shall determine not to continue with
the transactions contemplated hereby or shall terminate this Agreement or
otherwise to terminate negotiations, other than as expressly permitted by (and
in accordance with) Section 10.1 hereof, PRI shall be required to pay to Kali in
accordance with Section 10.3(b) hereof the sum of $15,000,000, which amount
shall be paid, at PRI's option, by delivering to Kali $15,000,000 in cash or by
(x) delivering to Kali $5,000,000 in cash and (y) immediately forgiving the PRI
56
Loan in whole, in each case as liquidated damages and the sole remedy, either of
which amount PRI, Xxxx and the Kali Shareholders hereby acknowledge is
reasonable and shall not constitute a penalty. Such amount shall not, except as
provided in this Section 10.3(a)(i), be subject to offset or reduction by PRI.
(ii) In the event that Kali or any of the Kali Shareholders
shall determine not to continue with the transactions contemplated hereby or
shall terminate this Agreement or otherwise to terminate negotiations, other
than as expressly permitted by (and in accordance with) Section 10.1 hereof,
Kali and the Kali Shareholders shall, jointly and severally, be required to pay
to PRI in accordance with Section 10.3(b) hereof the sum of $4,000,000 in cash,
as liquidated damages and, subject to subsection (iv) below, the sole remedy,
which amount PRI, Xxxx and the Kali Shareholders hereby acknowledge is
reasonable and shall not constitute a penalty. Such amount shall not be subject
to offset or reduction by Kali or the Kali Shareholders.
(iii) In the event that PRI shall terminate this Agreement
pursuant to Section 10.1(b)(ii) hereof, subject to its compliance with Section
6.16 hereof, PRI shall immediately (x) forgive $5,000,000 of the outstanding
principal of the PRI Loan and (y) extend the maturity date of the remaining
$5,000,000 principal amount of such Loan until five (5) years after the
effective date of such termination, with interest accruing but not payable until
maturity, and with a provision for the payment of such obligation by Xxxx in
cash or through its rendering of services to PRI as may be mutually and
reasonably agreed to by PRI and Xxxx. In addition, PRI shall, upon Xxxx's
written request, within two (2) months of such termination, loan to Kali up to
an additional $7,500,000, bearing interest at the same rate as the PRI Loan and
with a maturity date five (5) years from the date that such loan is made, with
interest accruing but not payable until maturity and with a provision for the
payment of such obligation by Xxxx in cash or through its rendering of services
to PRI as may be mutually and reasonably agreed to by PRI and Kali (the
"Additional Loan"). Notwithstanding the foregoing, if Kali or the Kali
Shareholders shall close a transaction of a type contemplated by subsection (iv)
below with Perrigo (or any of its Affiliates) within twelve (12) months of the
effective date of termination pursuant to this subsection (iii), then the unpaid
balance of each of the PRI Loan and any Additional Loan shall become due and
payable (including all accrued and unpaid interest thereon) in full immediately
upon such closing. PRI, Xxxx and the Kali Shareholders hereby acknowledge that
the forgiveness of $5,000,000 of the principal of the PRI Loan, the extension of
$5,000,000 of the principal of the PRI Loan and the making of the Additional
Loan are the sole remedy and are reasonable and shall not constitute a penalty.
Such amount shall not, except as provided in this Section 10.3(a)(iii), be
subject to offset or reduction by PRI.
(iv) If, within six (6) months following a termination
pursuant to Section 10.1(b)(i) hereof or within nine (9) months following a
termination pursuant to Section 10.3(a)(ii) hereof, Kali or the Kali
Shareholders shall enter into any agreement involving the sale (or series of
related sales) of Kali (whether through a sale of all or substantially all of
the assets or capital stock of Kali, including by a merger, consolidation or
otherwise) to or with a Person that is not an Affiliate or Associate of Kali or
any Kali Shareholder as of the Effective Date, then, subject to Section 11.7
hereof, Xxxx and the Kali Shareholders shall, upon the consummation of such
transaction, jointly and severally, be required to pay to PRI in accordance with
57
Section 10.3(b) hereof, in cash, the sum equal to 100% of the amount by which,
if any, the aggregate consideration amount received by Xxxx and the Kali
Shareholders (and their Affiliates and Associates) in connection with such
transaction (subject to subsequent modification to reflect any purchase price
adjustments and indemnification payments or any other provision that reduces the
consideration retained by Kali or the Kali Shareholders without any offsetting
benefit to them) exceeds the Cash Purchase Price (the "Percentage Amount"),
less, in respect of a termination pursuant to Section 10.3(a)(ii) hereof,
$4,000,000 (if, but only if, the Percentage Amount shall exceed $4,000,000). The
Kali Shareholders and Kali shall, in any definitive agreement setting forth the
terms of a transaction that would give rise to the payment of a Percentage
Amount, negotiate and provide for terms so that the Person acquiring Kali shall
be required to pay the Percentage Amount if the Kali Shareholders breach their
obligations pursuant to this Section 10.3(b)(iv) or Section 10.3(b) hereof.
(v) Upon the payment of a liquidated damages amount (and, if
applicable, the Percentage Amount) due under this Section 10.3(a) hereof, all
indemnification obligations of such payor under Section 11 hereof shall
immediately terminate.
(b) PAYMENT. Any liquidated damage payments required to be made
pursuant to Sections 10.3(a) or 6.5 hereof shall be made as promptly as
practicable, but not later than ten (10) Business Days after the event giving
rise to the applicable liquidated damages. The Percentage Amount, if applicable,
shall be paid on the closing date of any transaction(s) giving rise to the
payment of the Percentage Amount. The liquidated damages and, if applicable, the
Percentage Amount, shall be paid by wire transfer of immediately available funds
to an account designated by the Party(ies) to which it is owed (the "Payee").
The Percentage Amount shall be paid in cash, and if there shall be non-cash
consideration paid in any transaction giving rise to the obligation to pay the
Percentage Amount, then such consideration shall be calculated at its fair
value.
(c) COLLECTION EXPENSES AND INTEREST. In the event that the Kali
Shareholders or PRI, as the case may be (the "Payor") shall fail to pay the
applicable liquidated damages or the Percentage Amount (if applicable) when due
in accordance with Section 10.3(b) hereof, then the Payor shall additionally pay
all costs and expenses actually incurred by the Payee and its Affiliates
(including fees and expenses of legal counsel) in connection with the collection
of such liquidated damages and the Percentage Amount (if applicable), and shall
pay interest on such unpaid liquidated damages and the Percentage Amount (if
applicable), commencing on the date that such damages or Amount became due until
payment in full thereof, at a rate equal to the rate of interest publicly
announced by the Chase Manhattan Bank, from time to time, in New York City, at
such Bank's base rate plus two (2%) percent.
11. SURVIVAL; INDEMNIFICATION.
-------------------------
11.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Notwithstanding any right of PRI to investigate the business and condition of
Xxxx, PRI shall be entitled to rely upon the representations, warranties,
covenants and agreements of Kali and the Kali Shareholders. All representations
and warranties contained in this Agreement (including the Schedules hereto) and
in all certificates (including the Estimated Closing Certificate) required
hereby to be delivered shall be deemed to be representations and warranties
hereunder and shall survive the Closing (or, if no Closing, the Effective Date)
58
for a period ending nineteen (19) months from the Closing Date, except that the
representations and warranties contained in (i) Sections 3.13 (Tax Matters) and
Section 4.7 (Eligible S Corporation Shareholder) hereof shall survive until
thirty (30) days after expiration of the applicable statute of limitations, (ii)
Section 3.14 (Environmental Matters) hereof shall survive until thirty (30)
months from the Closing Date and (iii) Sections 3.3 (Capitalization; Options;
Shareholder Rights), 4.1 (Authority to Execute and Perform Agreements;
Enforceability) and 4.2 (Title to Kali Shares) hereof shall survive the Closing
indefinitely. As of the respective expiration dates applicable thereto set forth
above, such representations and warranties shall expire and be of no further
force and effect, except that any representation or warranty that is the subject
of a claim or dispute that was properly asserted in writing in accordance with
this Section 11 prior to the applicable expiration date provided above shall
survive with respect to such claim or dispute until the final resolution
thereof. The covenants and agreements made by the Parties in this Agreement
shall survive the Closing Date, without limitation, unless otherwise provided in
such covenant or agreement; PROVIDED, HOWEVER, that the covenants and agreements
contained in Section 6.1 hereof shall survive the Closing for a period ending
nineteen (19) months from the Closing Date and the covenants and agreements set
forth in Sections 6.2, 6.8, 6.14, 6.15, 6.17 and 6.18 hereof shall terminate on
the Closing Date. Any limitation or qualification set forth in any one
representation and warranty contained in Sections 3, 4 and 5 hereof shall not
limit or qualify any other representation and warranty contained in such
Sections. Each representation and warranty included in Sections 3, 4 and 5 is
independent and shall be interpreted without regard to any other representation
or warranty contained in Sections 3, 4 and 5 (including any more inclusive
representation or warranty).
11.2. INDEMNIFICATION.
---------------
(a) KALI'S AND KALI SHAREHOLDERS' AGREEMENTS TO INDEMNIFY. Subject
to the other provisions of this Section 11, Xxxx (but only if there is not a
Closing) and the Kali Shareholders (but, subject to Sections 10.3(a)(ii) and
(iv) and 10.3(b) hereof, only if there is a Closing) shall, jointly and
severally, indemnify, defend and hold harmless PRI, its Affiliates (including
Kali if there is a Closing) and their respective directors, officers,
shareholders, agents, successors and permitted assigns from and against, and
shall pay and reimburse the foregoing Persons for, (x) any and all Losses
relating to or arising out of the breach (or alleged breach if asserted by a
third party) of (i) any representation or warranty of any such Party(ies)
contained in this Agreement or (ii) any covenant or agreement of any of such
Party(ies) contained in this Agreement and (y) fifty (50%) percent of any and
all Losses relating to Environmental Claims at the Facility attributable to the
time(s) prior to its occupancy by Xxxx (the "Pre-Occupancy Losses"); PROVIDED,
that, if the representations and warranties contained in Section 3.14 hereof
relating to Environmental Claims at the Facility attributable to the time(s)
prior to its occupancy by Kali are not correct in any material respect, one
hundred (100%) percent of any and all of the Pre-Occupancy Losses shall be
subject to indemnification; and PROVIDED, FURTHER, that one hundred (100%)
percent of all Losses, including the Pre-Occupancy Losses, shall be applied to
determine whether the Deductible (as defined hereafter) has been met. If the
aggregate of Losses for all indemnification claims would exceed the Deductible,
all Losses (other than the Pre-Occupancy Losses), on the one hand, and the
Pre-Occupancy Losses alone, on the other hand, shall be applied to the
Deductible on a PRO RATA basis, based on the amounts of such respective Losses.
59
(b) PRI'S GENERAL AGREEMENT TO INDEMNIFY. Subject to the other
provisions of this Section 11, PRI shall indemnify, defend and hold harmless
Kali (but only if there is not a Closing) and the Kali Shareholders
(irrespective of whether there is a Closing) and their respective directors,
officers, shareholders, agents, successors, heirs, legal beneficiaries and
permitted assigns from and against, and shall pay and reimburse the foregoing
Persons for, any and all Losses relating to or arising out of the breach (or
alleged breach if asserted by a third party) of (i) any representation or
warranty of PRI contained in this Agreement, (ii) any covenant or agreement of
PRI contained in this Agreement or (iii) subject to the correctness of the
representations and warranties of Xxxx and the Kali Shareholders contained
herein, the operation of the business of Kali after the Closing Date.
(c) PERRIGO MATTER. Prior to the Closing, subject to Sections 6.16
and 10.3(a)(v) hereof, PRI shall pay to or reimburse Kali and each Kali
Shareholder for all legal costs and expenses reasonably incurred by them, and
any settlement amounts effected by PRI, arising out of any claims or lawsuits
asserted by Perrigo relating to its purported first refusal right, the Perrigo
Offer or any purported violation thereof. If (but only if) the Closing shall
occur, PRI shall, subject to Section 6.16 hereof, indemnify, defend and hold
harmless the Kali Shareholders from and against, and pay and reimburse them for,
all Losses incurred by them in connection with any claims or lawsuits asserted
by Perrigo relating to its purported first refusal right, the Perrigo Offer or
any purported violation thereof.
(d) TAX TREATMENT OF CERTAIN PAYMENTS. Xxxx, the Kali Shareholders
and PRI agree to treat any payments made under this Section 11 and Sections 6.5,
6.13(e) and 7 hereof as adjustments to the Purchase Price for Federal, state and
local income tax purposes.
11.3. PROCEDURES FOR INDEMNIFICATION.
------------------------------
(a) If any Party(ies) (the "Indemnitee") shall receive notice of a
claim or the commencement of any action or proceeding with respect to which the
other Party(ies) is obligated to provide indemnification (the "Indemnifying
Party") pursuant to Sections 11.2(a), 11.2(b) or 11.2(c) hereof, the Indemnitee
shall give the Indemnifying Party written notice thereof within a reasonable
period of time following the Indemnitee's receipt of such notice. Such notice
shall describe the claim in reasonable detail and shall indicate the amount
(estimated, if appropriate) of the Losses that have been or may be sustained by
the Indemnitee. The failure to so provide such notice shall not affect the
Indemnifying Party's obligations hereunder, unless such Party is materially
prejudiced as a result thereof. The Indemnifying Party may, subject to the other
provisions of this Section 11.3, settle, compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
any such matter involving the asserted liability of the Indemnitee in respect of
a third-party claim. If the Indemnifying Party shall elect to settle, compromise
or defend such asserted liability, it shall, within thirty (30) days (or sooner,
if the nature of the asserted liability so requires), notify the Indemnitee of
its intention to do so and the Indemnitee shall reasonably cooperate, at the
request and reasonable expense of the Indemnifying Party, in the compromise or
settlement of, or defense against, such asserted liability. In respect of any
Environmental Claims, the Indemnifying Party shall conduct and control any
investigation and remediation of such Environmental Claims subject to reasonable
consultation with and the participation of the Indemnitee; PROVIDED, HOWEVER,
that the Indemnitee shall have the right to reasonably approve the defense
counsel representing the Indemnifying Party in any Environmental Matter;
60
PROVIDED, FURTHER, that, if the Kali Shareholders' Rep shall (or PRI, if the
Kali Shareholders' Rep shall not) conduct or control the investigation and
remediation in response to an indemnifiable claim relating to any Environmental
Matter, such investigation and remediation shall be without prejudice to such
Party's rights to indemnification or contribution from third parties. The
Indemnifying Party shall not be released from any obligation to indemnify the
Indemnitee hereunder with respect to such asserted claim without the prior
written consent of the Indemnitee, unless the Indemnifying Party shall deliver
to the Indemnitee a duly executed agreement settling or compromising such claim
with no monetary liability to, or injunctive relief against, the Indemnitee and
a complete release of the Indemnitee with respect thereto, which agreement shall
not limit or impair the Indemnitee's ability to conduct its business. The
Indemnifying Party shall have the right, except as provided below in this
Section 11.3, to conduct and control the defense of any third-party claim or
action made for which it has been provided notice hereunder. All costs and fees
incurred with respect to any such claim shall be borne by the Indemnifying
Party. The Indemnitee shall have the right to participate in, but not control,
at its own expense, the defense, compromise or settlement of any such claim;
PROVIDED, HOWEVER, that if the Indemnitee and the Indemnifying Party shall have
conflicting or different claims or defenses, then the Indemnifying Party shall
not have control of such conflicting or different claims or defenses and the
Indemnitee shall be entitled to appoint a separate counsel (but only one (1)
counsel for such Indemnitee and any related Indemnitees) for such claims and
defenses, at the cost and expense of the Indemnifying Party; PROVIDED, FURTHER,
that if the Indemnifying Party shall not assume and pursue in a timely and
diligent manner the settlement or defense of any third-party claim, the
Indemnifying Party shall cede control of such claim and the Indemnitee shall be
entitled to appoint a counsel of its choice for such defense, at the sole cost
and expense of the Indemnifying Party. If the Indemnifying Party shall choose to
defend any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are reasonably
required for such defense. If one or more of the Kali Shareholders shall seek
indemnification hereunder, then such Indemnitee(s) shall, unless clearly
impracticable, consolidate any claims or matters relating to indemnification
into one proceeding, which, in accordance with Section 12.11(a) hereof, shall be
controlled by the Kali Shareholders' Rep.
11.4. LIMITATIONS.
-----------
(a) Notwithstanding any provision contained in this Section 11 to
the contrary, no Indemnitee shall be entitled to assert any claim for
indemnification in respect of breach(es) of representations, warranties,
covenants and agreements under Sections 11.2(a) or 11.2(b) hereof until such
time as all claims for indemnification hereunder (including those under Section
7 hereof) by such Person (and all related Indemnitees) shall exceed $4,000,000
(the "Deductible"), after which the amount of all claims in excess of the
Deductible (excluding the Deductible) shall be recoverable in full; PROVIDED,
HOWEVER, that the aggregate dollar amount of PRI's individual and the Kali
Shareholders' aggregate indemnification obligations hereunder shall not exceed
$32,500,000 (the "Claims Limitation"), except (i) if the Indemnifying Party
shall have made any representation or warranty contained herein that was
fraudulent or (ii) for breaches of Sections 3.3, 3.13(l), 4.2, 4.7, 6.4, 6.5,
6.9 and 6.10 hereof, in either of which case and subject to the terms of such
Sections, the Claims Limitation shall not apply and (in respect of clause (ii)
above) any Losses in connection therewith shall not be included or calculated in
determining whether the Claims Limitation has been exceeded. Notwithstanding any
of the foregoing, (A) the Deductible shall not apply to or cover (x) any
61
breach(es) of the representations and warranties contained in Sections 3.1
(other than the last two sentences thereof), 3.2, 3.3, 3.9(d) and (e), 3.13(l),
3.26, 3.27, 4.2, 4.7, 5.1, 5.5 or 5.6 hereof or in the Estimated Closing
Certificate or of the covenants and agreements contained in Sections 6.4, 6.5,
6.9, 6.10, 6.12, 6.16 and 6.19 hereof or (y) subject to Sections 10.2 and
10.3(a) hereof, any breach(es) of the representations, warranties, covenants or
agreements contained herein if the Closing does not occur and (B) the
Deductible, in respect of any breach(es) of Section 6.1 hereof, shall be deemed
to be $100,000.
(b) Notwithstanding anything set forth in this Agreement, except
(x) for the right to seek to specifically enforce the covenants contained in
Sections 6.4, 6.9, 6.10, 6.14 and 6.16 under this Agreement, (y) as specifically
provided in Sections 6.5, 6.13(e), 7 and 10 hereof and (z) for remedies that may
not be waived as a matter of law, the sole and exclusive remedy of the Parties
for breaches of the representations, warranties, covenants and agreements
contained in this Agreement (and any certificate delivered pursuant hereto), or
otherwise in connection with the transactions contemplated hereby, shall be
limited to the indemnification rights set forth in this Section 11.
11.5. RELATIONSHIP WITH CASH PURCHASE PRICE ADJUSTMENTS.
-------------------------------------------------
(a) Notwithstanding any payment that may be due to PRI under the
Cash Purchase Price adjustment provisions set forth in Sections 2.2(d) and 2.4
hereof, the indemnity provisions of Section 11.2(a) hereof shall remain in full
force and effect, without any modification or diminution thereof.
(b) Notwithstanding any payment that may be due to any Kali
Shareholder under the Gross-Up provisions set forth in Section 2.5 hereof, the
indemnity provisions of Sections 11.2(b) and 11.2(c) hereof shall remain in full
force and effect, without any modification or diminution thereof.
11.6. INDEMNIFICATION WAIVER. Effective upon the Closing, each of
the Kali Shareholders hereby irrevocably waives any and all rights to
indemnification or contribution from Xxxx, including any under the Kali
Organizational Documents, in his or her capacity as a director, employee or
officer of Xxxx, or as a trustee of any Kali Benefit Plan, to which he or she
would otherwise have been entitled for all periods through the Closing Date,
including in respect of the transactions contemplated hereby.
11.7. ORDER OF INDEMNIFICATION. PRI agrees that if the Kali
Shareholders are required to make any liquidated damage payments pursuant to
Section 6.5 hereof or make any indemnification payments pursuant to Sections 7
or 11.2(a) hereof, then such payments shall be sought first against Xx.
Xxxxxxxxxxx, then, only to the extent of any deficiency or failure to pay,
against Xx. Xxxxxxxxxxx and then, only to the extent of any deficiency or
failure to pay, against the IS Trust and/or the AS Trust, equally; PROVIDED,
HOWEVER, that with respect to Section 10.3 hereof, any payment of liquidated
damages (or the Percentage Amount) required thereunder shall be sought first
against Xxxx and then, only to the extent there is any deficiency or failure to
pay, the Kali Shareholders.
62
11.8. RESTRICTION ON TRANSFER. In order to secure any
indemnification obligations that they have hereunder, Xx. Xxxxxxxxxxx and Xx.
Xxxxxxxxxxx shall not, directly or indirectly, transfer more than $20,000,000 of
the aggregate Cash Purchase Price received by them to their children (or any
trust or similar vehicle formed for their benefit) or to any irrevocable trust
or similar vehicle during the nineteen- (19) month period following the Closing
Date.
12. MISCELLANEOUS.
--------------
12.1. FEES AND EXPENSES. Each of the Kali Shareholders (and not
Xxxx, other than as provided below) and PRI shall respectively pay all fees and
expenses incurred by him/it, or on his/its behalf, in connection with the
negotiation, execution and delivery of this Agreement (and the agreements
contemplated hereby) and the consummation of the transactions contemplated
hereby and thereby; PROVIDED, HOWEVER, that (i) Kali may pay the Kali
Transaction Costs, on behalf of the Kali Shareholders, up to the aggregate limit
set forth in Section 2.2(d)(v) hereof and (ii) Kali and PRI shall each bear
fifty (50%) percent of the filing fees required under the HSR Act and ISRA.
12.2. FURTHER ASSURANCES; COOPERATION. From time to time after the
Closing, at the request of a Party hereto and at the expense of the Party(ies)
so requesting, each Party agrees to execute and deliver to such requesting Party
such documents and take such other action as such requesting party may
reasonably request in order to consummate more effectively the transactions
contemplated hereby. The Kali Shareholders and PRI shall reasonably cooperate
with each other and provide each other with such assistance as reasonably may be
requested by either Party, including with respect to the prosecution and defense
of any third-party claims. The Party requesting assistance hereunder shall
reimburse the Party providing assistance for all reasonable out-of-pocket
expenses incurred by such Party in providing such assistance.
12.3. NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
sent by facsimile transmission or reputable overnight courier, or mailed
(certified or registered mail, return receipt requested):
IF TO PRI, TO:
-------------
Pharmaceutical Resources, Inc.
Xxx Xxx Xxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, General Counsel
Fax: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
X. Xxxx Xxxxxxx, Esq. Fax: (000) 000-0000
IF TO KALI OR THE KALI SHAREHOLDERS PRIOR TO THE CLOSING, to:
Kali Laboratories, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: President and Chief Executive Officer
Fax: (000) 000-0000
IF TO THE KALI SHAREHOLDERS AFTER THE CLOSING, to:
c/o Kali Laboratories, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxxxxxxxx, as the Kali Shareholders' Rep
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Reitler Brown LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxxxxx, Esq.
Fax: (000) 000-0000
or to such other Person or address as any Party shall specify by notice in
writing to the other Party(ies). All such notices, requests, demands, waivers
and other communications shall be deemed to have been received on the date on
which so hand-delivered or telecommunicated or delivered by overnight courier or
on the fifth Business Day following the date on which so mailed, except for a
notice of change of address (which shall be effected in accordance with this
Section 12.3), which shall be effective only upon receipt thereof.
12.4. ENTIRE AGREEMENT. This Agreement, the other agreements
contemplated hereby and the Schedules hereto and thereto contain the entire
understanding of the Parties hereto with respect to the subject matter thereof.
This Agreement supersedes all prior agreements and understandings, oral and
written, with respect to its subject matter.
12.5. SEVERABILITY. If any provision of this Agreement shall for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any of the other provisions of this Agreement,
64
which other provisions shall remain in full force and effect and be enforced to
the fullest extent permitted by applicable Law.
12.6. BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors (including any purchaser of all or
substantially all of the assets of a Party), heirs, legal beneficiaries and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned or delegated, directly or indirectly, by
any Party hereto without the prior written consent of the other Party(ies);
PROVIDED, HOWEVER, that PRI may assign and delegate this Agreement and any or
all of its rights, interests and obligations hereunder to an Affiliate thereof.
Upon any such permitted assignment, the references in this Agreement to the
assigning party shall also apply to any assignee unless the context otherwise
requires, but such assignment will neither relieve the assigning party of its
obligations hereunder nor reduce the economic benefit hereunder to the Party not
assigning this Agreement in the event that such assignee fails to perform such
obligations in accordance with the terms of this Agreement.
12.7. NO THIRD-PARTY BENEFICIARIES. This Agreement is not intended,
and shall not be deemed, to confer upon or afford any Person (including any past
or current employee of Xxxx), except the Parties hereto (and, with respect to
Section 11 hereof, any related Indemnitees) and their respective successors,
heirs, legal beneficiaries and permitted assigns, any remedy, claim, cause of
action or other right under or by reason of this Agreement.
12.8. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
12.9. GOVERNING LAW. This Agreement and any claim related directly
or indirectly to this Agreement shall be governed by and construed in accordance
with the Laws of the State of New York.
12.10. AMENDMENTS; WAIVERS. This Agreement may not be amended,
modified or supplemented except pursuant to an instrument in writing signed by
PRI and the Kali Shareholder's Rep. Any failure of Xxxx and the Kali
Shareholders to comply with any term or provision of this Agreement may be
waived by PRI at any time by an instrument in writing signed on behalf of PRI
and any failure of PRI to comply with any term or provision of this Agreement
may be waived by the Kali Shareholders' Rep at any time by an instrument in
writing signed by the Kali Shareholders' Rep. Any such waiver or failure to
insist upon strict compliance with such term or provision shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure to
comply.
12.11. APPOINTMENT AND DUTIES OF THE KALI SHAREHOLDERS' REP.
-----------------------------------------------------
(a) Each of the Kali Shareholders hereby irrevocably appoints Xx.
Xxxxxxxxxxx to act as the Kali Shareholders' Rep on its and her behalf hereunder
and under all other agreements and certificates contemplated by this Agreement
(other than the Form 8023 and the Certificates of Non-Foreign Status), and the
certificates required to be delivered pursuant to Sections 2.4(a) and 9.4 hereof
and to perform its and her obligations hereunder and thereunder. Each of the
65
Kali Shareholders hereby irrevocably authorizes the Kali Shareholders' Rep to
take such actions on its and her behalf and to exercise such powers as are
provided to the Kali Shareholders' Rep by the terms and provisions of this
Agreement (including Section 10 hereof), together with such actions and powers
as are reasonably incidental thereto. All matters of indemnification involving
any of the Kali Shareholders shall be solely controlled and conducted by the
Kali Shareholders' Rep. Xx. Xxxxxxxxxxx hereby irrevocably and unconditionally
accepts such appointment as the Kali Shareholders' Rep.
(b) PRI may rely upon written instructions from the Kali
Shareholders' Rep with respect to the giving of any notices to any of the Kali
Shareholders as an "Indemnitee" or "Indemnifying Party" hereunder or otherwise
in connection with this Agreement. PRI shall not be liable for any acts or
omissions of the Kali Shareholders' Rep in connection with the performance by
the Kali Shareholders' Rep of his obligations hereunder. Each of the Kali
Shareholders hereby irrevocably appoints the Kali Shareholders' Rep as its and
her agent for purposes of the first sentence of this Section 12.11(b).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
PHARMACEUTICAL RESOURCES, INC.
By: /S/ XXXXX XXXXXXX
---------------------------------------------
Name: Xxxxx Xxxxxxx
Title:President and Chief Executive Officer
KALI LABORATORIES, INC.
By: /S/ XXXXXXXXX XXXXXXXXXXX
---------------------------------------------
Name: Xxxxxxxxx Xxxxxxxxxxx, Ph.D.
Title: President and Chief Executive Officer
VGS HOLDINGS, INC.
(with respect to Sections 6.18 and 6.19 only)
By:/S/ XXXXXXXXX XXXXXXXXXXX
---------------------------------------------
Name: Xxxxxxxxx Xxxxxxxxxxx, Ph.D.
Title: President and Chief Executive Officer
/S/ XXXXXXXXX XXXXXXXXXXX
---------------------------------------------
Xxxxxxxxx Xxxxxxxxxxx, Ph.D.
/S/ XXXXXXXXXXX XXXXXXXXXXX
---------------------------------------------
Xxxxxxxxxxx Xxxxxxxxxxx, Ph.D.
THE XXX XXXXXXXXXXX IRREVOCABLE TRUST
By:/S/ XXXXXXXXX XXXXXXXXXXX
---------------------------------------------
Name: Xxxxxxxxx Xxxxxxxxxxx, Ph.D.
Title: Trustee
THE XXXXXX XXXXXXXXXXX IRREVOCABLE TRUST
By:/S/ XXXXXXXXX XXXXXXXXXXX
---------------------------------------------
Name: Xxxxxxxxx Xxxxxxxxxxx, Ph.D.
Title: Trustee
