AMENDED AND RESTATED PROCEEDS SHARING AGREEMENT
This AMENDED AND RESTATED PROCEEDS SHARING AGREEMENT (this "AGREEMENT") is
made and entered into as of May 1, 2008, by and among certain holders (the
"SERIES A-1 STOCKHOLDERS") of InterPharm Holdings, Inc., a Delaware corporation
(the "COMPANY") Series A-1 Preferred Stock, par value $.01 per share (the
"SERIES A-1 PREFERRED"), the holders (the "SERIES D-1 STOCKHOLDERS") of all of
the Company's Series D-1 Preferred Stock, par value $.01 per share (the "SERIES
D-1 PREFERRED" and, together with the Series A-1 Preferred, the "PREFERRED
STOCK"), and the holders (the "COMMON STOCKHOLDERS") of certain shares of the
Company's Common Stock, par value $.01 per share (the "COMMON STOCK"). The
Series A-1 Stockholders and Series D-1 Stockholders are collectively referred to
herein as the "PREFERRED STOCKHOLDERS." Such Common Stockholders and Preferred
Stockholders are listed on SCHEDULE A hereto and are collectively referred to
herein as the "STOCKHOLDERS" and each a "STOCKHOLDER."
RECITAL:
WHEREAS, the Company and the undersigned entered into an asset purchase
agreement (the "ORIGINAL ASSET PURCHASE AGREEMENT") with Amneal Pharmaceuticals,
LLC ("AMNEAL") on April 24, 2008 pursuant to which Amneal agreed to purchase,
and the Company agreed to sell, substantially all of the Company's assets,
subject, among other things, to Amneal's satisfactory completion of its due
diligence on or before April 30, 2008 (such purchase the "AMNEAL PURCHASE");
WHEREAS, Amneal has advised the Company that it is willing to proceed with
the Amneal Purchase only if the Company and the Stockholders execute and deliver
a First Amendment to Asset Purchase Agreement (such Original Asset Purchase
Agreement, as amended, the "ASSET PURCHASE AGREEMENT");
WHEREAS, the Stockholders are willing to execute the Asset Purchase
Agreement provided that the Preferred Stockholders enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and certain
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Stockholders agree as follows:
1. PROCEEDS SHARING.
(a) ALL HOLDERS OF COMMON STOCK. In the event that (i) the holders of
the Common Stock of the Company receive aggregate cash distributions from the
Company or Amneal with respect to their shares of Common Stock of less than $3
million, and (ii) the Series D-1 Stockholders receive aggregate cash
distributions from the Company or Amneal of at least
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$13 million with respect to their Series D-1 Preferred, each of the Series D-1
Stockholders, severally and not jointly, hereby agrees to share proceeds with
all holders of Common Stock of the Company to the extent that proceeds to such
Series D-1 Stockholder with respect to its shares of Series D-1 Preferred are in
excess of $6.5 million, until all holders of Common Stock have received proceeds
from the Company, Amneal and the Series D-1 Stockholders equal to an aggregate
of $3 million. For example, if a Series D-1 Stockholder receives distributions
of proceeds of $7.5 million, and the Common Stockholders receive no
distributions of proceeds from the Company or Amneal, such Series D-1
Stockholder will pay $1 million in the aggregate to all holders of Common Stock
of the Company in proportion to their respective holdings of shares of Common
Stock of the Company. No additional proceeds shall be payable to the holders of
Common Stock of the Company by the Series D-1 Stockholders once the Common
Stockholders have received aggregate proceeds from the Company, Amneal and
pursuant to this Section 1(a) equal to $3 million.
(b) BHUPATALAL X. XXXXXXX. Provided that each of the Series D-1
Stockholders has received cash proceeds from the Company or Amneal in connection
with the Amneal Purchase of at least $2 million, each of the holders of
Preferred Stock agrees, severally and not jointly, to pay to Bhupatalal X.
Xxxxxxx their pro rata share (as set forth opposite their names on SCHEDULE A
hereto) of $850,000. Notwithstanding the foregoing, in the event that Bhupatalal
X. Xxxxxxx receives aggregate proceeds from the Company, Amneal and pursuant to
Section 1(a) with respect to his shares of Common Stock in an amount greater
than $250,000, then any such excess amount shall reduce, dollar for dollar, the
aggregate amount payable to him pursuant to this Section 1(b).
(c) XXX XXXXXXX. Provided that each of the Series D-1 Stockholders has
received cash proceeds from the Company or Amneal in connection with the Amneal
Purchase of at least $2 million, each of the holders of Preferred Stock agrees,
severally and not jointly, to pay to Xxx Xxxxxxx their pro rata share (as set
forth opposite their names on SCHEDULE A hereto) of $350,000. Notwithstanding
the foregoing, in the event that Xxx Xxxxxxx receives aggregate proceeds from
the Company, Amneal and pursuant to Section 1(a) with respect to his shares of
Common Stock in an amount greater than $200,000, then any such excess amount
shall reduce, dollar for dollar, the aggregate amount payable to him pursuant to
this Section 1(c).
(d) LIMITATION ON PAYMENTS PURSUANT TO SECTIONS 1(B) AND 1(C).
Notwithstanding anything to the contrary in Section 1(b) or Section 1(c) above,
in the event that the Series D-1 Stockholders have each received cash proceeds
from the Company or Amneal in connection with the Amneal Purchase of less than
$2.4 million, then the amount payable pursuant to Section 1(b) and Section 1(c)
by the holders of the Preferred Stock shall be reduced (ratably as between
Bhupatalal X. Xxxxxxx and Xxx Xxxxxxx) such that each of the Series D-1
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Stockholders will retain, after the payments contemplated by Section 1(b) and
Section 1(c), at least $2 million. For example, if each of the Series D-1
Stockholders receive cash proceeds from the Company or Amneal in connection with
the Amneal Purchase of $2.2 million, the aggregate amount payable to both
Bhupatalal X. Xxxxxxx and Xxx Xxxxxxx would be reduced from $1.2 million to
$600,000, payable $425,000 to Bhupatalal X. Xxxxxxx and $175,000 to Xxx Xxxxxxx,
by the holders of the Preferred Stock in accordance with their pro rata share
(as set forth opposite their names on SCHEDULE A hereto).
2. TIMING OF PAYMENTS. Amounts payable pursuant to this Agreement
shall be made on the later of (i) as, if and when the Series D-1 Stockholders
receive distributions from the Company or Amneal with respect to their Series
D-1 Preferred from the proceeds of the Amneal Purchase and (ii) when the amounts
so payable can be reasonably determined. Proceeds which are escrowed in the
Amneal Purchase shall not be payable under this Agreement until such proceeds
have been paid to the Company and have been distributed by the Company or
directly by Amneal, if applicable. As proceeds are available for distribution to
the Series D-1 Stockholders, in the event that amounts are payable pursuant to
this Agreement, the Series D-1 Stockholders may direct the Company to pay a
portion of such amounts directly to the holders of Common Stock, Bhupatalal X.
Xxxxxxx or Xxx Xxxxxxx, as the case may be, pursuant to Section 1 above. The
holders of Common Stock, Bhupatalal X. Xxxxxxx and Xxx Xxxxxxx are collectively
referred to herein as the "BENEFICIARIES" and each a "BENEFICIARY."
3. CONDITION TO PAYMENT. Notwithstanding any other provision of this
Agreement, no Beneficiary shall be entitled to any payment hereunder unless such
Beneficiary has executed all documents reasonably requested or required by the
Company or Amneal in connection with the consummation of the Amneal Purchase,
which requirement may be waived by the holders of the Series D-1 Preferred in
their reasonable discretion.
4. APPROVAL OF AMNEAL PURCHASE. As a condition to the parties entering into
this Agreement, each of the Stockholders is simultaneously herewith executing
and delivering to the Company a signed written consent of stockholders approving
the Asset Purchase Agreement and the transactions contemplated thereby. Each
Stockholder, as a holder of Preferred Stock and/or Common Stock, hereby agrees
on behalf of itself, any entity he or she controls which holds such Common Stock
or Preferred Stock ("ENTITIES") and any transferee or assignee of any such
shares of Preferred Stock or Common Stock ("TRANSFEREES"), to hold all of the
shares of Preferred Stock and Common Stock registered in his, her or its name or
in the name of an Entity or Transferee (and any securities of the Company issued
with respect to, upon conversion of, or in exchange or substitution of the
Preferred Stock or Common Stock, and any other voting securities of the Company
subsequently acquired by such Stockholder, Entity or Transferee) (hereinafter
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collectively referred to as the "SHARES") subject to, and to vote the Shares at
a regular or special meeting of the stockholders (or by written consent) in
accordance with, and otherwise:
(i) to refrain from exercising any dissenters' rights or rights of
appraisal under applicable law at any time with respect to the
Amneal Purchase;
(ii) to execute and deliver all related documentation and take such
other action in support of the Amneal Purchase as shall be
requested by the Company which are reasonable and customary
for a stockholder in an asset purchase transaction; and
(iii) except as set forth herein and except as set forth in that
certain irrevocable proxy, dated November 7, 2007, neither any
of the parties hereto nor any affiliates thereof shall deposit
any shares of capital stock of the Company beneficially owned
by such person in a voting trust or subject any such shares to
any arrangement or agreement with respect to the voting of
such shares.
5. GRANT OF PROXY. Upon the failure of any Stockholder to vote their Shares
in accordance with the terms of this Agreement, such Stockholder hereby grants
to the Designated Stockholder (as defined below) a proxy coupled with an
interest in all Shares owned by such Stockholder, which proxy shall be
irrevocable until this Agreement terminated pursuant to its terms or this
Section 5 is amended to remove such grant of proxy in accordance with Section 12
hereof, to vote all such Shares in the manner provided in Section 4 hereof. As
used in this Section 5, "Designated Stockholder" means a stockholder designated
at the time of such failure by the Stockholders holding a majority of the Shares
who then voted in accordance with this Agreement.
6. OWNERSHIP OF SHARES. Each of the Stockholders, severally and not
jointly, represents and warrants to the other Stockholders that, as of the date
hereof, SCHEDULE A accurately sets forth opposite such Stockholder's name the
number of shares of Common Stock and Preferred Stock owned by such Stockholder
in all material respects.
7. SPECIFIC ENFORCEMENT. It is agreed and understood that monetary damages
would not adequately compensate an injured Stockholder for the breach of this
Agreement by any Stockholder, that this Agreement shall be specifically
enforceable, and that any breach or threatened breach of this Agreement shall be
the proper subject of a temporary or permanent injunction or restraining order.
Further, each Stockholder hereto waives any claim or defense that there is an
adequate remedy at law for such breach or threatened breach.
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8. NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day; (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the respective parties at the
addresses set forth on the signature pages attached hereto (or at such other
addresses as shall be specified by notice given in accordance with this Section
8).
9. MANNER OF VOTING. The voting of shares pursuant to this Agreement may be
effected in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
10. TAXES. The Beneficiaries shall be responsible for and shall pay all
federal, state and local taxes with respect to any amounts payable to them
pursuant to this Agreement.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and each of their respective successors, assigns and transferees.
12. TERM. This Agreement shall terminate and be of no further force or
effect upon the abandonment or termination of negotiations by the Company for
the Amneal Purchase.
13. AMENDMENTS AND WAIVERS. Any term hereby may be amended and the
observance of any term hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of each of the Stockholders party hereto.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to conflicts
of law principles thereof.
15. ENTIRE AGREEMENT. This Agreement (including the schedules hereto) is
intended to be the sole agreement of the Stockholders as it relates to this
subject matter and does hereby supersede all other agreements of the
Stockholders relating to the subject matter hereof.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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P&K HOLDINGS I, LLC
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx, Managing Member
RAJS HOLDINGS I, LLC
By: /s/ Xxxxx Xxxxxxx
---------------------------------------
Xxxxx Xxxxxxx, Managing Member
XXXXX HOLDINGS I, LLC
By: /s/ Xxxxxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxxxxx X. Xxxxxxx, Managing Member
/s/ Xxxxx Xxxxxxx
----------------------------------------
XXXXX XXXXXXX
/s/ Xxx Xxxxxxx
----------------------------------------
XXX XXXXXXX
/s/ Xxxx Xxxxxxx
----------------------------------------
XXXX XXXXXXX
/s/ Xxxxxxxx X.Xxxxxxx
----------------------------------------
XX. XXXXXXXX X. XXXXXXX
/s/ Xxxxxxxxx X. Xxxxxxx
----------------------------------------
XXXXXXXXX X. XXXXXXX
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XXXXXX-XXXXXXXXX CAPITAL FOCUS III, L.P.
By: Xxxxxx-Xxxxxxxxx Partners III, L.L.C., its general partner
By: /s/ Xxxx X. Xxxxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Principal
AISLING CAPITAL II, L.P.
By: AISLING CAPITAL PARTNERS, LP
Its General Partner
By: AISLING CAPITAL PARTNERS, LLC
Its General Partner
By: /s/ Xxxxxx Xxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxx
Title: SMD
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SCHEDULE A
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Series A-1 Series D-1 Pro Rata
as as Total as Share Under
converted converted Converted Sections
Stockholder Common Series A-1 Series D-1 to Common to Common to Common 1(b) and 1(c)
------------------------------------------------------------------------------------------------------------------------------
Xx. Xxxxxxxx X. Xxxxxxx 500,000 2,526,152 2,526,152 3,026,152 22.34%
------------------------------------------------------------------------------------------------------------------------------
Bhupatalal X. Xxxxxxx 548,381 548,381
------------------------------------------------------------------------------------------------------------------------------
Raj Holdings I LLC 15,526,102 624,225 624,225 16,150,327 5.50%
------------------------------------------------------------------------------------------------------------------------------
Xxx Xxxxxxx 2,130,946 2,130,946
------------------------------------------------------------------------------------------------------------------------------
P& K Holdings LLC 8,014,928 8,014,928
------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxx 2,019,166 624,225 624,225 2,643,391 5.50%
------------------------------------------------------------------------------------------------------------------------------
Xxxxx Holdings I, LLC 10,518,645 10,492,445
------------------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxx 1,864,800 1,864,800
------------------------------------------------------------------------------------------------------------------------------
Aisling Capital II, L.P. 505,561 10,000 10,526,316 11,031,877 33.33%
------------------------------------------------------------------------------------------------------------------------------
Xxxxxx-Xxxxxxxxx Capital 568,647 10,000 10,526,316 11,094,963 33.33%
Focus III, L.P.
------------------------------------------------------------------------------------------------------------------------------
42,197,176 3,774,602 20,000 3,774,602 21,052,632 66,998,210 100.00%
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