Exhibit 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
XANODYNE PHARMACEUTICALS, INC.,
AAIPHARMA INC.
AND
AAIPHARMA, LLC
--------------
Dated as of May 6, 2005
TABLE OF CONTENTS
PAGE
Article I DEFINITIONS..................................................1
1.1 Certain Definitions..........................................1
1.2 Terms Defined Elsewhere in this Agreement...................15
1.3 Other Definitional and Interpretive Matters.................18
Article II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES......18
2.1 Purchase and Sale of Assets.................................19
2.2 Licenses....................................................19
2.3 Excluded Assets.............................................27
2.4 Assumption of Liabilities...................................28
2.5 Excluded Liabilities........................................28
2.6 Cure Amounts................................................29
2.7 Services Agreement, Manufacturing Agreement and
Odyssey Co-Development Agreement............................30
2.8 Further Conveyances and Assumptions.........................30
2.9 Bulk Sales Law..............................................30
Article III CONSIDERATION...............................................30
3.1 Consideration...............................................30
3.2 Royalties on Lifecycle Products.............................31
3.3 Products Option.............................................31
3.4 Option on Purchaser Developed Products......................35
3.5 Odyssey.....................................................37
3.6 Disputed Statements.........................................38
3.7 Closing Date Inventory Adjustment...........................39
3.8 Adjustment for Excess Shipments.............................41
3.9 Payment of Purchase Price...................................41
Article IV CLOSING AND TERMINATION.....................................42
4.1 Closing Date................................................42
4.2 Deliveries by Sellers.......................................42
4.3 Deliveries by Purchaser.....................................43
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4.4 Termination of Agreement....................................43
4.5 Payment of Development Costs................................45
4.6 Procedure Upon Termination..................................45
4.7 Effect of Termination.......................................45
Article V REPRESENTATIONS AND WARRANTIES OF SELLERS...................46
5.1 Organization and Good Standing..............................46
5.2 Authorization of Agreement..................................46
5.3 Board Approval and Recommendation...........................47
5.4 Conflicts; Consents of Third Parties........................47
5.5 Financial Statements; Projections...........................47
5.6 No Undisclosed Liabilities..................................48
5.7 Absence of Certain Developments.............................49
5.8 Taxes.......................................................49
5.9 Title to Purchased Assets ..................................50
5.10 Intellectual Property.......................................50
5.11 Regulatory Status...........................................52
5.12 Material Contracts..........................................54
5.13 Labor.......................................................55
5.14 Litigation..................................................55
5.15 Compliance with Laws........................................55
5.16 Environmental Matters.......................................55
5.17 Insurance...................................................56
5.18 Inventories.................................................56
5.19 Customer....................................................56
5.20 Product Warranty; Product Liability.........................57
5.21 Financial Advisors..........................................57
5.22 FDA Indications.............................................57
5.23 Laboratory Notebooks........................................57
5.24 No Other Representations and Warranties.....................57
Article VI REPRESENTATIONS AND WARRANTIES OF PURCHASER.................58
6.1 Organization and Good Standing..............................58
6.2 Authorization of Agreement..................................58
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6.3 Conflicts; Consents of Third Parties........................58
6.4 Litigation..................................................59
6.5 Financial Advisors..........................................59
6.6 Financing...................................................59
Article VII BANKRUPTCY COURT MATTERS....................................59
7.1 Approval of Break-Up Fee and Expense Reimbursement..........59
7.2 Bidding Procedures..........................................60
7.3 Non-Solicitation Period.....................................61
7.4 Bankruptcy Court Approval...................................61
Article VIII COVENANTS...................................................62
8.1 Access to Information.......................................62
8.2 Permitted Sellers...........................................63
8.3 Conduct of the Business Pending the Closing.................63
8.4 Development of Darvocet-N XR and Lynxorb....................64
8.5 Rejection of Contracts......................................65
8.6 Consents....................................................65
8.7 Regulatory Approvals........................................65
8.8 Further Assurances..........................................67
8.9 Non-Competition; Non-Solicitation; Confidentiality..........67
8.10 Preservation of Records.....................................69
8.11 Publicity...................................................70
8.12 aaiPharma Name..............................................70
8.13 Cooperation with Financing..................................70
8.14 Returns, Rebates and Chargebacks............................70
8.15 Adverse Experience Reporting and Product Complaints.........72
8.16 Recalls.....................................................73
8.17 Inventory...................................................73
8.18 Financial Statements........................................73
8.19 Differentiation of Products.................................74
8.20 Resale Certificates.........................................74
8.21 Enforcement of Rights.......................................74
8.22 Laboratory Notebooks........................................74
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8.23 Darvocet-N XR IDM...........................................74
Article IX EMPLOYEES ..................................................75
9.1 Employment..................................................75
9.2 Indemnification.............................................75
Article X CONDITIONS TO CLOSING.......................................75
10.1 Conditions Precedent to Obligations of Purchaser............75
10.2 Conditions Precedent to Obligations of Sellers..............76
10.3 Conditions Precedent to Obligations of Purchaser and
Sellers.....................................................77
10.4 Frustration of Closing Conditions...........................77
Article XI INDEMNIFICATION.............................................77
11.1 Survival of Representations and Warranties..................77
11.2 Indemnification.............................................78
11.3 Indemnification Procedures..................................79
11.4 Limitations on Indemnification for Breaches of
Representations and Warranties..............................81
11.5 Indemnity Escrows...........................................81
11.6 Tax Treatment of Indemnity Payments.........................82
Article XII TAXES.......................................................83
12.1 Transfer Taxes..............................................83
12.2 Prorations..................................................83
12.3 Purchase Price Allocation...................................83
12.4 Cooperation on Tax Matters..................................84
Article XIII MISCELLANEOUS...............................................85
13.1 Expenses....................................................85
13.2 Specific Performance........................................85
13.3 Submission to Jurisdiction; Consent to Service of Process...85
13.4 Waiver of Right to Trial by Jury............................85
13.5 Entire Agreement; Amendments and Waivers....................86
13.6 Governing Law...............................................86
13.7 Notices.....................................................86
13.8 Severability................................................87
13.9 Binding Effect; Assignment..................................87
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13.10 Non-Recourse................................................88
13.11 Time of Essence.............................................88
13.12 Counterparts................................................88
Schedules
1.1(a) Darvocet-N XR IDM, Darvocet-N XR Product and Lynxorb Product
1.1(b) Inventory
1.1(c) Knowledge of Sellers
1.1(d) Marketed Products
1.1(e) Marketing Authorizations
1.1(f) Odyssey Patents and Odyssey Product
1.1(g) Pipeline Products
1.1(h) ProSorb Patents
1.1(i) Purchased Contracts
1.1(j) Purchased DMFs
1.1(k) Purchased INDs
1.1(l) Purchased Intellectual Property
2.7(i) Additional Manufacturing Agreement Terms
2.7(ii) Additional Services Agreement Terms
5.1 Good Standing
5.4(b) Consents
5.5(c) Exceptions to SEC Filings
5.7 Absence of Certain Developments
5.8 Taxes
5.9 Title to Purchased Assets
5.11 Regulatory Status
5.10 Intellectual Property
5.12 Material Contracts
5.14 Litigation
5.15 Compliance with Laws
5.16 Environmental Matters
5.17 Insurance
5.18 Inventory Estimate
5.19(a) Customers
5.19(b) Negative Customer Events
5.20 Product Warranty
5.21 Sellers Financial Advisors
6.5 Purchaser Financial Advisors
8.3 Conduct of the Business
8.5 Rejection of Contracts
8.14(a)(ii) Returned Marketed Products
9.1 Employees
10.3(e) Closing Consents
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Exhibits
A Xxxx of Sale
B Assumption Agreement
C Indemnity Escrow Agreement
D Trademark Assignment Agreement
E Manufacturing Agreement Term Sheet
F Bidding Procedures
G Services Agreement Term Sheet
H Sale Order
I Bidding Procedures Order
J Product Transfer of Ownership Letters to the FDA
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of May 6, 2005 (this
"Agreement"), between Xanodyne Pharmaceuticals, Inc., a Delaware corporation
("Purchaser"), aaiPharma Inc., a Delaware corporation ("Parent"), and aaiPharma,
LLC, a Delaware limited liability company ("LLC" and, together with Parent,
"Sellers").
W I T N E S S E T H:
WHEREAS, Sellers intend to commence chapter 11 cases in the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court") (such cases, the "Chapter 11 Case") and shall be debtors-in-possession
under chapter 11 of title 11 of the United States Code, 11 U.S.C. Section 101 et
seq. (the "Bankruptcy Code");
WHEREAS, Sellers desire to sell, transfer and assign to
Purchaser or its designated Affiliate or Affiliates, and Purchaser desires to
(or to cause its designated Affiliate or Affiliates to) acquire and assume from
Sellers, pursuant to Sections 363 and 365 of the Bankruptcy Code, all of the
Purchased Assets and Assumed Liabilities, all as more specifically provided
herein; and
WHEREAS, certain terms used in this Agreement are defined in
Section 1.1;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions.
For purposes of this Agreement, the following terms shall have
the meanings specified in this Section 1.1:
"AAI DS" means AAI Development Services, a division of Parent.
"AAI IP" means all Intellectual Property owned and primarily
used by Sellers or their Affiliates in connection with any business other than
the Business, the Pipeline Products or the New Products, but exclusive of the
Purchased Intellectual Property.
"AAI Trademarks" means the trademarks "aaiPharma," "AAI
Development Services," and "AAI," the aaiPharma and AAI DS corporate logos and
the trade names of Sellers, including the words "AAI" and "AAI Development
Services"
together with variations and derivatives thereof and any other logos, symbols,
trademarks, trade names or service marks of Sellers or their respective
Affiliates including, except for the licenses granted thereto, the ProSorb
Trademark, but excluding the Purchased Trademarks.
"Accountant" means an accounting firm of national reputation
(excluding each of Purchaser's and Sellers' respective regular outside
accounting firms) as may be mutually acceptable to Purchaser and Sellers;
provided, however, that in the event that Purchaser and Sellers are unable to
agree on such an accounting firm within ten (10) Business Days after the date
the Accountant is required to be engaged pursuant to Section 3.6, then Sellers
shall within ten (10) Business Days thereafter deliver to Purchaser a listing of
three other accounting firms of national reputation and Purchaser shall, within
ten (10) Business Days after receipt of such list, select one of such three
accounting firms as the Accountant.
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person, and
the term "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or otherwise.
"Alternative Transaction" means (a) the sale (whether by stock
sale, merger, consolidation or otherwise) of all or a substantial portion of the
capital stock of Sellers, (b) the sale of all or any of the Purchased Assets
pursuant to the Bidding Procedures, or (c) a transaction or series of
transactions outside or independent of the Bidding Procedures that result in the
Sellers realizing not less than an aggregate of $75,000,000 in cash and/or fair
market value of debt and/or equity securities (such fair market value to be
determined by the Bankruptcy Court or, if Sellers shall not then be the subjects
of a Chapter 11 Case, then jointly by Sellers and Purchaser or, failing such
joint determination, by an independent nationally recognized investment banking
firm jointly selected by Sellers and Purchaser or, failing such joint selection,
by such an independent nationally recognized investment banking firm selected by
two other investment banking firms selected one each by Sellers and Purchaser)
from the sale or transfer of Purchased Assets, in each case to a Person other
than Purchaser, excluding the sale of Inventory in the Ordinary Course of
Business.
"ANDA" means an abbreviated new drug application.
"APAP" means acetaminophen.
"Applicable Laws" means all binding laws, treaties, statutes,
ordinances, decrees, rules, injunctions, writs, regulations, Orders,
authorizations and permits as all of the preceding may be in effect and
interpreted on the date of this Agreement, in each case relating to, or of any
Governmental Body having jurisdiction over, the Business the Purchased Assets,
the Licensed Assets, Sellers or Purchaser, as the case may be.
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"Approval Motion" means the motion, acceptable to Purchaser in
its reasonable discretion, to be filed with the Bankruptcy Court by Sellers no
later than one (1) day following the commencement of the Chapter 11 Case seeking
approval of the (a) the Bidding Procedures Order (including the Bidding
Procedures) and (b) the Sale Order.
"Azathioprine ANDA" means ANDA 75-252.
"Azathioprine Copyrights" means Copyrights in all advertising,
marketing and promotional materials in any stage of development owned by Sellers
that are used or intended for use in connection with the Azathioprine Product.
"Azathioprine Know How" means all Know How necessary or useful
in connection with the Azathioprine Product.
"Azathioprine Product" means the 50 mg azathioprine product
marketed pursuant to the Azathioprine ANDA, including bioequivalents.
"Azathioprine Product Assets" means the Azathioprine ANDA,
Azathioprine Copyrights (but exclusive of any portions of advertising or
marketing and promotional materials describing the business of Sellers or
incorporating the AAI Trademarks and any variations thereof and related logos or
symbols), and the Azathioprine Know How.
"Bidding Procedures" means those bidding procedures set forth
in Exhibit F attached hereto.
"Bidding Procedures Order" means the order of the Bankruptcy
Court in the form attached hereto as Exhibit I, including such changes thereto
requested or approved by Purchaser in its reasonable discretion, which changes
shall in no event be adverse to Purchaser.
"Business" means the business of Sellers, as currently
conducted, of marketing, promoting, distributing, and selling the Marketed
Products, but excluding all other business of Sellers and their Affiliates,
including AAI DS.
"Business Day" means any day of the year on which national
banking institutions in New York are open to the public for conducting business
and are not required or authorized to close.
"Break-Up Fee" means the fee to be paid by Sellers to
Purchaser in accordance with the provisions of Section 7.1 hereof.
"Calcitriol ANDA" means ANDA 75-766.
"Closing Date Inventory" means the quantities of each item of
Inventory as of the Closing Date.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, commitment or other arrangement or agreement,
whether written or oral.
"Copyrights" means all copyrights, works of authorship, and
copyrightable works, and all registrations, applications, and renewals therefor.
"Darvocet-N Suspension Know How" means all Know How necessary
or useful in connection with the Darvocet-N Suspension Product and owned by
Sellers, which, for the avoidance of doubt, excludes any Know How licensed from
Xxx Lilly and Company that is the subject of the Assignment, Transfer and
Assumption Agreement dated as of February 18, 2002 between NeoSan
Pharmaceuticals, Inc. and Xxx Xxxxx and Company referenced on Schedule 1.1(i).
"Darvocet-N Suspension Product" means the product identified
as such in Schedule 1.1(a).
"Darvocet-N XR IDM" means the invention disclosure memorandum
identified in Schedule 1.1(a) and the invention described therein.
"Darvocet-N XR Know How" means all Know How necessary or
useful in connection with the Darvocet-N XR Product and owned by Sellers, which,
for the avoidance of doubt, excludes any Know How licensed from Xxx Lilly and
Company that is the subject of the Assignment, Transfer and Assumption Agreement
dated as of February 18, 2002 between NeoSan Pharmaceuticals, Inc. and Xxx Xxxxx
and Company referenced on Schedule 1.1(i).
"Darvocet-N XR Product" means the product identified as such
in Schedule 1.1(a).
"DEA" means the United States Drug Enforcement Administration.
"Derivative Darvocet Product" means the product identified as
such in Schedule 1.1(a).
"Derivative Lynxorb Product" means the product identified as
such in Schedule 1.1(a).
"Employee" means all individuals, as of the date hereof, who
are employed by Sellers in connection with the Business, together with
individuals who are hired in respect of the Business after the date hereof.
"Environmental Costs and Liabilities" means, with respect to
any Person, all liabilities, obligations, responsibilities, Remedial Actions,
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all
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reasonable fees, disbursements and expenses of counsel, experts and consultants
and costs of investigation and feasibility studies), fines, penalties, sanctions
and interest incurred as a result of any claim or demand by any other Person or
in response to any violation of Environmental Law, whether known or unknown,
accrued or contingent, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, to the extent based upon,
related to, or arising under or pursuant to any Environmental Law, Environmental
Permit, order or agreement with any Governmental Body or other Person, which
relates to any environmental, health or safety condition, violation of
Environmental Law or a Release or threatened Release of Hazardous Materials.
"Environmental Law" means any applicable foreign, federal,
state or local statute, regulation, ordinance, rule of common law or other legal
requirement as now or hereafter in effect in any way relating to the protection
of human health and safety, the environment or natural resources, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water
Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401
et seq.) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), as each has been or may be amended and the regulations promulgated
pursuant thereto.
"Environmental Permit" means any Permit required by
Environmental Laws for the operation of the Business.
"Escrow Agent" means Wilmington Trust Company in its capacity
as Escrow Agent under the Indemnity Escrow Agreement.
"Excluded Contracts" means those Contracts of Sellers which
are not set forth in Schedule 1.1(i).
"Expense Reimbursement" means the reimbursement of Purchaser's
expenses to be paid by Sellers to Purchaser in accordance with the provisions of
Section 7.1 hereof.
"Extended Units" means the number of tablets, capsules, or
milliliters of liquid, as applicable, of the Marketed Products.
"FDA" means the United States Food and Drug Administration.
"Final Order" means any order or judgment which has not been
reversed, vacated, or stayed, and as to which (i) the time to appeal, petition
for certiorari, or move for a new trial, reargument, or rehearing has expired,
and as to which no appeal, petition for certiorari, or other proceedings for a
new trial, reargument, or rehearing shall then be pending, or (ii) if an appeal,
writ of certiorari, new trial, reargument, or rehearing thereof
5
has been sought, such order or judgment shall have been affirmed by the highest
court to which such order was appealed, or certiorari shall have been denied, or
a new trial, reargument, or rehearing shall have been denied or resulted in no
modification of such order, and the time to take any further appeal, petition
for certiorari or move for a new trial, reargument, or rehearing shall have
expired; provided, however, that the possibility that a motion under Rule 59 or
Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the
Bankruptcy Rules, may be filed relating to such order shall not cause such order
to not be a Final Order.
"GAAP" means generally accepted accounting principles,
consistently applied in the United States in effect at the relevant time.
"Governmental Body" means any court (including the Bankruptcy
Court), tribunal, arbitrator (public or private), authority, agency, commission,
official or other instrumentality of the United States or any state, county,
city or other political subdivision thereof.
"Hazardous Material" means any substance, material or waste
that is regulated, classified, or otherwise characterized under or pursuant to
any Environmental Law as "hazardous," "toxic," "pollutant," "contaminant,"
"radioactive," or words of similar meaning or effect, including, without
limitation, petroleum and its by-products, asbestos, polychlorinated biphenyls,
radon, mold or other fungi, and urea formaldehyde insulation.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"IDM" means invention disclosure memorandum.
"IMS" means IMS Health Inc.
"IMS National Sales Perspective" means the monthly audit
prepared by IMS and usually available 27 days after the closing of the month.
All available channels of distribution to be included.
"IMS Product Demand Average Value" means, with respect to each
Marketed Product, the three (3) month rolling average of the latest available
IMS National Sales Perspective data at the time of Closing in Extended Units
(prorated for any partial months) for such Marketed Product times the actual
monthly Net Selling Price for such Marketed Product.
"Included Books and Records" shall mean all of the books,
records, files, documents, information and correspondences (including Marketing
and Pricing Data) owned by either Seller or any of their Subsidiaries as of the
Closing Date necessary for, or to the extent solely related to, selling,
promoting, manufacturing, advertising, marketing or distributing the Products,
and necessary for, or to the extent related to, all other books, records, files,
documents, information and correspondences that are used in,
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held for use in or intended to be used in, or that arise primarily out of, the
Business, Pipeline Products or New Products, including documents relating to
Products, services, Purchased Intellectual Property, personnel files for
Transferred Employees and all customer files and documents (including credit
information), supplier lists, records, literature and correspondences, but
excluding the Excluded Books and Records.
"Indebtedness" of any Person means, without duplication, (i)
the principal of and premium (if any) in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable; (ii) all obligations of such Person issued or assumed as
the deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the Ordinary Course of Business); (iii) all obligations of such
Person under leases required to be capitalized in accordance with GAAP; (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction; (v) the liquidation
value of all redeemable preferred stock of such Person; (vi) all obligations of
the type referred to in clauses (i) through (v) of any Persons for the payment
of which such Person is responsible or liable, directly or indirectly, as
obligor, guarantor, surety or otherwise, including guarantees of such
obligations; and (vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person).
"Indemnity Escrow Agreement" means the Indemnity Escrow
Agreement to be dated as of the Closing Date by and among Sellers, Purchaser and
the Escrow Agent substantially in the form of Exhibit C hereto.
"Intellectual Property" means: (i) all patents and patent
applications, including continuations, divisionals, continuations-in-part,
re-examinations, extensions, and/or reissues or foreign counterparts of patent
applications and patents issuing thereon (collectively, "Patents"); (ii) all
trademarks, service marks, trade names, service names, brand names, trade dress
rights, logos, and corporate names and general intangibles of a like nature,
together with the goodwill associated with any of the foregoing, and all
applications, registrations, and renewals thereof (collectively, "Trademarks");
(iii) all Internet domain names; (iv) all Copyrights; and (v) all Know How.
"Intellectual Property Licenses" means (i) any grant to a
third Person of any right to use any of the Purchased Intellectual Property, and
(ii) any grant to Sellers of a right to use a third Person's Intellectual
Property rights which is necessary or useful for the use of any Purchased
Intellectual Property or the development, manufacture, use, sale, offer for
sale, distribution, marketing or promotion of Products.
"Inventory" means all inventory of finished Marketed Products
and propoxyphene bulk active ingredient owned by Sellers as of the Closing Date,
excluding all other active ingredients, raw materials, or work in progress. For
purposes of "Parent
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Closing Date Inventory Adjustment Amount" and "Purchaser Closing Date Inventory
Adjustment Amount," "Inventory" means all items of inventory with an expiration
date of no less than six (6) months following the Closing Date for Schedule II
Marketed Products and with an expiration date of no less than twelve (12) months
following the Closing Date for all other Marketed Products and in quantities no
less than the minimum quantities set forth on Schedule 1.1(b).
"IRS" means the United States Internal Revenue Service.
"Know How" means any and all product specifications, product
formulations, compositions, product designs, plans, technology, ideas, concepts,
trade secrets, manufacturing and packaging processes, technical information,
expertise, skill, practice, inventions, procedures, manufacturing formulae,
manufacturing directions, manufacturing specifications, manufacturing validation
data, component specifications, test methods, preclinical, clinical, toxicology
and stability data, validation data of analytical methods and know how, whether
or not patentable.
"Knowledge of Sellers" means the actual knowledge, after due
inquiry, of the Persons listed on Schedule 1.1(c).
"Law" means any foreign, federal, state or local law
(including common law), statute, code, ordinance, rule, regulation or other
requirement (including the Bankruptcy Code).
"Legal Proceeding" means any judicial, administrative or
arbitral actions, suits, proceedings (public or private) or claims or any
proceedings by or before a Governmental Body.
"Liability" means any debt, loss, damage, adverse claim,
liability or obligation (whether direct or indirect, known or unknown, asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, or due or to become due, and whether in contract, tort, strict
liability or otherwise), and including all costs and expenses relating thereto.
"Licensed Assets" means the Azathioprine ANDA and the Licensed
Intellectual Property.
"Licensed Intellectual Property" means the Azathioprine Know
How, the Azathioprine Copyrights, the ProSorb Know How, the ProSorb Patents, the
ProSorb Trademark, the Darvocet-N XR IDM and the Darvocet-N XR Patents.
"Lien" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, proxy, voting trust or agreement, transfer restriction under any
shareholder or similar agreement, encumbrance or any other restriction or
limitation whatsoever.
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"Lifecycle Products" means Pipeline Products, Derivative
Darvocet Products, and Derivative Lynxorb Products.
"Lynxorb Licensed Assets" means the ProSorb Patents, the
ProSorb Trademark and the ProSorb Know How.
"Lynxorb Know How" means all Know How necessary or useful in
connection with the Lynxorb Product other than the ProSorb Know How.
"Lynxorb Product" means the product identified in Schedule
1.1(a).
"Manufacturing Agreement" means the agreement between
Purchaser and Sellers to manufacture those Products identified on Schedule
2.7(i), in form and substance mutually agreed upon by each of Purchaser and
Sellers and containing the terms set forth on Schedule 2.7(i) and Exhibit E
attached hereto.
"Marketed Products" means those products identified as
currently marketed products on Schedule 1.1(d).
"Marketed Products Know How" means all Know How necessary or
useful in connection with the Marketed Products, except for the Azathioprine
Product.
"Marketing Authorizations" means those NDAs and ANDAs set
forth in Schedule 1.1(e).
"Marketing and Pricing Data" shall mean (i) copies of all
market research, marketing plans, media plans, advertising, promotional and
marketing books and records, customer lists, sales data, price lists, sales
training materials, and all other pricing, advertising and promotional
information owned by and in the possession or control of Sellers as of the
Closing Date and used solely in connection with the Marketed Products, and (ii)
originals of all Marketed Product labels and inserts and all films, artwork,
photography and other graphic materials related thereto, but excluding any such
items in clauses (i) and (ii) to the extent that (a) any Applicable Law
prohibits their transfer or disclosure to Purchaser or (b) any transfer or
disclosure to Purchaser thereof would subject Sellers to any contractual
liability.
"Material Adverse Effect" means (a) any event, change,
condition (financial or otherwise) or matter that, individually or in the
aggregate, results in or would be reasonably expected to result in a material
adverse effect on the Purchased Assets and the Licensed Assets taken as a whole;
(b) any written indication by the FDA that a factorial design study (being a
study in which the Darvocet-N XR Product is required to be compared against one
or more of its ingredients alone) will be required for FDA approval of the
Darvocet-N XR Product (it being understood that the results of bioequivalence
studies or the clinical trial results for the Darvocet-N XR Product shall not be
deemed to be a Material Adverse Effect); or (c) a material adverse effect on the
ability of Sellers to consummate the transactions contemplated by this Agreement
or perform their obligations under this Agreement or the Seller Documents,
excluding any
9
such effect to the extent resulting from or arising in connection with (i)
general economic or market changes or changes that generally affect businesses
of the same type as the Business, but only if, in each case, the Purchased
Assets or Licensed Assets are not disproportionately affected; (ii) the filing
of the Chapter 11 Case; or (iii) the public announcement of the transactions
contemplated hereunder. Any determination as to whether any event, change,
circumstance or effect has a Material Adverse Effect shall be made only after
taking into account all effective insurance coverages and third-party
indemnifications with respect to such event, change, circumstance or effect.
Purchaser acknowledges that Seller has ceased actively marketing and promoting
the Marketed Products through a sales force or otherwise and that the cessation
of such marketing and promotion shall not, in and of itself, constitute a
Material Adverse Effect.
"Modification" means, with respect to any item, any
modification, translation, conversion, compilation, upgrade or other derivative
version of, or change or addition to, such item. "Modified" and "Modify" shall
have corollary meanings.
"NDA" means a new drug application.
"Net Sales" means with respect to a Lifecycle Product or New
Product, as the case may be, the gross amount invoiced by a Permitted Seller of
such Lifecycle Product or New Product, to third Persons, less
(a) trade, quantity and/or cash discounts actually
allowed;
(b) discounts, refunds, rebates, chargebacks, retroactive
price adjustments and any other allowances, credits or payments which
effectively reduce the net selling price; and
(c) actual Lifecycle Product or New Product returns and
allowances, as the case may be;
provided that in no event shall Net Sales equal less than zero. For the
avoidance of doubt, all licensing fees not based on product sales, milestone
payments and other similar payments derived from any sublicense, assignment or
transfer of the rights to sell or otherwise market a Lifecycle Product or New
Product, as the case may be, shall be deemed to be Net Sales. Net Sales shall be
determined from books and records maintained in accordance with GAAP and shall
be deemed to have been made as of the recorded sale date according to GAAP for
such product.
"Net Selling Price" means, with respect to a Marketed Product,
the gross amount invoiced by a Seller or a Subsidiary of a Seller for such
Marketed Product, to third Persons, less
(a) trade, quantity and/or cash discounts actually
allowed;
10
(b) discounts, refunds, rebates, chargebacks, retroactive
price adjustments and any other allowances, credits or payments (other than
commissions) which effectively reduce the net selling price; and
(c) actual Marketed Product returns and allowances, as
the case may be.
"New Licensed Intellectual Property" means any Intellectual
Property necessary or useful in connection with a New Product that Purchaser has
elected to acquire under Section 3.3 other than the New Purchased Intellectual
Property associated with that New Product.
"New Purchased Intellectual Property" means any Intellectual
Property necessary or useful in connection with a New Product that Purchaser has
elected to acquire under Section 3.3 that does not have general applicability to
products other than the New Product.
"NSAID" means any non-steroidal anti-inflammatory drug.
"Odyssey Co-Development Agreement" means the co-development
agreement referenced in Section 3.5, in form and substance mutually agreed upon
by Purchaser and Sellers.
"Odyssey Ingredient" means the ingredient identified in
Schedule 1.1(f).
"Odyssey Know How" means all Know How necessary or useful in
connection with the Odyssey Product.
"Odyssey Patents" means those Patents set forth in Schedule
1.1(f).
"Odyssey Product" means the product identified in Schedule
1.1(f).
"Order" means any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award.
"Ordinary Course of Business" means the ordinary and usual
course of normal day-to-day operations of the Business since January 1, 2005
through the date hereof.
"Pain Product" means a prescription pharmaceutical product for
which the FDA labeling in the Indication and Usage section of such product's
package insert could reasonably be expected to include the words "relief" or
"management" plus the word "pain."
"Parent Closing Date Inventory Adjustment Amount" means, with
respect to each item of Inventory, the product of (i) Sellers' actual cost of
such item of Inventory
11
and (ii) the difference between the quantities of such item of Inventory listed
in Schedule 1.1(b) and the quantities included in the Final Closing Date
Inventory.
"Permits" means any approvals, authorizations, consents,
licenses, permits or certificates.
"Permitted Seller" means Purchaser and its Affiliates and any
assignee, licensee or sublicensee having the right to sell Marketed Products,
Lifecycle Products or New Products.
"Person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"Pipeline Products" means those products identified as
pipeline products on Schedule 1.1(g).
"PK Study" means a pharmacokinetics study.
"Post-Signing Shipment Value" means, with respect to each
Marketed Product, the total monthly Extended Units (prorated for any partial
month) of such Marketed Product times the actual monthly Net Selling Price of
such Marketed Product shipped to a customer by or on behalf of either Seller
from the date hereof through and including the Closing Date, as reported by SPS
Cord.
"Product Registration Data" shall mean, to the extent solely
related to a Product and owned by and in the possession and control of Sellers
as of the Closing Date, the following (including electronic copies where no hard
copies exist): (i) all regulatory files relating thereto, other than the
Marketing Authorizations, Purchased DMFs and Purchased INDs, including, but not
limited to, any Permits (to the extent transferable), and minutes of meetings
and telephone conferences with the FDA, validation data, preclinical and
clinical studies and tests related to the applicable Product, and all audit
reports of clinical studies, plus all annual reports and safety reports
associated therewith, drug master files, FDA approvals for export, documents
relating to Phase IV studies and pediatric studies, and all correspondence with
the FDA regarding the marketing status of such applicable Product; and (ii) all
records maintained under current good manufacturing practices or other record
keeping or reporting requirements of the FDA, the DEA, the Occupational Safety
and Health Administration or any other Governmental Body, including, but not
limited to, FDA warning letters, FDA Notices of Adverse Finding Letters, FDA
audit reports (including any comments on such reports), all other correspondence
and communications with regulatory agencies in connection with such Product
(including any advertising and promotion documents and 2253 forms), adverse
event files, complaint files and manufacturing records.
"Products" means the Marketed Products set forth in
Schedule 1.1(d), and the Pipeline Products set forth in Schedule 1.1(g).
12
"ProSorb Know How" means the Know How necessary or useful in
connection with the Lynxorb Product, which Know How has general applicability
beyond that product.
"ProSorb Patents" means the Patents set forth in Schedule
1.1(h).
"ProSorb Trademark" means the common law rights in the United
States to use the phrase "ProSorb" as a trademark and the rights arising under
the United States registration of the trademark for "ProSorb," registration
number 2,346,573.
"Purchased Contracts" means the Contracts set forth in
Schedule 1.1(i). Purchaser shall have the right, by written notice delivered to
Sellers at any time during the period from and after the date hereof and until
the Closing Date to delete any Contract from Schedule 1.1(i) (it being
understood that any such Contract deleted by Purchaser from such schedule may
subsequently be rejected by Sellers in the Chapter 11 Case and, if so rejected,
Purchaser shall reimburse Sellers for any administrative expenses incurred by
Sellers after the commencement of the Chapter 11 Case as a result of the
rejection of such Contract). Purchaser shall also have the right by written
notice delivered to Sellers at any time during the period from and after the
date hereof and until the Closing Date to add any Contract to Schedule 1.1(i)
that was not disclosed to Purchaser prior to the date hereof. Schedule 1.1(i)
also sets forth the estimated amounts (as of the date hereof) of all amounts
which Sellers expect will be payable pursuant to Section 365(b) of the
Bankruptcy Code on account of the assumption and assignment of any Purchased
Contract.
"Purchased DMFs" means those drug master files set forth in
Schedule 1.1(j).
"Purchased INDs" means those investigational new drug
applications set forth in Schedule 1.1(k).
"Purchased Intellectual Property" means all right, title, and
interest in and to the following Intellectual Property which is owned (and not
licensed) by Sellers: (i) all the Trademarks set forth on Schedule 1.1(l) (the
"Purchased Trademarks"); (ii) all the Internet domain names set forth on
Schedule 1.1(l) (the "Purchased Domain Names"); (iii) all the Copyrights in all
advertising, marketing, promotional and packaging materials relating to the
Products (other than the Azathioprine Copyrights), exclusive of any portions of
advertising, marketing, promotional and packaging materials describing the
business of Sellers or incorporating the AAI Trademarks and any variations
thereof and related logos or symbols (the "Purchased Copyrights"); (iv) all
Patents set forth in Schedule 1.1(l) (the "Purchased Patents"); (v) the Marketed
Product Know How; (vi) the Darvocet-N XR Know How; (vii) the Darvocet-N
Suspension Know How; and (viii) the Lynxorb Know How.
"Purchaser Closing Date Inventory Adjustment Amount" means,
with respect to each item of Inventory, the product of (i) Sellers' actual cost
of such item of
13
Inventory as of the Closing Date and (ii) the difference between the quantities
of such item of Inventory listed in Schedule 1.1(b) and the quantities included
in the Final Closing Date Inventory.
"Purchaser's Indemnity Escrow Amount" means $2,000,000.
"Purchaser's Indemnity Escrow Fund" means the Purchaser's
Indemnity Escrow Amount together with all interest or income actually earned
thereon pursuant to the Indemnity Escrow Agreement.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property.
"Remedial Action" means all actions to (i) clean up, remove,
treat or in any other way remediate any Hazardous Material; (ii) prevent the
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; (iii)
perform pre-remedial studies and investigations or post-remedial monitoring and
care; or (iv) to correct a condition of noncompliance with Environmental Laws.
"Restructuring Transaction" means (a) a recapitalization
transaction involving, in whole or in part, Sellers and its existing security
holders or creditors, or (b) a transaction or series of transactions, including
by way of a plan of reorganization, in connection with a liquidation or
reorganization or other continuation of Seller's business relating to some or
all of the Purchased Assets.
"Sale Order" means the order of the Bankruptcy Court in the
form attached hereto as Exhibit H, including such changes thereto requested or
approved by Purchaser in its sole discretion.
"Sellers' Indemnity Escrow Amount" means $8,000,000.
"Sellers' Indemnity Escrow Fund" means the Sellers' Indemnity
Escrow Amount together with all interest or income actually earned thereon
pursuant to the Indemnity Escrow Agreement.
"Services Agreement" means the agreement to provide services
with respect to the Marketed Products, Purchaser Developed Products, Lifecycle
Products, and New Products, in form and substance mutually agreed upon by
Purchaser and Sellers and containing the terms set forth on Schedule 2.7(ii) and
Exhibit G attached hereto.
"Shipping Adjustment Amount" means the cash value of the
difference between the sum of the Post-Signing Shipment Values for all Marketed
Products minus the sum of the IMS Product Demand Average Values for all Marketed
Products, in the event that the sum of the Post-Signing Shipment Values is
greater than the sum of the IMS Product Demand Average Values.
14
"Split Lot" means any lot of Marketed Product that Sellers
have sold some, but not all, of the applicable Marketed Product in such lot
prior to the Closing Date.
"SPS Cord" means Cardinal Health 105, Inc. (formerly known as
Cord Logistics, Inc.), an Ohio corporation.
"Subsidiary" means any Person of which a majority of the
outstanding voting securities or other voting equity interests are owned,
directly or indirectly, by such Person.
"Tax" or "Taxes" means (i) any and all federal, state, local
or foreign taxes, charges, fees, imposts, levies or other assessments,
including, without limitation, all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, (ii) all interest,
penalties, fines, additions to tax or additional amounts imposed by any Taxing
Authority in connection with any item described in clause (i), and (iii) any
liability in respect of any items described in clauses (i) and/or (ii) payable
by reason of contract, assumption, transferee liability, operation of law,
Treasury Regulation section 1.1502-6(a) (or any predecessor or successor thereof
or any analogous or similar provision under law) or otherwise.
"Taxing Authority" means the IRS and any other Governmental
Body responsible for the administration of any Tax.
"Tax Return" means any return, report or statement required to
be filed with respect to any Tax (including any attachments thereto, and any
amendment thereof) including, but not limited to, any information return, claim
for refund, amended return or declaration of estimated Tax, and including, where
permitted or required, combined, consolidated or unitary returns for any group
of entities that includes the Sellers or any of their Subsidiaries.
"Territory" means worldwide.
"WARN" means the Worker Adjustment and Retraining Notification
Act of 1988, as amended.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of
this Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
---- -------
AAI Packaging 8.12
Agreement Recitals
Adjustment Deadline 3.1
15
Term Section
---- -------
Allocation Objection Notice 12.3
Allocation Response Period 12.3
Antitrust Division 8.7(a)
Antirust Laws 8.7(b)
Asset Acquisition Statement 12.3
Assumed Liabilities 3.1
Audit Termination Date 3.6(a)
Balance Sheet 5.5(a)
Balance Sheet Date 5.5(a)
Bankruptcy Code Recitals
Bankruptcy Court Recitals
Basket 11.4(a)
Chapter 11 Case Recitals
Chargeback Termination Date 8.14(c)
Closing 4.1
Closing Date 4.1
Closing Date Inventory Statement 3.7(a)
Commitment Letters 6.6
Confidential Information 8.9(d)
Confidentiality Agreement 8.9(d)
Cure Amounts 2.6
Cure Deadline 3.5(d)
Darvocet-N XR Patents 2.2(f)(ii)
Development Costs 8.4
Disclosing Party 8.9(d)
Domain Name Transfer Agreement 4.2(i)
Excess Cure Amount 2.6
Exchange Act 5.5(c)
Excluded Assets 2.3
Excluded Books and Records 2.3(d)
Excluded Liabilities 2.5
Expenses 11.2(a)(vi)
Final Closing Date Inventory 3.7(e)
Financial Statement of the Business 5.5(b)
Financial Statements 5.5(a)
Five Year Period 3.3(c)
FTC 8.7(a)
Indemnification Claim 11.3(a)
Lifecycle Product Statement 3.2
LLC Recitals
Losses 11.2(a)(i)
New Combo Product 3.3(b)
New Internal Product 3.3(c)
New P/D Product 3.3(a)
16
Term Section
---- -------
New Product 3.3(a)
New Product Statement 3.3(h)
Net Cash Proceeds 3.5(b)
Net Sale Proceeds 3.5(c)
Net Sales Statement 3.6(a)
Non-Solicitation Period 7.3(a)
Notebooks 2.1(f)
Parent Recitals
Parent Inventory Payment 3.7(e)
Patents 1.1 (in Intellectual
Property definition)
Period of Election 3.3(a)
Post-Signing Shipments Statement 3.8
Purchased Assets 2.1
Purchase Price 3.1
Purchase Price Adjustment 3.1
Purchaser Recitals
Purchaser Developed Product 3.3(b)
Purchaser Documents 6.2
Purchaser Indemnified Parties 11.2(a)
Purchaser Inventory Payment 3.7(e)
Rebates Termination Date 8.14(b)
Recalls 8.16
Receiving Party 8.9(d)
Rejected Pain Products 2.2(c)(ii)
Restricted Business 8.9(a)
Restrictive Agreements 8.21
Revised Statements 12.2
SEC 5.5(c)
Securities Act 8.18
Sellers Recitals
Seller Documents 5.2
Seller Indemnified Parties 11.2(b)
Seller Representatives 7.3(a)
Seven Year Period 3.3(a)
Survival Period 11.1
Ten Year Period 3.3(d)(i)
Trademark Assignment Agreement 4.2(b)
Transferred Employees 9.1(a)
Transfer Taxes 12.1
Unresolved Claims 11.5
WAC 8.14(e)
17
1.3 Other Definitional and Interpretive Matters
(a) Unless otherwise expressly provided, for purposes of
this Agreement, the following rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of
time before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Dollars. Any reference in this Agreement to $ means U.S.
dollars.
Exhibits/Schedules. The Exhibits and Schedules to this
Agreement are hereby incorporated by reference and made a part hereof and are an
integral part of this Agreement. All Exhibits and Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Schedule or
Exhibit but not otherwise defined therein shall be defined as set forth in this
Agreement.
Gender and Number. Any reference in this Agreement to gender
shall include all genders, and words imparting the singular number only shall
include the plural and vice versa.
Headings. The provision of a Table of Contents, the division
of this Agreement into Articles, Sections and other subdivisions and the
insertion of headings are for convenience of reference only and shall not affect
or be utilized in construing or interpreting this Agreement. All references in
this Agreement to any "Section" are to the corresponding Section of this
Agreement unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof,"
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
(b) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as jointly drafted by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
Article II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
18
2.1 Purchase and Sale of Assets. On the terms and subject to the
conditions set forth in this Agreement, at the Closing Purchaser shall (or shall
cause its designated Affiliate or Affiliates to) purchase, acquire and accept
from Sellers, and Sellers shall (and shall cause its Subsidiaries to) sell,
transfer, assign, convey and deliver to Purchaser (or its designated Affiliate
or Affiliates) all of Sellers' right, title and interest in, to and under the
Purchased Assets, free and clear of all Liens, claims (as defined in Section
101(5) of the Bankruptcy Code) and interests. "Purchased Assets" means each of
the following assets:
(a) the Purchased DMFs;
(b) the Purchased INDs;
(c) the Marketing Authorizations;
(d) the Inventory;
(e) the Purchased Intellectual Property;
(f) subject to the terms of Section 8.22, copies of
laboratory notebooks to the extent relating to the Purchased Intellectual
Property and the Licensed Assets ("Notebooks"), it being understood that such
Notebooks are included in Excluded Assets other than the Purchaser's right to
receive copies thereof;
(g) all rights of Sellers under the Purchased Contracts;
(h) the Included Books and Records;
(i) all rights of Sellers under non-disclosure or
confidentiality, non-compete, or non-solicitation agreements relating to
Transferred Employees;
(j) the Calcitriol ANDA;
(k) the Product Registration Data;
(l) all goodwill associated with the Purchased Assets;
and
(m) all amounts recoverable or recovered in connection
with Legal Proceedings relating to the Purchased Assets or Licensed Assets
commenced after the Closing Date, subject to Section 2.2(j).
2.2 Licenses.
(a) All the licenses granted in this Section 2.2 are
subject to the terms and conditions set forth herein and, in the case of the
licenses granted from Sellers to Purchaser, the terms and conditions set forth
in the Services Agreement and the Manufacturing Agreement.
19
(b) Development Cross-License.
(i) Purchaser to Sellers:
(A) From and after the Closing Date,
Purchaser hereby grants to Sellers, and Sellers
accept, a worldwide, perpetual, irrevocable
royalty-free license to the Patents and Know How
contained within the Purchased Intellectual Property
and the New Purchased Intellectual Property to
develop any pharmaceutical products other than the
Darvocet-N XR Product or the Lynxorb Product.
(B) The license granted in Section
2.2(b)(i)(A) is exclusive outside the field of Pain
Products and shall become exclusive for all products
other than Lifecycle Products at the end of the Seven
Year Period. It is otherwise nonexclusive.
(C) Sellers shall use all reasonable efforts
to maintain the confidentiality of all confidential
Know How licensed under this Section 2.2(b) and shall
not disclose it to any third party other than as
reasonably warranted in connection with Sellers'
licensed development activities or sublicenses or
assignments as contemplated in Section 2.2(l) and in
any event pursuant to appropriate terms of
confidentiality.
(ii) Sellers to Purchaser:
(A) From and after the Closing Date, Sellers
hereby grant to Purchaser, and Purchaser accepts, a
worldwide irrevocable license to the Patents and Know
How contained within the Licensed Intellectual
Property and New Licensed Intellectual Property to
develop any pharmaceutical products in the field of
Pain Products. This license shall not include fields
to the extent and for the time covered by other
licenses granted in this Section 2.2 with the
intention of the parties being that after taking all
such licenses into account, Purchaser has the sum of
the license rights specified in all the relevant
sections but for each activity of Purchaser, only the
license most specific to that activity applies.
(B) The license granted in Section
2.2(b)(ii)(A) shall expire at the end of the Seven
Year Period, except (x) as otherwise granted in this
Section 2.2, for which it shall survive; and (y) for
products that have reached the stage of development
by or for Purchaser of a prototype and dissolution
profile by the end of the Seven Year Period, as to
which specific products it will survive.
20
(C) Purchaser shall have the right, upon
request, to receive a copy of any written or
electronic embodiments of Know How contained within
the Licensed Intellectual Property and New Licensed
Intellectual Property that are necessary or useful
for the development of Pain Products, provided that
Purchaser shall agree in writing to maintain the
confidentiality of such information pursuant to
appropriate terms of confidentiality; provided,
further, to the extent not precluded by agreements
between Sellers and third parties, Purchaser may
disclose confidential portions of such Know How to
third parties developing Pain Products on Purchaser's
behalf, under appropriate written terms of
confidentiality. Purchaser shall reimburse Sellers at
cost for such materials. All such copies will be
returned to Sellers at the end of the Seven Year
Period.
(c) Exploitation License Back.
(i) Outside Field of Pain Products. From and after
the Closing Date, Purchaser hereby grants to Sellers, and Sellers
accept, a worldwide, exclusive, perpetual, royalty-free, transferable
license to the Patents and Know How contained within the Purchased
Intellectual Property and New Purchased Intellectual Property to make,
have made, distribute, use, sell, offer to sell, have sold, market,
co-market, import, promote and co-promote products other than Pain
Products and Marketed Products.
(ii) Rejected Pain Products. From and after the
Closing Date, Purchaser hereby grants to Sellers, and Sellers accept a
worldwide, exclusive, perpetual, royalty-free, transferable license
(with a right to sublicense without consent) to the Patents and Know
How contained within the Purchased Intellectual Property and New
Purchased Intellectual Property to make, have made, distribute, use,
sell, offer to sell, have sold, market, co-market, import, promote and
co-promote Pain Product(s) that under the terms of Sections 3.3(a)
3.3(b) or 3.3(c), Sellers developed and Sellers offered to Purchaser,
and that Purchaser declined ("Rejected Pain Products"), thereby
entitling Sellers to market such Rejected Pain Product(s) themselves or
through a licensee, in which case the license shall be exclusive but
only as to the specific Rejected Pain Product(s) offered, provided that
in the case of rejected New P/D Products, the license shall only be
effective after the Seven Year Period.
(iii) Non-Offered Pain Products. Purchaser grants to
Sellers an exclusive license under the Patents and Know How contained
within the Purchased Intellectual Property and New Purchased
Intellectual Property of scope equivalent to that granted under Section
2.2(c)(ii) with respect to each product that under the terms of Section
3.3, Sellers are entitled to develop and market without offering to
Purchaser once such products have reached the stage of development of a
prototype and dissolution profile upon delivery by Sellers of a
21
written notice describing in reasonable detail the product that will be
the subject of the exclusive license, provided that in no event will
any license granted pursuant to this Section 2.2(c)(iii) under the
Purchased Intellectual Property or New Purchased Intellectual Property
restrict Purchaser's rights to any Product, any New Product Purchaser
has elected to acquire under Section 3.3, any Derivative Lynxorb
Product, any Derivative Darvocet Product, the Odyssey Product or any
product that Purchaser is legally authorized to develop under the
license granted in Section 2.2(b)(ii)(A). The scope of the exclusive
license shall be automatically conformed to apply only to the specific
product marketed once that product has reached final formulation.
(iv) Sellers shall use all reasonable efforts to
maintain the confidentiality of all confidential Know How licensed
under this Section 2.2(c) and shall not disclose it to any third party
other than as reasonably warranted and pursuant to appropriate terms of
confidentiality.
(d) General License.
(i) Sellers hereby grant Purchaser a license under
the Licensed Intellectual Property and New Licensed Intellectual
Property to make, have made, distribute, use, sell, offer to sell, have
sold, market, co-market, import, promote and co-promote any Pain
Products. Purchaser covenants, however, not to make, have made,
distribute, use, sell, offer to sell, have sold, market, co-market,
import, promote or co-promote any Pain Products using the Licensed
Intellectual Property or New Licensed Intellectual Property other than
the Lynxorb Product (as to the Lynxorb Licensed Assets), Derivative
Lynxorb Products (as to the Lynxorb Licensed Assets), Darvocet-N XR
Product (as to the Darvocet-N XR Know How, the Darvocet-N XR IDM and
the Darvocet-N XR Patents), Derivative Darvocet Products (as to the
Darvocet-N XR Know How, the Darvocet-N XR IDM and the Darvocet-N XR
Patents), Darvocet-N Suspension Product, any New Products that
Purchaser has elected to acquire under Section 3.3 and any products
that Purchaser is legally authorized to develop under the license
granted in Section 2.2(b)(ii)(A).
(ii) Rejected Pain Products. The license granted in
Section 2.2(d)(i) shall terminate with respect to Rejected Pain
Products upon Sellers' entitlement to market a Rejected Pain Product,
but only with respect to the particular Rejected Pain Product offered.
(iii) Non-Offered Pain Products. The license granted
in Section 2.2(d)(i) shall terminate with respect to Pain Products that
under the terms of Section 3.3 Sellers are entitled to develop and
market without offering to Purchaser once such products have reached
the stage of development of a prototype and dissolution profile upon
delivery by Sellers of a written notice describing in reasonable detail
the product that will be the subject of the termination, provided that
in no event will the termination with respect to the
22
Purchased Intellectual Property or New Purchased Intellectual Property
restrict Purchaser's rights to any Product, any New Product Purchaser
has elected to acquire under Section 3.3, any Derivative Lynxorb
Product, any Derivative Darvocet Product, the Odyssey Product or any
product that Purchaser is legally authorized to develop under the
license granted in Section 2.2(b)(ii)(A). The scope of the termination
shall be automatically conformed to apply only to the specific product
marketed once that product has reached final formulation.
(e) Lynxorb License.
(i) Sellers hereby grant to Purchaser, and Purchaser
accepts a worldwide, exclusive, perpetual, transferable license under
the Lynxorb Licensed Assets and New Licensed Intellectual Property
necessary or useful for the Lynxorb Product or Derivative Lynxorb
Products in order to develop, make, have made, distribute, use, sell,
offer to sell, have sold, market, co-market, import, promote and
co-promote the Lynxorb Product and Derivative Lynxorb Products, which
license is irrevocable for all assets other than the ProSorb Trademark,
but which as to the ProSorb Trademark may be terminated as set forth in
Section -------- 2.2(e)(ii). For the avoidance of doubt, Sellers retain
all rights to exploit the ProSorb Trademark for products other than
with respect to the Lynxorb Product and Derivative Lynxorb Products and
Purchaser is prohibited from exploiting its trademark rights under this
Section 2.2(e)(i) except with respect to the Lynxorb Product and
Derivative Lynxorb Products.
(ii) All uses by Purchaser, its Affiliates and their
respective sublicensees and assigns of the ProSorb Trademark (whether
on Lynxorb Products or Derivative Lynxorb Products, in marketing
materials or otherwise) shall be in an appropriate manner, without
jeopardizing the significance, distinctiveness or validity of such
trademarks; shall use the designation "(R)" with such trademarks and
labeled as a registered trademark of Parent; and shall only be in such
form and manner as approved in writing by Sellers. Purchaser shall only
use the ProSorb Trademark on products of high quality that do not
tarnish, dilute or diminish the current value of such trademarks. All
trademark rights from the use of the ProSorb Trademark by Purchaser,
its Affiliates and their respective sublicensees and assigns will inure
to the benefit of Sellers. Neither Purchaser, its Affiliates nor their
respective sublicensees and assigns shall contest or challenge the
validity of, or Sellers' ownership of, the ProSorb Trademark. All
Lynxorb Products and Derivative Lynxorb Products and related marketing
materials featuring the ProSorb Trademark must be manufactured,
labeled, sold, distributed and advertised in accordance with all
Applicable Laws. Once each calendar year upon the written request of
Sellers, in order that Sellers can assure themselves of the maintenance
of the above-described quality standards, Purchaser and its Affiliates
will, and shall cause their respective sublicensees and assigns to: (i)
provide to Sellers at cost (not to exceed $10.00) two (2) then-current
production samples of each Lynxorb Product or Derivative Lynxorb
Product featuring the ProSorb Trademark (with the current packaging) to
the extent not
23
manufactured by AAI DS, together with two (2) copies of all marketing
materials, and (ii) permit Sellers to inspect the manufacturing process
for each Lynxorb Product and Derivative Lynxorb Product not
manufactured by AAI DS featuring the ProSorb Trademark upon five (5)
Business Days prior notice, which inspection shall be scheduled during
normal business hours. If Sellers reasonably determine that Purchaser
has breached the provisions of this Section 2.2(e)(ii) with respect to
the ProSorb Trademark and such breach is not materially cured within
sixty (60) days after Purchaser's receipt of written notice thereof,
Sellers may terminate the license granted in Section 2.2(e)(i) above
with respect to the ProSorb Trademark subject to such violation
immediately upon written notice to Purchaser.
(f) Darvocet-N XR License.
(i) Sellers hereby grant to Purchaser, and Purchaser
accepts a worldwide, exclusive, perpetual, irrevocable, transferable
license under the Darvocet-N XR Know How, Darvocet-N XR IDM and New
Licensed Intellectual Property necessary or useful for Darvocet-N XR
Product or Derivative Darvocet Products in order to develop, make, have
made, distribute, use, sell, offer to sell, have sold, market,
co-market, import, promote and co-promote the Darvocet-N XR Product and
Derivative Darvocet Products.
(ii) Sellers hereby grant to Purchaser, and Purchaser
accepts a worldwide, exclusive, perpetual, irrevocable, transferable
license under any patent that solely and exclusively relates to the
Darvocet-N XR Product (the "Darvocet-N XR Patents") with respect to the
full scope of rights provided by such patent.
(g) Azathioprine Product License. Sellers hereby grant to
Purchaser, and Purchaser accepts a worldwide, exclusive, perpetual, irrevocable,
transferable license under the Azathioprine Product Assets in order to develop,
make, have made, distribute, use, sell, offer to sell, have sold, market,
co-market, import, promote and co-promote the Azathioprine Product. For the
avoidance of doubt, no right is granted hereunder to use the Azathioprine
Product Assets in connection with any dosages other than the 50 mg dose of the
Azathioprine Product.
(h) Patent Prosecution.
(i) Platform Patents. Sellers shall prepare and file,
at Sellers' expense, subject to the review and approval of Purchaser,
one or more patent applications claiming the invention disclosed in the
Darvocet-N XR IDM or as further developed to the final Darvocet-N XR
Product. Once filed, prosecution of that patent application shall be
under the control and the expense of Sellers. Purchaser agrees to
coordinate with Sellers in the prosecution of those applications to
ensure consistency with Sellers' other patent filing efforts regarding
similar and "platform" inventions. Sellers shall give due consideration
to Purchaser's input in the prosecution of these applications.
24
(ii) Lynxorb. Purchaser shall prepare and file, to
the extent possible, at Purchaser's expense, subject to the review of
Sellers, one or more patent applications claiming potentially
patentable subject matter to the extent solely and directly related to
the Lynxorb Product.
(iii) Other Licensed Patents. Sellers shall prepare
and file, at Sellers' expense, to the extent practicable, subject to
the review, but not approval, of Purchaser, all other patent
applications that are contained within the Licensed Intellectual
Property with a scope that allows at a minimum for protection of the
final Darvocet-N XR Product and Lynxorb Product. Once filed,
prosecution of these applications shall be under the control of and at
the expense of Sellers. Sellers agree to coordinate with Purchaser in
the prosecution of those applications to ensure consistency with
Purchaser's other patent filing efforts and the development of the
products acquired hereunder. Sellers shall give due consideration to
Purchaser's input in the prosecution of these applications.
(iv) Purchaser Prosecution Rights. Sellers hereby
appoint Purchaser its agent to file patent applications claiming the
inventions contained within the Licensed Intellectual Property and
prosecute such applications and any other patent applications contained
within the Licensed Intellectual Property that solely pertain to Pain
Products. Purchaser covenants, however, not to exercise its right to so
file and prosecute while Sellers are making commercially reasonable
efforts to file and prosecute such inventions.
(i) Orange Book. Purchaser hereby agrees that if Sellers
request that any Patents contained in the Purchased Intellectual Property or New
Purchased Intellectual Property be listed in the Orange Book and such listing
would protect products of Sellers other than those acquired hereunder, it will
consent to such listing so long as it does not reasonably believe, in good
faith, that such listing would give rise to a claim of patent misuse. Sellers
hereby agree that if Purchaser requests that any Patents contained in the
Licensed Intellectual Property or New Licensed Intellectual Property be listed
in the Orange Book and such listing would protect products acquired hereunder,
it will consent to such listing so long as it does not reasonably believe, in
good faith, that such listing would give rise to a claim of patent misuse.
(j) Third Party Infringement.
(i) If either party learns of any actual or
threatened infringement, misappropriation, dilution, tarnishment, or
unauthorized use of the Purchased Intellectual Property or Licensed
Intellectual Property by any third Person, such party shall notify the
other party of such infringement in writing. Either party shall have
the right, but not the obligation, to take any action against such
third Person to stop the same, or otherwise enforce Purchaser's rights
in the Purchased Intellectual Property and Seller's rights in the
Licensed Intellectual Property. If a party initiates suit as
contemplated in this Section 2.2(j)(i), such party shall have the
exclusive right to employ counsel of its own selection and to
25
direct and control the litigation or any settlement thereof. The party
that initiates suit shall notify the other party in writing. In the
event either party initiates suit, (A) the other party shall cooperate
in such action, (B) the other party shall have the right to retain
separate counsel in connection with any such action (the costs of such
separately-retained counsel at that party's expense, provided, that if
the other party is a necessary party to such action, the costs of such
separately retained counsel shall be at the expense of the party
bringing the action), and (C) the party bringing the action shall
reimburse the other party for all reasonable costs, attorneys' fees and
other expenses incurred by the other party in connection with such
action, including appropriate reimbursement for time of that party's
personnel involved in discovery, trial and other related matters,
except as provided in Section 2.2(j)(i)(B). Nothing herein shall be
construed to prevent Sellers and Purchaser from taking action jointly
in any infringement suit or other action with respect to the Purchased
Intellectual Property.
(ii) Each party shall be entitled to any recovery of
damages (including payments received in any settlement) resulting from
a lawsuit brought solely in its own name and, in the event both Sellers
and Purchaser are joint parties to any lawsuit, Sellers and Purchaser
shall share in any recovery, after reimbursement of each party's
expenses in connection with the action, including appropriate
reimbursement for time of that party's personnel involved in discovery,
trial and other related matters, in proportion to the expenses it
incurred. Neither party may settle with an infringer in a manner which
could reasonably be considered to negatively impact any rights of the
other without the other's prior written approval, which approval shall
not be unreasonably withheld or delayed.
(k) Sellers agree that they will not, during or after the
term of this Agreement, in any way challenge the validity of the Purchased
Intellectual Property or Purchaser's ownership thereof. Purchaser agrees that if
Purchaser challenges the validity of the Licensed Intellectual Property,
Purchaser will pay Sellers' expenses in connection therewith.
(l) Any license granted pursuant to this Section 2.2
shall be freely transferable and sub licensable, and may be assumed and/or
assigned in whole or in part without the consent of any Party, so long as the
transfer, sublicense, assumption and/or assignment is subject to the obligation
and restrictions contained in this Agreement.
(m) Purchaser acknowledges and agrees that a breach of
Sections 2.2(d)(i) (second sentence) or 3.4(b) (last paragraph) would cause
irreparable damage to Sellers not compensable by monetary damages and that
Sellers will not have an adequate remedy at law. Therefore, Purchaser's
obligations under Section 2.2(d)(i) (second sentence) or 3.4(b) (last paragraph)
shall be enforceable by, and Sellers shall be entitled to seek, temporary,
preliminary and/or permanent equitable or injunctive relief (including a decree
of specific performance) from any court of competent jurisdiction, without the
necessity of posting bond. Sellers' remedies under this Section 2.2(m) shall,
26
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.
2.3 Excluded Assets. Nothing herein contained shall be deemed to
transfer, assign or convey the Excluded Assets to Purchaser, and Sellers shall
retain all right, title and interest to, in and under the Excluded Assets.
"Excluded Assets" means each of the following assets:
(a) the Excluded Contracts;
(b) cash, cash equivalents, all prepayments (including
all prepayments made to third party manufacturers, suppliers and contractors),
deferred assets, refunds, credits or overpayments or other receivables for
Taxes;
(c) all accounts receivable of Sellers;
(d) all books and records to the extent related to or
constituting (i) human resources and any other employee-related files and
records for employees that are not Transferred Employees or any other books and
records Sellers are required by law to retain, (ii) original (but not copies of)
financial and accounting records; (iii) any tax files, returns, documents,
instruments, papers, books and records not related to the Purchased Assets or
Assumed Liabilities; (iv) original (but not copies of, to the extent relating to
the Purchased Intellectual Property and the Licensed Assets) laboratory
notebooks and (v) Excluded Assets or Excluded Liabilities (collectively, the
"Excluded Books and Records");
(e) the AAI Trademarks;
(f) the AAI IP;
(g) all rights of Sellers under or pursuant to all
warranties, representations and guarantees made by suppliers, manufacturers and
contractors to the extent relating to Products sold by, or services provided to,
Sellers or to the extent affecting any Purchased Assets in respect of matters
occurring prior to the Closing Date;
(h) any refund or credit of (i) Taxes that relate to the
Purchased Assets or the Assumed Liabilities attributable to any period or
portion thereof ending prior to the Closing Date, including any Taxes allocated
to Sellers pursuant to Section 12.2 and (ii) Taxes of Sellers that are not
Assumed Liabilities;
(i) all deposits (including customer deposits and
security deposits for rent, electricity, telephone or otherwise) and prepaid
charges and expenses of Sellers and its Subsidiaries;
(j) all amounts recoverable or recovered by Sellers or
their Affiliates in connection with any Legal Proceedings commenced prior to the
Closing Date, or after
27
the Closing Date to the extent not related to the Purchased Assets or the
Licensed Assets subject to Section 2.2(j).
(k) all manufacturing and laboratory facilities;
(l) all computers, software and office equipment,
personal property, furniture, fixtures and equipment;
(m) all real estate and leasehold interests of Sellers;
and
(n) all businesses of Sellers and their Affiliates other
than the Business.
2.4 Assumption of Liabilities. On the terms and subject to the
conditions set forth in this Agreement, at the Closing Purchaser shall (or shall
cause its designated Affiliate or Affiliates to) assume, effective as of the
Closing, only the following liabilities of Sellers (collectively, the "Assumed
Liabilities"):
(a) all Liabilities of Sellers under the Purchased
Contracts that arise out of or relate to the period on and after the Closing
Date;
(b) all Liabilities for (i) Purchaser's portion of the
Transfer Taxes pursuant to Section 12.1 and (ii) Taxes that relate to the
Purchased Assets or the Assumed Liabilities for taxable periods (or portions
thereof) beginning on or after the Closing Date, including any Taxes allocated
to Purchaser pursuant to Section 12.2; and
(c) all Liabilities relating to amounts required to be
paid by Purchaser hereunder.
2.5 Excluded Liabilities. Notwithstanding anything in this
Agreement to the contrary, Purchaser shall not assume, and shall be deemed not
to have assumed, any Liabilities relating to the Business of Sellers or any
Affiliate of Sellers except as expressly provided in Section 2.4 hereof or
elsewhere in this Agreement, and Sellers and their Affiliates shall be solely
and exclusively liable with respect to all such Liabilities, other than the
Assumed Liabilities (collectively, the "Excluded Liabilities"), including
without limitation, those Liabilities set forth below:
(a) all Liabilities in respect of any and all Products
sold and/or services performed by Sellers before the Closing Date, including
product liability claims;
(b) all Environmental Costs and Liabilities, to the
extent arising out of or otherwise related to (i) the ownership or operation by
Sellers of the Business on or prior to the Closing Date, (ii) the manufacture by
Sellers' or their Subsidiaries at any time of the Products set forth in Exhibit
E and (iii) the Excluded Assets or any other real property presently or formerly
owned, operated, leased or otherwise used by Seller;
28
(c) except to the extent specifically provided in
Article IX, all Liabilities arising out of, relating to or with respect to (i)
the employment or performance of services, or termination of employment or
services by Sellers or any of its Affiliates of any individual before the
Closing Date, (ii) workers' compensation claims against Sellers or any of their
Subsidiaries that relate to the period before the Closing Date, irrespective of
whether such claims are made prior to or after the Closing or (iii) any employee
benefit plan of Sellers or their Affiliates;
(d) all Liabilities arising out of, under or in
connection with Contracts that are not Purchased Contracts and, with respect to
Purchased Contracts, Liabilities in respect of a breach by or default of Sellers
accruing under such Contracts with respect to any period prior to Closing and
all Cure Amounts;
(e) all Liabilities arising out of, under or in
connection with any Indebtedness of Sellers or any of their Subsidiaries;
(f) all Liabilities for (i) Sellers' portion of the
Transfer Taxes pursuant to Section 12.1, (ii) Taxes of Sellers that are not
Assumed Liabilities, (iii) Taxes that relate to the Purchased Assets or the
Assumed Liabilities for taxable periods (or portions thereof) ending before the
Closing Date, including any Taxes allocated to Sellers pursuant to Section 12.2,
and (iv) payments under any Tax allocation, sharing or similar agreement
(whether oral or written) with respect to which Sellers or any Affiliates are
liable;
(g) all Liabilities in respect of any pending or
threatened Legal Proceeding, or any claim arising out of, relating to or
otherwise in respect of (i) the operation of the Business to the extent such
Legal Proceeding or claim relates to such operation prior to the Closing Date,
or (ii) any Excluded Asset; and
(h) all Liabilities relating to amounts required to be
paid by Sellers hereunder.
2.6 Cure Amounts. At Closing and pursuant to Section 365 of the
Bankruptcy Code, Sellers shall assume and assign to Purchaser the Purchased
Contracts. The cure amounts, as determined by the Bankruptcy Court, if any (the
"Cure Amounts"), necessary to cure all defaults, if any, and to pay all actual
or pecuniary losses that have resulted from such defaults under the Purchased
Contracts, shall be paid by Sellers, on or before Closing, and not by Purchaser
and Purchaser shall have no liability therefor. Notwithstanding the foregoing,
in the event the actual Cure Amounts for all Purchased Contracts required to be
paid by Sellers on the Closing Date in accordance with this Section 2.6 exceed
the aggregate of the estimated Cure Amounts set forth on Schedule 1.1(i) for
such Purchased Contracts (such excess, the "Excess Cure Amount") by $6,000,000
or more, then Purchaser may, by written notice to Sellers, elect to (i) pay the
amount by which the Excess Cure Amount exceeds $6,000,000 and/or (ii) cause
Sellers to reject any Purchased Contract or (iii) to the extent the failure to
assume the Purchased Contract would result in a Material Adverse Effect,
terminate this Agreement
29
in accordance with Section 4.4(f). If Purchaser elects to proceed pursuant to
clause (i) and/or (ii) above, then Sellers shall pay, in addition to the
aggregate Cure Amounts specified in Schedule 1.1(i), the first $6,000,000 of the
Excess Cure Amount.
2.7 Services Agreement, Manufacturing Agreement and Odyssey
Co-Development Agreement. At the Closing, Purchaser and Sellers shall enter into
and deliver to each other the (i) Services Agreement, (ii) Manufacturing
Agreement and (iii) Odyssey Co-Development Agreement.
2.8 Further Conveyances and Assumptions. From time to time
following the Closing, Sellers and Purchaser shall, and shall cause their
respective Affiliates to, execute, acknowledge and deliver all such further
conveyances, notices, assumptions, releases and acquaintances and such other
instruments, and shall take such further actions, as may be necessary or
appropriate to assure fully to Purchaser and its respective successors or
assigns, all of the properties, rights, titles, interests, estates, remedies,
powers and privileges intended to be conveyed to Purchaser under this Agreement
and the Seller Documents and to assure fully to Sellers and their Affiliates and
their successors and assigns, the assumption of the liabilities and obligations
intended to be assumed by Purchaser under this Agreement and the Seller
Documents, and to otherwise make effective the transactions contemplated hereby
and thereby.
2.9 Bulk Sales Law. Purchaser hereby waives compliance by Sellers
with the requirements and provisions of any "bulk-transfer" Laws of any
jurisdiction that may otherwise be applicable with respect to the sale of any or
all of the Purchased Assets to Purchaser. Pursuant to Section 363(f) of the
Bankruptcy Code, the transfer of the Purchased Assets shall be free and clear of
any security interests in the Purchased Assets, including any Liens or claims
arising out of the bulk transfer laws, and the parties shall take such steps as
may be necessary or appropriate to so provide in the Sale Order.
ARTICLE III
CONSIDERATION
3.1 Consideration. The aggregate consideration for the Purchased
Assets shall be (i) the payment by Purchaser to Seller, in the manner provided
in Section 3.9 hereof, of $170,000,000, less the Development Costs, if any (the
"Purchase Price"), provided that if the Closing Date does not occur within the
ninetieth (90th) day following the commencement of the Chapter 11 Case (the
"Adjustment Deadline"), the Purchase Price shall be reduced by $1,500,000 on
each weekly anniversary of the Adjustment Deadline prior to the Closing Date
(the "Purchase Price Adjustment"), provided that the Purchase Price Adjustment
shall not be applicable to any week (or portion thereof) after the Adjustment
Deadline in which (A) there shall be an uncured breach by Purchaser of covenant
or agreement contained in this Agreement which would result in a failure of a
condition set forth in Section 10.2 or 10.3 and all other conditions set forth
in Article X (other than conditions that by their nature are to be satisfied at
the Closing) to have been satisfied or (B) the waiting period under the HSR Act
shall not have expired or early
30
termination shall not have been granted; provided, further, that in no event,
shall the Purchase Price Adjustment exceed $6,000,000 in the aggregate, (ii) the
assumption by Purchaser of the Assumed Liabilities, and (iii) the payment by
Purchaser to Sellers of royalty payments pursuant to Section 3.2. Commencing on
the one hundred twentieth (120th) day following the commencement of the Chapter
11 Case and provided that the Closing Date has not yet occurred, Purchaser shall
have the right to terminate this Agreement pursuant to Section 4.4; provided,
however, that in the event Purchaser terminates this Agreement pursuant to
Section 4.4, Purchaser shall be paid the Expense Reimbursement on the first
(1st) Business Day after such termination and Purchaser shall remain entitled to
receive the Break-Up Fee in accordance with Section 7.1 upon the satisfaction of
the conditions set forth therein.
3.2 Royalties on Lifecycle Products. From the Closing Date through
December 31, 2011, Purchaser shall pay to Parent royalties on the aggregate Net
Sales of the Lifecycle Products as follows:
(a) 0% of Net Sales under $25,000,000 per calendar
quarter,
(b) 5% of Net Sales between $25,000,000 and $50,000,000
per calendar quarter and
(c) 10% of Net Sales over $50,000,000 per calendar
quarter.
Within ten (10) Business Days after the end of each calendar quarter, Purchaser
shall provide to Parent a written statement (each, a "Lifecycle Products
Statement"), which shall set forth the aggregate Net Sales of the Lifecycle
Products for such quarter and the calculation of the corresponding royalty
payment. Purchaser shall pay to Parent such royalty payment reflected in such
Lifecycle Products Statement within twenty (20) Business Days after the end of
each calendar quarter.
3.3 Products Option.
(a) If at any time between the Closing Date and the
seventh (7th) anniversary of the Closing Date (the "Seven Year Period") Sellers
or any of their Subsidiaries develop to the stage of creation of a prototype and
dissolution profile any new Pain Product (a "New Product") that contains
propoxyphene and/or diclofenac (a "New P/D Product"), then Sellers shall, or
shall cause their Subsidiaries to, offer in writing to Purchaser prior to any
other Person the option for a sixty (60) day period (as such time period may be
extended as provided for in Section 3.3(e), the "Period of Election") to acquire
any such New P/D Product. Purchaser shall accept or reject such offer by Sellers
during the Period of Election. If Purchaser notifies Sellers in writing within
the Period of Election that Purchaser declines to exercise such option to
acquire any such New P/D Product, then Sellers shall not sell, license,
transfer, assign, convey or deliver such New P/D Product to any third party for
the remainder of the Seven Year Period; provided, however, that Purchaser
acknowledges that Sellers may continue to develop (but not commercialize) such
New P/D Product during the Seven Year Period.
31
(b) If during the Seven Year Period Sellers or any of
their Subsidiaries develop to the stage of creation of a prototype and
dissolution profile any New Product that (i) does not contain propoxyphene
and/or diclofenac, and (ii) is an opioid/APAP combination or an opioid/NSAID
combination (a "New Combo Product"), then Sellers shall, or shall cause their
Subsidiaries to, offer in writing to Purchaser prior to any other Person the
option for a Period of Election to acquire any such New Combo Product. Purchaser
shall accept or reject such offer by Sellers during the Period of Election. If
Purchaser notifies Sellers in writing within this Period of Election that
Purchaser declines to exercise such option to acquire any such New Combo
Product, then Purchaser shall have no further rights with respect to the New
Combo Product, and Sellers shall have no further obligation to notify Purchaser
with respect to such New Combo Product and may continue to develop, make, have
made, distribute, use, sell, offer to sell, have sold, market, co-market,
import, promote and co-promote such New Combo Product or sublicense such New
Combo Product to a third party.
(c) If at any time between the Closing Date and the
fifth (5th) anniversary of the Closing Date (the "Five Year Period") Sellers or
any of their Subsidiaries develop to the stage of creation of a prototype and
dissolution profile any New Product for their own internal business purpose and
not for any third party, and such New Product (i) does not contain propoxyphene
and/or diclofenac and (ii) is not an opioid/APAP combination or an opioid/NSAID
combination (a "New Internal Product"), then Sellers shall, or shall cause their
Subsidiaries to, offer in writing to Purchaser prior to any other Person the
option for a Period of Election to acquire any such New Internal Product.
Purchaser shall respond to such offer by Sellers during the Period of Election.
If Purchaser notifies Sellers that Purchaser declines to exercise such option to
acquire any such New Internal Product, then Purchaser shall have no further
rights with respect to the New Internal Product, and Sellers shall have no
further obligation to notify Purchaser with respect to such New Internal Product
and may continue to develop, make, have made, distribute, use, sell, offer to
sell, have sold, market, co-market, import, promote and co-promote such New
Internal Product or sublicense such New Internal Product to a third party.
(d) If Purchaser notifies Sellers in writing that it
elects to acquire any New Product, within the applicable Period of Election,
pursuant to Sections 3.3(a), 3.3(b) or 3.3(c), then:
(i) Sellers will develop such New Product and, during
the period of time between the commercial launch of such New Product
and the tenth (10th) anniversary of such commercial launch (the "Ten
Year Period"), Purchaser shall pay to Sellers or their Subsidiaries, as
the case may be, the amounts specified in the Services Agreement in
connection with the development of such New Product and royalties on
the aggregate Net Sales of such New Product as follows:
(x) 7.5% of Net Sales up to and including
$25,000,000 per calendar quarter, and
32
(y) 10% of the portion of Net Sales, if any,
over $25,000,000 per calendar quarter;
or
(ii) Sellers shall notify Purchaser within
twenty (20) Business Days after their receipt of Purchaser's notice if
Sellers are unable or unwilling to continue development and production
of any such New Product, and Sellers shall promptly grant to Purchaser
a license to utilize any and all intellectual property of Sellers
necessary or useful to any such New Product to enable Purchaser to
either develop such New Product internally or utilize a third party to
develop such New Product, and during the Ten Year Period Purchaser
shall pay to Sellers or their Subsidiary, as the case may be, royalties
on the aggregate Net Sales of such New Product as follows:
(x) 3.75% of Net Sales up to and including
$25,000,000 per calendar quarter, and
(y) 5% of the portion of Net Sales, if any,
over $25,000,000 per calendar quarter;
provided that for each Derivative Darvocet Product and each Derivative Lynxorb
Product that Sellers develop and license to Purchaser in accordance with the
terms of this Section 3.3, Purchaser shall pay to Sellers or their Subsidiaries,
as the case may be, royalties pursuant to Section 3.2 prior to December 31, 2011
and royalties pursuant to Section 3.3(d)(i) from the period January 1, 2012
through the end of the Ten Year Period for that product. For each Derivative
Darvocet Product and each Derivative Lynxorb Product that Purchaser develops and
offer to Sellers and that Sellers decline in accordance with the terms of this
Section 3.3, or that Purchaser otherwise develops on its own, Purchaser shall
pay to Sellers or their Subsidiaries, as the case may be, royalties pursuant to
Section 3.2 prior to December 31, 2011 and royalties pursuant to Section
3.3(d)(ii) from the period January 1, 2012 through the end of the Ten Year
Period for that product.
(e) Notwithstanding the foregoing, with regard to the
Period of Election for an option of Purchaser to acquire a New Product pursuant
to Section 3.3(a), Section 3.3(b) or Section 3.3(c), no Period of Election shall
expire less than six (6) months after the expiration of the Period of Election
for the immediately preceding New Product (if any) in the event that Purchaser
has exercised its option to acquire such immediately preceding New Product;
provided, however, that in the event that Purchaser has declined such
immediately preceding New Product, the Period of Election for the then-current
New Product shall expire sixty (60) days after the later of the date that
Purchaser declined such immediately preceding New Product and the date of
submission of the then-current New Product.
(f) If Sellers or any of their Subsidiaries are
contracted to develop any New Product by and for any unaffiliated third party
and not for Sellers' own internal
33
business purpose, and such New Product (i) does not contain propoxyphene and/or
diclofenac and (ii) is not an opioid/APAP combination or an opioid/NSAID
combination, then Purchaser shall have no rights with respect to the New Product
and Sellers shall have no obligation to notify Purchaser with respect to such
New Product and may develop, make, have made, distribute, use, sell, offer to
sell, have sold, market, co-market, import, promote and co-promote such New
Product or sublicense such New Product to a third party.
(g) To the extent Purchaser exercises an option under
this Section 3.3, if Purchaser notifies Sellers in writing that (y) it elects to
develop any such New Product internally or to utilize a third party to develop
such New Product and (z) it has determined that Sellers are or reasonably could
be impaired in their ability to perform in accordance with Section 3.3 in a
timely manner with respect to any such New Product, Sellers shall promptly grant
to Purchaser a license to utilize any and all intellectual property of Sellers
applicable to any such New Product to enable Purchaser to either develop such
product internally or utilize a third party to develop such product, and during
the Ten Year Period Purchaser shall pay to Sellers or their Subsidiaries, as the
case may be, royalties on the aggregate Net Sales of such New Product as
follows:
(i) 3.75% of Net Sales up to and including
$25,000,000 per calendar quarter, and
(ii) 5% of the portion of Net Sales, if any, over
$25,000,000 per calendar quarter.
(h) Within ten (10) Business Days after the end of each
calendar quarter, Purchaser shall provide to Parent a written statement (each, a
"New Product Statement"), which shall set forth the aggregate Net Sales of each
such New Product for such calendar quarter and the calculation of the
corresponding royalty payment. Purchaser shall pay to Parent such royalty
payment reflected in such New Product Statement within twenty (20) Business Days
after the end of each calendar quarter.
(i) With respect to each New Product that Purchaser
elects to acquire, all royalty payments by Purchaser with respect to such New
Product pursuant to this Section 3.3 shall be reduced by 50% upon the commercial
launch of a generic version of such New Product.
(j) Upon submission of a notice that Purchaser elects to
acquire a New Product, Sellers shall immediately assign to Purchaser all New
Purchased Intellectual Property associated with the New Product.
(k) In the event that Purchaser elects to acquire a New
Product pursuant to Section 3.3(a), Section 3.3(b) or Section 3.3(c), Purchaser
agrees to use commercially reasonable efforts to develop or have developed, as
applicable, market such New Product; provided, however, that Purchaser shall
have the right to terminate its license to such New Product provided that
Purchaser assigns back the New Purchased
34
Intellectual Property. If Purchaser terminates its license to such New Product,
then Purchaser shall have no further rights or obligations with respect to the
New Product (including, but not limited to, the obligation to market such New
Product), and Sellers may make, have made, distribute, use, sell, offer to sell,
have sold, market, co-market, import, promote and co-promote such New Product or
sublicense such New Product to a third party (subject to the restrictions
regarding New P/D Products during the Seven Year Period).
(l) Sellers and Purchaser shall negotiate in good faith
the focus of Sellers' development efforts regarding the New Products that may be
submitted under this Section 3.3 for Purchaser's option, which negotiation is
anticipated to include the planned identity and order of the first several New
Products.
(m) Notwithstanding anything herein to the contrary, any
Pain Product that has been developed to the state of creation of a prototype and
dissolution profile (i) prior to the date hereof, (ii) during the period of time
between the date hereof and the Closing Date, or (iii) after the Closing Date,
which is owned by Sellers or their Subsidiaries and has not been licensed to a
third party prior to the date hereof, shall be considered a New Product which
Sellers shall, or shall cause their Subsidiaries to, offer in writing to
Purchaser prior to any other Person the option for a Period of Election to
acquire any such New Product pursuant to Section 3.3(a), Section 3.3(b) or
Section 3.3(c), provided that such new Pain Product contains or does not
contain, as applicable, the chemical ingredients or compounds required by such
sections.
(n) Notwithstanding anything herein to the contrary,
including this Section 3.3 and Section 8.9, this Agreement shall not prevent
Sellers or their Affiliates from providing any routine services to third
parties, where Sellers or their Affiliates are merely implementing such third
parties' instructions and Sellers or their Affiliates are not engaged in
providing formulating services to such parties or otherwise performing inventive
work (including conceiving inventions for the third party or reducing the third
party's inventions to practice). Illustrative examples of such non-precluded
routine services include (i) chemical structure analysis and elucidation of
compounds or chemicals independently provided by third parties (without
formulation by Sellers or their Affiliates) (ii) clinical supply manufacturing
on a contract basis of compounds or chemicals independently provided by third
parties; (iii) clinical studies; (iv) validation services with respect to
processes and methods; (v) regulatory services; (vi) method development; and
(vii) stability testing.
(o) For the avoidance of doubt, the terms of Sellers'
right to develop New Products as set forth herein shall be subject to the
Services Agreement.
3.4 Option on Purchaser Developed Products. If at any time during
the Seven Year Period Purchaser wants to internally develop, or wants to utilize
a third party to develop, any Pain Product containing (i) propoxyphene and/or
diclofenac or (ii) an opioid/APAP combination or an opioid/NSAID combination (a
"Purchaser Developed Product"), then Purchaser shall offer in writing to Sellers
prior to any other Person the
35
option for a Period of Election to develop any such Purchaser Developed Product.
Sellers shall respond to such offer by Purchaser during the Period of Election.
If Sellers notify Purchaser that Sellers decline to exercise such option to
develop any such Purchaser Developed Product, then Sellers shall have no further
rights with respect to the Purchaser Developed Product, and Purchaser shall have
no further obligation to notify Sellers with respect to such Purchaser Developed
Product and may develop, or may utilize a third party to develop, such Purchaser
Developed Product. If Seller notifies Purchaser in writing that it elects to
develop any Purchaser Developed Product within such Period of Election, then:
(a) Sellers will develop such Purchaser Developed Product
and, during the Ten Year Period, Purchaser shall pay to Sellers or their
Subsidiaries, as the case may be, the amounts specified in the Services
Agreement in connection with the development of such New Product and royalties
on the aggregate Net Sales of such Purchaser Developed Product as follows:
(i) 7.5% of Net Sales up to and including
$25,000,000 per calendar quarter, and
(ii) 10% of the portion of Net Sales, if any,
over $25,000,000 per calendar quarter;
or
(b) Sellers shall notify Purchaser within sixty (60)
Business Days after their receipt of Purchaser's notice if Sellers are unable or
unwilling to develop and produce any such Purchaser Developed Product; provided,
however, that Sellers shall have no right to any royalty payments with respect
to such Purchaser Developed Product pursuant to this Section 3.4(b).
Notwithstanding the foregoing, with regard to the Period of
Election for an option of Sellers to develop a Purchaser Developed Product
pursuant to this Section 3.4, no Period of Election shall expire less than six
(6) months after the expiration of the Period of Election for the immediately
preceding Purchaser Developed Product (if any) in the event that Sellers have
exercised their option to develop such immediately preceding Purchaser Developed
Product; provided, however, that in the event that Sellers have failed to elect
to develop such immediately preceding Purchaser Developed Product, the Period of
Election for the then-current Purchaser Developed Product shall expire sixty
(60) days after the end of the Period of Election in which Sellers failed to
make such election and the date of submission of the then-current Purchaser
Developed Product.
Purchaser covenants not to develop any pharmaceutical products
using the Patents and Know How contained within the Licensed Assets and
Purchased Assets during the Seven Year Period except with respect to Lifecycle
Products that Purchaser requested Sellers to develop and Sellers were unable or
unwilling to develop, in which case Purchaser may develop such Lifecycle
Products itself or retain a third party to do the
36
same using, in the case of Derivative Darvocet Products, the Darvocet-N Know How
and the Darvocet-N XR IDM and, in the case of Derivative Lynxorb Products, the
ProSorb Patents and the ProSorb Know How.
3.5 Odyssey.
(a) On the Closing Date, Purchaser and Sellers shall
enter into the Odyssey Co-Development Agreement for the development and
commercialization of the Odyssey Product. Pursuant to the Odyssey Co-Development
Agreement, Sellers shall grant to Purchaser an exclusive license to the Odyssey
Patents and Odyssey Know How for all pharmaceutical products containing the
Odyssey Ingredient as the sole active ingredient. The Odyssey Co-Development
Agreement shall further provide that Purchaser shall pay for all costs and
expenses relating to the development and commercialization of the Odyssey
Product, including costs arising from the defense and prosecution of the Odyssey
Patent application filed on May 26, 2004 and Odyssey Know How, in each case
solely as it relates to products containing the Odyssey Ingredient.
(b) Each party shall retain fifty percent (50%) of any
cash proceeds from the development and commercial exploitation of the Odyssey
Product (net of Purchaser's and Sellers' aggregate costs and expenses incurred
in connection with the development and commercial exploitation of the Odyssey
Product) (the "Net Cash Proceeds").
(c) If Purchaser and Sellers mutually agree to sell the
rights to the Odyssey Product, then each party shall retain fifty percent (50%)
of the sale proceeds (net of Purchaser's and Sellers' aggregate costs and
expenses incurred in connection with the development and commercial exploitation
of the Odyssey Product) (the "Net Sale Proceeds"). To the extent there is any
deferred consideration in such sale, including, but not limited to, milestone
payments and royalties, each party shall retain fifty percent (50%) of any such
deferred compensation.
(d) Notwithstanding the foregoing, in the event that
Purchaser has not enrolled at least one (1) subject in a PK Study on or prior to
the later of six (6) months (i) from the Closing Date, or (ii) after the date
upon which delivery of the Odyssey Product formulation and clinical supply
thereof is made by Sellers to Purchaser, then thereafter Purchaser shall only
retain twenty-five percent (25%), rather than fifty percent (50%), of any of the
Net Sale Proceeds, deferred compensation and Net Cash Proceeds referred to in
Section 3.5(b) and Section 3.5(c); provided, however, that in the event that
Purchaser has enrolled at least one (1) subject in a PK Study on or prior to the
later of twelve (12) months (x) from the Closing Date or (y) after the date upon
which delivery of the Odyssey Product formulation and clinical supply thereof is
made (the "Cure Deadline"), Purchaser shall regain its right to receive fifty
percent (50%) by Sellers to Purchaser of any of the Net Sale Proceeds, deferred
compensation and Net Cash Proceeds referred to in Section 3.5(b) and Section
3.5(c); provided, further, however, if Purchaser fails to enroll at least one
(1) subject in a PK Study on or prior to the Cure Deadline, then Purchaser's
rights to the Odyssey Patents and Odyssey Know How shall revert to Parent,
37
provided that (notwithstanding such reversion) Purchaser shall retain the right
to receive twenty-five percent (25%), of any of the Net Sale Proceeds, deferred
compensation and Net Cash Proceeds referred to in Section 3.5(b) and Section
3.5(c) and Purchaser shall thereafter pay for all costs and expenses relating to
the development and commercialization of the Odyssey Product.
(e) During any period Purchaser retains the rights to the
Odyssey Product in accordance with the foregoing, Purchaser shall pursue the
development and commercialization, including any litigation, relating to the
Odyssey Product and Purchaser shall bear all costs and expenses in connection
therewith; provided, however, that in the event that Parent determines in good
faith that Purchaser is not aggressively pursuing the development,
commercialization, and any litigation, Parent shall have the right, upon five
(5) Business Days written notice to Purchaser, to assume the pursuit of all or
any part of such development, commercialization, or litigation at Sellers'
costs.
(f) Purchaser shall have the right to assign its rights
under the Odyssey Co-Development Agreement to a third party without consent,
provided that the third party agrees to be bound by the obligations of Purchaser
and perform Purchaser's obligations under that agreement. Purchaser may, at any
time, terminate the Odyssey Co-Development Agreement, in which case Purchaser
shall have no further obligations regarding the Odyssey Product or that
agreement, but shall also waive all rights it received under that agreement.
3.6 Disputed Statements.
(a) Purchaser will keep full and accurate books and
records relating to the performance required with respect to its obligations to
pay royalties under this Agreement and its Net Sales. For one (1) year after
receipt of a Lifecycle Products Statement or New Product Statement delivered
pursuant to Section 3.2 or Section 3.2(a) (each, a "Net Sales Statement"), as
applicable (the "Audit Termination Date"), Sellers shall have the right, during
regular business hours and upon reasonable advance notice, to have the books and
records of Purchaser relating to such Net Sales and royalty payments audited no
more frequently than once per year so as to verify the accuracy of Purchaser's
calculation of such Net Sales or royalty payment. If, upon the inspection of the
books and records of Purchaser, Sellers disagree with Purchaser's calculation of
Net Sales or royalty payments set forth in any Net Sales Statement, Sellers may,
prior to the expiration of the Audit Termination Date, deliver written notice to
Purchaser disagreeing with such calculation and setting forth Sellers'
calculation of such amount. Any such notice of disagreement shall specify those
items or amounts as to which Sellers disagree, and Sellers shall be deemed to
have agreed with all other items and amounts contained in the Net Sales
Statement and the calculation of Net Sales included in such Net Sales Statement.
If Sellers do not deliver to Purchaser a written notice of disagreement prior to
the expiration of the Audit Termination Date, then Sellers shall be deemed to
have agreed to such Net Sales Statement.
38
(b) If a notice of disagreement shall be duly delivered
pursuant to Section 3.6(a), Purchaser and Sellers shall, during the ten (10)
Business Days following such delivery, use their commercially reasonable efforts
to reach agreement on the disputed items or amounts in order to determine, as
may be required, the amount of Net Sales of the Lifecycle Products, or New
Products, as applicable, and the royalty payments in connection therewith, which
amount shall not be less than the amount thereof shown in Purchaser's
calculation set forth in the Net Sales Statement nor more than the amount
thereof set forth in Sellers' calculation delivered pursuant to Section 3.6(a).
If during such period, Purchaser and Sellers are unable to reach such agreement,
they shall promptly thereafter cause the Accountant to review this Agreement and
the disputed items or amounts for the purpose of calculating Net Sales of the
Lifecycle Products, or New Products, as applicable, and the amount of the
royalty payments in connection therewith included in such Net Sales Statement
(it being understood that in making such calculation, the Accountant shall be
functioning as an expert and not as an arbitrator). In making such calculation,
the Accountant shall consider only those items or amounts in the Net Sales
Statement and Sellers' calculation of Net Sales included in such Net Sales
Statement as to which Sellers have disagreed. The Accountant shall deliver to
Purchaser and Sellers, as promptly as practicable (but in any case no later than
twenty (20) Business Days from the date of engagement of the Accountant), a
report setting forth such calculation. Such report shall be final and binding
upon Purchaser and Sellers. The cost of such review and report shall be borne
equally by Purchaser on one hand and Sellers on the other hand; provided,
however, that if the Accountant's report is in agreement with either party's
calculations included in the Net Sales Statement, the cost of such review and
report shall be borne solely by the other party.
(c) Purchaser and Sellers shall, and shall cause their
respective representatives to, cooperate and assist in the preparation of the
Net Sales Statement and the calculation of the amount of Net Sales of the
Lifecycle Products, or New Products, as applicable, and the amount of the
royalty payments in connection therewith and in the conduct of the review
referred to in this Section 3.6(a), including making available, to the extent
necessary, books, records, work papers and personnel.
(d) If the amount of Net Sales of the Lifecycle Products,
or New Products, as applicable, and the royalty payments in connection
therewith, as determined by the Accountant pursuant to Section 3.6(a), is
greater than the calculation provided for by Purchaser in the applicable Net
Sales Statement, then Purchaser shall promptly pay to Parent an amount equal to
the difference between the Accountant's calculation of such royalty payments and
Purchaser's calculation of such royalty payments.
3.7 Closing Date Inventory Adjustment.
(a) As promptly as practicable, but no later than
sixty (60) days after the Closing Date, Purchaser shall cause to be prepared and
delivered to Sellers a statement calculating the Closing Date Inventory (the
"Closing Date Inventory Statement"), including copies of any and all back-up or
supporting data used in the preparation of the Closing Date Inventory Statement.
39
(b) If Sellers disagree with Purchaser's calculation of
the Closing Date Inventory delivered pursuant to Section 3.7(a), Sellers may,
within ten (10) Business Days after delivery of the Closing Date Inventory
Statement, deliver a written notice to Purchaser disagreeing with such
calculation and setting forth Sellers' calculation of the Closing Date
Inventory. Any such notice of disagreement shall specify those items or amounts
as to which Sellers disagree, and Sellers shall be deemed to have agreed with
all other items and amounts contained in the Closing Date Inventory Statement
and the calculation of Closing Date Inventory delivered pursuant to Section
3.7(a). If Sellers do not deliver to Purchaser a written notice of disagreement
within such ten (10) Business Day period, then Sellers shall be deemed to have
agreed to such the Closing Date Inventory Statement.
(c) If a notice of disagreement shall be duly delivered
pursuant to Section 3.7(b), Purchaser and Sellers shall, during the ten (10)
Business Days following such delivery, use their commercially reasonable efforts
to reach agreement on the disputed items or amounts in order to determine, as
may be required, the Closing Date Inventory. If during such period, Purchaser
and Sellers are unable to reach such agreement, they shall promptly thereafter
cause the Accountant to review this Agreement and the disputed items or amounts
for the purpose of calculating Closing Date Inventory. In making such
calculation, the Accountant shall consider only those items or amounts in the
Closing Date Inventory Statement and Sellers' calculation of Closing Date
Inventory as to which Sellers have disagreed. The Accountant shall deliver to
Purchaser and Sellers, as promptly as practicable (but in any case no later than
twenty (20) Business Days from the date of engagement of the Accountant), a
report setting forth such calculation. Such report shall be final and binding
upon Purchaser and Sellers. The cost of such review and report shall be borne
equally by Purchaser on one hand and Sellers on the other hand; provided,
however, that if the Accountant's report is substantially in agreement with
either party's calculations included in the Closing Date Inventory Statement,
the cost of such review and report shall be borne solely by the other party.
(d) Purchaser and Sellers shall, and shall cause their
respective representatives to, cooperate and assist in the preparation of the
Closing Date Inventory Statement and the calculation of Closing Date Inventory
and in the conduct of the review referred to in this Section 3.7, including the
making available to the extent necessary of books, records, work papers and
personnel.
(e) "Final Closing Date Inventory" means Closing Date
Inventory (i) as shown in Purchaser's calculation delivered pursuant to Section
3.7(a) if no notice of disagreement with respect thereto is duly delivered
pursuant to Section 3.7(b); or (ii) if such a notice of disagreement is
delivered, (A) as agreed by Purchaser and Sellers pursuant to Section 3.7(c) or
(B) in the absence of such agreement, as shown in the Accountant's calculation
delivered pursuant to Section 3.7(c). If the Final Closing Date Inventory does
not include each item of Inventory and in the minimum quantities listed in
Schedule 1.1(b), then Parent shall be obligated to pay to Purchaser an amount in
cash equal to the Purchaser Closing Date Inventory Adjustment Amount (the
"Purchaser Inventory Payment") within three (3) Business Days after the Final
Closing Date
40
Inventory is determined; provided, however, that if the Final Closing Date
Inventory reflects any item of Inventory in quantities exceeding the minimum
quantities listed in Schedule 1.1(b), then the Purchaser Inventory Payment shall
be offset by an amount equal to the Parent Closing Date Inventory Adjustment
Amount (the "Parent Inventory Payment"); provided, further, however, that if the
Parent Inventory Payment exceeds the Purchaser Inventory Payment, then Purchaser
shall not be entitled to the Purchaser Inventory Payment and Purchaser shall pay
to Parent, within three (3) Business Days after the Final Closing Date Inventory
is determined, an amount in cash equal to the amount that the Parent Inventory
Payment exceeds the Purchaser Inventory Payment. Any payment that any party is
obligated to make to the other party pursuant to this Section 3.7 shall be paid
by wire transfer of immediately available funds into an account designated by
such other party; provided, however, that such other party may (but shall not be
obligated to) elect, at any time, to withdraw the amount of any such payment
from the Purchaser's Indemnity Escrow Fund or the Sellers' Indemnity Escrow
Fund, as applicable.
3.8 Adjustment for Excess Shipments. As promptly as practical, but no
later than sixty (60) days after the Closing Date, Sellers shall cause to be
prepared and delivered to Purchaser a statement calculating the Post-Signing
Shipment Values for each Marketed Product (the "Post-Signing Shipments
Statement"), including any and all back-up or supporting data used in the
preparation of the Post-Signing Shipments Statement. If the sum of the
Post-Signing Shipment Values of all of the Marketed Products is greater than the
sum of applicable IMS Product Demand Average Values, then the Sellers shall pay
to the Purchaser an amount in cash equal to the Shipping Adjustment Amount
within three (3) Business Days after the Post-Signing Shipment Statement is
delivered. Any payment Sellers are obligated to make to Purchaser pursuant to
this Section 3.8 shall be paid by Sellers by wire transfer of immediately
available funds into an account designated by Purchaser; provided, however, that
Purchaser may (but shall not be obligated to) elect, at any time, to withdraw
the amount of any such payment from the Sellers' Indemnity Escrow Fund.
3.9 Payment of Purchase Price.
(a) On the Closing Date, Purchaser shall pay the Purchase
Price (less Sellers' Indemnity Escrow Amount) to Sellers, which shall be paid by
wire transfer of immediately available funds into an account designated by
Sellers.
(b) On the Closing Date, Purchaser, Sellers and the
Escrow Agent shall enter into the Indemnity Escrow Agreement and Purchaser shall
deliver to the Escrow Agent under the Indemnity Escrow Agreement, by wire
transfer of immediately available funds, Sellers' Indemnity Escrow Amount and
Purchaser's Indemnity Escrow Amount.
41
ARTICLE IV
CLOSING AND TERMINATION
4.1 Closing Date. Subject to the satisfaction of the conditions
set forth in Sections 10.1 and 10.2 hereof (or the waiver thereof by the party
entitled to waive that condition), the closing of the purchase and sale of the
Purchased Assets and the assumption of the Assumed Liabilities provided for in
Article II hereof (the "Closing") shall take place at the offices of Weil,
Gotshal & Xxxxxx LLP located at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or
at such other place as the parties may designate in writing) at 10:00 a.m. (New
York City time) on a date to be specified by the parties, which date shall be no
later than the second (2nd) Business Day after satisfaction or waiver of the
conditions set forth in Article X (other than conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or waiver of
such conditions), unless another time or date, or both, are agreed to in writing
by the parties hereto. The date on which the Closing shall be held is referred
to in this Agreement as the "Closing Date." Unless otherwise agreed by the
parties in writing, the Closing shall be deemed effective and all right, title
and interest of Sellers to be acquired by Purchaser hereunder shall be
considered to have passed to Purchaser as of 12:01 a.m. (New York City time) on
the Closing Date.
4.2 Deliveries by Sellers. At the Closing, Sellers shall deliver
to Purchaser:
(a) a duly executed xxxx of sale in the form of
Exhibit A hereto;
(b) duly executed assumption agreement in the form of
Exhibit B hereto and duly executed assignments of the U.S. trademark
registrations and applications included in the Purchased Intellectual Property,
in the form attached hereto as Exhibit D (the "Trademark Assignment Agreement"),
and general assignments of all other Purchased Intellectual Property;
(c) copies of all consents, waivers and approvals
referred to in Section 10.3(e);
(d) duly executed affidavits of non-foreign status for
each Seller that comply with Section 1445 of the Code;
(e) a copy of the Sale Order;
(f) the officer's certificate required to be delivered
pursuant to Sections 10.1(a) and 10.1(b);
(g) a duly executed Manufacturing Agreement;
(h) a duly executed Services Agreement;
42
(i) a duly executed domain name transfer agreement
substantially in a form and substance reasonably satisfactory to Purchase and
Sellers (the "Domain Name Transfer Agreement");
(j) a duly executed Indemnity Escrow Agreement;
(k) a duly executed Odyssey Co-Development Agreement;
(l) product transfer of ownership letters to the FDA
substantially in the form attached hereto as Exhibit J; and
(m) such other documents, instruments and certificates as
Purchaser may reasonably request.
4.3 Deliveries by Purchaser. At the Closing, Purchaser shall
deliver to Seller:
(a) the Purchase Price (less Sellers' Indemnity Escrow
Amount);
(b) evidence of the wire transfers referred to in
Section 3.9 hereof;
(c) a duly executed assumption agreement in the form
attached hereto as Exhibit B hereto;
(d) the officer's certificate required to be delivered
pursuant to Sections 10.2(a) and 10.2(b);
(e) a duly executed Manufacturing Agreement;
(f) a duly executed Domain Name Transfer Agreement in a
form and substance reasonably satisfactory to Purchaser and Sellers;
(g) a duly executed Trademark Assignment Agreement;
(h) a duly executed Indemnity Escrow Agreement;
(i) a duly executed Services Agreement;
(j) a duly executed Odyssey Co-Development Agreement;
(k) product transfer of ownership letters to the FDA
substantially in the form attached hereto as Exhibit J; and
(l) such other documents, instruments and certificates as
Sellers may reasonably request.
4.4 Termination of Agreement. This Agreement may be terminated
prior to the Closing as follows:
43
(a) by mutual written consent of Sellers and Purchaser;
(b) by Purchaser, if any of the conditions to the
obligations of Purchaser set forth in Sections 10.1 and 10.3 shall have become
incapable of fulfillment, other than as a result of a breach by Purchaser of any
covenant or agreement contained in this Agreement, and such condition is not
waived by Purchaser;
(c) by Sellers, if any condition to the obligations of
Sellers set forth in Sections 10.2 and 10.3 shall have become incapable of
fulfillment, other than as a result of a breach by Sellers of any covenant or
agreement contained in this Agreement, and such condition is not waived by
Sellers;
(d) by Sellers or Purchaser if there shall be in effect a
final nonappealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that Sellers and Purchaser, as
the case may be, shall promptly appeal any adverse determination which is not
nonappealable (and Sellers and Purchaser, as the case may be, shall use their
commercially reasonable efforts to pursue such appeal);
(e) by Purchaser, in accordance with Section 3.1;
(f) by Purchaser, if there is a Material Adverse Effect;
(g) by Purchaser or Sellers, if the Bankruptcy Court
approves a Restructuring Transaction or an Alternative Transaction;
(h) by Purchaser, if Sellers have not commenced the
Chapter 11 Case within four (4) Business Days after the date hereof;
(i) by Purchaser, if the Sellers have not filed with the
Bankruptcy Court the Approval Motion within one (1) Business Day after the date
of commencement of the Chapter 11 Case;
(j) by Purchaser, if the Bidding Procedures Order has not
been entered by the Bankruptcy Court within thirty-five (35) days after the date
of commencement of the Chapter 11 Case;
(k) by Purchaser, if the Sale Order has not been entered
by the Bankruptcy Court within seventy (70) days after the date of commencement
of the Chapter 11 Case;
(l) by Purchaser, if the Bidding Procedures Order
(including the Bidding Procedures) or the Sale Order is modified in any respect
without the consent of Purchaser; provided, however, in the case of the Bidding
Procedures Order, Purchaser shall exercise its reasonable discretion, provided
that no such modification shall be adverse to Purchaser;
44
(m) by Purchaser, if (i) the Bankruptcy Court enters an
order appointing a trustee, examiner with expanded powers or responsible officer
in the Chapter 11 Case, (ii) the Chapter 11 Case is converted to a case under
chapter 7 of the Bankruptcy Code or (iii) the Chapter 11 Case is dismissed;
(n) by Purchaser, if Purchaser shall have sent written
notice to Sellers at least three (3) Business Days prior to the hearing to
approve the Bidding Procedures Order that the condition set forth in Section
10.1(d) has not been satisfied; or
(o) by Purchaser, if any secured creditor of either
Seller obtains relief from the stay to foreclose on a significant portion of the
Purchased Assets or Licensed Assets, the effect of which would cause a Material
Adverse Effect.
Notwithstanding the foregoing, if the Closing shall not have occurred
by the close of business on one hundred eighty (180) days after the date hereof,
this Agreement shall automatically terminate.
4.5 Payment of Development Costs. If this Agreement is terminated,
Sellers shall pay to Purchaser the Development Costs, if any, on the fifth (5th)
Business Day after such termination, which payment obligation of Sellers shall
be an administrative priority expense under Sections 503(b) and 507(a)(1) of the
Bankruptcy Code. The payment by Sellers to Purchaser of the Development Costs
shall be in addition to the payment of the Expense Reimbursement and shall not
be included in the calculation of the Expense Reimbursement.
4.6 Procedure Upon Termination. In the event of termination and
abandonment by Purchaser or Sellers, or both, pursuant to Section 4.4 hereof,
written notice thereof shall forthwith be given to the other party or parties,
and this Agreement shall terminate, and the purchase of the Purchased Assets
hereunder shall be abandoned, without further action by Purchaser or Sellers. If
this Agreement is terminated as provided herein each party shall redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same.
4.7 Effect of Termination. In the event that this Agreement is
validly terminated as provided herein, then each of the parties shall be
relieved of its duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to
Purchaser or Seller; provided, however, that the obligations of the parties set
forth in Article XIII and Sections 4.6, 4.7 and 7.1 hereof shall survive any
such termination and shall be enforceable hereunder; provided, further, however,
that nothing in this Section 4.7 shall relieve Purchaser or Sellers of any
liability for a breach of this Agreement prior to the effective date of such
termination.
45
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby, jointly and severally, represent and warrant
to Purchaser that:
5.1 Organization and Good Standing.
Each Seller is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now conducted. Except as set forth in Schedule 5.1 each Seller is duly
qualified or authorized to do business as a foreign company and is in good
standing under the laws of each jurisdiction in which it owns or leases real
property and each other jurisdiction in which the conduct of its business or the
ownership of its properties requires such qualification or authorization, except
where the failure to be so qualified, authorized or in good standing would not
have a Material Adverse Effect. Each Seller has delivered to Purchaser true,
complete and correct copies of its certificate of incorporation and by-laws or
comparable organizational documents as in effect on the date hereof.
5.2 Authorization of Agreement. Subject to obtaining Bankruptcy
Court approval pursuant to the Sale Order, Sellers have all requisite power,
authority and legal capacity to execute and deliver this Agreement and Sellers
and each of their Subsidiaries have all requisite power, authority and legal
capacity to execute and deliver each other agreement, document, or instrument or
certificate contemplated by this Agreement or to be executed by Sellers in
connection with the consummation of the transactions contemplated by this
Agreement (the "Seller Documents"), to perform their respective obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. Subject to obtaining Bankruptcy Court approval pursuant to the Sale
Order, the execution and delivery of this Agreement and the Seller Documents and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all requisite corporate action on the part of Sellers and
each of their Subsidiaries. This Agreement has been, and each of the Seller
Documents will be at or prior to the Closing, duly and validly executed and
delivered by Sellers and each of their Subsidiaries which is a party thereto and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) following the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court pursuant to the Sale
Order, this Agreement, constitutes, and each of the Seller Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
Sellers, or, as the case may be, their Subsidiaries enforceable against Sellers
or, as the case may be, their Subsidiaries in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
46
5.3 Board Approval and Recommendation. The Board of Directors of
Parent has (i) determined that this Agreement and the transactions contemplated
hereby, including the purchase of the Purchased Assets by Purchaser in
accordance with the Bidding Procedures, are advisable, fair to and in the best
interests of the Sellers' chapter 11 estates, (ii) determined that an immediate
sale of the Purchased Assets pursuant to Section 363 of the Bankruptcy Code is
necessary to preserve the value of the Purchased Assets, and (iii) approved this
Agreement and the transactions contemplated hereby.
5.4 Conflicts; Consents of Third Parties.
(a) Except as a result of the Chapter 11 Case, none of the
execution and delivery by Sellers of this Agreement or by Sellers of the Seller
Documents, the consummation of the transactions contemplated hereby or thereby,
or compliance by Sellers with any of the provisions hereof or thereof will
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or give rise to any obligation of Sellers to make any payment under, or
to the increased, additional, accelerated or guaranteed rights or entitlements
of any Person under, or result in the creation of any Liens upon any of the
properties or assets of Sellers under any provision of (i) the certificate of
incorporation and by-laws or comparable organizational documents of Sellers or
any Subsidiary; (ii) subject to entry of the Sale Order, any Purchased Contract;
(iii) subject to entry of the Sale Order, any Order of any court, Governmental
Body or arbitrator applicable to Sellers or any Subsidiary or any of the
properties or assets of Sellers or any Subsidiary as of the date hereof; or (iv)
subject to entry of the Sale Order, any Applicable Law except as set forth on
Schedule 5.4(b).
(b) Other than in connection with the commencement of the
Chapter 11 Case, entry of the Bidding Procedures Order and entry of the Sale
Order, no consent, waiver, approval, Order or authorization of, or declaration
or filing with, or notification to, any Person or Governmental Body is required
on the part of Sellers or any Subsidiary (i) in connection with the execution
and delivery of this Agreement or the Seller Documents, the compliance by
Sellers or any Subsidiary with any of the provisions hereof or thereof, the
consummation of the transactions contemplated hereby or the taking by Sellers or
any Subsidiary of any other action contemplated hereby, or (ii) for the
continuing validity and effectiveness immediately following the Closing of any
of the Purchased Assets or Licensed Assets, except for compliance with the
applicable requirements of the HSR Act or as set forth in Schedule 5.4(b).
5.5 Financial Statements; Projections.
(a) Sellers have delivered to Purchaser copies of the
audited consolidated balance sheets of Parent as at December 31, 2003 and 2004
and the related audited consolidated statements of income and of cash flows of
Parent for the fiscal years then ended (such audited statements, including the
related notes and schedules thereto, are referred to herein as the "Financial
Statements"). The Financial Statements have been
47
prepared in accordance with GAAP consistently applied and present fairly in all
material respects the consolidated financial position, results of operations and
cash flows of Parent as at the dates and for the periods indicated.
For the purposes hereof, the audited consolidated balance
sheet of Parent as at December 31, 2004 is referred to as the "Balance Sheet"
and December 31, 2004 is referred to as the "Balance Sheet Date."
(b) Sellers have delivered to Purchaser the unaudited
statement of gross revenues, net revenues and direct costs of the Business for
the fiscal year ended December 31, 2004 and the interim period ended March 31,
2005 (collectively, the "Financial Statements of the Business"). The gross
revenues, net revenues and direct costs included in the Financial Statements of
the Business were prepared in accordance with Parent's applicable accounting
policies, which are consistent with and based upon GAAP, via Parent's compliance
with GAAP, and present fairly in all material respects the gross revenues, net
revenues and direct costs of the Business for the periods indicated.
(c) Except as disclosed in Schedule 5.5(c), Parent has
made all required filings with the U.S. Securities and Exchange Commission (the
"SEC") since January 1, 2004 through the date hereof. Except as disclosed in
Schedule 5.5(c), to the Knowledge of Sellers, as of their respective dates, all
such filings complied as to form in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
filings, and such SEC filings 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 therein, in light of the circumstances under which they
were made, not misleading. Except as disclosed in Schedule 5.5(c), to the
Knowledge of Sellers, the financial statements set forth in such SEC filings
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC promulgated
under the Exchange Act, including Regulation S-X. Except as disclosed in
Schedule 5.5(c), to the Knowledge of Sellers, with respect to each Annual Report
on Form 10-K and each Quarterly Report on Form 10-Q included in such SEC
filings, the financial statements and other financial information included in
such reports fairly present in all material respects the financial condition and
results of operations of Parent as of, and for, the periods presented in the SEC
filings. The reports of Parent's independent auditors regarding Parent's
consolidated financial statements in the SEC filings have not been withdrawn,
supplemented or modified, and none of Parent or any of its Subsidiaries has
received any written communication from its independent auditors concerning any
such withdrawal, supplement or modification.
5.6 No Undisclosed Liabilities. Except as disclosed in
Schedule 5.6, neither Sellers nor any of their Subsidiaries have any
Indebtedness, obligations or Liabilities of any kind related to the Business
other than those (i) fully reflected in, reserved against or otherwise described
in the Financial Statements or the notes thereto; (ii) immaterial to Sellers or
any Subsidiary and incurred in the Ordinary Course of Business since
48
December 31, 2004; or (iii) which would not have or would not reasonably be
expected to have a Material Adverse Effect.
5.7 Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth in Schedule 5.7, since the
Balance Sheet Date (i) Sellers have conducted the Business only in the Ordinary
Course of Business and (ii) there has not occurred any Material Adverse Effect.
Except as set forth in Schedule 5.7, without limiting the generality of the
foregoing, since the Balance Sheet Date, with respect to only the Business,
Purchased Assets and Licensed Assets:
(i) Sellers have not made or rescinded any
election relating to Taxes or settled or compromised any claim, action,
suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes to the extent such election, settlement
or compromise would have any material post Closing effect that would be
binding on Purchaser for taxable periods (or portions thereof)
beginning on or after the Closing Date;
(ii) neither Sellers nor any Subsidiary has
amended, modified, canceled, terminated, relinquished, waived or
released any Purchased Contract or right except in the Ordinary Course
of Business and which, in the aggregate, would not have a Material
Adverse Effect;
(iii) neither Sellers nor any Subsidiary has
instituted or settled any material Legal Proceeding relating to the
Purchased Assets or the Licensed Assets that would result in a Material
Adverse Effect;
(iv) Sellers have not granted any license or
sublicense of any rights under or with respect to any Purchased
Intellectual Property; or
(v) Sellers have not agreed, committed, arranged
or entered into any understanding to do anything set forth in this
Section 5.7.
5.8 Taxes.
(a) With respect to the Business, the Purchased Assets
and the Licensed Assets, (i) all material Tax Returns required to be filed by or
on behalf of Sellers or any affiliated group of which Sellers are or were a
member have been duly and timely filed with the appropriate Taxing Authority in
all jurisdictions in which such Tax Returns are required to be filed (after
giving effect to any valid extensions of time in which to make such filings),
and all such Tax Returns are true, complete and correct in all material
respects; and (ii) all material Taxes payable by or on behalf of Sellers or any
Affiliated Group of which Sellers are or were a member have been fully and
timely paid.
(b) Sellers have timely paid or caused to be paid all
Taxes due with respect to the Purchased Assets, Licensed Assets or the Business,
the non-payment of which would result in a Lien on any Purchased Asset or
Licensed Assets or would result in Purchaser becoming liable or responsible
therefor.
49
(c) All deficiencies asserted or assessments made as a
result of any examinations by any Taxing Authority of the Tax Returns related to
the Purchased Assets, the Licensed Assets or the Business have been fully paid,
and, to the knowledge of Sellers, there are no other audits or investigations by
any Taxing Authority in progress, nor have Sellers received any written notice
from any Taxing Authority that it intends to conduct such an audit or
investigation related to the Purchased Assets or the Business.
(d) There is no Purchased Contract covering any Person
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible by Purchaser, Sellers or any of their respective
Affiliates by reason of Section 280G of the Code.
(e) Neither Seller is a foreign person within the meaning
of Section 1445 of the Code.
(f) No power of attorney with respect to any Tax matter
is currently in force with respect to the Purchased Assets, the Licensed Assets
or the Business that would, in any manner, bind, obligate, or restrict
Purchaser.
(g) Sellers have not executed or entered into any
agreement with, or obtained any consents or clearances from, any Taxing
Authority, or have been subject to any ruling guidance specific to any Seller,
that would be binding on Purchaser for any taxable period (or portion thereof)
ending on or after the Closing Date.
5.9 Title to Purchased Assets . Sellers own and have good title to
each of the Purchased Assets and the Licensed Assets, and at the Closing,
Sellers shall convey each of the Purchased Assets free and clear of all Liens.
5.10 Intellectual Property.
(a) Schedule 5.10 sets forth an accurate and complete
list of all Patents, registered Trademarks, pending applications for
registrations of any Trademarks, registered Copyrights, and pending applications
for registration of Copyrights, owned or filed by Sellers or any of their
Subsidiaries included in the Purchased Intellectual Property, including the
jurisdictions in which each such item has been issued or registered or in which
any such application for such issuance and registration has been filed.
(b) To the actual knowledge of Sellers: (i) the Purchased
Intellectual Property does not; (ii) the manufacturing, licensing, importation,
offer for sale, sale, use, marketing, co-marketing, promotion and co-promotion
of the Marketed Products as such products are currently manufactured, licensed,
imported, offered for sale, sold, used, marketed, co-marketed, promoted and
co-promoted does not; (iii) the manufacturing, licensing, importation, offer for
sale, sale, use, marketing, co-marketing, promotion and co-promotion of the
Pipeline Products as they exist as of the date hereof will not; and (iv) the
manufacturing, licensing, importation, offer for sale, sale, use, marketing,
co-marketing, promotion and co-promotion of the Lynxorb Product and the
Darvocet-N
50
Suspension Product as they are currently contemplated to be developed will not
constitute an infringement, unauthorized use or misappropriation of any patent,
copyright, trademark, trade secret or other similar right, of any Person
(including, without limitation, pursuant to any non-disclosure agreements or
obligations to which Sellers or any of their present or former employees is a
party). To the actual knowledge of Sellers, the manufacturing, licensing,
importation, offer for sale, sale, use, marketing, co-marketing, promotion and
co-promotion of the Darvocet-N XR Product and the Odyssey Product as they each
are currently contemplated to be developed does not and will not constitute
infringement, unauthorized use or misappropriation of any copyright, trademark,
trade secret or similar non-patent right of any Person (including, without
limitation, pursuant to any non-disclosure agreements or obligations to which
Sellers or any of their present or former employees is a party). Subject to the
consents referred to in Section 5.4(b) being obtained for the Purchased
Contracts, the Purchased Intellectual Property, the Licensed Assets, the
Purchased Assets, and the transactions contemplated by the Manufacturing
Agreement and the Services Agreement include all of the Intellectual Property
rights necessary to enable Sellers to conduct the Business in the manner in
which such Business is currently being conducted as of the date hereof. The
consummation of the transactions contemplated hereby will not result in the loss
or impairment of Purchaser's right to own or use any of the Purchased
Intellectual Property.
(c) Except as set forth in Schedule 5.10, other than the
Purchased Intellectual Property and Licensed Assets, neither Sellers nor any of
their Subsidiaries own or are exclusive licensees under any Intellectual
Property necessary for the manufacturing, licensing, importation, offer for
sale, sale, use, marketing, co-marketing, promotion and co-promotion of the
Marketed Products, the Pipeline Products or the Odyssey Product and, to the
actual knowledge of Sellers, there are no Intellectual Property rights owned by
or exclusively licensed to Sellers useful in connection with the same.
(d) Except as set forth in Schedule 5.10, neither Sellers
nor any of their Subsidiaries are obligated to pay any royalties, fees or
similar obligations to any owner, licensor of, or other claimant for the use of
the Purchased Intellectual Property.
(e) Schedule 5.10 sets forth a complete and accurate list
of all: (i) Intellectual Property Licenses; and (ii) material Contracts to which
Sellers or any of their Subsidiaries are a party containing an agreement to
indemnify any other Person against any claim of infringement by the Purchased
Intellectual Property.
(f) Except as set forth in Schedule 5.10 or except as
would not have or would not reasonably be expected to have a Material Adverse
Effect, (i) each of the Intellectual Property Licenses is in full force and
effect and constitutes a valid and binding obligation of Sellers and/or their
Subsidiaries, enforceable against them in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), (ii) except as a
result of the
51
Chapter 11 Case, neither Sellers nor any Subsidiary is in default under any
Intellectual Property License, nor, to the Knowledge of Sellers, is any other
party to an Intellectual Property License in default thereunder, (iii) to the
Knowledge of Sellers, no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder, and (iv) no
party to any of the Intellectual Property Licenses has exercised any termination
rights with respect thereto.
(g) Except as set forth in Schedule 5.10, no trade
secret or any other non-public, proprietary information material to the Marketed
Products, the Pipeline Products or the Odyssey Product has been authorized to be
disclosed or, to the Knowledge of Sellers, has been actually disclosed by
Sellers or any of their Subsidiaries to any employee or any third party other
than pursuant to a non-disclosure agreement restricting the disclosure and use
of the Purchased Intellectual Property. Sellers have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all material trade secrets and other confidential information included in the
Purchased Intellectual Property, including invention disclosures not covered by
any patents owned or patent applications filed by Sellers.
(h) To the actual knowledge of Sellers, no Person is
infringing, violating, misusing or misappropriating any Purchased Intellectual
Property.
(i) Except as set forth in the Parent's SEC filings or
Schedule 5.10, as of the date hereof, no Legal Proceedings are pending or, to
the actual knowledge of Sellers, threatened in writing (i) against the Sellers
or any of their Subsidiaries (A) claiming infringement, unauthorized use, or
violation of any other Person's Intellectual Property with respect to the
Marketed Products or the Pipeline Products, (B) challenging the ownership, use,
validity or enforceability of, any Purchased Intellectual Property or Licensed
Assets, or (ii) against any third Person charging that such third Person is
infringing, violating, misusing or misappropriating any Purchased Intellectual
Property or Licensed Assets of Sellers. To the Knowledge of Sellers, all Patents
and applications or registrations for Trademarks included in the Purchased
Intellectual Property or Licensed Assets have been appropriately prosecuted,
registered, filed, and maintained consistent with all applicable US patent and
trademark laws and rules, including determination of inventorship and citation
of material prior art references.
(j) Schedule 5.10 sets forth the true and complete list
of all contributors to the science of all potentially claimed subject matter
contained within the Darvocet-N XR IDM and Lynxorb Know How, together with the
identity of their respective inventions. Except as set forth in Schedule 5.10,
to the Knowledge of Sellers, no present or former employee has any right, title,
or interest, directly or indirectly, in whole or in part, in any Purchased
Intellectual Property.
5.11 Regulatory Status.
(a) Sellers are the lawful holder of the Marketing
Authorizations, Azathioprine ANDA, Purchased INDs and Purchased DMFs.
52
(b) Except as otherwise set forth in Schedule 5.11, all
of the Marketing Authorizations and the Azathioprine ANDA are in full force and
effect and, to the Knowledge of Sellers, all of the Marketing Authorizations and
the Azathioprine ANDA have been duly and validly issued. Except as otherwise set
forth in Schedule 5.11, there is no Legal Proceeding by any Governmental Body
pending or, to the Knowledge of Sellers, threatened seeking the revocation or
suspension of any of the Marketing Authorizations or the Azathioprine ANDA.
(c) Except as set forth in Schedule 5.11, to the
Knowledge of Sellers there is no information suggesting that the Marketed
Products that are the subject of an NDA or ANDA cannot be marketed in the
Territory pursuant to the applicable Marketing Authorization or the Azathioprine
ANDA. Sellers do not represent and warrant that the FDA will not, at some future
date, require the submission of a new drug application, abbreviated new drug
application, other regulatory approval or additional information for Marketed
Products marketed without an approved new drug application or abbreviated new
drug application, or require the submission of additional information for any
other Marketed Products.
(d) Except as set forth in Schedule 5.11, to the
Knowledge of Sellers there are no facts which are reasonably likely to cause (i)
market withdrawal, recall or suspension of any of the Marketed Products, (ii) a
change in the marketing classification of any of the Marketed Products, (iii) a
material change in the labeling of any of the Marketed Products or (iv) a
termination or suspension of marketing of any of the Marketed Products.
(e) Except as set forth in Schedule 5.11, Sellers have
made available to Purchaser all (i) outstanding post-approval commitments to the
FDA; (ii) adverse drug experience information, (iii) customer complaints, (iv)
files with respect to investigations of complaints, (v) FDA adverse event
reports and (vi) reports of trends of adverse events, in each case to the extent
relating to the Marketed Products and to the extent that any of the foregoing is
in Sellers' possession. Sellers have made available to Purchaser all
preclinical, clinical and validation data and any risk assessments in each
Sellers' possession that have been generated to demonstrate the safety and/or
effectiveness of each of the Marketed Products.
(f) Except as set forth in Schedule 5.11, Sellers (only
with respect to the operation of the Business), and the Marketed Products
(including the labeling thereof) are in compliance with Applicable Law, except
where the failure to be in compliance would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
set forth in Schedule 5.11, to the Knowledge of Sellers there are no facts which
furnish any reasonable basis for any notice of adverse findings, warning or
other regulatory letters or sanctions, Section 305 notices, or other similar
communication. Except as set forth in Schedule 5.11, to the Knowledge of Sellers
there are no misstatements or material omissions relating to the Marketed
Products in any regulatory submission or other document required to be
maintained by Applicable Law
53
and the accuracy of its regulatory submissions has not been contested by any
Governmental Body.
(g) No employee or officer of Sellers, or to the
Knowledge of Sellers, any other Person, including any clinical investigator,
involved in any services in connection with the Products was debarred or
otherwise deemed to be ineligible to provide services in connection with any of
the Products at the time such services were provided to Sellers.
(h) Sellers and their respective employees, and, to the
Knowledge of Sellers, all contract manufacturers, packagers, and other Persons
involved in the manufacture, processing, testing, promoting or advertising of
the Marketed Products are in compliance with all applicable FDA regulations with
respect to the Marketed Products, except to the extent any noncompliance with
such applicable FDA regulations would not reasonably be expected to have a
Material Adverse Effect.
(i) Except as otherwise set forth in Schedule 5.11, all
filings and notices required to be delivered to any Governmental Body with
respect to any of the Marketed Products have been made on a timely basis, except
where the failure to make such filings and notices on a timely basis would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(j) Sellers (with respect to the Business) and the
Marketed Products are in compliance with the Federal Controlled Substances Act
and applicable DEA and state regulations, including, but not limited to, record
keeping, reporting, registration, security, labeling, and quota requirements,
except where the failure to be in compliance would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
5.12 Material Contracts. Schedule 5.12 sets forth each material
Contract to which either Seller is currently a party that (i) relates to the
manufacture, marketing, distribution, licensing or sale of any of the Marketed
Products; (ii) has been entered into with any Governmental Body with respect to
the manufacture, marketing, distribution, licensing or sale of the Marketed
Products; (iii) contains covenants not to compete or otherwise restricts
Sellers' rights to manufacture, market, distribute, license or sell the Marketed
Products, the Odyssey Products or any Pain Products; or (iv) provides for
coupons, rebates, chargebacks, promotions, discounts or advertising of any of
the Products. Except as set forth in Schedule 5.12, each such Purchased Contract
is in full force and effect, constitutes a valid and binding obligation of each
Seller party thereto and, to the Knowledge of Sellers, the other parties
thereto, and is legally enforceable against the applicable Seller party thereto
and, to the Knowledge of Sellers, the other parties thereto, in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization, or similar laws from time to
time in effect which affect the enforcement of creditors' rights generally.
Except as disclosed in Schedule 5.12, neither Seller is in material breach or
default under any such Purchased Contract to which it is a party and, to the
Knowledge of Sellers, no other
54
party to any of such Purchased Contracts is in material breach or default in any
material respect thereunder. To the Knowledge of Sellers, no party to any of the
Purchased Contracts has exercised any termination rights with respect thereto.
Sellers have delivered or otherwise made available to Purchaser true, correct
and complete copies of all of the Purchased Contracts, together with all
amendments, modifications or supplements thereto.
5.13 Labor. Neither Sellers nor any of their Subsidiaries is a
party to any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of Sellers or any of
their Subsidiaries.
5.14 Litigation. Except as set forth in Schedule 5.14 and except
for the contemplated Chapter 11 Case, there is no suit, action, proceeding,
investigation (to the Knowledge of Sellers as of the date hereof), claim or
order pending or, to the Knowledge of Sellers, threatened against Sellers or any
of their Subsidiaries (or to the Knowledge of Sellers, pending or threatened,
against any of the officers, directors, members or key employees of Sellers or
any of their Subsidiaries with respect to their business activities on behalf of
Seller), or to which any Seller or any of their Subsidiaries is otherwise a
party, which, if adversely determined, would have a Material Adverse Effect,
before any Governmental Body; nor to the Knowledge of Sellers is there any
reasonable basis for any such action, proceeding, or investigation. Other than
the Chapter 11 Case, neither Sellers nor any Subsidiary is subject to any Order
of any Governmental Body except to the extent the same could not reasonably be
expected to have a Material Adverse Effect.
5.15 Compliance with Laws. Except as set forth in Schedule
5.15, Sellers are in compliance in all material respects with all Applicable
Laws of any Governmental Body applicable to the Business. Neither Sellers nor
any of their Subsidiaries has received any written notice of or been charged
with the violation of any Applicable Laws which would reasonably be expected to
have a Material Adverse Effect. To the Knowledge of Sellers, neither Sellers nor
any of their Subsidiaries is under investigation with respect to the violation
of any Applicable Laws that would reasonably be expected to have a Material
Adverse Effect and there are no facts or circumstances which could form the
basis for any such violation.
5.16 Environmental Matters. Except as set forth in Schedule 5.16
hereto or as would individually or in the aggregate, not have a Material Adverse
Effect:
(a) the operations of Sellers and each of their
Subsidiaries, with respect to the Business, are and have been in compliance with
all applicable Environmental Laws, which compliance includes obtaining,
maintaining in good standing and complying with all Environmental Permits
necessary to operate the Business and no action or proceeding is pending or, to
the Knowledge of Sellers, threatened to revoke, modify or terminate any such
Environmental Permit, and, to the Knowledge of Sellers, no facts, circumstances
or conditions currently exist that could adversely affect such continued
compliance with Environmental Laws and Environmental Permits;
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(b) with respect to the Business, neither Sellers nor
any of their Subsidiaries is the subject of any outstanding written order or
Contract with any Governmental Body or Person respecting (i) Environmental Laws,
(ii) Remedial Action or (iii) any Release or threatened Release of a Hazardous
Material;
(c) no claim has been made or is pending or, to the
Knowledge of Sellers, threatened against Sellers nor any of its Subsidiaries,
alleging, with respect to the Business, that either or both Sellers, or any of
its Subsidiaries, may be in violation of any Environmental Law or any
Environmental Permit or may have any liability under any Environmental Law; and
(d) the transactions contemplated hereunder do not
require the consent of or filings with any Governmental Body with jurisdiction
over Sellers with respect to environmental matters.
5.17 Insurance. Set forth in Schedule 5.17 is a list of all product
liability insurance relating to the Business, setting forth, in respect of each
such policy, the policy name, policy number, carrier, term, type of coverage and
annual premium. Except as noted on Schedule 5.17, to Seller's Knowledge all such
product liability insurance will remain in full force and effect.
5.18 Inventories. The Inventory has been manufactured in material
compliance with United States current good manufacturing practices (as set forth
in 21 C.F.R. 210 and 211) and in accordance with relevant product specifications
used by Sellers at the date of manufacture. The inventories of the Business set
forth in the Balance Sheet were properly stated therein in accordance with GAAP
consistently applied. Adequate reserves have been reflected in the Balance Sheet
for obsolete, excess, damaged or otherwise unusable inventory, which reserves
were calculated in a manner consistent with past practice and in accordance with
GAAP consistently applied. Schedule 5.18 sets forth the quantities of Inventory
that the Sellers in good faith estimate will be on hand at June 30, July 31,
August 31, and September 30, 2005. The inventories and related reserves were
prepared from Sellers' books and records, which books and records are correct
and complete in all material respects.
5.19 Customer.
(a) Schedule 5.19(a) sets forth a list of the ten (10)
largest customers with respect to the Marketed Products, as measured by the
dollar amount of invoices therefrom or thereby, during each of the fiscal years
ended December 31, 2003 and December 31, 2004, showing the approximate total
sales by Sellers to each such customer during such period.
(b) Except as set forth in Schedule 5.19(b) since
December 31, 2004 through the date hereof, no customer listed on Schedule
5.19(a) has terminated its relationship with Sellers or any of their
Subsidiaries or materially reduced or changed the pricing or other terms of its
business with Sellers or any of their Subsidiaries and, to the
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Knowledge of Sellers, no customer listed on Schedule 5.19(a) has notified
Sellers that it intends to terminate or materially reduce or change the pricing
or other terms of its business with Sellers or any of their Subsidiaries, in
each case which termination or notification would reasonably be expected to have
a Material Adverse Effect.
5.20 Product Warranty; Product Liability.
(a) Except as set forth in Schedule 5.20, each product
manufactured, sold or delivered by Sellers or any of their Subsidiaries in
conducting the Business has been in material conformity with applicable product
specifications and all express warranties. Neither Sellers nor any of their
Subsidiaries has any liability for replacement of any such products or other
damages in connection therewith or any other customer or product obligations not
reserved against on the Balance Sheet. Neither Sellers nor any of their
Subsidiaries has sold any products in connection with the Business that included
a warranty for a period of longer than the applicable expiration date for such
products.
(b) Neither Sellers nor any of their Subsidiaries have
committed any act or failed to commit any act, which would result in, and there
has been no occurrence which would give rise to or form the basis of, any
product liability or liability for breach of warranty (whether covered by
insurance or not) on the part of Sellers or any of their Subsidiaries with
respect to Marketed Products.
5.21 Financial Advisors. Except as set forth in Schedule 5.21, no
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for Sellers or any of their Subsidiaries in connection with the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment in respect thereof.
5.22 FDA Indications. Sellers have not received any written or oral
indication from the FDA that a factorial design study (being a study in which
the Darvocet-N XR Product is required to be compared against one or more of its
ingredients alone) will be required for FDA approval of the Darvocet-N XR
Product.
5.23 Laboratory Notebooks. The copies of the Notebooks included in
the Purchased Assets, which shall be provided at Purchaser's expense, shall be
identical copies of the portions of the Notebooks for which copies are provided
by Sellers to Purchaser and no information has been removed or deleted from such
copies with respect to any Purchased Intellectual Property or Licensed Assets as
they relate to the Marketed Products, Pipeline Products and Odyssey Products.
5.24 No Other Representations and Warranties. Purchaser
acknowledges that except as expressly provided in this Agreement, (A) Sellers
make no representation or warranty of any kind whatsoever or by operation of
law, by statute or otherwise, and specifically disclaim any representation or
warranty with respect to any forward-looking projections, forecasts, budgets,
financial data or any other information (written or oral) with respect to the
Business, the Purchased Assets, the Licensed Assets, or any other matter,
including those supplied in the Confidential Information Memorandum
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distributed by Rothschild, Inc. or presented in due diligence, and the Purchaser
takes full responsibility for making its own evaluation of such matters, and (b)
Sellers specifically disclaim any and all implied or statutory warranties,
including, without limitation, any warranty of merchantability, warranty of
fitness for a particular purpose, warrant of noninfringement or warranty of
title.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers that:
6.1 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
6.2 Authorization of Agreement. Purchaser has full corporate power
and authority to execute and deliver this Agreement and each other agreement,
document, instrument or certificate contemplated by this Agreement or to be
executed by Purchaser in connection with the consummation of the transactions
contemplated hereby and thereby (the "Purchaser Documents"), and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and each Purchaser Document have been
duly authorized by all necessary corporate action on behalf of Purchaser. This
Agreement has been, and each Purchaser Document will be at or prior to the
Closing, duly executed and delivered by Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each Purchaser Document when so executed and
delivered will constitute, legal, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
6.3 Conflicts; Consents of Third Parties.
(a) Except as set forth in Schedule 6.3 hereto, neither
of the execution and delivery by Purchaser of this Agreement and of the
Purchaser Documents, nor the compliance by Purchaser with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach of, any
provision of the certificate of incorporation or by-laws of Purchaser, (ii)
conflict with, violate, result in the breach of, or constitute a default under
any note, bond, mortgage, indenture, license, agreement or other obligation to
which Purchaser is a party or by which Purchaser or its properties or assets are
bound or (iii) violate any statute, rule, regulation or Order by which Purchaser
is bound, except, in the case of clauses (ii) and (iii), for such violations,
breaches or defaults as would not,
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individually or in the aggregate, have a material adverse effect on the ability
of Purchaser to consummate the transactions contemplated by this Agreement.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of Purchaser in connection with the
execution and delivery of this Agreement or Purchaser Documents or the
compliance by Purchaser with any of the provisions hereof or thereof, except for
compliance with the applicable requirements of the HSR Act.
6.4 Litigation. There are no Legal Proceedings pending or, to the
knowledge of Purchaser, threatened that are reasonably likely to prohibit or
restrain the ability of Purchaser to enter into this Agreement or consummate the
transactions contemplated hereby.
6.5 Financial Advisors. Except as set forth in Schedule 6.5, no
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for Purchaser in connection with the transactions contemplated by this
Agreement and no Person is entitled to any fee or commission or like payment in
respect thereof.
6.6 Financing. On the date hereof, Purchaser has obtained an
executed commitment letter or executed commitment letters (collectively, the
"Commitment Letters") for the financing of the consummation of the transactions
contemplated hereunder. The obligations to fund the commitments under the
Commitment Letters are not subject to any condition, other than the conditions
in the Commitment Letters. Copies of such Commitment Letters, which have been
provided to Sellers, have been duly executed by Purchaser and each other Person
party thereto, and have not been amended, modified, withdrawn, terminated or
replaced. There are no fees, expense reimbursement obligations, or other amounts
that are required to be paid by Purchaser prior to the Closing under or in
respect of the Commitment Letters that are unpaid. None of the lenders or
investors thereunder have notified Purchaser of its intention to terminate its
commitment under its Commitment Letter or not to provide in full the financing
contemplated thereby. Purchaser has provided to Sellers a chart showing a
reasonably detailed breakdown of the contemplated sources and uses of such
financing as of the date of this Agreement.
ARTICLE VII
BANKRUPTCY COURT MATTERS
7.1 Approval of Break-Up Fee and Expense Reimbursement.
(a) Sellers acknowledge and agree that Purchaser has
expended considerable time and expense in connection with this Agreement and the
negotiation thereof and the identification and quantification of assets of
Sellers. In consideration therefor, Sellers shall file with and seek the
approval of the Bankruptcy Court of the
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Approval Motion, including the Break-Up Fee and Expense Reimbursement, and the
entry by the Bankruptcy Court of the Bidding Procedures Order approving the
payment of the Break-Up Fee in an amount equal to Five Million Two Hundred Fifty
Thousand Dollars ($5,250,000) and the Expense Reimbursement in an amount not to
exceed One Million Five Hundred Thousand Dollars ($1,500,000) (not including any
amounts previously paid by Sellers) for Purchaser's reasonable out-of-pocket
documented expenses incurred in connection with the transactions contemplated
hereby and the financing thereof and deeming the Break-Up Fee and the Expense
Reimbursement as administrative priority expenses under Sections 503(b) and
507(a)(1) of the Bankruptcy Code.
(b) Sellers shall pay to Purchaser the Expense
Reimbursement on the first (1st) Business Day after the earlier to occur of (i)
Purchaser's termination of this Agreement pursuant to Section 4.4(e) through
Section 4.4(m) or Section 4.4(o) and (ii) any of the events specified in Section
7.1(c).
(c) Sellers shall pay to Purchaser the Expense
Reimbursement (unless previously paid to Purchaser in accordance with Section
7.1(b)) and the Break-Up Fee on the first (1st) Business Day after the earlier
to occur of:
(i) the Bankruptcy Court enters an order
approving an Alternative Transaction;
(ii) Outside of the Bidding Procedures, Sellers
consummate an Alternative Transaction, provided that Sellers have
entered into an agreement for such Alternative Transaction on or prior
to twelve (12) months following the date of termination of this
Agreement.
(d) If on or prior to twelve (12) months following the
date of termination of this Agreement Sellers file with the Bankruptcy Court a
Restructuring Transaction or enter into a Restructuring Transaction, Sellers
shall pay to Purchaser, on the first (1st) Business Day after consummation of
such Restructuring Transaction, the Expense Reimbursement and 50% of the
Break-Up Fee (in each case if not previously paid to Purchaser in accordance
with Section 7.1(b)).
7.2 Bidding Procedures. Not later than the date that is one (1)
Business Day following commencement of the Chapter 11 Case, Sellers shall file
the Approval Motion seeking approval of the Bidding Procedures Order, including
the Bidding Procedures, and the Sale Order with the Bankruptcy Court. No later
than thirty-five (35) days after the date of the commencement of the Chapter 11
Case, Sellers shall obtain entry by the Bankruptcy Court of the Bidding
Procedures Order (with such changes thereto as Purchaser shall approve or
request in its reasonable discretion, which changes shall not be adverse to
Purchaser). Sellers shall comply with all of the terms and conditions contained
in the Bidding Procedures, including the occurrence of the events by the dates
and times listed therein which are expressly incorporated by reference herein as
if set forth at length. Sellers agree to make promptly any filings, to take all
actions and to
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obtain entry of the Bidding Procedures Order and the Sale Order and any and all
other approvals and orders necessary or appropriate for the consummation of the
transactions contemplated hereby.
7.3 Non-Solicitation Period.
(a) From the time of Sellers' and Purchaser's execution
and delivery of this Agreement until the Bankruptcy Court's entry of the Bidding
Procedures Order (the "Non-Solicitation Period"), Sellers shall not, nor shall
they authorize or permit any Affiliate to, nor shall they authorize or permit
any officer, director, manager or employee of, or any investment banker,
attorney or other advisor, agent or representative of, Sellers or any Subsidiary
(collectively, "Seller Representatives") to solicit or otherwise encourage any
entity with respect to the submission of an Alternative Transaction or negotiate
the terms of an Alternative Transaction. Sellers shall not execute any
Alternative Transaction prior to the Bankruptcy Court's entry of the Bidding
Procedures Order.
(b) Following entry of the Bidding Procedures Order until
the bid deadline set forth therein, Sellers and Seller Representatives shall not
be subject to any restrictions with respect to the solicitation or encouragement
of any entity concerning the potential or actual submission of a qualified bid
in accordance with the Bidding Procedures; provided, however, that within
twenty-four (24) hours after Sellers' receipt of any offer for an Alternative
Transaction, Sellers must deliver to Purchaser by facsimile transmission or same
day courier service true and complete copies of all documents related to any
such Alternative Transaction.
(c) To the extent the Bidding Procedures Order is
inconsistent with the terms of this Agreement, the Bidding Procedures Order
shall control.
7.4 Bankruptcy Court Approval.
(a) At least twenty-five (25) days prior to the hearing
approving the Sale Order, Sellers shall serve a copy of the Approval Motion
(along with a copy of the proposed Sale Order and the Bidding Procedures Order)
on each jurisdiction where the Purchased Assets are subject to Tax.
(b) Sellers shall obtain entry by the Bankruptcy Court of
the Sale Order no later than seventy (70) days after the date of commencement of
the Chapter 11 Case.
(c) If the Bidding Procedures Order or Sale Order or any
other orders of the Bankruptcy Court relating to this Agreement shall be
appealed by any party (or a petition for certiorari or motion for
reconsideration, amendment, clarification, modification, vacation, stay,
rehearing or reargument shall be filed with respect to any such order), Sellers
shall diligently defend against such appeal, petition or motion and shall use
their reasonable best efforts to obtain an expedited resolution of any such
appeal, petition or motion.
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(d) Sellers shall not make any filing with the Bankruptcy
Court or any other court or Governmental Body with respect to the Bidding
Procedures Order or Sale Order without the consent of Purchaser, which consent
shall not be unreasonably withheld or delayed.
(e) Sellers shall cooperate with Purchaser and its
representatives in connection with the Sale Order, the Bidding Procedures Order
and the bankruptcy proceedings in connection therewith. Such cooperation shall
include, but not be limited to, consulting with Purchaser at Purchaser's
reasonable request concerning the status of such proceedings and providing
Purchaser with copies of requested pleadings, notices, proposed orders and other
documents relating to such proceedings as soon as reasonably practicable prior
to any submission thereof to the Bankruptcy Court. Sellers further covenant and
agree that the terms of any plan it submits to the Bankruptcy Court for
confirmation shall not conflict with, supersede, abrogate, nullify or restrict
the terms of this Agreement, or in any way prevent or interfere with the
consummation or performance of the transactions contemplated by this Agreement,
including, without limitation, any transaction contemplated by or approved
pursuant to the Sale Order or the Bidding Procedures Order.
(f) Notwithstanding anything to the contrary herein,
neither Purchaser nor Sellers shall be prohibited or otherwise restrained from
making any filing with the Bankruptcy Court to challenge or object to the entry
of an order by the Bankruptcy Court approving the entry by Sellers into an
Alternative Transaction or Restructuring Transaction; provided, that nothing
herein shall grant Purchaser standing to the extent that Purchaser would not
otherwise have standing under Applicable Law.
ARTICLE VIII
COVENANTS
8.1 Access to Information. Sellers agree that, prior to the
Closing Date, Purchaser shall be entitled, through its officers, employees and
representatives (including, without limitation, its legal advisors and
accountants), to make such investigation of the properties, businesses and
operations of Sellers and such examination of the books, records and financial
condition of Sellers as it reasonably requests and to make extracts and copies
of such books and records. Any such investigation and examination shall be
conducted during regular business hours and under reasonable circumstances, and
Sellers shall cooperate fully therein. No investigation by Purchaser prior to or
after the date of this Agreement shall diminish or obviate any of the
representations, warranties, covenants or agreements of Sellers contained in
this Agreement or the Seller Documents. In order that Purchaser may have full
opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may reasonably request of the affairs of
Sellers, Sellers shall use their commercially reasonable efforts to cause the
officers, employees, consultants, agents, accountants, attorneys and other
representatives of Sellers to cooperate fully with such representatives in
connection with such review and examination. Sellers shall promptly deliver to
Purchaser such copies of all pleadings,
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motions, notices, statements, schedules, applications, reports and other papers
filed by Sellers in the Chapter 11 Case. Sellers shall promptly provide to
Purchaser all documents and materials relating to the proposed sale of the
Purchased Assets, or any portion thereof, and otherwise cooperate with
Purchaser, to the extent reasonably necessary in connection with Purchaser's
preparation for or participation in any part of the Chapter 11 Case in which
Purchaser's participation is necessary, required or reasonably appropriate.
Sellers shall promptly deliver to Purchaser all pleadings, motions, notices,
statements, schedules, applications, reports and other papers filed in any other
judicial or administrative proceeding as Purchaser may reasonably request.
8.2 Permitted Sellers. To the extent any Permitted Seller assigns,
licenses, or sublicenses the rights to sell Marketed Products, Lifecycle
Products, or New Products, such Permitted Seller must notify Sellers in writing
no later than three (3) Business Days after such assignment, license, or
sublicense of the identity of the new Permitted Seller and provide Sellers with
a copy of such assignment, license, or sublicense agreement.
8.3 Conduct of the Business Pending the Closing.
(a) Except as otherwise expressly contemplated by this
Agreement (including the prosecution of the Chapter 11 Case) or with the prior
written consent of Purchaser, Sellers shall, and shall cause their Subsidiaries
to, with respect to the Business only:
(i) except as set forth in Schedule 8.3, conduct
the Business only in the Ordinary Course of Business as debtors in
possession;
(ii) use their commercially reasonable efforts,
as debtors in possession, to (A) preserve their present business
operations, organization (including employees) and goodwill of Sellers
and (B) preserve the present relationships with Persons having business
dealings with Sellers (including without limitation customers and
suppliers);
(iii) maintain (A) all of the Purchased Assets and
Licensed Assets in their current condition, ordinary wear and tear
excepted and (B) insurance upon all of the Purchased Assets and
Licensed Assets in such amounts and of such kinds comparable to that in
effect on the date of this Agreement;
(iv) (A) maintain the books, accounts and records
of Sellers in the Ordinary Course of Business, (B) continue to pay,
with respect to the Purchased Contracts, post-petition accounts payable
when due and without discounting or accelerating payment of such
accounts, and (C) subject to existing defaults and future payment
defaults, comply with all obligations under the Purchased Contracts;
(v) comply in all material respects with
Applicable Laws; and
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(vi) not take any action which would adversely
affect the ability of the parties to consummate the transactions
contemplated by this Agreement.
(b) Except as otherwise expressly contemplated by this
Agreement (including the prosecution of the Chapter 11 Case) or with the prior
written consent of Purchaser, Sellers shall not, and shall not permit their
Subsidiaries to, with respect to the Business only:
(i) with respect to the Employees set forth in
Schedule 9.1, enter into any non-competition or similar agreement to
which Sellers or any of their Subsidiaries is a party;
(ii) make or rescind any election relating to
Taxes or settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating
to Taxes to the extent that such election, settlement or compromise
would have any material post-Closing effect that would be binding on
Purchaser for taxable periods (or portions thereof) beginning on or
after the Closing Date;
(iii) sell, assign, license, transfer, convey,
lease or otherwise dispose of any of the Purchased Assets (except for
fair consideration in the Ordinary Course of Business) of Sellers;
(iv) with respect to the Employees set forth in
Schedule 9.1, enter into any labor or collective bargaining agreement
or, through negotiation or otherwise, make any commitment or incur any
liability to any labor organization;
(v) except as set forth in Schedule 8.3,
introduce any material change with respect to the operation of the
Business, including any material change in the types, nature,
composition (except as required by the FDA) or quality of the Products
or services, or make any change in Product specifications or prices or
terms of distributions of such Products;
(vi) enter into any Contract, understanding or
commitment that restrains, restricts, limits or impedes the ability of
the Business, or the ability of Purchaser, to compete with or conduct
any business or line of business in any geographic area;
(vii) terminate, amend, restate, supplement or
waive any rights under any Purchased Contract or Intellectual Property
License; or
(viii) agree to do anything prohibited by this
Section 8.3 or anything which would make any of the representations and
warranties of Sellers in this Agreement untrue or incorrect in any
material respect.
8.4 Development of Darvocet-N XR and Lynxorb. Upon the entry of
the Bidding Procedures Order and prior to the Closing Date, upon Purchaser's
written notice
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to Sellers, Sellers shall continue to develop the Darvocet-N XR Product and the
Lynxorb Product in accordance with a development plan mutually agreed upon by
Sellers and Purchaser, with such costs and expenses of development to be funded
by Purchaser (the "Development Costs") up to $1,000,000; provided, that nothing
contained herein shall be deemed an affirmative obligation, absent Purchaser's
written notice, to develop the Darvocet-N XR Product or the Lynxorb Product in
the Ordinary Course of Business.
8.5 Rejection of Contracts. Except as set forth in Schedule 8.5,
Sellers shall not seek to have any Contract related to the Business rejected in
the Chapter 11 Case until after the Closing Date.
8.6 Consents. Sellers and Purchaser shall use (and shall cause
each of their Subsidiaries to use) their commercially reasonable efforts, and
Purchaser shall cooperate with Sellers, to obtain at the earliest practicable
date all consents and approvals required to consummate the transactions
contemplated by this Agreement, including, without limitation, the consents and
approvals referred to in Section 5.4(b) hereof.
8.7 Regulatory Approvals.
(a) Each of Purchaser and Sellers shall (i) make or cause
to be made all filings required of each of them or any of their respective
Subsidiaries or Affiliates under the HSR Act or other Antitrust Laws with
respect to the transactions contemplated hereby as promptly as practicable and,
in any event, within five (5) Business Days after approval of the Bidding
Procedures by the Bankruptcy Court in the case of all filings required under the
HSR Act and within ten (10) Business Days in the case of all other filings
required by other Antitrust Laws, (ii) comply at the earliest practicable date
with any request under the HSR Act or other Antitrust Laws for additional
information, documents, or other materials received by each of them or any of
their respective Subsidiaries from the Federal Trade Commission (the "FTC"), the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") or any other Governmental Body in respect of such filings or such
transactions, and (iii) cooperate with each other in connection with any such
filing (including, to the extent permitted by Applicable Law, and at Purchaser's
cost providing copies of all such documents to the non-filing parties prior to
filing and considering all reasonable additions, deletions or changes suggested
in connection therewith) and in connection with resolving any investigation or
other inquiry of any of the FTC, the Antitrust Division or other Governmental
Body under any Antitrust Laws with respect to any such filing or any such
transaction. Each such party shall use commercially reasonable efforts to
furnish to each other all information required for any application or other
filing to be made pursuant to any applicable law in connection with the
transactions contemplated by this Agreement. Each such party shall promptly
inform the other parties hereto of any oral communication with, and provide
copies of written communications with, any Governmental Body regarding any such
filings or any such transaction. No party hereto shall independently participate
in any formal meeting with any Governmental Body in respect of any such filings,
investigation, or other inquiry without giving the other parties hereto prior
notice of the meeting and, to the extent permitted by such Governmental Body,
the opportunity
65
to attend and/or participate. Subject to applicable law, the parties hereto will
consult and cooperate with one another in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto relating to proceedings
under the HSR Act or other Antitrust Laws. Sellers and Purchaser may, as each
deems advisable and necessary, reasonably designate any competitively sensitive
material provided to the other under this Section 8.7 as "outside counsel only."
Such materials and the information contained therein shall be given only to the
outside legal counsel of the recipient and will not be disclosed by such outside
counsel to employees, officers, or directors of the recipient, unless express
written permission is obtained in advance from the source of the materials
(Sellers or Purchaser, as the case may be). Notwithstanding anything to the
contrary provided herein, none of Sellers, Purchaser nor any of their respective
Affiliates shall be required (i) to hold separate (including by trust or
otherwise) or divest any of its businesses, product lines or assets, or any of
the Purchased Assets, (ii) to agree to any limitation on the operation or
conduct of the Business, or (iii) to waive any of the conditions to this
Agreement set forth in Section 10.1.
(b) Each of Purchaser and Sellers shall use commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Body with respect to the transactions contemplated by this
Agreement under the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the Federal Trade Commission Act, as amended, and any other United
States federal or state or foreign statutes, rules, regulations, orders,
decrees, administrative or judicial doctrines or other laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, the "Antitrust Laws"). In
connection therewith, if any Legal Proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement is in
violation of any Antitrust Law, Sellers shall use reasonable best efforts, and
Purchaser shall cooperate with Sellers, to contest and resist any such Legal
Proceeding, and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order whether temporary, preliminary or permanent,
that is in effect and that prohibits, prevents, or restricts consummation of the
transactions contemplated by this Agreement, including by pursuing all available
avenues of administrative and judicial appeal and all available legislative
action, unless, by mutual agreement, Purchaser and Sellers decide that
litigation is not in their respective best interests. Each of Purchaser and
Sellers shall use commercially reasonable efforts to take such action as may be
required to cause the expiration of the notice periods under the HSR Act or
other Antitrust Laws with respect to such transactions as promptly as possible
after the execution of this Agreement. Notwithstanding anything to the contrary
provided herein, none of Sellers, Purchaser nor any of their respective
Affiliates shall be required (i) to hold separate (including by trust or
otherwise) or divest any of its businesses, product lines or assets, or any of
the Purchased Assets, (ii) to agree to any limitation on the operation or
conduct of the Business, or (iii) to waive any of the conditions to this
Agreement set forth in Section 10.1.
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(c) All filings fees related to this Agreement incurred
in connection with the HSR Act or other Antitrust Laws shall be borne by the
parties in accordance with their respective legal obligations.
8.8 Further Assurances. Subject to Section 8.7, each of Sellers
and Purchaser shall use its commercially reasonable efforts to (i) take all
actions reasonably necessary or appropriate to consummate the transactions
contemplated by this Agreement including actively pursuing and securing the
financing as set forth in the Commitment Letters and (ii) cause the fulfillment
at the earliest practicable date of all of the conditions to their respective
obligations to consummate the transactions contemplated by this Agreement.
Without limiting the foregoing, Purchaser or Sellers, as applicable, shall
cooperate in transferring Excluded Assets to Sellers or Purchased Assets
(including assets of Sellers intended to be Purchased Assets) to Purchaser,
including turning over any payments received by the other party, and assisting
in the collection of any Excluded Assets. Sellers shall take all necessary
actions to enforce all rights of Sellers with respect to employees, consultants
and agents of Sellers and their Subsidiaries, who are contributors to the
science of patentable inventions of the Darvocet-N XR Product, the Lynxorb
Product, the Darvocet-N Suspension Product, and the New Products to effectuate
the transactions contemplated herein.
8.9 Non-Competition; Non-Solicitation; Confidentiality.
(a) Except with respect to Sellers' manufacturing
Products for Purchaser pursuant to the Manufacturing Agreement or as otherwise
provided for in Section 3.3, for a period from the Closing Date until the
seventh (7th) anniversary of the Closing Date, Sellers shall not and shall cause
their Subsidiaries not to directly or indirectly, own, manage, operate, control
or participate in the ownership, management, operation or control of any
business, whether in corporate, proprietorship or partnership form or otherwise,
engaged in the marketing, promoting, distributing and selling of pharmaceutical
products competitive with any of the Products (a "Restricted Business") in the
Territory; provided, however, that the restrictions contained in this Section
8.9(a) shall not restrict the acquisition by Sellers, directly or indirectly, of
less than 2% of the outstanding capital stock of any publicly traded company
engaged in a Restricted Business; provided, further, however, that, except as
otherwise provided for in Section 3.3, nothing contained herein shall preclude
Sellers or their Affiliates from developing or manufacturing products for third
parties.
(b) For a period of one (1) year from the Closing Date,
Sellers shall not and shall cause their Subsidiaries not to: (i) cause, solicit,
induce or encourage any employees of Sellers who are or become employees of
Purchaser or its Affiliates to leave such employment or hire, employ or
otherwise engage any such individual; or (ii) cause, induce or encourage any
material client, customer, supplier, or licensor of the Business (including any
existing customer of Sellers and any Person that becomes a client or customer of
the Business after the Closing) or any other Person who has a material business
relationship with the Business, to terminate or modify any such relationship;
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provided that the foregoing shall not apply to general advertisements in
newspapers, newsletters, magazines, commercials, billboards, or other media
outlets.
(c) For the period commencing on the date hereof and
continuing until one (1) year from the Closing Date, Purchaser shall not and
shall cause its Affiliates not to: (i) cause, solicit, induce or encourage any
employees of Sellers or their Affiliates, except as set forth in Schedule 9.1,
to become employees of Purchaser or its Affiliates to leave such employment or
hire, employ or otherwise engage any such individual without the prior written
consent of Sellers; or (ii) cause, induce or encourage any material actual
client, customer, supplier, or licensor of Sellers or their Affiliates, except
as set forth in Schedule 9.1 (including any existing customer of Sellers, their
Affiliates, or the Business and any Person that becomes a client or customer of
the Business after the Closing) or any other Person who has a material business
relationship with the Sellers, their Affiliates or the Business, to terminate or
modify any such actual or prospective relationship.
(d) The confidentiality agreement between Purchaser and
Parent dated November 12, 2004 (the "Confidentiality Agreement") shall remain in
effect and terminate upon the earlier to occur of the Closing and as otherwise
provided in the Confidentiality Agreement. From and after the Closing Date, none
of Sellers or Purchaser shall, and each shall cause their respective Affiliates,
officers and directors (collectively, with Sellers or Purchaser, as applicable,
a "Receiving Party") not to, directly or indirectly, without the prior written
consent of the other (the "Disclosing Party"), disclose any Confidential
Information (as defined below) of the Disclosing Party to any Person, except to
a Receiving Party's or its Affiliates' employees or representatives who need to
know such information for any reason contemplated by this Agreement (and then
only to the extent that such Persons are under an obligation to maintain the
confidentiality of the Confidential Information), or use any Confidential
Information of the Disclosing Party for any reason other than contemplated by
this Agreement unless such Receiving Party has (i) consulted with the Disclosing
Party and obtained the Disclosing Party's prior written consent or (ii) been
advised by counsel that disclosure is required to be made under Applicable Law,
legal process, subpoena, litigation, discovery requests or demands from a
Governmental Body or other legal compulsion, or the requirements of a national
securities exchange or another similar regulatory body. In the event that the
Receiving Party is required by subpoena, civil investigative demand,
interrogatories, requests for information, or other similar process, as provided
for in the preceding sentence, to disclose any Confidential Information, the
Receiving Party shall provide the Disclosing Party with prompt written notice of
such demands so that the Disclosing Party may seek an appropriate protective
order; provided, however, to the extent that the Disclosing Party does not seek
a protective order or it is denied a protective order, such disclosure of
Confidential Information by the Receiving Party shall not constitute a breach of
this Agreement. Notwithstanding the foregoing, Sellers shall not make any
filings with the Bankruptcy Court or otherwise permit any filings to be made
with respect to any Confidential Information of Purchaser without the reasonable
prior written consent of Purchaser, and Sellers further agree that any such
filings shall be made under seal pursuant to section 107(b) of the Bankruptcy
Code and Bankruptcy Rule 9018 to the extent reasonably requested by Purchaser.
For purposes of
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this Section 8.9(d), "Confidential Information" means any confidential
information with respect to the Business, including, Licensed Assets, methods of
operation, customers, customer lists, Products, prices, fees, costs, technology,
inventions, trade secrets, know how, software, marketing methods, plans,
personnel, suppliers, competitors, markets or other specialized information or
proprietary matters. "Confidential Information" does not include, and there
shall be no obligation hereunder with respect to, information that (i) is
generally available to the public on the date of this Agreement or (ii) becomes
generally available to the public other than as a result of a disclosure not
otherwise permissible hereunder. This Section 8.9 shall not in any way limit the
disclosure of information (x) by Sellers in connection with the prosecution of
the Chapter 11 Case or (y) regarding Sellers to other bidders or potential
bidders, to the extent specifically permitted by this Agreement. Notwithstanding
the generality of the foregoing, Sellers agree that, without Purchaser's prior
written consent, Sellers shall not disclose the identity of Purchaser's
financing sources or the amount or terms of financing proposed to be supplied by
an such source, except as otherwise required by Applicable Law or by the
Bankruptcy Court with respect to filings to be made with the Bankruptcy Court in
connection with this Agreement.
(e) The covenants and undertakings contained in this
Section 8.9 relate to matters which are of a special, unique and extraordinary
character and a violation of any of the terms of this Section 8.9 will cause
irreparable injury to the parties, the amount of which will be impossible to
estimate or determine and which cannot be adequately compensated. Therefore,
Purchaser will be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction in the event of any
breach of this Section 8.9. The rights and remedies provided by this Section 8.9
are cumulative and in addition to any other rights and remedies which Purchaser
may have hereunder or at law or in equity. In the event that Purchaser were to
seek damages for any breach of this Section 8.9, the portion of the Purchase
Price which is allocated by the parties to the foregoing covenant shall not be
considered a measure of or limit on such damages.
(f) The parties hereto agree that, if any court of
competent jurisdiction in a final nonappealable judgment determines that a
specified time period, a specified geographical area, a specified business
limitation or any other relevant feature of this Section 8.9 is unreasonable,
arbitrary or against public policy, then a lesser time period, geographical
area, business limitation or other relevant feature which is determined to be
reasonable, not arbitrary and not against public policy may be enforced against
the applicable party.
8.10 Preservation of Records. Sellers and Purchaser agree that each
of them shall preserve and keep the records held by it or their Affiliates
relating to the Business for a period of seven (7) years from the Closing Date
and shall make such records and personnel available to the other as may be
reasonably required by such party in connection with, among other things, any
insurance claims by, legal proceedings against or governmental investigations of
Sellers or Purchaser or any of their Affiliates or in order to enable Sellers or
Purchaser to comply with their respective obligations under this Agreement and
each other agreement, document or instrument contemplated hereby or
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thereby. To the extent that any party provides the other with records relating
to the Business, such party providing the files shall have the right to
duplicate and maintain copies of such files. In the event Sellers or Purchaser
wishes to destroy such records before or after that time, such party shall first
give ninety (90) days prior written notice to the other and such other party
shall have the right at its option and expense, upon prior written notice given
to such party within such ninety (90) day period, to take possession of the
records within one hundred and eighty (180) days after the date of such notice.
8.11 Publicity. Neither Sellers nor Purchaser shall issue any press
release or public announcement concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
party hereto, which approval will not be unreasonably withheld or delayed,
unless, in the sole judgment of Purchaser or Sellers, disclosure is otherwise
required by Applicable Law or by the Bankruptcy Court with respect to filings to
be made with the Bankruptcy Court in connection with this Agreement or by the
applicable rules of any stock exchange on which Purchaser or Sellers lists
securities, provided that the party intending to make such release shall use
commercially reasonable efforts consistent with such Applicable Law or
Bankruptcy Court requirement to consult with the other party with respect to the
text thereof.
8.12 aaiPharma Name. From the earlier to occur of (i) one (1) year
following the Closing Date or (ii) until exhaustion of packaging and promotional
materials existing as of the Closing Date ("AAI Packaging"), Purchaser shall
have the right to use, in connection with the AAI Packaging, the name
"aaiPharma" or similar names or any service marks, trademarks, trade names,
identifying symbols, logos, emblems or signs containing or comprising the
foregoing, only to the extent that such right is reasonably necessary or
required for the limited use of the AAI Packaging.
8.13 Cooperation with Financing. In order to assist with obtaining
Purchaser's acquisition financing in connection with this Agreement, Sellers
shall, and shall cause their Subsidiaries to, provide such reasonable assistance
and cooperation as Purchaser and its Affiliates may reasonably request.
8.14 Returns, Rebates and Chargebacks.
(a) (i) Sellers shall be financially responsible for
returned Marketed Products sold by Sellers prior to the Closing Date and
Purchaser shall be financially responsible for returned Marketed Products sold
by Purchaser on or after the Closing Date, provided that Sellers and Purchaser
shall be financially responsible for their own allocated percentage of Split
Lots of returned Marketed Products that will be set forth on a schedule of Split
Lots to be provided by Sellers within ten (10) Business Days after the Closing
Date; provided, however, that Sellers' financial obligation for such returns
shall terminate two hundred seventy (270) days after the Closing Date. Such
allocated percentage of a Split Lot that Purchaser shall be responsible for
under this Section 8.14(a)(i) shall be equal to the percentage of such Split Lot
located at SPS Cord on the Closing Date and such allocated percentage of a Split
Lot that Sellers shall be
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responsible for under this Section 8.14(a)(i) shall equal the percentage of such
Split Lot not located at SPS Cord on the Closing Date.
(ii) As of the Closing, Purchaser and Sellers
will use commercially reasonable efforts in requesting that customers
direct all returned Marketed Products to Purchaser; provided, however,
that except as set forth on Schedule 8.14(a)(ii), returned Marketed
Products received by Purchaser or Sellers after the Closing Date will
be handled by such party at its respective returns handling facility.
Neither Purchaser nor Sellers shall issue credits or make any cash
payments for returned Marketed Products for which the other party is
financially responsible as set forth in Section 8.14(a)(i) above;
provided, however, that such party shall destroy such returned Marketed
Product and invoice the other party for the reasonable cost of
destruction. Each such invoice shall set forth information as shall be
necessary to support the invoice. Sellers and Purchaser shall, within
thirty (30) days of such party's receipt of invoice, pay the other
party for the full invoiced amount. Notwithstanding anything else
contained herein, if either Purchaser or Sellers issue financial credit
or other reimbursement for returned Marketed Products and related
administrative fees for which the other party was financially
responsible as set forth in this Section 8.14(a), such party shall
invoice the other party for such amount setting forth information as
shall be reasonably necessary to support the invoice. Purchaser and
Sellers shall, within thirty (30) days of Purchaser's or Sellers'
receipt of invoice, pay the other party for the full invoiced amount.
(iii) Neither Purchaser nor Sellers shall
encourage Marketed Product returns or accept Marketed Product returns
outside of its normal course of business without the prior written
approval of the other party.
(b) Sellers shall be financially responsible for all
rebates pursuant to any rebate programs, including government rebate programs,
with respect to claims for the Marketed Products dispensed (the dispense date
contained in any report from a rebate program shall be used for purposes of
determining the date of such rebate) on or before thirty (30) days after the
Closing Date; provided, however, that Sellers' financial obligation for such
rebates shall terminate one-hundred eighty (180) days after the Closing Date
(the "Rebates Termination Date"). Purchaser shall assume financial
responsibility for all rebates pursuant to any such rebate programs with respect
to claims for the Marketed Products dispensed after the Rebates Termination
Date. Purchaser and Sellers acknowledge that government rebates are billed on a
calendar quarter basis and to the extent that the periods set forth in this
Section 8.14(b) do not end on a calendar quarter, the Purchaser and Seller shall
make payments for such fractional periods of any applicable quarter on a
pro-rata basis based on the number of days for which such party is responsible
for rebates in the applicable quarter. Purchaser acknowledges that Sellers will
require certain information from Purchaser in order to calculate the Medicaid
rebate for Marketed Products bearing Sellers' NDC number. Accordingly, Purchaser
agrees that, from and after the Closing Date until the date which is one (1)
calendar year after the expiration date of the last lot of Marketed Products
produced with Sellers' NDC
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number, Purchaser will provide to Sellers, concurrently with its timely delivery
of related information to the Centers for Medicare and Medicaid Services (or any
successor agency), the following information: (a) the "best price" (as defined
under the Social Security Act, 42 U.S.C. Section 1396r-8(c)(1)(C)) for each
Marketed Product identified by NDC number, (b) on the twentieth (20th) day after
the end of each calendar quarter during such one (1) year period, all
information reasonably necessary for Sellers to calculate the "average
manufacturer price" (as defined under the Social Security Act, 42 U.S.C.
Sections 1396r-8(k)(1)) for each Marketed Product identified by NDC number, and
(c) any additional data or other information related to such Medicaid issues
reasonably requested by Sellers.
(c) Sellers shall be financially responsible for all
chargeback claims and related administrative service fees for the Marketed
Products with a chargeback invoice dated (i.e., the date of sale from the
wholesaler to the wholesaler customer) on or before forty-five (45) days after
the Closing Date; provided, however, that Sellers' maximum financial obligation
for chargeback claims and related administrative service fees for the Marketed
Products shall terminate one-hundred eighty (180) days after the Closing Date
(the "Chargeback Termination Date"). Purchaser shall be financially responsible
for all chargeback claims and related administrative service fees for the
Marketed Products with a chargeback invoice dated after the Chargeback
Termination Date. If either Purchaser or Sellers issues financial credit or
other reimbursement for chargeback claims and related administrative fees for
which the other party was financially responsible as set forth in this Section
8.14(c), such party shall invoice the other party for such amount setting forth
information as shall be reasonably necessary to support the invoice. Purchaser
and Sellers shall, within thirty (30) days of Purchaser's or Sellers' receipt of
invoice, pay the other party for the full invoiced amount.
(d) After the Closing Date, the Purchaser and Sellers
shall use commercially reasonable efforts and cooperate in good faith to notify
the wholesale trade customers that Purchaser will begin marketing the Marketed
Products, which notification shall include letters or other communication as
Purchaser and Sellers may mutually agree.
(e) In the event that Purchaser increases the published
Wholesaler Acquisition Cost ("WAC") of any of the Marketed Products prior to the
last to expire of the Rebates Termination Date or the Chargeback Termination
Date, Purchaser shall (i) promptly notify Sellers of such increase and (ii)
reimburse Sellers the increase in amounts associated with returns, rebates or
chargebacks as a result of such increase in WAC. Purchaser and Sellers
acknowledge that a percentage increase in WAC may result in a greater percentage
increase in rebates, in which case Sellers would invoice Purchaser for the full
increase in the rebate. Sellers shall invoice Purchaser on a monthly basis for
amounts due pursuant to this Section 8.14(e) and Purchaser shall pay such
invoices within thirty (30) days after receipt of same.
8.15 Adverse Experience Reporting and Product Complaints. Sellers
shall promptly submit to Purchaser all adverse drug experience information and
product
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complaints brought to the attention of Sellers in writing following the Closing
in respect of any of the Products, as well as any material events and matters
concerning or affecting the safety or efficacy of any of the Products. Without
limiting the foregoing, Sellers shall notify Purchaser of any adverse or
unexpected event brought to the attention of Sellers in writing following the
Closing in respect of any of the Products within three (3) Business Days from
the date Sellers receive written notice of such event.
8.16 Recalls. Purchaser shall be solely responsible and liable for
conducting all voluntary recalls, stop sales, field alerts, market withdrawals
or other related actions (collectively "Recalls") of units of any Products after
the Closing Date relating to Products sold by or on behalf of Sellers prior to
the Closing Date; provided, however, that, subject to Purchaser's compliance
with this Section 8.16, Sellers shall reimburse Purchaser for all of its
reasonable out-of-pocket costs and expenses, including notification, shipping
and handling charges and amounts refunded or credited to customers incurred in
respect of any Recalls relating to the Products sold by or on behalf of Sellers
prior to the Closing Date and deemed necessary by Purchaser in Purchaser's
commercially reasonable judgment. Purchaser shall reasonably consult with
Sellers and take into consideration Sellers' reasonable recommendations
regarding such Recalls; provided, that Purchaser shall not be required to
consult with Sellers in advance to the extent circumstances preclude prior
consultation. In addition, Purchaser shall use commercially reasonable efforts
to mitigate the costs and expenses associated with any such Recall.
8.17 Inventory. Sellers shall deliver the Inventory to Purchaser
FOB Sellers' third party distribution center. Sellers shall invoice Purchaser
for reasonable storage fees with respect to Inventory not picked up by Purchaser
within ten (10) Business Days after the Closing Date. Purchaser shall pay any
such invoiced amounts within thirty (30) days of its receipt of invoice.
8.18 Financial Statements. At Purchaser's cost (and with Purchaser
making direct arrangements with certified public accountants), Sellers shall use
their commercially reasonable efforts to furnish Purchaser and its
representatives as soon as practicable, but no later than sixty (60) days after
the Closing Date, audited balance sheets of the Purchased Assets, Licensed
Assets and Assumed Liabilities as at December 31, 2002 , 2003 and 2004 and the
audited statements of gross revenue, net revenues and direct costs for the three
(3) years ended December 31, 2004. No later than September 30, 2005, Sellers
shall furnish Purchaser and its representatives with a balance sheet of the
Purchased Assets, Licensed Assets and Assumed Liabilities as at June 30, 2005
and the statement of gross revenues, net revenues and direct costs of the
Business for the six-month period ended June 30, 2004. At Purchaser's expense,
Sellers shall also make reasonable efforts to furnish Purchaser with such other
financial, business and operating data of the Business as may be required or
reasonably requested by Purchaser for inclusion in, or in connection with, any
private placement memoranda or filings with the U.S. Securities and Exchange
Commission and registration statement (including, without limitation, any
prospectus supplement) of Purchaser under the Securities Act of 1933, as amended
(the "Securities Act"), including using commercially reasonable efforts
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to furnish Purchaser, with financial information of the Business for any period
ending on or before the Closing Date that complies with any requirements of the
staff of the SEC applicable to the balance sheets and statements of gross
revenue, net revenues and direct costs described above and using reasonable
commercial efforts to cause Sellers' certified public accountants to provide
their opinion, consents for the inclusion thereof in any such registration
statement and comfort letters that are customary for registration statements or
private placement memoranda.
8.19 Differentiation of Products. Not later than three (3) months
following the Closing, Purchaser shall use commercially reasonable efforts to
ensure that Marketed Products manufactured, finished or sold by, or on behalf
of, Purchaser bear an NDC code different than that used by the Sellers for the
Marketed Products.
8.20 Resale Certificates. Purchaser shall use commercially
reasonable efforts to deliver to Sellers at the Closing resale certificates with
respect to the Inventory, in form and substance mutually acceptable to Purchaser
and Sellers, but in no event shall the failure to deliver such resale
certificates delay the Closing or the delivery of such resale certificates be
deemed a condition to the Closing.
8.21 Enforcement of Rights. Sellers shall enforce all rights of
Sellers under non-disclosure or confidentiality, non-compete, or
non-solicitation agreements (collectively, the "Restrictive Agreements") with
employees and agents of Sellers or with third parties to the extent relating to
the Business, the Purchased Assets (or any portion thereof) or the Licensed
Assets (or any portion thereof) and Sellers shall aggressively pursue all
litigation in connection with any breach of such Restrictive Agreements. If
Sellers fail to aggressively pursue any such litigation, then, at Purchaser's
option, Purchaser may send written notice to Sellers indicating Purchaser's
desire to take over such litigation, and Sellers shall, upon receipt of such
written notice, promptly assign their right to pursue such litigation to
Purchaser and Purchaser shall have the right pursue such litigation, at
Purchaser's cost.
8.22 Laboratory Notebooks. Within a commercially reasonable time
after the Closing Date, Sellers shall, at Purchaser's expense, create and
deliver copies of the Notebooks to Purchaser, provided that prior to the
delivery of copies of the Notebooks relating to the Licensed Assets, Purchaser
and Sellers shall enter into a mutually acceptable
confidentiality/non-disclosure or similar agreement protecting the
confidentiality of, and any applicable privilege or protection in, the
information contained in such Notebooks.
8.23 Darvocet-N XR IDM. Prior to the Closing Date, Sellers shall
update the Darvocet-N XR IDM to reflect the then-current formulation of the
Darvocet-N XR Product to the extent the relevant formulation exists or is
available.
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ARTICLE IX
EMPLOYEES
9.1 Employment.
(a) Except as otherwise provided herein, at any time immediately
prior to or after the Closing, Purchaser shall be permitted to offer employment
to those employees listed on Schedule 9.1. Such individuals who accept such
offer are referred to herein as the "Transferred Employees." Subject to
Applicable Laws, Purchaser shall have the right to dismiss any or all
Transferred Employees at any time, with or without cause, and to change the
terms and conditions of their employment (including compensation and employee
benefits provided to them).
(b) To the extent permitted by Applicable Law, from time to time
following the Closing, Sellers shall, or shall cause their Subsidiaries to, make
available to Purchaser such non-confidential data in personnel records of
Transferred Employees as is reasonably necessary for Purchaser to transition
such employees into Purchaser's records.
9.2 Indemnification. Sellers shall indemnify and hold Purchaser
and its Affiliates harmless with respect to any Transferred Employee from (i)
any employment-related liability with respect to employment on or prior to the
date any such Transferred Employee was hired by Purchaser and (ii) any liability
under WARN.
ARTICLE X
CONDITIONS TO CLOSING
10.1 Conditions Precedent to Obligations of Purchaser. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by Purchaser
in whole or in part to the extent permitted by Applicable Law):
(a) the representations and warranties of Sellers set
forth in this Agreement qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material respects,
as of the date of this Agreement and as of the Closing as though made at and as
of the Closing, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of
such earlier date) and Purchaser shall have received a certificate signed by an
authorized officer of Sellers (in form and substance reasonably satisfactory to
Purchaser), dated the Closing Date, to such effect;
(b) Sellers shall have performed and complied in all
material respects with all obligations and agreements required in this Agreement
to be performed or
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complied with by it prior to the Closing Date, and Purchaser shall have
received a certificate signed by an authorized officer of Sellers (in form and
substance reasonably satisfactory to Purchaser), dated the Closing Date, to such
effect;
(c) there shall not have been or occurred any event,
change, occurrence or circumstance that has had or which could reasonably be
expected to have a Material Adverse Effect since the Balance Sheet Date,
provided that if there is an oral indication by the FDA that a factorial design
study (being a study in which the Darvocet-N XR Product is required to be
compared against one or more of its ingredients alone) may or will be required
for FDA approval of the Darvocet-N XR Product, Purchaser shall not be obligated
to consummate the transactions contemplated by this Agreement unless there is a
subsequent written indication by the FDA that no such factorial design study is
required, and if there is a written indication by the FDA that such factorial
design study is required, then such written indication shall be a Material
Adverse Effect; and
(d) Purchaser shall have received the financing set forth
in the Commitment Letters, which condition shall be deemed satisfied if
Purchaser does not provide written notice to Sellers on or prior to three (3)
Business Days before the Bankruptcy Court's hearing with respect to the Bidding
Procedures that such condition has not been satisfied.
10.2 Conditions Precedent to Obligations of Sellers. The
obligations of Sellers to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions (any or all of which may be waived by Sellers
in whole or in part to the extent permitted by applicable law):
(a) The representations and warranties of Purchaser set
forth in this Agreement qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material respects,
as of the date of this Agreement and as of the Closing as though made at and as
of the Closing, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties qualified as to materially shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of
such earlier date) and Sellers shall have received a certificate signed by an
authorized officer of Purchaser (in form and substance reasonably satisfactory
to Purchaser), dated the Closing Date, to such effect;
(b) Purchaser shall have performed and complied in all
material respects with all obligations and agreements required by this Agreement
to be performed or complied with by Purchaser on or prior to the Closing Date
and Sellers shall have received a certificate signed by an authorized officer of
Purchaser (in form and substance reasonably satisfactory to Sellers), dated the
Closing Date, to such effect; and
(c) Purchaser shall have paid the Purchase Price in
accordance with Section 3.9.
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10.3 Conditions Precedent to Obligations of Purchaser and Sellers.
The respective obligations of Purchaser and Sellers to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, on
or prior to the Closing Date, of each of the following conditions (any or all of
which may be waived by Purchaser and Sellers in whole or in part to the extent
permitted by Applicable Law):
(a) no Legal Proceedings (including any proceeding over
which the Bankruptcy Court has jurisdiction under 28 U.S.C. Section 157(b))
shall have been instituted or threatened or claim or demand made against Sellers
or Purchaser seeking to restrain or prohibit or to obtain substantial damages
with respect to the consummation of the transactions contemplated hereby, and
there shall not be in effect any Order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby;
(b) the Bankruptcy Court shall have entered the Bidding
Procedures Order and the Sale Order shall be a Final Order;
(c) the waiting period under the HSR Act shall have
expired or early termination shall have been granted and Sellers shall have
obtained any other consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Body required to be
obtained or made in connection with the execution and delivery of this Agreement
or the performance of the transactions contemplated herein and no Governmental
Body shall have instituted, or announced an intention to institute, any
proceeding against Purchaser or either Seller arising out of or based upon an
antitrust, competition or similar Applicable Law in connection with the
transactions contemplated herein:
(d) each of Sellers on the one hand and Purchaser on the
other hand shall have executed and delivered to each other the (i) Services
Agreement, (ii) the Manufacturing Agreement and (iii) the Odyssey Co-Development
Agreement; and
(e) Sellers shall have obtained those consents, waivers
and approvals referred to Schedule 10.3(e) hereof in a form satisfactory to
Purchaser.
10.4 Frustration of Closing Conditions. Neither Sellers nor
Purchaser may rely on the failure of any condition set forth in Section 10.1,
10.2, 10.3, or, as the case may be, if such failure was caused by such party's
failure to comply with any provision of this Agreement.
ARTICLE XI
INDEMNIFICATION
11.1 Survival of Representations and Warranties. The
representations and warranties of the parties contained in Articles V and VI of
this Agreement shall survive the Closing through and including twelve (12)
months following the Closing Date (the "Survival Period"); provided, however,
that any obligations to indemnify and hold
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harmless shall not terminate with respect to any Losses as to which the Person
to be indemnified shall have given notice (stating in reasonable detail the
basis of the claim for indemnification) to the indemnifying party in accordance
with Section 13.3(a) before the termination of the Survival Period.
11.2 Indemnification.
(a) Subject to Section 11.4 hereof, Sellers hereby agree
to indemnify and hold Purchaser and its directors, officers, employees,
Affiliates, stockholders, agents, attorneys, representatives, successors and
assigns (collectively, the "Purchaser Indemnified Parties") harmless from and
against:
(i) any and all losses, liabilities,
obligations, damages, costs and expenses (collectively, "Losses") based
upon, attributable to or resulting from the failure of any
representation or warranty of Sellers set forth in this Agreement or in
any Sellers Document, to be true and correct in all respects at the
date hereof and at the Closing Date (except where Sellers
representations and warranties are given as of any other applicable
date in which case such representation and warranty shall be correct as
of such date);
(ii) any and all Losses based upon, attributable
to or resulting from the breach of any covenant or other agreement on
the part of Sellers under this Agreement or any Sellers Document;
(iii) any and all Losses arising out of, based
upon or relating to any Excluded Asset or any Excluded Liability;
(iv) any recall, warranty claim, product
liability claim or other claim which arises from or relates to any
Products sold by or on behalf of Sellers prior to the Closing Date;
(v) any amounts owed by Sellers to Purchaser
pursuant to Section 8.14; and
(vi) any and all notices, actions, suits,
proceedings, claims, demands, assessments, judgments, costs, penalties
and expenses, including reasonable attorneys' and other professionals'
fees and disbursements (collectively, "Expenses") incident to any and
all Losses with respect to which indemnification is provided hereunder.
(b) Subject to Section 11.4, Purchaser hereby agrees to
indemnify and hold Sellers and their Affiliates, stockholders, agents,
attorneys, representatives, successors and permitted assigns
(collectively, the "Seller Indemnified Parties") harmless from and
against:
(i) any and all Losses based upon, attributable
to or resulting from the failure of any representation or warranty of
Purchaser set forth in this
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Agreement or any Purchaser Document, to be true and correct at the date
hereof and at the Closing Date;
(ii) any and all Losses based upon, attributable
to or resulting from the breach of any covenant or other agreement on
the part of Purchaser under this Agreement or any Purchaser Document;
(iii) any and all Losses arising out of, based
upon or relating to any Assumed Liability;
(iv) any and all Losses arising in connection
with the conduct and operation of Purchaser's business on and after the
Closing Date;
(v) any recall, warranty claim, product
liability claim or other claim which arises from or relates to any
Products sold by or on behalf of Purchaser after the Closing Date;
(vi) any amounts owed by Purchaser to Sellers
pursuant to Section 8.14; and
(vii) any and all Expenses incident to any and all
Losses with respect to which indemnification is provided hereunder.
11.3 Indemnification Procedures.
(a) In the event that any Legal Proceedings shall be
instituted or that any claim or demand shall be asserted by any Person in
respect of which payment may be sought under Section 11.2 hereof (regardless of
the limitations set forth in Section 11.4) "Indemnification Claim"), the
indemnified party shall reasonably and promptly cause written notice of the
assertion of any Indemnification Claim of which it has knowledge which is
covered by this indemnity to be forwarded to the indemnifying party. The
indemnifying party shall have the right, at its sole expense, to be represented
by counsel of its choice, which must be reasonably satisfactory to the
indemnified party, and to defend against, negotiate, settle or otherwise deal
with any Indemnification Claim which relates to any Losses indemnified against
hereunder; provided that the indemnifying party shall have acknowledged in
writing to the indemnified party its unqualified obligation to indemnify the
indemnified party as provided hereunder. If the indemnifying party elects to
defend against, negotiate, settle or otherwise deal with any Indemnification
Claim which relates to any Losses indemnified against hereunder, it shall within
fifteen (15) Business Days (or sooner, if the nature of the Indemnification
Claim so requires) notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Indemnification Claim which relates to any Losses indemnified
against hereunder, fails to notify the indemnified party of its election as
herein provided or contests its obligation to indemnify the indemnified party
for such Losses under this Agreement, the indemnified party may defend against,
negotiate, settle or otherwise deal with such Indemnification Claim. If the
indemnified party defends any Indemnification Claim, then the indemnifying party
shall reimburse the
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indemnified party for the Expenses of defending such Indemnification Claim upon
submission of periodic bills. If the indemnifying party shall assume the defense
of any Indemnification Claim, the indemnified party may participate, at his or
its own expense, in the defense of such Indemnification Claim; provided,
however, that such indemnified party shall be entitled to participate in any
such defense with separate counsel at the expense of the indemnifying party if
(i) so requested by the indemnifying party to participate or (ii) in the
reasonable opinion of counsel to the indemnified party a conflict or potential
conflict exists between the indemnified party and the indemnifying party that
would make such separate representation advisable; and provided, further, that
the indemnifying party shall not be required to pay for more than one such
counsel for all indemnified parties in connection with any Indemnification
Claim. The parties hereto agree to cooperate fully with each other in connection
with the defense, negotiation or settlement of any such Indemnification Claim.
Notwithstanding anything in this Section 11.3 to the contrary, neither the
indemnifying party nor the indemnified party shall, without the written consent
of the other party, settle or compromise any Indemnification Claim or permit a
default or consent to entry of any judgment unless the claimant and such party
provide to such other party an unqualified release from all liability in respect
of the Indemnification Claim. Notwithstanding the foregoing, if a settlement
offer solely for money damages is made by the applicable third party claimant,
and the indemnifying party notifies the indemnified party in writing of the
indemnifying party's willingness to accept the settlement offer and, subject to
the applicable limitations of Section 11.4, pay the amount called for by such
offer, and the indemnified party declines to accept such offer, the indemnified
party may continue to contest such Indemnification Claim, free of any
participation by the indemnifying party, and the amount of any ultimate
liability with respect to such Indemnification Claim that the indemnifying party
has an obligation to pay hereunder shall be limited to the lesser of (A) the
amount of the settlement offer that the indemnified party declined to accept
plus the Losses of the indemnified party relating to such Indemnification Claim
through the date of its rejection of the settlement offer or (B) the aggregate
Losses of the indemnified party with respect to such Indemnification Claim. If
the indemnifying party makes any payment on any Indemnification Claim, the
indemnifying party shall be subrogated, to the extent of such payment, to all
rights and remedies of the indemnified party to any insurance benefits or other
claims of the indemnified party with respect to such Indemnification Claim.
(b) After any final judgment or award shall have been
rendered by a Governmental Body of competent jurisdiction and the expiration of
the time in which to appeal therefrom, or a settlement shall have been
consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement with respect to an Indemnification Claim
hereunder, the indemnified party shall forward to the indemnifying party notice
of any sums due and owing by the indemnifying party pursuant to this Agreement
with respect to such matter and the indemnifying party shall be required to pay
all of the sums so due and owing to the indemnified party by wire transfer of
immediately available funds within ten (10) Business Days after the date of such
notice.
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(c) The failure of the indemnified party to give
reasonably prompt notice of any Indemnification Claim shall not release, waive
or otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss and
prejudice as a result of such failure.
11.4 Limitations on Indemnification for Breaches of Representations
and Warranties.
(a) An indemnifying party shall not have any liability
under Section 11.2(a)(i) or Section 11.2(b)(i) hereof unless and until the
aggregate amount of Losses and Expenses to the indemnified parties finally
determined to arise thereunder based upon, attributable to or resulting from the
failure of any representation or warranty to be true and correct (unless such
failure is the result of the indemnifying party's fraud or willful misconduct),
other than the representations and warranties set forth in Sections 5.1, 5.2,
5.8, 5.16 and 6.1, 6.2 and 6.5 hereof, exceeds $1,700,000 (the "Basket"), in
which case, only the Losses in excess of such amount of Loss shall be covered.
(b) Sellers shall not be required to indemnify any Person
for an aggregate amount of Losses and Expenses above the amount of Sellers'
Indemnity Escrow Fund, which shall be the sole source of payment of such
amounts, and Purchaser shall not be required to indemnify any Person for an
aggregate amount of Expenses and Losses under Section 11.2(b)(i) above the
amount of Purchaser's Indemnity Escrow Fund.
(c) For purposes of calculating Losses hereunder with
respect to determining whether the Losses and Expenses exceed $1,700,000 for
purposes of Section 11.4(a), any materiality or material adverse effect
qualifications in the representations, warranties, covenants and agreements
shall be ignored.
11.5 Indemnity Escrows.
(a) Purchaser's Indemnity Escrow Amount. On the Closing
Date, Purchaser shall pay to the Escrow Agent, in immediately available funds,
to the account designated by the Escrow Agent, the Purchaser's Indemnity Escrow
Amount in accordance with the terms of this Agreement and the Indemnity Escrow
Agreement. Six (6) months after the Closing Date, the Escrow Agent shall release
fifty percent (50%) of (i) the then existing amount of the Purchaser's Indemnity
Escrow Fund to Purchaser, less (ii) the amount of claims for indemnification
under this Article XI asserted by Sellers prior to the expiration of such six
(6) month period but not yet resolved ("Unresolved Claims"), and any unreleased
amount shall be retained by the Escrow Agent. Twelve (12) months after the
Closing Date, the Escrow Agent shall release the remaining amount of Purchaser's
Indemnity Escrow Fund to Purchaser, except that the Escrow Agent shall retain an
amount equal to the amount of the Unresolved Claims asserted prior to the
expiration of such twelve (12) month period. The Purchaser's Indemnity Escrow
Fund retained for Unresolved Claims shall be released by the Escrow Agent (to
the extent not
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utilized to pay Sellers for any such claims resolved in favor of Sellers) upon
their resolution in accordance with this Article XI.
(b) Sellers' Indemnity Escrow Amount. On the Closing
Date, Purchaser shall pay to the Escrow Agent, in immediately available funds,
to the account designated by the Escrow Agent, the Sellers' Indemnity Escrow
Amount (which shall be deducted from the Purchase Price) in accordance with the
terms of this Agreement and the Indemnity Escrow Agreement. Any payment Sellers
are obligated to make to any Purchaser Indemnified Party pursuant to this
Article XI shall be paid from the Sellers' Indemnity Escrow Fund. Six (6) months
after the Closing Date, the Escrow Agent shall release fifty percent (50%) of
(i) the then existing amount of the Sellers' Indemnity Escrow Fund to Sellers,
less (ii) the amount of the Unresolved Claims asserted by Sellers prior to the
expiration of such six (6) month period, and any unreleased amount shall be
retained by the Escrow Agent. Twelve (12) months after the Closing Date, the
Escrow Agent shall release the remaining amount of the Seller's Indemnity Escrow
Fund to Sellers, except that the Escrow Agent shall retain an amount equal to
the amount of the Unresolved Claims asserted prior to the expiration of such
twelve (12) month period. The Sellers' Indemnity Escrow Fund retained for
Unresolved Claims shall be released by the Escrow Agent (to the extent not
utilized to pay Purchaser for any such claims resolved in favor of Purchaser)
upon their resolution in accordance with this Article XI.
11.6 Tax Treatment of Indemnity Payments. Sellers and Purchaser
agree to treat any indemnity payment made pursuant to this Article XI as an
adjustment to the Purchase Price for all Tax purposes. If, notwithstanding the
treatment required by the preceding sentence, any indemnification payment is
determined to be taxable to the party receiving such payment by any Taxing
Authority, the paying party shall also indemnify the party receiving such
payment for any Taxes incurred by reason of the receipt of such payment and any
Expenses incurred by the party receiving such payment in connection with such
Taxes (or any asserted deficiency, claim, demand, action, suit, proceeding,
judgment or assessment, including the defense or settlement thereof, relating to
such Taxes). The amount of any Loss shall be reduced on account of any Tax
benefit actually realized by the party incurring such Loss.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL
ANY PARTY OR THEIR AFFILIATES BE LIABLE UNDER ANY THEORY, INCLUDING NEGLIGENCE,
FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES
OR LOST PROFITS, DAMAGE TO REPUTATION, LOST BUSINESS OPPORTUNITIES, INTERFERENCE
WITH BUSINESS OPPORTUNITIES OR DIMINUTION OF VALUE.
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ARTICLE XII
TAXES
12.1 Transfer Taxes. (i) Purchaser and Sellers shall each be
responsible for (and shall indemnify and hold harmless each other against) half
of any and all Liabilities for any sales, use, stamp, documentary, filing,
recording, transfer, real estate transfer, stock transfer, gross receipts,
registration, duty, securities transactions or similar fees or taxes or
governmental charges (together with any interest or penalty, addition to tax or
additional amount imposed) as levied by any Taxing Authority in connection with
the transactions contemplated by this Agreement (collectively, "Transfer
Taxes"), regardless of the Person liable for such Transfer Taxes under
Applicable Law and (ii) Sellers or Purchaser, as required by Applicable Law,
shall timely file or caused to be filed all necessary documents (including all
Tax Returns) with respect to Transfer Taxes. Notwithstanding the foregoing, the
Sellers shall seek to include in the Sale Order a provision that Sellers' sale,
transfer, assignment and conveyance of the Purchased Assets to Purchaser
hereunder shall be entitled to the protections afforded under Section 1146(c) of
the Bankruptcy Code. The parties will reasonably cooperate to minimize any such
taxes, including with respect to delivery location.
12.2 Prorations. All personal property taxes, or ad valorem
obligations and similar recurring taxes and fees on the Purchased Assets for
taxable periods beginning before, and ending after, the Closing Date, shall be
prorated between Purchaser and Sellers as of 12:01 a.m. eastern standard time on
the Closing Date. With respect to Taxes described in this Section 12.2, Sellers
shall timely file all Tax Returns due before the Closing Date with respect to
such Taxes and Purchaser shall prepare and timely file all Tax Returns due after
the Closing Date with respect to such Taxes. If one party remits to the
appropriate Taxing Authority payment for Taxes, which are subject to proration
under this Section 12.2 and such payment includes the other party's share of
such Taxes, such other party shall promptly reimburse the remitting party for
its share of such Taxes.
12.3 Purchase Price Allocation. Not later than sixty (60) days
after the Closing Date, Purchaser shall prepare and deliver to Sellers copies of
Form 8594 and any required exhibits thereto (the "Asset Acquisition Statement")
allocating the purchase price (including the Assumed Liabilities) among the
Purchased Assets in accordance with Section 1060 of the Code and the Treasury
regulations thereunder. Purchaser shall prepare and deliver to Sellers from time
to time revised copies of the Asset Acquisition Statement (the "Revised
Statements") so as to report any matters on the Asset Acquisition Statement that
need updating (including purchase price adjustments, if any). Sellers shall have
a period of ten (10) days after the delivery of the Asset Acquisition Statement
or, if applicable, the last Revised Statement (the "Allocation Response Period")
to present in writing to Purchaser notice of any objections Sellers may have to
the allocations set forth therein (an "Allocation Objections Notice"). Unless
Sellers object within such period, the Asset Allocation Statement or, if
applicable, the last Revised Statement shall be binding on the parties. If
Sellers shall raise any objections within the Allocation Response Period,
Purchaser and Sellers shall negotiate in good faith
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and use their commercially reasonable efforts to resolve such dispute. If the
parties fail to agree within fifteen (15) days after the delivery of the
Allocation Objections Notice, then Purchaser shall submit the Asset Acquisition
Statement or, if applicable, the last Revised Statement, including
modifications, if any, that Purchaser chooses to make as a result of its
negotiations with Sellers, to the Accountant for resolution by it. The disputed
items shall be submitted to the Accountant within fifteen (15) days following
such failure to agree. The determination of the Accountant shall be final and
binding on the parties and shall not be subject to appeal. The Accountant shall
resolve the dispute by selecting the proposed allocation submitted by either
Purchaser or Sellers which in the sole judgment of the Accountant most
accurately allocates the purchase price and the Assumed Liabilities among the
Purchased Assets in accordance with their relative fair market values, but not
by choosing any other formulation. The Accountant shall render such decision and
report to Purchaser and Sellers in writing, specifying the reasons for its
decision in reasonable detail, not later than thirty (30) days after the item
has been referred to it. The costs, fees and expenses of the Accountant shall be
borne equally by Sellers and Purchaser. The purchase price for the Purchased
Assets shall be allocated in accordance with the Asset Acquisition Statement or,
if applicable, the last Revised Statements, as finally determined, and all
income Tax Returns and reports filed by Purchaser and Sellers shall be prepared
consistently with such allocation.
12.4 Cooperation on Tax Matters.
(a) Purchaser and Sellers shall furnish or cause to be furnished
to each other, as promptly as practicable, such information and assistance
relating to the Purchased Assets and the Assumed Liabilities as is reasonably
necessary for the preparation and filing of any Tax Return, claim for refund or
other required or optional filings relating to Tax matters, for the preparation
for any Tax audit, for the preparation for any Tax protest, or for the
prosecution or defense of any suit or other proceeding relating to Tax matters.
(b) Purchaser shall retain possession of all accounting,
business, financial and Tax records and information relating to the Purchased
Assets or the Assumed Liabilities that are in existence on the Closing Date and
transferred to Purchaser hereunder for a period of at least three (3) years from
the Closing Date. Purchaser shall give Sellers notice and an opportunity to
retain any such records in the event that Purchaser determines to destroy or
dispose of them after such period. In addition, from and after the Closing Date,
Purchaser shall provide access to Sellers (after reasonably detailed prior
notice and during normal business hours), to the books, records, documents and
other information relating to the Purchased Assets or the Assumed Liabilities as
is reasonably necessary for Sellers to properly prepare for, file, prove,
answer, prosecute and/or defend any Tax Return, claim, filing, tax audit, tax
protest, suit, proceeding or answer.
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ARTICLE XIII
MISCELLANEOUS
13.1 Expenses. Except for the Expense Reimbursement and as
otherwise expressly provided in this Agreement, each of Sellers and Purchaser
shall bear its own expenses incurred in connection with the negotiation and
execution of this Agreement and each other agreement, document and instrument
contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby.
13.2 Specific Performance. Sellers and Purchaser acknowledge and
agree that the breach of this Agreement would cause irreparable damage to the
other and that neither Sellers nor Purchaser will have an adequate remedy at
law. Therefore, the obligations of Sellers and Purchaser under this Agreement
shall be enforceable by a decree of specific performance issued by any court of
competent jurisdiction, and appropriate injunctive relief may be applied for and
granted in connection therewith. Such remedies shall, however, be cumulative and
not exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
13.3 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
exclusive jurisdiction of the Bankruptcy Court over any dispute arising out of
or relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action proceeding related thereto may be heard and determined in
the Bankruptcy Court; provided, however, that in the event the Bankruptcy Court
abstains from exercising or declines to exercise jurisdiction with respect to
any matter provided for in this sentence or is without jurisdiction, such
abstention, refusal or lack of jurisdiction shall have no effect upon and shall
not control, prohibit or limit the exercise of jurisdiction of any other court
having competent jurisdiction with respect to any such matter. The parties
hereby irrevocably waive, to the fullest extent permitted by Applicable Law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
the mailing of a copy thereof in accordance with the provisions of Section 13.7.
13.4 Waiver of Right to Trial by Jury. Each party to this Agreement
waives any right to trial by jury in any action, matter or proceeding regarding
this Agreement or any provision hereof.
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13.5 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto) and the Confidentiality Agreement
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof. This Agreement can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement, including without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.
13.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and performed in such State.
13.7 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand (with written confirmation of receipt), (ii) when sent by
facsimile (with written confirmation of transmission) or (iii) one business day
following the day sent by overnight courier (with written confirmation of
receipt), in each case at the following addresses and facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to Sellers, to:
aaiPharma Inc.
0000 Xxxxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Ludo Xxxxxxxx
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx LLP
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
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If to Purchaser, to:
Xanodyne Pharmaceuticals, Inc.
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxx, Esq.
Simeon Gold, Esq.
13.8 Severability. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
13.9 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either Sellers or Purchaser (by
operation of law or otherwise) without the prior written consent of the other
parties hereto and any attempted assignment without the required consents shall
be void; provided, however, that Purchaser may assign this Agreement and any or
all rights or obligations hereunder (including, without limitation, Purchaser's
rights to purchase the Purchased Assets and assume the Assumed Liabilities and
Purchaser's rights to seek indemnification hereunder) to any wholly-owned
Subsidiary of Purchaser); provided, further, however, in such event, Purchaser
shall remain bound by the terms of this Agreement. Upon any such permitted
assignment, the references in this Agreement to Purchaser shall also apply to
any such assignee unless the context otherwise requires.
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13.10 Non-Recourse. No past, present or future director, officer,
employee, incorporator, member, partner, equityholder, Affiliate, agent,
attorney or representative of Purchaser or Sellers or their respective
Affiliates shall have any liability for any obligations or liabilities of
Purchaser or Sellers, as the case may be, under this Agreement or the Purchaser
Documents of or for any claim based on, in respect of, or by reason of, the
transactions contemplated hereby and thereby.
13.11 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, including, without limitation, the
deadline by which the Approval Motion must be filed, the deadlines by which the
Bidding Procedures Order and Sale Order must be entered, and the deadline by
which the Closing Date must occur, each of the parties hereto acknowledge that
time is of the essence. The failure to meet the foregoing deadlines shall
constitute a default under this Agreement.
13.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above.
XANODYNE PHARMACEUTICALS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
AAIPHARMA INC.
By: /s/ Ludo X. Xxxxxxxx
-------------------------------------
Ludo X. Xxxxxxxx, Ph. D.
President and Chief Executive Officer
AAIPHARMA, LLC
By: /s/ Ludo X. Xxxxxxxx
-------------------------------------
Ludo X. Xxxxxxxx, Ph. D.
President and Chief Executive Officer
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