Exhibit 2.3
================================================================================
ASSET PURCHASE AGREEMENT
Among
The DuPont Merck Pharmaceutical Company
Endo Laboratories, L.L.C.
DuPont Merck Pharma
As Sellers
And
Endo Pharmaceuticals Inc.
As Purchaser
Dated As Of:
June 27, 1997
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions
1.1 Definitions................................................ 2
1.2 References to Schedules and Exhibits....................... 8
1.3 References to Agreements................................... 8
ARTICLE 2
Assets and Liabilities
2.1 Assets Transferred at Closing............................. 8
2.2 Excluded Assets........................................... 10
2.3 Liabilities............................................... 11
2.4 Retention of Records and Samples.......................... 12
2.5 License to Purchaser; Other Purchaser Rights.............. 12
2.6 Licenses to Sellers...................................... 12
2.7 Additional License Considerations......................... 13
2.8 Required Consents......................................... 14
2.9 Rights to Endo Name and Marks............................. 14
2.10 Identification of Post Closing Sales...................... 15
ARTICLE 3
Purchase Price
3.1 Purchase Price - General................................... 15
3.2 Transferred Inventory...................................... 15
ARTICLE 4
Representations and Warranties
4.1 Seller's Warranties........................................ 16
4.2 Purchaser's Warranties..................................... 24
ARTICLE 5
Conduct of Business Pending Closing; Interim Covenants
5.1 Ordinary Course............................................ 25
5.2 Other Offers; Termination of Agreement..................... 26
5.3 Access..................................................... 27
5.4 Filings; Consents.......................................... 28
-i-
5.5 Transfer of Regulatory Approvals.................................. 28
5.6 Expenses.......................................................... 29
5.7 Supplemental Disclosure........................................... 29
ARTICLE 6
Covenants
6.1 Employees......................................................... 29
6.2 Mutual Covenant Not to Compete.................................... 32
6.3 Confidentiality................................................... 34
6.4 ADE Database...................................................... 35
6.5 Compliance with Law in Conduct of Business........................ 35
6.6 Use of Labeling................................................... 35
6.7 Continuing Relationships.......................................... 36
6.8 Sales and Transfer Taxes.......................................... 38
6.9 Access to Records................................................. 38
6.10 Right of First Refusal/Right of First Offer....................... 39
6.11 Reliance On and Maintenance of Current NDAs and ANDAs............. 40
6.12 Einstein Project.................................................. 41
6.13 Borrowings........................................................ 42
ARTICLE 7
Conditions to Closing; Closing
7.1 Conditions to Purchaser's Obligation to Close..................... 42
7.2 Conditions to Sellers' Obligation to Close........................ 43
7.3 Closing Location.................................................. 44
7.4 Closing Deliveries to Sellers..................................... 44
7.5 Closing Deliveries to Purchaser................................... 44
ARTICLE 8
Indemnification
8.1 Indemnification Of Purchaser By Sellers........................... 45
8.2 Indemnification Of Sellers By Purchaser........................... 46
8.3 Notice, Defense Of Indemnification Regarding Third Party Claims... 46
8.4 Survival.......................................................... 47
8.5 Limitations on Indemnification.................................... 47
ARTICLE 9
Miscellaneous
9.1 Notices........................................................... 48
9.2 Further Assurances................................................ 49
-ii-
9.3 Negotiation/Transaction Costs............................. 49
9.4 Return of Documents Costs................................. 49
9.5 Assignability............................................. 50
9.6 Counterparts.............................................. 50
9.7 Severability.............................................. 50
9.8 Entire Agreement.......................................... 50
9.9 Modifications............................................. 50
9.10 Non-Waiver of Default..................................... 50
9.11 GOVERNING LAW/CONSENT TO JURISDICTION..................... 50
9.12 Interpretation............................................ 50
9.13 Bulk Sales................................................ 51
9.14 Publicity................................................. 51
9.15 No Third Party Rights..................................... 51
ASSET PURCHASE AGREEMENT
This Agreement is made as of June 27, 1997 by and among The DuPont
Merck Pharmaceutical Company, a Delaware general partnership ("DMPC"), DuPont
Merck Pharma, a Delaware general partnership ("DuPont Pharma"), Endo
Laboratories, L.L.C., a Delaware limited liability company ("Endo") (DMPC,
DuPont Pharma and Endo being herein sometimes individually referred to as a
"Seller" and collectively as the "Sellers"), and Endo Pharmaceuticals Inc., a
Delaware corporation ("Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, Endo is a limited liability company owned 98% by DMPC, 1% by
Merck & Co., Inc. ("Merck") and 1% by ▇.▇. ▇▇▇▇▇▇ de Nemours and Company
("DuPont"), established by DMPC to engage in the business of developing,
manufacturing, marketing and selling generic pharmaceuticals;
WHEREAS, DMPC, through its Multi-Source Brand Products Unit, also
engages, directly or through marketing arrangements with Endo, in the
manufacture, marketing, sale and distribution of generic pharmaceuticals;
WHEREAS, DuPont Pharma engages in the manufacture of pharmaceutical
products, including certain of the Products;
WHEREAS, Sellers desire to sell to Purchaser their combined worldwide
generic and multi-source branded pharmaceutical businesses and related rights
and assets (excluding the Excluded Business and other Excluded Assets), and
Purchaser desires to acquire the same, all in accordance with the further terms
and conditions of this Agreement; and
WHEREAS, contemporaneously with Closing hereunder, the parties will
enter into certain ancillary agreements providing, inter alia, for the lease by
----- ----
DMPC of its Garden City, New York research facility building to Purchaser, the
continuing manufacture by DMPC and DuPont Pharma of certain existing and new
pharmaceuticals for Purchaser and the continued provision by DMPC of certain
customer service, distribution and other administrative services for Purchaser;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties agree as follows:
-1-
ARTICLE 1
Definitions
1.1 Definitions. As used in this Agreement, including attached
-----------
Schedules, the following definitions shall apply:
"Administrative Services Agreement" means the services agreement to be
entered into between DMPC and Purchaser concurrently with Closing, in the form
attached as Exhibit A hereto.
"Affiliate" means, as to any entity, any person or entity that
directly or indirectly controls, is controlled by, or is under common control
with such first entity. For purposes of the foregoing definition, "control"
shall mean the power to direct the business policies and affairs of an entity
whether by reason of the ownership of voting securities, by contract or
otherwise.
"Agreement" means this Asset Purchase Agreement by and among Sellers
and Purchaser, as the same may be amended from time to time, together with all
Schedules and Exhibits attached hereto.
"Ancillary Agreements" means the Lease Agreement, the Manufacture and
Supply Agreement, the Administrative Services Agreement, the Warehousing and
Distribution Agreement and the Put Agreement.
"API" means any active pharmaceutical ingredient contained in any of
the Products (including without limitation oxycodone, oxycodone hydrochloride,
oxycodone terapthalate and oxymorphone).
"Assumed Contracts" means all contracts identified in Part I of
Schedule 4.1(r) (including, without limitation, (i) all confidentiality
agreements entered into by Sellers with Transferred Employees (and certain prior
employees who performed services relating to the Business as identified on
Schedule 4.1(r)), (ii) all confidentiality agreements entered into by Sellers
with any third parties with respect to the contemplated sale of the generic and
multi-source branded pharmaceutical businesses of DMPC and Endo and (iii) all of
Sellers' sales contracts with third parties relating to the Business (excepting
Excluded Sales Contracts)), all Partially Assigned Contracts and all Routine
Contracts.
"Assumed Liabilities" shall have the meaning set forth in Section
2.3(b).
"Bank Financing" shall have the meaning set forth in Section 4.2(c).
"Building" means the two-story research facility utilized in
connection with the Business located on DMPC's manufacturing and research campus
in Garden City, New York, and consisting of approximately 24,000 square feet, as
further defined in the Lease Agreement.
"Business" means the worldwide business operations conducted by
Sellers relating to the development, marketing, sale and distribution of the
Products, and rights to manufacture the Products, but excluding the Excluded
Assets and business operations of Sellers relating to Excluded Assets.
-2-
"Closing" means the consummation of the acquisition transactions
contemplated hereby in accordance with the terms of Article 7 of this Agreement,
which Closing shall be deemed effective as of 12:01 a.m. on the date on which
Closing occurs.
"Closing Date" means (subject to any termination of this Agreement
under Section 5.2(b)) the date that is 45 days following the date of this
Agreement or, if later, the third business day after the fulfillment of the
conditions to Closing contained in Sections 7.1(d), 7.1(e), 7.2(d) and 7.2(e),
or such other date as may be agreed upon by the parties.
"Code" means the Internal Revenue Code of 1986, as amended.
"DEA" means the U.S. Drug Enforcement Administration or any successor
agency.
"Discontinued Products" means those products previously developed or
marketed by Endo or any predecessor business which are set forth on Exhibit F
hereto.
"Dosage Form" means the form in which a Product is designed to be
administered, whether oral solid, oral liquid, nasal, injectable, suppository or
transdermal.
"DuPont SIP Plan" means the DuPont Savings & Investment Plan in which
DMPC participates as a DuPont Affiliate.
"DuPont SIP Plan Account" means, with respect to each Transferred
Employee, the vested balance (whether or not such balance exceeds $3,500.00) to
the credit of such Transferred Employee in the DuPont SIP Plan Trust.
"DuPont SIP Plan Trust" means the trust administered by DuPont to
which amounts held pursuant to the terms of the DuPont SIP Plan are contributed.
"DMFs" means the Drug Master Files maintained by Sellers prior to
Closing with respect to the Products and the APIs.
"Eligible Retirement Plan" means (i) any employees' trust described in
Code ' 401(a) created pursuant to any defined contribution plan sponsored by
Purchaser or in which Purchaser is a participating employer and (ii) any
individual retirement account or individual retirement annuity described in Code
' 408(a) or (b).
"Employee(s)" means the employees of DMPC who are engaged in the
conduct of the Business, as identified on Schedule 4.1(m).
"Environmental Laws" means all foreign, federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection of the
environment or human health or safety, including, without limitation, laws
relating to Releases or threatened Releases of Hazardous Substances into the
indoor or outdoor environment (including, without limitation, ambient air,
-3-
surface water, groundwater and surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances and all laws and
regulations with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Substances, and all laws relating to
endangered or threatened species of fish, wildlife and plants.
"Equipment" shall have the meaning set forth in Section 2.1(g).
"ERISA Affiliate" shall have the meaning set forth in Section 4.1(m).
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Business" means (i) those filings and registrations in the
Exempt Territories and all rights associated therewith (including without
limitation ownership of foreign product registrations and foreign trademark
rights), together with the rights granted pursuant to this Agreement which,
collectively, permit Sellers to manufacture, market, sell and distribute (x)
Multi-Source Brand Products and Generic Products, in the Dosage Forms existing
on the Closing Date, solely in the respective country or countries where each
such Product is currently being sold by Sellers (directly or indirectly through
marketing arrangements with others), other than the United States, as identified
in Schedule 1.1(a), and (y) Carbex(R), Narcan(R), including Narcan Neonatal, and
Nubain7 in all parts of the world other than the United States; and (ii) the
development, manufacture, marketing, sale and distribution of any and all
products sold by Sellers or in development that are not defined as Products or
Discontinued Products herein.
"Excluded Products" means Coumadin(R) and any generic sodium warfarin
product.
"Excluded Sales Contracts" means those sales contracts identified by
an asterisk on Part I of Schedule 4.1 (r) as being excluded from contracts being
assigned to and assumed by Purchaser hereunder.
"Exempted Products" means the Products identified in subclauses (x)
and (y) of clause (i) of the definition of Excluded Business, until and unless
with respect to each such Product in any applicable Exempt Territory Sellers'
retained rights relating to such Product in such Exempt Territory are purchased
by, or transferred to, Purchaser or its assignee under Section 6.10 hereof.
"Exempt Territory" or "Exempt Territories" means, with respect to each
Exempted Product, the country or countries, respectively, in which Sellers
retain rights to manufacture, market, sell or distribute such Exempted Product
as referenced in subclauses (x) and (y) of clause (i) of the definition of
Excluded Business, unless and until, with respect to any such country and as
regards any applicable Exempted Product, Sellers' retained rights relating to
such Product in such country are purchased by, or transferred to, Purchaser or
its assignee under Section 6.10 hereof.
"FDA" means the U.S. Food and Drug Administration or any successor
agency.
-4-
"Generic Products" means the pharmaceutical products of Endo that are
identified in Part I of Schedule 1.1(b), and the products of Endo in development
(including, without limitation, Paroxetine) that are identified in Part II of
Schedule 1.1(b).
"Hazardous Substances" means any toxic, hazardous, radioactive,
caustic or dangerous substances, wastes, pollutants or contaminants, or any
other substances that are defined as any of the above by, or regulated as such
under, any Environmental Law, including, but not limited to, petroleum and
asbestos.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" means (i) the Patents and any memoranda of
invention, (ii) the Trademarks, (iii) all service marks, tradenames (including
corporate, assumed and fictitious business names and the logos associated
therewith), trade dress and copyrights (and applications and registrations for
the foregoing) and (iv) all proprietary data and technical, scientific, medical,
manufacturing or marketing know-how or information in the possession of any
Seller, including, in each case, new developments, discoveries, inventions,
ideas and trade secrets and documentation thereof (and including related papers,
designs, drawings, chemical compositions, formulae, notebooks, specifications,
methods of manufacture, data processing cards, disks and tapes and all data
contained therein or thereon) -- insofar as any of the foregoing predominantly
relates to the Products or the API (rather than the Excluded Business) or is
predominantly used in the conduct of the Business (rather than the Excluded
Business); but excluding, for the avoidance of doubt, (x) the names "DuPont
Merck", "DuPont" and "Merck" and any variants of such names and all logos
associated therewith and (y) intellectual property relating to Sinemet(R) or
Sinemet CR(R) (provided that nothing contained herein shall prohibit Purchaser
from entering into contracts with Merck or any other third party producer to
obtain rights to manufacture, market, sell or distribute generic forms of
carbidopa/levodopa).
"Inventory" means (i) raw materials, packaging components, work-in-
process (including semi-finished goods) and finished goods inventory relating to
the Products and (ii) finished goods inventory of pharmaceutical products sold
under Assumed Contracts or to be sold under the West Point Pharma contracts
referenced in Section 7.5(j).
"IRS" means the U.S. Internal Revenue Service or any successor agency.
"Knowledge of Seller(s)" means the actual knowledge after due inquiry
of the members of Sellers' management identified on Schedule 1.1(c).
"Lease Agreement" means the lease of the Building to be entered into
between DMPC and Purchaser concurrently with Closing hereunder, in the form
attached hereto as Exhibit B.
-5-
"Legal Requirements" shall mean all laws, ordinances, codes, rules,
regulations, standards, judgments, decrees, writs, injunctions, rulings, orders
and other requirements of all governmental, administrative or judicial
authorities having jurisdiction.
"Lien" means any lien, mortgage, deed of trust, security interest,
pledge, conditional sale or other title retention agreement, claim, restriction,
reservation of rights, encumbrance, charge, option, special or other assessment,
restraint on transfer, or any title defect of any material nature.
"Licensed Software" shall have the meaning set forth in Section
4.1(q).
"Losses" means all losses, liabilities, damages, claims, charges,
actions, judgments, suits, proceedings, deficiencies, interest and penalties,
and all reasonable costs and expenses related thereto (including any and all
reasonable attorneys' and other professional fees and reasonable costs of
investigation, litigation or settlement and any other costs associated with
Purchaser's, on the one hand, or Sellers', on the other, enforcement of its or
their respective rights under this Agreement).
"Manufacture and Supply Agreement" means the agreement to be entered
into among DMPC, DuPont Pharma and Purchaser concurrently with Closing pursuant
to which DMPC or DuPont Pharma will manufacture certain products for sale by
Purchaser, in the form attached hereto as Exhibit C.
"Material Adverse Effect" means any change in, or effect on, the
Business or Purchased Assets that is materially adverse to the business, assets
or financial condition of the Business, taken as a whole.
"Multi-Source Brand Products" means Carbex(R) and Percocet(R),
Percodan(R) and the other branded products of DMPC that are identified on
Schedule 1.1(d).
"NDA" / "ANDA" means, respectively, approved and pending U.S. new drug
applications and abbreviated new drug applications for Products or APIs owned by
Sellers and all modifications, amendments or supplements thereto.
"NYBCS" means the New York State Bureau of Controlled Substances.
"Owned Software" shall have the meaning set forth in Section 2.1(f).
"Partially Assigned Contracts" means those contracts identified in
Part II of Schedule 4.1(r), being contracts as to which the rights and
obligations of Sellers relating to the Business are being assigned to and
assumed by Purchaser, but also as to which rights and obligations unrelated to
the Business (e.g., rights and obligations relating to proprietary
----
pharmaceuticals or the Excluded Business) are being retained by Sellers (or, as
the context requires, the partial rights and obligations under such contracts
assigned to and assumed by Purchaser pursuant to Sections 2.1 and 2.3(b)).
-6-
"Patents" means all U.S. and foreign (if any) patents and patent
applications identified on Schedule 1.1(e).
"Permits" shall have the meaning set forth in Section 2.1(h).
"Permitted Liens" means any Lien relating to the Purchased Assets that
is identified on Schedule 4.1(d).
"Plan" shall have the meaning set forth in Section 4.1(m).
"Plant Managers" means the plant manager at each of DMPC's
pharmaceutical manufacturing facility in Garden City, New York and DuPont
Pharma's pharmaceutical manufacturing facility in Manati, Puerto Rico.
"Products" means, collectively, the Generic Products and the Multi-
Source Brand Products.
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Put Agreement" means the agreement pursuant to which DMPC has the
right to cause Purchaser to buy Sellers' entire Garden City, New York research
and development and manufacturing complex, in the form attached hereto as
Exhibit D.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, and surface or subsurface strata) or into or out of
any property, including the movement of Hazardous Substances through or in the
air, soil, surface water or groundwater.
"Required Consents" means any consents or waivers of third parties
required to be obtained by Sellers or their Affiliates in connection with the
assignment of contracts hereunder to Purchaser, as identified in Part II of
Schedule 4.1(c).
"Required DEA/NYBCS Permits" shall have the meaning set forth in
Section 5.4(c).
"Retained Liabilities" means all obligations and liabilities of
Sellers relating to the Products or the Business that are not Assumed
Liabilities.
"Returns" means all chargebacks, rebates (including payments to
Medicaid), returns or retroactive shelf price reductions made in the ordinary
course of business with respect to sales of Products in the United States.
"Routine Contracts" means contracts (other than sales contracts for
the Products) entered into by Sellers, or any of them, in the ordinary course of
the Business that either are
-7-
terminable without penalty on 90 days notice or less or do not involve the
expenditure by any party thereto of an amount in excess of $100,000 during any
successive 12-month period following the Closing Date.
"Sellers" has the meaning set forth in the Preamble of this Agreement.
The term "Sellers" does not include either Merck or DuPont, the general partners
of DMPC.
"Tax" and "Tax Returns" shall have respective meanings set forth in
Section 4.1(h).
"Termination Date" shall have the meaning set forth in Section 5.2(b).
"Trademarks" means all U.S. and foreign (if any) trademarks and
trademark applications identified on Schedule 1.1(f).
"Transferred Employees" means all Employees who accept employment with
Purchaser as of the time of Closing as contemplated by Section 6.1(a).
"Transferred Inventory" means all Inventory of the Business that will
be transferred to Purchaser as part of the Purchased Assets as provided in
Section 2.1(d).
"U.S." or "United States" means the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ of
America, the District of Columbia and the Commonwealth of Puerto Rico.
"Warehousing and Distribution Agreement" means the agreement to be
entered into between DMPC and Purchaser concurrently with Closing hereunder, in
the form attached hereto as Exhibit E.
1.2 References to Schedules and Exhibits. References to Schedules
------------------------------------
and Exhibits in this Agreement shall be deemed references to the forms thereof
attached hereto which shall be the final forms of such Schedules and Exhibits,
except as otherwise agreed by the parties; provided that Sellers shall update
Schedules as referenced in Section 5.7 (subject to the caveats therein contained
as to the effect of such updates).
1.3 References to Agreements. References herein to this Agreement,
------------------------
the Ancillary Agreements and any other agreements or instruments shall mean all
such agreements and instruments as from time to time in effect.
ARTICLE 2
Assets and Liabilities
2.1 Assets Transferred at Closing. Subject to the terms and
-----------------------------
conditions of this Agreement, Sellers hereby agree to sell and, on the Closing
Date, shall sell, convey, assign, transfer and deliver to Purchaser, and
Purchaser shall purchase, acquire and accept from Sellers, free and clear of all
Liens (other than Permitted Liens), all of Sellers' rights, title and interests
in and to all
-8-
assets, properties, privileges, claims and rights predominantly relating to the
Business (rather than the Excluded Business) or predominantly used in the
conduct of the Business (rather than the Excluded Business) (or where referenced
below, solely relating to or used in the Business) consistent with past
practice, including those identified below (the "Purchased Assets") (but
excluding the Excluded Assets):
(a) all Intellectual Property;
(b) all NDAs and ANDAs and all files and filings relating to the
Products and APIs (other than files and filings made or relating to Exempted
Products in Exempt Territories);
(c) all DMFs, if any;
(d) the Transferred Inventory, which will consist of all finished
goods Inventory of Products, and pharmaceutical products sold under Assumed
Contracts or to be sold under the West Point Pharma contracts referenced in
Section 7.5(j), owned by Sellers at the time of Closing;
(e) subject to Section 2.8, all Assumed Contracts (including all
Partially Assigned Contracts except to the extent they relate to the Excluded
Business);
(f) all computer software (including object and source codes and
related documentation) owned by Sellers that is employed solely in conjunction
with the operation of the Business (the "Owned Software") and, to the extent
assignable at no cost to DMPC or Endo, Licensed Software;
(g) all laboratory, testing, formulation and other equipment, and all
computer equipment (including without limitation computer hardware,
workstations, peripherals and any documentation relating thereto), furniture,
furnishings, office materials, supplies and all other tangible personal property
located in the Building and the Wilmington offices of the Transferred Employees
(but excluding fixtures) (collectively, the "Equipment");
(h) all permits, licenses, franchises, approvals, certificates of
compliance, registrations and authorizations by governmental or regulatory
authorities, including without limitation the FDA and DEA, used or held for use
predominantly in connection with the conduct of the Business (rather than the
Excluded Business) ("Permits") (which Permits are identified on Schedule
4.1(k)), to the extent such Permits are transferable;
(i) all books, computer data and records of Sellers, current and
archived, to the extent solely relating to the operation of the Business or the
ownership, use or possession of the Purchased Assets that are necessary or
useful to the continued operation of the Business or the ownership, use or
possession of the Purchased Assets after Closing, including without limitation
copies of lists of U.S. customers and suppliers, business development plans,
advertising matter, catalogs, correspondence, mailing lists, photographs, sales
and distribution materials and records,
-9-
purchasing materials and records, personnel records of Transferred Employees
(subject to any necessary employee consents), and manufacturing and quality
control records and procedures (other than samples and records referenced in
Section 2.4);
(j) the license in favor of Purchaser set forth in Section 2.5(a);
(k) the Products, including Percodan(R) and Percocet(R) (but
excluding the Excluded Business and other Excluded Assets); and
(l) all goodwill of the Business.
2.2 Excluded Assets. The following assets of Sellers are not
---------------
included in the Purchased Assets and no rights in connection with such assets
are to be transferred pursuant to this Agreement ("Excluded Assets"):
(a) Sellers' manufacturing assets and business (other than Equipment
located in the Building);
(b) the Excluded Business and the Excluded Products and all other
products of Sellers or products of Sellers in development that are not defined
as Products or Discontinued Products herein;
(c) the rights to manufacture, market, sell and distribute Sinemet
and Sinemet CR (provided that nothing contained herein shall prohibit Purchaser
from entering into contracts with Merck or any other third party producer to
obtain rights to manufacture, market, sell or distribute generic forms of
carbidopa/levodopa);
(d) All accounts and notes receivable (net of allowances and
reserves);
(e) Cash or cash equivalents on hand or in banks;
(f) DMPC's logo, the DuPont oval, and the names "DuPont", "Merck",
"DuPont Merck" and any trademarks or trade names incorporating such words and
all logos and trade dress associated therewith;
(g) DMPC's distribution center located in Duluth, Gwinnett County,
Georgia;
(h) All software and software licenses other than as described in
Section 2.1(f);
(i) All insurance policies relating to the Business or Purchased
Assets, including without limitation all rights to make or prosecute claims
thereunder and to receive the proceeds thereof;
-10-
(j) All prepaid taxes and taxes withheld by Sellers or any of their
Affiliates as an employer or vendor;
(k) All causes of actions or claims of either Seller or any of their
Affiliates against third parties relating to the Business or Purchased Assets,
whether known or unknown, existing as of the Closing Date;
(l) All documentation, intellectual property, technology,
confidential information, software, permits or product registrations
predominantly relating to the Excluded Business or other Excluded Assets or
predominantly used in the conduct of the Excluded Business or Excluded Assets
consistent with past practice;
(m) All Inventory other than Transferred Inventory;
(n) Sellers' tax records (provided that Sellers shall provide
Purchaser with access to such records as provided in Section 6.9(a));
(o) All Plan assets, held pursuant to the terms of any Plan or
related trust described in Section 401 of the Code, relating to the Transferred
Employees; and
(p) All rights, title and interests of Sellers in or relating to
Sellers' generic or non-generic branded products, and any and all other assets
owned or possessed by either Seller, that do not relate to the Business.
2.3 Liabilities.
-----------
(a) Except as provided in Section 2.3(b) and Section 8.2, Purchaser
does not assume any of the liabilities of the Business, known or unknown.
Without limiting the generality of the foregoing, liabilities retained by
Sellers shall include, but not be limited to, all liabilities, obligations, or
responsibilities: (i) arising under or related to Environmental Laws or
Hazardous Substances, whether such liability or obligation or responsibility is
known or unknown, contingent or accrued, arising as a result of the operations
or activities of the Business prior to the Closing Date, including liabilities,
obligations, or responsibilities arising from or connected with (x) the presence
or Release of Hazardous Substances at or from the Building, (y) the violation or
alleged violation of Environmental Laws in connection with the operations and
activities of the Business, and (z) the disposal, storage, transportation,
discharge, Release, recycling, or the arrangement for any of such activities, of
Hazardous Substances that were generated, used, or otherwise handled in
connection with the operation of the Business, at any off-site facility; (ii)
for product liability claims brought by third parties arising out of injuries
and illnesses and other damage, including death, that result from use of
Products sold by the Business prior to the Closing Date; and (iii) for Returns
of Products sold prior to Closing, except as otherwise provided in Section
6.7(b).
(b) Effective as of Closing, Purchaser will assume the following
obligations and liabilities of Sellers (the "Assumed Liabilities"):
-11-
(i) all of Sellers' performance obligations under the
Assumed Contracts arising from and after the Closing Date;
(ii) all product liability claims brought by third parties
on or after the Closing Date arising out of injuries and illnesses and
other damage, including death, that result from use of Products sold by the
Business on or after the Closing Date; and
(iii) financial responsibility for certain Returns of
Products sold prior to Closing to the extent provided in Section 6.7(b).
2.4 Retention of Records and Samples. Sellers will continue to
--------------------------------
maintain all retention samples and compliance records existing in the Business
as of the Closing Date relating to any Products sold by the Business at any time
prior to the Closing Date, for periods meeting all applicable regulations of the
FDA and other regulatory agencies. Sellers will make such samples and records
available to Purchaser upon request. Purchaser will provide reasonable
assistance to Sellers, at Sellers' request and expense, in investigating
complaints and adverse drug experiences relating to Products sold by the
Business prior to Closing.
2.5 License to Purchaser; Other Purchaser Rights.
--------------------------------------------
(a) Effective as of Closing, but subject to the non-compete
provisions set forth in Section 6.2 and subject, further, to Section 2.7,
Sellers grant to Purchaser a perpetual non-exclusive worldwide royalty-free
field of use license, with right of sublicense, with respect to the
pharmaceutical use of intellectual property and computer software owned by
Sellers that constitute assets related to or used in connection with the
Products or the conduct of the Business and that would constitute Intellectual
Property or Owned Software as defined herein except that the same are not used
predominantly (in the case of Intellectual Property) or solely (in the case of
Owned Software) in connection with the Business.
(b) To the extent there exist permits or other items of the type
referenced in Section 2.1(h) that do not relate predominantly to the conduct of
the Business but relate thereto or are used in connection therewith, then, to
the extent permitted by applicable Legal Requirements, the parties shall use
reasonable commercial efforts to implement appropriate arrangements for the
sharing or other mutual use of such permits or other items.
(c) To the extent Sellers maintain books, data or records of the type
referenced in Section 2.1(i) that are used in connection with the Business but
do not solely relate to the operation of the Business or solely to the
ownership, use or possession of the Purchased Assets, Sellers agree to provide
copies of such additional records to Purchaser upon Purchaser's request therefor
(including, without limitation, copies of all records relating predominantly to
the development of the Products).
2.6 Licenses to Sellers.
-------------------
-12-
(a) Effective as of Closing, but subject to the non-compete
provisions set forth in Section 6.2 and the Right of First Refusal set forth in
Section 6.10, to the extent it applies, and subject, further, to Section 2.7,
Purchaser grants to Sellers a perpetual non-exclusive worldwide royalty-free
field of use license, with right of sublicense to Affiliates or successors in
interest of Sellers' businesses other than the Business, or persons acting on
Sellers' or such successors' behalf, with respect to the pharmaceutical use of
(x) Intellectual Property (other than that described in clauses (i), (ii) and
(iii) of the definition of Intellectual Property) that constitutes a Purchased
Asset hereunder or (y) any of the patents identified in the ▇▇▇▇ of sale
attached hereto as Exhibit H that are to be conveyed to Purchaser pursuant to
such ▇▇▇▇ of sale, but which Intellectual Property or patents may also be used
in one or more of Sellers' businesses other than the Business, solely for the
applications for which such Intellectual Property and patents are utilized in
such other businesses on the Closing Date.
(b) Effective as of Closing, but subject to the non-compete
provisions set forth in Section 6.2 and subject to the termination of Sellers'
rights with respect to applicable Exempted Products in applicable Exempt
Territories in accordance with Section 6.10 and subject, further, to Section
2.7, Purchaser grants to Sellers a non-exclusive worldwide royalty-free field of
use license, with right of sublicense, in accordance with clauses (i), (ii),
(iii) and (iv) of this Section 2.6(b) with respect to the pharmaceutical use of
the Products, the Intellectual Property and the Permits (including the NDAs and
ANDAs) solely for the purpose of permitting Sellers (i) to fulfill their
obligations under the Excluded Sales Contracts or under orders received under
contracts that are intended to be Assumed Contracts but for which a Required
Consent to assignment is not obtained, for so long as such contracts are in
force, (ii) to manufacture, market, sell and distribute applicable Exempted
Products in the applicable Exempt Territories for so long as Sellers shall sell,
directly or indirectly, such Exempted Products in such Exempt Territories, (iii)
to perform their obligations for the account of Purchaser under the Ancillary
Agreements for so long as such agreements are in force and (iv) to perform their
obligations under the contracts identified on Schedule 6.10(e), as in effect on
the date hereof, for so long as such contracts are in force. With further regard
to the matters referenced in clause (iv) of the preceding sentence, Purchaser
agrees that it will supply to Sellers (on standard commercial terms)
pharmaceutical products constituting line extensions of Products or Product
improvements that are hereafter manufactured or sold by Purchaser or its
Affiliates to the extent the same are required to be supplied by Sellers to
others under the contracts identified on Schedule 6.10(e), as in effect on the
date hereof.
2.7 Additional License Considerations. With further reference to
---------------------------------
the cross licenses granted by Sellers and Purchaser pursuant to Sections 2.5(a)
and 2.6, the parties agree that: (i) the licensee shall utilize the licensed
rights in accordance with the reasonable standards promulgated from time to time
by the licensor regarding such matters as (x) permitted uses and depictions of
names and logos, (y) protection of the value of marks and associated good will
and (z) quality (including specifications relating to manufacture, formulation
and packaging), but in any event licensee's use shall accord with standards no
less stringent than those employed by Sellers prior to the Closing; (ii) the
licensee shall promptly advise the licensor of cases of infringement of
intellectual property rights or adverse claims that come to the attention of the
licensee and shall render, at the expense of the licensor, such assistance as
may reasonably be requested by the licensor
-13-
with respect to any such infringement or adverse claims; and (iii) the licensor
of rights shall have the right, upon reasonable notice, to review and copy books
and records of the licensee, and visit licensee facilities, in order to verify
compliance with the requirements of this Section 2.7. Licensee's failure to
comply with the provisions of this Section with respect to any ▇▇▇▇, name or
logo shall give licensor the right to terminate the license of such ▇▇▇▇, name
or logo, upon thirty (30) days' written notice, if such failure is not cured
within such notice period; provided, however, that such notice period shall be
extended to the extent that licensee makes a diligent, good faith effort to
comply with the provisions of this Section, except that such notice period shall
be extended for more than six (6) months only where such extension is necessary
to accommodate an administrative or other governmental approval process related
to licensee's efforts to comply with the provisions of this Section.
2.8 Required Consents. Sellers shall use their reasonable commercial
-----------------
efforts to obtain all Required Consents prior to the Closing. To the extent that
any Required Consent is not obtained as of Closing with respect to any contract,
then, unless and until such Required Consent is obtained, this Agreement shall
be deemed to create a subcontract relationship, effective as of Closing, whereby
(i) Purchaser shall perform all obligations to be performed after Closing by the
applicable Seller under such contract to the same extent as if Purchaser were
the contracting party and (ii) Purchaser shall become entitled to the benefits
of that contract, including payments to become due thereunder, with the right to
enforce those benefits to the same extent as if Purchaser were the contracting
party. Notwithstanding the foregoing, if Sellers and Purchaser reasonably
conclude that the foregoing described subcontract relationship would conflict
with the terms of such contract, Sellers and Purchaser shall cooperate to
attempt to effect a reasonable alternative arrangement for transferring to
Purchaser, effective as of Closing, the benefits and obligations intended to be
transferred to Purchaser under Article 2 hereof; provided, however, that Sellers
shall have no obligation to expend funds aggregating to an amount in excess of
$250,000 in out-of-pocket expenses, or otherwise incur liabilities, in
connection with their efforts to obtain Required Consents or to implement
alternative arrangements, except that, to the extent that Sellers are unable to
obtain consent to the assignment of the Joint Marketing and Supply Agreement
between DMPC and King Pharmaceutical, Inc. ("King"), dated February 8, 1995, or,
in the alternative, to implement an arrangement reasonably acceptable to
Purchaser whereby Purchaser receives the benefit of King's performance under
such agreement, then Sellers agree to reimburse Purchaser, until February 8,
2000, quarterly in arrears or as otherwise agreed by the parties, for one-half
of the difference between the cost of the product as the same would have been
determined under such agreement as in effect on the date hereof if it had been
assigned to Purchaser and the cost of obtaining the same amount of the product
from a third party or from King, under an amended or modified form of the
agreement with King or a new agreement, up to an aggregate amount of $750,000.
2.9 Rights to Endo Name and Marks.
-----------------------------
(a) The Intellectual Property acquired by Purchaser pursuant to
Section 2.1 hereof shall include all of Sellers' rights, title and interest in
and to the name "Endo" and all associated marks; provided, however, that Sellers
retain the right to use the name "Endo" and associated marks in connection with
the manufacture, marketing, sale and distribution of Generic Products in Canada
-14-
for a period of three years following the Closing Date. Except as referenced in
the prior sentence and except for uses of the name and marks of Endo for the
purposes referenced in clauses (i) and (iii) of Section 2.6(b), following the
Closing Date, Sellers shall make no use of the name "Endo" or associated marks,
or any confusingly similar name or marks; provided that Sellers shall have a
transition period of six (6) months following the Closing Date to terminate such
usage. Within thirty (30) days following the Closing Date, Endo shall remove
the word "Endo" from its corporate title by making an appropriate filing with
the Office of the Secretary of State of the State of Delaware.
(b) Following the Closing Date, Sellers shall not use, attempt to
register or challenge Purchaser's rights to use or register any trademark,
service ▇▇▇▇, trade name, logo or trade dress identical to, or confusingly
similar to any of the Trademarks in any jurisdiction throughout the world;
provided, however, that Sellers may use or register any of the foregoing to
identify the Exempted Products in the Exempt Territories.
2.10 Identification of Post Closing Sales. Sellers and Purchaser
------------------------------------
shall mutually cooperate to implement such procedures as, to the extent
reasonably practicable, will permit the separate identification of Products sold
to customers prior to the Closing Date, on the one hand, or on or after the
Closing Date, on the other.
ARTICLE 3
Purchase Price
3.1 Purchase Price - General. The purchase price for the Purchased
------------------------
Assets described in Section 2.1, including the Transferred Inventory, is
$260,000,000 plus an amount payable by delivery at Closing of a note, in the
form attached as Exhibit G hereto, with a face value equal to one-half the net
book value of the Transferred Inventory (such net book value being determined as
provided in Schedule 3.2) (which net book value is in no way intended to relate
to the allocation of the purchase price for the Transferred Inventory to be set
forth in Schedule 3.1). The cash portion of the purchase price is payable to
DMPC, for the account of Sellers, by wire transfer in immediately available
funds in United States dollars at Closing as set forth in Schedule 3.1. The
purchase price shall be allocated among the Purchased Assets as provided in
Schedule 3.1. The allocation provided in Schedule 3.1 shall be used in
reporting the transactions contemplated by this Agreement for all tax purposes,
including as required by Section 1060 of the Code. No party shall take any
position on any of its tax returns that is inconsistent with such allocation and
each party shall file IRS Form 8594 in the United States (and equivalent forms
in other countries, if necessary) in a manner consistent with the allocation
provided in Schedule 3.1.
3.2 Transferred Inventory. In order to permit the valuation of the
---------------------
Transferred Inventory for purposes of determining the allocation of the purchase
price and the face value of the note referenced in Section 3.1, Sellers shall
cease shipments of Transferred Inventory to customers one business day prior to
Closing. After shipments have ceased and prior to the Closing Date, Sellers
shall, at Purchaser's expense, perform test counts of the Transferred Inventory
under Purchaser's observation and review. Sellers shall prepare a certificate
setting forth the quantities of the Transferred Inventories to be transferred to
Purchaser as of Closing and a calculation of the
-15-
purchase price therefor (which certificate and calculation shall be prepared
utilizing the "ENDO Inventory by Lot" form included in Schedule 3.2), in each
case based on Sellers' perpetual inventory records. Based on the foregoing
procedures, the purchase price for the Transferred Inventory shall preliminarily
be determined on the Closing Date. Within thirty (30) days following Closing,
DMPC and Purchase shall finalize the determination of the purchase price for
Transferred Inventory.
In addition, based on the foregoing procedures, the amount of the note
referenced in Section 3.1 shall be based on a preliminary determination. Within
thirty (30) days following Closing, DMPC and Purchaser shall finalize the
determination of the net book value of the Transferred Inventory and, if the
amount changes, Purchaser shall execute and deliver to DMPC a revised note
reflecting the amount, dated the Closing Date, and concurrently therewith DMPC
shall conceal and return to Purchaser the original note delivered on the Closing
Date.
ARTICLE 4
Representations and Warranties
4.1 Seller's Warranties. Sellers, jointly and severally, represent
-------------------
and warrant as follows:
(a) Organization and Related Matters. DMPC is a general partnership
--------------------------------
organized pursuant to the terms of a partnership agreement dated as of January
1, 1991 between DuPont and a wholly-owned subsidiary of Merck (the "Partnership
Agreement"), and is duly formed and validly existing under the laws of the State
of Delaware. DuPont Pharma is a general partnership organized pursuant to the
terms of a partnership agreement dated December 13, 1990, as amended by an
amendment and supplement dated as of June 18, 1991, between a wholly-owned
subsidiary of DuPont and a wholly-owned subsidiary of Merck (the "Pharma
Partnership Agreement"). Endo is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware.
Each Seller has, as applicable, all necessary partnership or limited liability
company power and authority to own its respective properties and assets and to
carry on the Business as now conducted. Sellers are duly qualified or licensed
to do business in each jurisdiction where such qualification is required, except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect.
(b) Power and Authorization. Each Seller has, as applicable, all
-----------------------
necessary partnership or limited liability company power and authority to
conduct its business as currently conducted, to carry out the transactions
contemplated by this Agreement and to perform its obligations hereunder, and
each has taken, or prior to Closing will take, all necessary and proper
partnership or limited liability company action authorizing the execution,
delivery and performance of this Agreement and the Ancillary Agreements. This
Agreement has been duly executed and delivered by each Seller and constitutes,
and the Ancillary Agreements, upon execution, will constitute, valid and binding
obligations of DMPC and, as applicable, DuPont Pharma, enforceable in accordance
with their terms, except as regards the Ancillary Agreements as such enforcement
may be limited by bankruptcy, insolvency, fraudulent conveyance, liquidation,
reorganization,
-16-
moratorium or other laws or equitable principles affecting generally the
enforcement of creditors' rights and remedies.
(c) No Conflicts, etc. The execution and delivery of this Agreement
-----------------
and the consummation of the transactions contemplated hereby do not and will not
conflict with or result in any violation of or default under the Partnership
Agreement (or other organizational documents) of DMPC, the Pharma Partnership
Agreement (or other organizational documents) of DuPont Pharma, or the limited
liability company agreement (or other organizational documents) of Endo or any
mortgage, indenture, lease, or other agreement, contract, instrument, or license
or law or regulation applicable to any of the Sellers, or any substantial part
of their properties, except to the extent such conflict, violation or default
would not give rise to a Material Adverse Effect. Except as set forth in Part I
of Schedule 4.1(c), the execution and delivery of this Agreement or any of the
Ancillary Agreements and the consummation of the transactions contemplated
hereby or thereby (i) do not require the approval of any governmental authority
on the part of any Seller, (ii) will not violate or result in a breach of or
constitute a default under any law, rule, regulation, judgment, injunction,
order, decree or other restriction of any court or other governmental authority
(including without limitation the FDA and the DEA) to which any Seller is
subject, including any governmental authorization, and (iii) will not result in
the creation or imposition of any Lien, except, in the case of clause (i), any
such approval the failure of which to obtain and, in the case of clause (ii),
any such violation, breach or default as, would not have a Material Adverse
Effect. Except as set forth in Part II of Schedule 4.1(c), no consent of any
third party is required to be obtained by any Seller in connection with the
execution, delivery and performance of this Agreement or any of the Ancillary
Agreements or the consummation of the transactions contemplated hereby or
thereby, except such consents the failure of which to obtain would not have a
Material Adverse Effect.
(d) Title. Except as set forth on Schedule 4.1(d), Sellers
-----
(collectively or individually) are the sole and exclusive lawful record and
beneficial owners of all of, and possess good and marketable title to, the
Purchased Assets and upon Closing the Purchased Assets will be transferred to
Purchaser, free and clear of all Liens (including Liens for Taxes).
(e) Financial Statements. Sellers have delivered to Purchaser copies
--------------------
of audited statements of assets to be sold relating to the Products as of
December 31, 1996 and 1995 and the audited statements of earnings relating to
the Business for the years ended December 31, 1996 and 1995, together with notes
to such financial statements and the report of independent public accountants
rendering an unqualified opinion thereon (collectively, the "Financial
Statements"). The Financial Statements (i) fairly present in all material
respects the items contained thereon and were derived from Sellers' historical
records and (ii) were prepared in conformity with generally accepted accounting
principles, consistently applied for the years 1996 and 1995.
(f) Inventories. All Inventories included in the Transferred
-----------
Inventory will be free and clear of all Liens (other than Permitted Liens) and
will, in all material respects, meet all applicable FDA approved release
specifications and otherwise be in good, usable and saleable condition and
include no out-of-date or discontinued items. Transferred Inventory will, in
addition, meet the inventory level and shelf life limitations and requirements
set forth in Schedule 4.1(f).
-17-
SELLERS MAKE NO EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO ANY OF THE TRANSFERRED INVENTORY; provided, however, that
Sellers warrant that the Transferred Inventory contains no adulterated or
misbranded items, or items that would be considered adulterated, misbranded or
in violation of any other Legal Requirement upon introduction into commerce, or
items that have failed quality testing.
(g) Absence of Certain Changes or Events. Since December 31, 1996,
------------------------------------
the Business has been conducted in the ordinary course consistent with past
practice and there has not been:
(i) any change in the financial condition, properties, assets
or liabilities of the Business, or any other event or occurrence, that has
had, or could reasonably be anticipated to have, a Material Adverse Effect;
(ii) except for annual changes implemented as of January 1,
1997, any material changes in the fixed or variable cost allocations of the
Business;
(iii) any damage, destruction or loss of any material properties
of the Business, whether or not covered by insurance;
(iv) any change in the manner in which the Business has been
conducted that has had a Material Adverse Effect;
(v) any material change in the method of accounting or
accounting practice with respect to the Business or the Purchased Assets;
(vi) any material change in the treatment or protection of
trade secrets or other confidential information of the Business;
(vii) any change in the business or contractual relationship of
DMPC or Endo with any material customer or supplier of the Business;
(viii) any acquisition or disposition of any assets, or any
capital expenditure or commitment to make a capital expenditure, or the
entering into, relinquishment or modification of any agreement or
arrangement of any nature, except in the ordinary course of business
consistent with past practices; or
(ix) any agreement on the part of Sellers or their Affiliates
(in writing or otherwise) to do any of the foregoing.
(h) Taxes.
-----
(i) For purposes of this Agreement: "Tax" (and, with
correlative meaning, "Taxes") shall mean any federal, state, local or
foreign income, alternative or add-on
-18-
minimum, business, employment, franchise, occupancy, payroll, property,
sales, transfer, use, value added, withholding or other tax, levy, impost,
fee, imposition, assessment or similar charge together with any related
addition to tax, interest, penalty or fine thereon; and "Tax Returns" shall
mean all returns (including, without limitation, information returns),
reports and forms relating to Taxes.
(ii) Sellers have filed all Tax Returns required to be filed by
them relating to the Business, except such returns the failure of which to
file will not have a Material Adverse Effect. All such Tax Returns were,
when filed, and are, accurate and complete in all material respects and
were prepared in conformity with applicable Legal Requirements in all
material respects. Sellers have paid or, if not yet due, will pay in full
or have adequately reserved against all Taxes otherwise due in respect of
the Business through the Closing Date.
(iii) Except as set forth on Schedule 4.1(h), no Seller is a
party to any pending action or proceeding by any governmental authority for
the assessment of any material Tax, no material adjustments or deficiencies
relating to the Tax Returns referred to in Section 4.1(h)(ii) have been
proposed, asserted or assessed by the IRS or the relevant state, local or
foreign taxing authority and no claim for assessment or collection of any
material Tax related to the Business has been asserted that has not been
paid. There are no Tax liens upon the assets of the Business. There is no
valid basis for any assessment, deficiency, notice, 30-day letter or
similar intention to assess any Tax to be issued relating to the Business
by any governmental authority that would have a Material Adverse Effect.
(iv) All Taxes that Sellers are required to collect or withhold
relating to the Business have been duly and timely collected and withheld
and have been set aside in accounts for such purposes, or to the extent
required and due, have been duly and timely paid to the proper governmental
authority, except to the extent the failure to collect and withhold or pay
such Taxes would not have a Material Adverse Effect.
(i) Litigation. Except as set forth on Schedule 4.1(i), there is no
----------
judicial or administrative action, suit, arbitration proceeding or investigation
pending or, to the Knowledge of Sellers, threatened against Sellers, or any of
them, that is reasonably likely to be material to the Business or the Purchased
Assets or that relates to the validity of this Agreement or the Ancillary
Agreements or of any action taken or to be taken in connection therewith.
Sellers have delivered or made available to Purchaser copies of the files of the
Business containing information with respect to (i) customer complaints relating
to Product performance since January 1, 1995, and (ii) recalls of Products, or
notifications therefor, required by any governmental authority or undertaken
voluntarily by the Business since January 1, 1995. Except as set forth on
Schedule 4.1(i), neither the Business nor the Purchased Assets is subject to any
order, writ, judgment, injunction, decree, determination or award.
(j) Compliance with Laws and Regulations. Sellers are each in
------------------------------------
compliance with all Legal Requirements applicable to the operation of the
Business, except for such laws, rules,
-19-
regulations, orders and requirements the failure with which to comply would not
have a Material Adverse Effect, and except as referenced on Schedule 4.1(s), (i)
since January 1, 1995, no notice of any claim of a material violation of Legal
Requirements relating to the Business has been received by Sellers, (ii) no
investigation or review (other than routine audits) by any governmental
authority is pending with respect to the Business and, (iii) to the Knowledge of
Sellers after inquiry to the Plant Managers, none of the FDA, NYBCS or the DEA
has threatened, orally or in writing, to conduct any investigation or review of
the nature referenced in clause (ii). To the Knowledge of Sellers, all product
processes (including processes relating to API) used in connection with the
Business meet all material regulatory requirements and applicable FDA filings
relating to the Products.
(k) Governmental Licenses, Etc. Sellers have all governmental
--------------------------
Permits necessary for the conduct of the Business as presently conducted.
Schedule 4.1(k) includes a list of all material Permits. Except as disclosed in
Schedule 4.1(k), no consent of any governmental authority is required in
connection with the transfer of any Permit pursuant to the transactions
contemplated hereby. The material Permits are in full force and effect. No
proceeding for the suspension or cancellation of any Permit is pending or, to
the Knowledge of Sellers, threatened, which suspension or cancellation would
have a Material Adverse Effect. Specifically identified in such Schedule is a
complete list of all approved and pending NDAs and ANDAs submitted to the FDA.
All applications and amendments previously submitted by Sellers in connection
with receiving such Permits were correct in all material respects at the time
such applications were granted and were made in accordance and substantial
compliance with all applicable rules, regulations and instructions for the
filing of the same, other than such errors or failures of compliance as would
not have a Material Adverse Effect. Access has been provided to Purchaser to all
applications previously made or pending, including all related files,
correspondence, notes and telephone logs as well as all written reports known to
Sellers relating to field trials, clinical studies or laboratory testing
relating to the Products. To the extent that execution and delivery of this
Agreement or any Ancillary Agreement, or the consummation of the transactions
contemplated hereby or thereby, to the Knowledge of Sellers, will or reasonably
could be expected to, result in the revocation, cancellation or suspension of
any of the Permits, Sellers have so notified Purchaser.
(l) Condition of Assets. Except as set forth on Schedule 4.1(l), the
-------------------
Purchased Assets are in good operating condition and repair (ordinary wear and
tear excepted) for the conduct of the Business as it is currently operated.
Except as set forth in an Assumed Contract or Schedule 6.10(e), there are no
options to purchase, rights of first refusal or rights of first offer relating
to the Purchased Assets or any portion thereof.
(m) Employees, Labor Matters, Etc.
-----------------------------
(i) Schedule 4.1 (m) contains a complete and correct list of the
names of and compensation for all Employees as of the date hereof, as well
as a listing of (w) each deferred compensation, incentive compensation and
equity compensation plan, and each "welfare" plan, fund or program (within
the meaning of section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), (x) each "pension" plan,
-20-
fund or program (within the meaning of section 3(2) of ERISA), (y) each
employment, termination or severance agreement, and (z) each other employee
benefit plan, fund, program, agreement or arrangement ("Plan") that is
sponsored, maintained or contributed to or required to be contributed to by
Sellers or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with any or all Sellers would be deemed a
"single employer" within the meaning of section 4001(b) of ERISA, or to
which any or all Sellers or an ERISA Affiliate is party, whether written or
oral, in each case for the benefit of any Employee.
(ii) There are no unfair labor practice charges or complaints
pending against Sellers with respect to the Business before any
governmental or administrative authority and no claim thereof has been
formally asserted, nor is there any strike, slowdown, work stoppage or
lockout, or, to the Knowledge of Sellers, any threat thereof, with respect
to the Business.
(iii) None of the Employees is represented by any labor union or
collective bargaining unit and, to the Knowledge of Sellers, no
organizational efforts are currently taking place with respect to such
representation.
(iv) Except as set forth in Schedule 4.1(m), with respect to
each Plan maintained by Sellers or any ERISA Affiliate:
(A) Each Plan is in compliance with all material respects
with applicable Legal Requirements (including, if applicable, ERISA
and the Code); and each of the Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified;
(B) No Plan has a material accumulated or waived funding
deficiency within the meaning of Section 412 of the Code; no Seller
nor any ERISA Affiliate has incurred, directly or indirectly, any
material liability (including any material contingent liability) to or
on account of a Plan pursuant to Title IV of ERISA; no proceedings
have been instituted to terminate any Plan that is subject to Title IV
of ERISA; to the Knowledge of Sellers, no "reportable event," as such
term is defined in Section 4043(c) of ERISA, has occurred with respect
to any Plan and no condition exists that presents a material risk of
incurring a liability to or on account of a Plan pursuant to Title IV
of ERISA; and
(C) No Plan is a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA); there is no pending or, to the Knowledge
of Sellers, threatened claim of any material nature (other than
routine claims for benefits) by, on behalf of or against any of the
Plans or any trusts related thereto.
(v) Except as set forth in Schedule 4.1(m) or as referenced in
Section 6.1, neither the execution, delivery or performance of this
Agreement, nor the consummation of
-21-
the transactions contemplated thereby, will accelerate the time of payment
or vesting, or increase the amount, of compensation due to any Transferred
Employee.
(vi) Except as previously disclosed to Purchaser in writing,
none of the Employees has been recommended by his or her respective
supervisor for termination or is a participant in a formal probation
process. To the Knowledge of Sellers, no Employee has been debarred by the
FDA under the Generic Drug Enforcement Act of 1992 or convicted of a felony
under federal law for conduct relating to the diversion, development or
approval of a drug product or relating to a drug product, nor has any
Employee been accused or investigated by any government or regulatory
enforcement authority for any of the foregoing. Sellers have complied in
all material respects with Legal Requirements relating to the conduct of
background checks on Employees.
(n) Investment Advisers. Sellers have utilized the services of J.P
-------------------
▇▇▇▇▇▇ Securities Inc. in connection with the subject transaction and will be
solely responsible for their fees and charges. Except as provided in the
foregoing sentence, Sellers have not made any agreement or taken any action with
any person or taken any action that would cause any person to be entitled to any
agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
(o) Intellectual Property.
---------------------
(i) Part I of Schedule 4.1(o) hereof is a true and complete
list of all material Intellectual Property (other than generic type
property such as know-how described in clause (iv) of the definition of the
term Intellectual Property). Each of the Trademarks is valid and subsisting
and, except as set forth on Schedule 4.1(o) or Schedule 6.10(e), all of the
filed Patents and Trademarks are owned solely and exclusively by Sellers
and Sellers have the sole and exclusive right to the use thereof for their
applicable fields of use in the jurisdictions in which they are registered,
subject to the rights of third parties under Assumed Contracts. Sellers
warrant that all fees or required submissions with respect to Intellectual
Property that are due on or before the Closing have been or will be made
prior to the Closing.
(ii) Except as set forth on Schedule 4.1(o), there are no
material asserted claims or demands of any person or entity pertaining to
the Intellectual Property or the rights of Sellers thereunder, and there
are no proceedings pending or, to the Knowledge of Sellers, threatened,
that challenge the rights of Sellers in respect of the Intellectual
Property, and to the Knowledge of Sellers, (x) none of the Intellectual
Property is being infringed upon or misappropriated by any third party, (y)
none is subject to any outstanding order, decree, judgment, stipulation,
injunction, restriction or agreement affecting the scope of the free and
unrestricted use thereof by Sellers and (z) there is no pending opposition,
revocation or cancellation proceeding or similar action in respect of the
Intellectual Property.
(iii) No material trade secret or confidential know-how or other
confidential information relating to the Business has been disclosed or
authorized to be
-22-
disclosed to any third party, other than pursuant to a non-disclosure
agreement that fully protects the Sellers' proprietary interests in and to
such confidential information, except where such disclosure would not have
a Material Adverse Effect.
(iv) To the Knowledge of Sellers, other than as set forth (solely
for informational purposes, and not for purposes of making a
representation) on Part II of Schedule 4.1(o), no person or entity has
registered, attempted to register or otherwise used any trademark, service
▇▇▇▇, trade name, logo or trade dress identical to, or confusingly similar
to, any of the Trademarks, except for (i) Sellers' use of the foregoing to
identify the Exempted Products in the Exempt Territories, (ii) the
Trademarks themselves and (iii) third parties exercising rights to use
trademarks in non-U.S. jurisdictions as referenced on Part I of Schedule
6.10(e) or pursuant to rights to such usage transferred by DuPont prior to
the formation of DMPC as referenced on Part II of Schedule 6.10(e).
(p) Selling Materials and Policies. DMPC and Endo have delivered to
------------------------------
Purchaser (i) all customer lists relating to the Business and (ii) information
regarding terms and conditions of all existing material contracts relating to
the Products (including, without limitation, copies of such contracts).
(q) Computer Software. Schedule 4.1(q) contains a complete and
-----------------
accurate list of (i) all material computer software used solely in connection
with the Business under which Endo or DMPC is a licensee, lessee or otherwise
has obtained from a third party the right to use computer software (the
"Licensed Software") and (ii) all Owned Software. Endo and DMPC have the right
and license to use and sublicense the Licensed Software, free and clear of any
limitations or encumbrances, except as may be set forth in Schedule 4.1(q) or
except such that would not have a Material Adverse Effect. Endo and DMPC are in
compliance with all material provisions of each license, lease or other similar
agreement pursuant to which either has rights to use the Licensed Software,
except where the failure to so comply would not have a Material Adverse Effect.
Except as set forth on Schedule 4.1(q), to the Knowledge of Sellers, all Owned
Software was developed (i) by employees of Sellers within the scope of their
employment or (ii) as "works-made-for-hire" as that term is defined under 17
U.S.C. (S) 101.
(r) Contracts Listed; No Default. Schedule 4.1(r) contains a
----------------------------
complete and correct list of all Assumed Contracts, other than Routine
Contracts. Sellers have made available to Purchaser complete and correct copies
of all Assumed Contracts, except that, in the case of Partially Assigned
Contracts, the portions thereof relating to non-Generic Products or sales
outside of the United States may have been redacted. All Assumed Contracts
listed in Schedule 4.1(r), as to third parties, to the Knowledge of Sellers, are
in full force and effect and there does not exist thereunder any material
default or breach, or impending default or breach, by Sellers or, to the
Knowledge of Sellers, the other parties thereto. All Assumed Contracts are
assignable to Purchaser without the consent of any third party or governmental
authority, except as set forth on Schedule 4.1(c) and except for contracts where
the absence of such consent would not have a Material Adverse Effect. Aside from
the Assumed Contracts, to the Knowledge of Sellers there are no material
contracts to which Sellers are party which are related to the conduct of the
Business.
-23-
(s) Environmental Protection: Except as set forth in Schedule 4.1(s)
------------------------
hereto:
(i) Sellers have obtained all permits, licenses and other
authorizations which are required under the Environmental Laws for the
ownership, use and operation of the Business, including, but not limited
to, the ownership, use and operation of the Building, all such permits,
licenses and authorizations are in effect, no appeal or any other action is
pending to revoke any such permit, license or authorization, and Sellers
are in full compliance with all terms and conditions of all such permits,
licenses and authorizations, except where any such failure to obtain or
failure of compliance would not have a Material Adverse Effect.
(ii) To the Knowledge of Sellers, Sellers are in compliance with
all Environmental Laws with respect to the operations and activities of the
Business, except where failure to be in compliance would not have a
Material Adverse Effect.
(iii) Sellers have delivered to Purchaser true and complete
copies of any environmental studies made in the last five years relating to
the Building or the Business.
(iv) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter existing or pending, or to the Knowledge of
Sellers, threatened, against or involving the Business or the Building that
relates in any way to the Environmental Laws or any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder. Sellers have not received
any official notice or order affecting the Business or the Building from
any governmental agency or other third party advising Sellers that they are
responsible or potentially responsible for cleanup or paying the cost of
cleanup of any Hazardous Substances and Sellers have not entered into any
agreements concerning any such cleanup.
(v) Sellers have not, and to the Knowledge of Sellers, no other
person has, Released, discharged, buried, dumped or disposed of any
Hazardous Substances on, or beneath or adjacent to the Building, except in
compliance with applicable Environmental Laws.
(t) Sufficiency of Assets. The Purchased Assets, taken together with
---------------------
Purchaser's rights under the Ancillary Agreements, the Assumed Contracts and the
West Point Pharma contracts referenced in Section 7.5(j), comprise assets,
rights and properties that are reasonably sufficient in order for Purchaser to
carry on the Business as currently conducted in all material respects.
4.2 Purchaser's Warranties. Purchaser represents and warrants as of
----------------------
the date of this Agreement as follows:
(a) Organization and Related Matters. Purchaser is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has all
-24-
necessary corporate power and authority to own its properties and assets and is
duly qualified or licensed to do business in each jurisdiction where such
qualification is required, except where the failure to be so qualified or
licensed would not have a material adverse effect on the business, assets or
financial condition of Purchaser. Purchaser has all necessary corporate power
and authority to conduct its business as currently conducted, to carry out the
transactions contemplated by this Agreement and to perform its obligations
hereunder, and has taken, or prior to Closing will take, all necessary and
proper action authorizing the execution, delivery and performance of this
Agreement and the Ancillary Agreements. This Agreement has been duly executed
and delivered by Purchaser and constitutes, and the Ancillary Agreements, upon
execution, will constitute, valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their terms, except as regards
the Ancillary Agreements as such enforcement may be limited by bankruptcy,
insolvency, fraudulent conveyance, liquidation, reorganization, moratorium or
other laws or equitable principles affecting generally the enforcement of
creditors' rights and remedies.
(b) No Contravention of Applicable Law. Purchaser's execution,
----------------------------------
delivery and performance of this Agreement and the Ancillary Agreements do not
and will not contravene or cause a default under any Legal Requirement or
contract to which Purchaser is subject or party.
(c) Purchase Price Funding. Purchaser has delivered to the Sellers
----------------------
copies of a written commitment letter from The Chase Manhattan Bank to act as
agent for, and to participate in, a syndicate of banks to provide to Purchaser,
subject to the terms and conditions thereof, acquisition financing in the amount
of $ 165,000,000 (the "Bank Financing"). The Bank Financing, together with
Purchaser's anticipated equity capitalization, is sufficient to pay at Closing
the cash portion of the purchase price for the Purchased Assets as set forth in
Section 3.1. Purchaser has delivered to Sellers a copy of its written commitment
letter for equity capitalization from ▇▇▇▇▇ & Company.
(d) Investment Advisers. Purchaser has not made any agreement or
-------------------
taken any action that would cause any person to be entitled to claim payment of
any agent's, broker's finder's fee or commission from Sellers or their
Affiliates in connection with the transactions contemplated by this Agreement.
(e) DEA Permitting. Purchaser is not aware of any facts or
--------------
circumstances which would reasonably be expected to make it unlikely for
Purchaser to obtain in a timely manner all DEA and NYBCS approvals required in
connection with Purchaser's intended operation of the Business.
ARTICLE 5
Conduct of Business Pending Closing; Interim Covenants
5.1 Ordinary Course. From the date hereof to the Closing Date (or
---------------
until the Termination Date, if earlier):
-25-
(a) Subject to Section 5.1(f), Sellers shall operate the Business in
the ordinary course consistent with past practices and shall use reasonable
commercial efforts (i) to maintain and preserve relationships with the suppliers
and customers of the Business and (ii) to keep available to Purchaser the
services of the present Employees. Sellers shall not transfer, sell or
otherwise convey any of the Purchased Assets (except for sales of Inventory in
the ordinary course of business) or subject any of the Purchased Assets to any
Lien.
(b) Sellers shall not knowingly take any action that would be
reasonably likely to cause any of its representations or warranties contained in
the Agreement to be untrue in any material respect.
(c) Sellers shall not increase the compensation payable or to become
payable by Seller to its Employees, except for increases in salary or wages in
the ordinary course of business consistent with past practices or as required by
applicable law, or grant any severance or termination pay (except as required by
current agreement or by applicable law).
(d) Sellers shall not in connection with the Business other than in
the ordinary course of business and after consultation with Purchaser (i) enter
into any new agreements or commitments (including any employment or severance
agreements with any Employee, except as provided in this Agreement) or (ii)
terminate or amend any existing agreements or commitments; and Sellers shall in
no event sell, transfer, license or otherwise dispose of, or permit to lapse or
expire, any Intellectual Property or NDAs/ANDAs, or any interest therein.
(e) Sellers will promptly notify Purchaser of any event of which
Sellers obtain knowledge that has had, or that is reasonably expected to have, a
Material Adverse Effect.
(f) Sellers agree that (i) any action relating to any of the
following must be (and Sellers represent that such actions since April 7, 1997
have been) jointly agreed to by the Chief Financial Officer of DMPC and the
President of the U.S. Pharmaceuticals Division of DMPC prior to being taken by
Sellers; (x) any significant decisions of any kind related to the Products; (y)
any single or multiple offerings to any existing or potential customer of the
Business which relate to commercial terms, short-term dating or inventory
arrangements; or (z) any special or long-term stocking arrangements relating to
the Business; and (ii) the President of the U.S. Pharmaceuticals Division of
DMPC, or her designee, has (and Sellers represent that since April 7, 1997 such
person has had): (x) the right to participate in DMPC's Sales and Operations
Planning decision-making processes relating to the Business and (y) the
responsibility for jointly managing, together with representatives of DMPC, the
inventory of Products.
5.2 Other Offers; Termination of Agreement.
--------------------------------------
(a) Effective as of the date hereof, and continuing through the
earlier of the Closing Date or the Termination Date, Sellers shall not, directly
or indirectly, through any officer, director, agent or otherwise, solicit,
initiate or encourage the initiation of inquiries or proposals from, provide any
confidential information to, or participate in any discussions or negotiations
or cooperate
-26-
with, any corporation, partnership, person or other entity or group (other than
Purchaser and its Affiliates and their respective officers, employees,
representatives and agents) that could involve, directly or indirectly, any sale
by Sellers of the Business or the Purchased Assets (other than the sales of
Inventory in the ordinary course of business consistent with past practices), or
any similar transaction involving Sellers or otherwise facilitate or encourage
any effort or attempt to do or seek any of the foregoing, regardless of the
economic or other terms of any such sale or transaction. Sellers will
immediately advise all parties that have previously entered into confidentiality
agreements regarding such a sale with Sellers that all confidential information
shall be returned to Sellers and that any consents or invitations to make any
proposals of the type prohibited herein are withdrawn. Sellers will immediately
cease and cause to be terminated any existing activities or negotiations with
any parties conducted heretofore with respect to any such inquiry or proposal
relating to the sale of the Business or the Purchased Assets. Sellers will
promptly advise Purchaser of the identity of any person, entity or group that
makes any proposal or inquiry of the type described in the first sentence of
this Section 5.2(a).
(b) In the event that Closing does not take place within ninety (90)
days following the date of this Agreement, each of Sellers, on the one hand, and
Purchaser, on the other, shall have the right to terminate this Agreement in
their or its sole discretion at any time thereafter on written notice to the
other, without sustaining any liability to the other, other than for a breach of
any of the representations, warranties or covenants contained herein; provided,
however, that in the event Closing is delayed beyond such ninety (90) day period
due to the failure of Purchaser to obtain the Required DEA/NYBCS Permits
(notwithstanding diligent efforts to obtain the same) then the Termination Date
will be extended until the third business day after the Required DEA/NYBCS
Permits are obtained, except that (i) Sellers may terminate this Agreement in
their sole discretion upon notice to Purchaser if the Required DEA/NYBCS Permits
are not obtained within 150 days following the date hereof and (ii) Purchaser
may terminate this Agreement in its sole discretion upon notice to Sellers if
the Required DEA/NYBCS Permits are not obtained within 180 days following the
date hereof. The effective date of any termination of this Agreement made in
accordance with the terms of this Section 5.2(b) is herein referred to as the
"Termination Date".
(c) In the event of termination of this Agreement in accordance with
this Section 5.2, this Agreement shall thereafter become void and have no
effect, and no party hereto shall have any liability to the other parties hereto
or their respective Affiliates, directors, officers or employees, except for any
liability for breach referenced in Section 5.2(b) or the obligations of the
parties contained in Sections 5.6, 6.3 and 9.3.
5.3 Access. Sellers agree that, from the date hereof until the
------
Closing, upon reasonable prior notice, Sellers shall allow Purchaser and its
authorized agents, accountants, advisors and financing sources reasonable access
to examine the Purchased Assets, the Building, relevant records of the Business
(including, without limitation, monthly internal financial reports concerning
the Business to the extent prepared) and such additional information regarding
the Business and Purchased Assets as Purchaser may from time to time, reasonably
request; provided that any such examination shall be conducted during normal
business hours in such manner as not to interfere with the operation of the
Business. No investigation or review by Purchaser or its agents pursuant to
this
-27-
Section 5.3 shall affect any representation or warranty given by the Sellers
hereunder nor shall such investigation or review be deemed to have cured any
misrepresentation or warranty made in this Agreement; provided, however, that
Purchaser shall advise Sellers of any circumstances that come to its attention
that are, or could reasonably be likely to be, in violation of any of the
representations and warranties of Sellers made pursuant to this Agreement or any
Ancillary Agreement.
5.4 Filings; Consents.
-----------------
(a) As promptly as practicable after the date hereof, Sellers and
Purchaser shall (i) cooperate with one another to identify all notices,
declarations, filings and registrations required to be filed with, and all
consents, authorizations, approvals and waivers required to be obtained from,
any third person or governmental authority in connection with the transactions
contemplated by this Agreement and (ii) cooperate with one another to take such
actions as may be necessary to cause such notices, declarations, filings and
registrations to be filed and such consents, authorizations, approvals and
waivers to be obtained.
(b) Without limitation of Section 5.4(a), promptly after the
execution and delivery of this Agreement, Sellers, on the one hand, and
Purchaser, on the other, shall make any and all filings required under the HSR
Act and shall furnish to each other such necessary information and reasonable
assistance as the other may request (including, without limitation, copies of
all correspondence, filings or communications with representatives of any
governmental agency) in connection with its preparation of necessary filings or
submissions to any governmental agency. The parties shall keep each other
appraised of the status of any communications with, and inquiries or requests
for additional information from, the Federal Trade Commission and the Department
of Justice and shall comply promptly with any such inquiry or request and shall
use their best efforts to reach mutually agreeable resolutions with respect to
any action required to obtain clearance of the transactions contemplated by this
Agreement.
(c) Without limitation of Section 5.4(a), Purchaser shall promptly
make all filings with the DEA and the NYBCS necessary for obtaining all permits
that will be required for its continuing operations at the Building (the
"Required DEA/NYBCS Permits") and shall diligently prosecute such applications.
In addition, Purchaser and Sellers shall cooperate in identifying alterations
that will be required at the Building in order for Purchaser to obtain the
Required DEA/NYBCS Permits, and Sellers shall make such alterations at
Purchaser's sole expense.
(d) Each of the parties hereto agrees to use its best efforts to
bring about the satisfaction of the conditions required to be performed by it
hereunder prior to or at the Closing and to effect Closing.
5.5 Transfer of Regulatory Approvals. In connection with the
--------------------------------
consummation of the transactions contemplated by this Agreement, Sellers agree
to transfer or cause their Affiliates to transfer all transferable Permits
related to the operation of the Business to Purchaser in a timely fashion and
Sellers shall use all commercially reasonable efforts both prior to and after
Closing to complete such transfers as promptly as possible.
-28-
5.6 Expenses. Subject to Section 6.8, each of the parties shall be
--------
solely responsible for all of its expenses in connection with the performance of
this Agreement, including all expenses associated with obtaining all required
approvals required hereunder or by applicable law to be obtained by it in
connection with consummating the subject transactions.
5.7 Supplemental Disclosure. Sellers shall, prior to Closing,
-----------------------
supplement the Schedules hereto with respect to any matter coming to their
knowledge that, if existing or known as of the date of this Agreement, would
have been required to be set forth or described in any such Schedule. Any such
supplemental disclosure will not be deemed to have cured any breach of any
representation or warranty made in this Agreement or affect any rights to
indemnification hereunder, nor will it be deemed to have been disclosed as of
the date of this Agreement for purposes of determining whether or not the
conditions to Closing set forth in Article 7 have been satisfied.
ARTICLE 6
Covenants
6.1 Employees.
---------
(a) Employment by Purchaser. The parties agree that each of the
-----------------------
Employees identified on Schedule 6.1(a) who continues to be on the employment
rolls of DMPC as of the Closing Date will be offered employment by Purchaser
beginning as of the Closing Date. Purchaser's intent is that each such
Transferred Employee will be continued in his or her employment for a minimum
period of one (1) year from the Closing Date; provided, however, that the
parties acknowledge that Purchaser's ability to continue such Employee's
employment will be subject to market and business conditions and nothing
contained herein shall be construed as obligating Purchaser to continue the
employment of any such Employee for any minimum period of time if it is not, in
Purchaser's discretion, reasonably practicable to do so under prevailing market
and business conditions.
(b) Transfer of Personnel; Pension and Other Benefits.
-------------------------------------------------
(i) Subject to Section 6.1(a) and except as otherwise expressly
provided in this Section 6.1(b), any Employee who accepts Purchaser's offer
of employment and becomes a Transferred Employee shall be treated as a
newly-hired employee of Purchaser and shall be subject to the applicable
terms and conditions set forth in Purchaser's employment and personnel
manuals and procedures as established and revised from time to time.
(ii) As of the Closing Date, Transferred Employees shall cease to
participate in DMPC's Plans and shall commence participation in the
applicable employee benefit plans of the Purchaser (which shall include a
pension plan). All liabilities under DMPC's Plans with respect to the
Employees shall remain liabilities of Sellers. Purchaser will provide full
credit for service recognized by DMPC under the DuPont Merck
-29-
Pharmaceutical Company Pension and Retirement Plan as of the Closing Date
for purposes of eligibility and vesting under Purchaser's pension and
retirement plan. Without limitation of the foregoing provisions of this
Section 6.1(b)(ii), DMPC will maintain responsibility for pension benefits
accrued up to the Closing Date under The DuPont Merck Pharmaceutical
Company Pension and Retirement Plan and will pay such benefits directly to
the Employees in accordance with the terms of that Plan.
(iii) Purchaser shall treat employment with DMPC as if it were
employment with Purchaser for purposes of calculating the entitlement of a
Transferred Employee to future sick leave days, personal days and vacation
days.
(iv) Each Transferred Employee shall be paid by DMPC for the
value of vacation days accrued by such Transferred Employee while employed
by DMPC and available for use as of the Closing Date, including any such
days first accrued prior to 1997 and carried over to 1997. Following
Closing, each Transferred Employee shall accrue vacation days at the rate
determined under Purchaser's vacation schedules as in effect from time to
time.
(v) As of the Closing Date, or as soon thereafter as is
practicable, DMPC shall permit each Transferred Employee to elect, in
accordance with applicable law, to (i) maintain such Transferred Employee's
DuPont SIP Plan Account, if any, in the DuPont SIP Plan Trust, as if the
Transferred Employee were currently employed by DMPC (except that
Transferred Employees shall not earn service credit nor make contributions
following the Closing Date), until such time as the Transferred Employee
elects, or is required by law, to receive a complete or partial
distribution of the DuPont SIP Plan Account or (ii) transfer such DuPont
SIP Plan Account to an Eligible Retirement Plan in accordance with Code
Section 402(c); provided, however, that no transfer to an Eligible
Retirement Plan sponsored by Purchaser shall occur until Purchaser
demonstrates to the reasonable satisfaction of DMPC that, at the time of
transfer, such Eligible Retirement Plan satisfies the requirements for
qualification under Section 401(a) of the Code. Notwithstanding the
foregoing, DMPC reserves its right to distribute DuPont SIP Plan Accounts
in connection with the complete or partial termination of DMPC's
participation in the DuPont SIP Plan. Purchaser covenants that in the
event it sponsors any Eligible Retirement Plan the terms of such Eligible
Retirement Plan and any associated trust agreement shall permit the
transfers contemplated by this Section 6.1(b)(v).
(vi) Each Transferred Employee who is a participant in one or
more of DMPC's group life and/or health benefit plans (including plans
providing non-core benefits such as dental or vision care) (including plans
offered by DMPC as a participating Affiliate in DuPont benefit plans) shall
become a participant in a similar plan or plans (if any) maintained by
Purchaser as of such employee's initial date of employment with Purchaser,
subject only to any generally applicable requirements contained in the
Purchaser's plans for (A) enrollment, (B) eligibility based upon the number
of hours generally worked, and/or (C) execution of a salary
deduction/reduction agreement for payment of any employee premium
-30-
share for such coverage. Each such Transferred Employee's (and covered
dependents') period of coverage under DMPC's plans shall be counted as
coverage under the Purchaser's plans for purposes of applying any (A) pre-
existing condition exclusion or limitation, or (B) waiting period
requirement contained in the Purchaser's plans. Transferred Employees who,
as of the Closing Date, are not eligible for coverage under DMPC's group
life and/or health benefit plans or are eligible for coverage but have not
elected coverage (A) shall, for purposes of determining eligibility for
coverage in the similar Purchaser's plans, be entitled to credit in the
Purchaser's plans for service as an employee of DMPC and (B) shall be
treated as newly-hired employees under the similar Purchaser's plans for
all other purposes (including for purposes of determining the applicability
of any exclusions or limitations relating to evidence of insurability and
pre-existing conditions).
(vii) Purchaser shall not be liable or responsible for any
obligation of any kind to any Transferred Employee existing or arising
prior to Closing under any Plan, or with respect to any claimed breach of a
Legal Requirement relating to the employment relationship between any
Transferred Employee and DMPC, and DMPC agrees to indemnify Purchaser with
respect to any claims any Transferred Employees may make against Purchaser
with respect to such obligations.
(c) Terminations. After the Closing Date, Purchaser will have the
------------
right to terminate any Transferred Employee as prevailing market and business
conditions dictate in Purchaser's sole discretion; provided, however, that it is
Purchaser's intent not to terminate any Transferred Employee except for cause
for a minimum period of one (1) year from the Closing Date. DMPC will have no
liability for severance pay for any Transferred Employee terminated by
Purchaser. Purchaser agrees to indemnify and hold harmless DMPC for any and all
costs, including attorneys fees, associated with (i) any claim for severance pay
by a Transferred Employee terminated by Purchaser, (ii) any claim for any loss
by a Transferred Employee terminated by Purchaser relating to wrongful
termination or discrimination and (iii) any claim for any loss by a Transferred
Employee relating to any alleged violation of any applicable Legal Requirements
by Purchaser on or after the Closing Date.
(d) DMPC Payments. DMPC will pay to applicable Transferred Employees
-------------
amounts equal to the prorated portion of the base pool budgeted amount that
would have been earned by participating Transferred Employees under the DMPC
annual variable compensation plan with respect to the 1997 plan year, which
payments shall be made when and as due under the terms of the annual variable
compensation plan. Transferred Employees who were participants in the DMPC's
Founders' Shares and/or Performance Sharing Plans will be deemed to have been
subject to "good faith termination" for purposes of such plans. Payments under
the Founders's Shares Plan shall be made according to each applicable
Transferred Employee's election pursuant to such plan. Payments under the
Performance Sharing Plan shall be made to applicable Transferred Employees in
accordance with the terms of such plan. Transferred Employees who were
participants in the DMPC's Strategic Performance Incentive Plan as applicable to
the performance periods 1995-1997 and 1996-1998 will be deemed to have been
subject to "good faith termination" for purposes of such plan periods and shall
receive a pro rata share of distributions for the applicable plan periods when
-31-
such distributions are otherwise payable in accordance with the terms of the
DMPC Strategic Performance Incentive Plan for such plan periods.
6.2 Mutual Covenant Not to Compete.
------------------------------
(a) For a period of five (5) years following the Closing Date, Sellers
shall not, directly or indirectly, manufacture, market, sell or distribute, or
license to or otherwise grant or transfer to third parties (including without
limitation DuPont and Merck or their Affiliates) the right to manufacture,
market, sell, distribute or develop (unless any such product to be developed is
not marketed, sold or distributed prior to the fifth anniversary of the Closing
Date), any pharmaceutical product that contains a compound that constitutes an
API on the Closing Date or a compound that is a Derivative of any such API or,
directly or indirectly, invest in, manage, operate, join or control as a
partner, stockholder, member or otherwise any entity that engages in any such
activities (any of the foregoing constituting a "Competitive Activity");
provided, however, that nothing contained herein shall limit Sellers from: (i)
conducting any Competitive Activity with respect to an Exempted Product, in the
Dosage Form existing on the Closing Date, in its applicable Exempt Territory or
Exempt Territories; (ii) conducting any Competitive Activity with respect to
Sinemet or Sinemet CR; (iii) manufacturing an Exempted Product, in the Dosage
Form existing on the Closing Date, in the United States or elsewhere for
distribution and sale in its applicable Exempt Territory or Exempt Territories
or conducting any other activities for which Sellers are licensed under Section
2.6(b); (iv) conducting any Competitive Activity for the account of Purchaser
necessary to the performance of Sellers' obligations under this Agreement or the
Ancillary Agreements; (v) conducting any Competitive Activity with respect to a
product that combines any such API or Derivative with a separate active
pharmaceutical ingredient where the product is intended to be principally
utilized for an indication outside of pain management or the principal
indication (as of the Closing Date) of the Products utilizing the API or
Derivative contained in such product; provided, however, that the exception
provided in this clause (v) shall not apply to oxymorphone or molindone; (vi)
investing in securities having less than 10% of the outstanding voting power of
any entities whose securities are publicly traded or listed on any securities
exchange or automatic quotation system or owning any equity interest through any
employee pension or benefit plan; or (vii) acquiring any interest in any
business some of the operations of which would otherwise violate the Competitive
Activity prohibitions, whether as part as an acquisition, by joint venture,
merger or other business combination, so long as the acquiring entity divests
itself of such competing operations as soon as reasonably practicable, but no
later than 12 months after such acquisition. As used in this Section 6.2, a
"Derivative" of an API shall mean a compound whose molecular structure is a
modification of the molecular structure of the first API, but is not so
different as to constitute a separately patentable compound. If any such
modified compound does not constitute a Derivative solely because it is
separately patentable, then for a period of five (5) years following the Closing
Date Sellers shall not conduct any Competitive Activity with respect to a
pharmaceutical product containing such modified compound where the product is
intended to be principally utilized for any pain management indication or the
principal indication (as of the Closing Date) of any of the Products utilizing
the API from which such modified compound was derived; provided, however, that
prior to the commencement of commercial sale of any such modified compound
described in the preceding sentence, Sellers shall provide to Purchaser a copy
of an issued patent or patent
-32-
pending with claims covering such compound having a filing date subsequent to
the Closing Date, it being understood that, in the event such patent pending is
rejected, such modified compound shall no longer be considered a separately
patentable compound under this Section 6.2(a).
(b) For a period of five (5) years following the Closing Date,
Purchaser shall not, directly or indirectly, manufacture, market, sell or
distribute, or license to or otherwise grant to third parties the right to
manufacture, market, sell or distribute, (i) an Exempted Product, in the Dosage
Form existing on the Closing Date, in its applicable Exempt Territory or Exempt
Territories or (ii) any Excluded Product in the U.S. or elsewhere, or, directly
or indirectly, invest in, manage, operate, join or control as a partner,
stockholder, member or otherwise any entity that engages in any such activities;
provided, however, that nothing contained herein shall limit Purchaser from
engaging in any of the permitted activities (as construed to apply to Purchaser)
referenced in clauses (vi) and (vii) of Section 6.2(a), subject to satisfaction
of the conditions therein set forth; and provided further, that in the event
Purchaser should develop a new formulation of a Product that is also an Exempted
Product in its applicable Exempt Territory or Exempt Territories, which
formulation consists of the same, or a variation of the same Dosage Form as such
Exempted Product but is of a different strength or formulation, then Purchaser
shall have the right to manufacture, market, sell or distribute, directly or
indirectly, such Product in the applicable Exempt Territory or Exempt
Territories to the extent it first offers Sellers a right of first refusal to
act as Purchaser's agent in connection with such manufacturing, marketing, sale
or distribution of such Product in the applicable Exempt Territory or Exempt
Territories, provided that if Sellers fail to exercise such right within three
(3) months after being offered such right, then Purchaser shall not be bound by
the restrictions in this Section 6.2(b) as to the manufacture, marketing, sale
or distribution of such new formulation of a Product in the applicable Exempt
Territory or Exempt Territories.
(c) Sellers, on the one hand, and Purchaser, on the other, recognize
and agree that a breach of any of its respective covenants set forth in this
Section 6.2 could cause irreparable harm to the nonbreaching party, that the
nonbreaching party's remedies at law in the event of such breach would be
inadequate, and that, accordingly, in the event of such breach a restraining
order, preliminary injunction or injunction or all of said remedies may be
issued against the breaching party, in addition to any other rights and remedies
that are available to the nonbreaching party. If this Section 6.2 is more
restrictive than permitted by the laws of any jurisdiction in which a party
hereto seeks enforcement hereof, this Section 6.2 shall be limited to the extent
required to permit enforcement under such laws. In particular, the parties
intend that the covenants contained in this Section 6.2 shall be construed as a
series of separate covenants, one for each state within the United States and
one for each country outside the United States. Except for geographic coverage,
each such separate covenant shall be deemed identical in terms. If, in any
judicial proceeding, a court shall refuse to enforce any of the separate
covenants deemed included in this Section 6.2, then such unenforceable covenant
shall be deemed reduced in scope or duration, or eliminated from these
provisions for the purpose of those proceedings, to the extent necessary to
permit the remaining separate covenants to be enforced and this Section 6.2 to
be given effect to the maximum extent permissible.
-33-
(d) If all or part of this Section 6.2 is held invalid, illegal or
incapable of being enforced by any governmental, administrative or judicial
authority, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect. If any part of this Section 6.2 is held to be
excessively broad as to duration, scope, activity or subject, such part will be
construed by limiting and reducing it so as to be enforceable to the maximum
extent compatible with applicable law.
(e) Nothing contained in this Section 6.2 shall apply to actions
properly taken by Purchaser or Sellers in accordance with the provisions of this
Agreement (including, without limitation, Section 2.6) or any of the Ancillary
Agreements.
6.3 Confidentiality.
---------------
(a) Except as expressly set forth in this Section 6.3(a), each party
shall, and shall cause its Affiliates and its and their officers, directors,
employees, agents and subcontractors (collectively, "Recipients") to, keep
secret and retain in confidence any and all data, reports, technical,
commercial, scientific and other information that is or has been disclosed to it
in any form and designated as confidential by the other party hereto or any of
such other party's Affiliates or Recipients prior to or after the date of this
Agreement and that relate to any such other party or any such other party's
Affiliates or their respective businesses ("Confidential Information") and shall
not disclose directly or indirectly any Confidential Information, and shall
cause its Affiliates and its and their Recipients not to disclose directly or
indirectly any Confidential Information, to anyone outside such party, such
Affiliates and their respective agents; provided, however, that (i) if either
party is legally required to disclose any of the Confidential Information, such
party shall provide the other with prompt notice thereof so that the other party
may seek an appropriate protective order, and in the absence of such an order,
the party being required to make disclosure of the Confidential Information
shall furnish only that portion of the Confidential Information that such party
has been advised by its attorneys in writing it is legally required to disclose
and shall use its best efforts to obtain confidential treatment thereof; (ii)
the restriction on disclosure of Confidential Information set forth in this
Section 6.3(a) shall not apply to Confidential Information that (x) is already
in the public domain, or released to the public through no fault of the
Recipient, (y) information disclosed to the Recipient by a third party having
the right to disclose such information or (z) information that is developed by
or for the Recipient or its Affiliates independently of either the information
provided under this Agreement or any information provided under any Ancillary
Agreement; and (iii) each party agrees to treat all non-public information
disclosed to it in any form and not designated as confidential by the other
party hereto with the same standard of care with which it treats its own non-
public information.
(b) Purchaser shall, and shall request each Transferred Employee who
has or had access to the intellectual property of Sellers to, enter into such
further confidentiality agreements as Sellers may reasonably request in
connection with Sellers' safeguarding of its trademarks, trade secrets,
proprietary and other confidential information that is known to Purchaser or any
Transferred Employee and that is not being transferred hereunder to Purchaser.
Sellers shall, and shall request each of their employees who has or had access
to the Intellectual Property to, enter into such further
-34-
confidentiality agreements as Purchaser may reasonably request in connection
with Purchaser's safeguarding of the Intellectual Property acquired by
Purchaser.
(c) Purchaser, on the one hand, and Sellers, on the other,
acknowledge and agree that a breach by the other of any of the confidentiality
agreements referred to in this Section 6.3 could cause irreparable harm to the
non-breaching party, that such non-breaching party's remedies at law in the
event of such a breach would be inadequate, and that, accordingly, in the event
of such a breach, a restraining order, preliminary injunction or injunction or
all of said remedies may be issued against the breaching party and/or any of its
officers or employees, as applicable, in addition to any other rights and
remedies that are available to the non-breaching party.
(d) Sellers further agree to assign to Purchaser, and Purchaser
hereby agrees to assume, any and all confidentiality agreements that Sellers
have entered into with any third parties in connection with the sale, or
contemplated sale, of the Business.
(e) The confidentiality obligations of the parties under this Section
6.3 (including, without limitation, Sellers' obligations to maintain strict
confidentiality pertaining to all Intellectual Property conveyed to Purchaser
hereunder, and Purchaser's obligation to maintain strict confidentiality with
respect to all intellectual property of Sellers that is not being transferred to
Purchaser) shall in each case survive Closing and remain in full force and
effect for a period of ten (10) years following the Closing Date.
6.4 ADE Database. From and after the Closing Date, for a period of
------------
time as provided in the Administrative Services Agreement, (i) Sellers will
continue to maintain the official worldwide adverse drug experience ("ADE")
databases for the Products and the API and (ii) Sellers will continue to
coordinate ADE investigations, prepare and file reports with the FDA (including
"periodic reports" and "product annual reports"), maintain surveillance of the
published scientific literature to compile all safety and other information
necessary for FDA filings, make increased frequency calculations for ADEs as
required to meet FDA requirements, and conduct all other activities required to
comply with all U.S. federal, state and local laws and regulations relating to
the Products and APIs. Upon the expiration of the periods of time for
performance of the foregoing services by Sellers pursuant to the Administrative
Services Agreement, Purchaser will perform or cause to be performed all of the
foregoing activities, except with respect to Exempted Products in Exempt
Territories.
6.5 Compliance with Law in Conduct of Business. Purchaser agrees
------------------------------------------
that it will comply in all material respects with all Legal Requirements that
govern the conduct of the Business from and after the Closing Date, including
all orders, judgments and decrees issued by any court of competent jurisdiction.
6.6 Use of Labeling. After the Closing Date, except as provided in
---------------
the Ancillary Agreements, or as subsequently agreed to by the parties in
writing, Purchaser shall not use the names "DuPont Merck", "Merck", or "DuPont"
or the DuPont Merck corporate logo except that Purchaser shall be entitled for
six (6) months after the Closing Date (a) to use any inventory of product
labels,
-35-
product packaging, package inserts, leaflets and sales literature with respect
to Transferred Inventory in existence at the Closing Date and (b) to sell any
Transferred Inventory on or with which such labels, packaging, inserts and
leaflets are used, except that, to the extent that Transferred Inventory of any
Product is, upon transfer, of such a quantity that it is not practicable to sell
all Transferred Inventory of such Product within six (6) months of Closing,
Purchaser shall have the right to continue to sell the Transferred Inventory of
such Product until it is exhausted, without regard to the restrictions contained
in this Section 6.6, but in no event after the first anniversary of the Closing
Date.
6.7 Continuing Relationships
------------------------
(a) Sellers shall use their reasonable commercial efforts to
facilitate the transfer of the Business from Sellers to Purchaser by providing
assistance to Purchaser subsequent to the Closing in (i) communicating with each
customer regarding the transfer of the Business, outlining how future orders
should be placed, describing changes in invoicing procedure, summarizing
Sellers' ongoing obligations to the Business (including without limitation those
obligations relating to Returns effected under Section 6.7(b)) pursuant to this
Agreement and any other facts or information that would assist customers in
complying in all respects with any new requirements arising from the
transactions contemplated by this Agreement, provided, that the content of such
--------
communications shall be the product of representatives of both Purchaser and
Sellers, and both sides will be in agreement on such content prior to it being
sent; (ii) forwarding payments from Purchaser's customers that may be
misdirected to Sellers; and (iii) otherwise providing reasonable general
assistance as requested by Purchaser with matters concerning the Business. Any
out-of-pocket expenses incurred by Sellers in connection with providing any such
assistance at the request of Purchaser shall be reimbursed by Purchaser within
thirty (30) days following request from DMPC.
(b) Sellers or Purchaser shall provide credit to customers in the
United States for Returns as follows:
(i) Sellers shall have responsibility for Medicaid rebates due
and payable within nine (9) months following the Closing Date (except
for any Medicaid rebates that it is clear from the circumstances
relate to Products sold on or after the Closing Date) and Purchaser
shall be responsible for such rebates thereafter.
(ii) With respect to Returns other than Medicaid rebates and
subject to clause (iv) of this Section 6.7(b), Sellers shall have
responsibility for returns, rebates, chargebacks and shelf price
adjustments with respect to all Products sold, directly or indirectly,
whether to wholesales or retailers, prior to Closing and Purchaser
shall have responsibility for such returns, rebates, chargebacks and
shelf price adjustments with respect to all Products sold, directly or
indirectly, whether to wholesalers or retailers, on or after Closing.
(iii) The foregoing notwithstanding, as to all such returns,
rebates, chargebacks and shelf price adjustments where either party
believes that it is unclear
-36-
from the circumstances which party is the responsible party, then
Purchaser and Sellers hereby agree to cooperate in good faith and use
their best efforts to arrive at an estimate of (x) the aggregate costs
associated with such returns, rebates, chargebacks and shelf price
adjustments and (y) the proper allocation of such costs between the
parties, no later than one (1) month after Closing and to revise such
estimate as and when necessary until the sixth month after Closing.
(iv) In furtherance of the principles set forth in clause (iii)
of this Section 6.7(b), Sellers and Purchaser hereby agree to pay
their respective liabilities under such clause, based on the revised
estimates referenced therein, until the end of the sixth (6th) month
after Closing (if necessary) to those customers to whom such
liabilities are due and owing, after which time Sellers and Purchaser
shall pay to each other any and all outstanding amounts (if any) in
connection with Returns under this Section 6.7(b); thereafter all such
costs (if any) shall be borne by Purchaser (regardless of when the
Products in question were sold), except to the extent that there is a
dispute between the parties as to any portion of such estimate at any
time during the six month period described above, in which case the
parties hereby agree to use their best efforts to reach agreement as
to such disputed portion as promptly as possible, provided that such
six month period shall be tolled (solely with respect to such disputed
portion) until final resolution of such dispute as provided herein.
(v) In the event that the parties are unable to reach agreement
as to such dispute within thirty (30) days, then such dispute shall be
resolved by a jointly selected independent certified public accounting
firm of nationally recognized standing to be retained by the parties
solely in the event of a dispute as herein described, which accounting
firm shall have expertise with respect to such determinations; such
accounting firm shall make its determination as promptly as
practicable, and such determination shall be final and binding on the
parties. Such accounting firm shall, acting as experts and not as
arbitrators, determine on the basis of standards it deems appropriate
whether and to what extent the disputed portion of the estimate as
described herein is incorrect. Sellers, on the one hand, and
Purchaser, on the other, shall each bear one-half of the cost
associated with the engagement of such accounting firm.
(c) After the Closing each party will act as agent for the other with
respect to the receipt of payments of accounts receivable with respect to the
Business, it being understood that payments of accounts receivable relating to
sales of Products by Sellers prior to the Closing Date are for the account of
Sellers and payments of accounts receivable relating to Products sold by
Purchaser on or after the Closing Date are for the account of Purchaser.
Sellers and Purchaser, as the case may be, shall promptly remit full payment to
the other. In furtherance of the foregoing, it is understood that (i) payments
which by their terms relate to a specific invoice will be applied to the
satisfaction of such invoice and (ii) to the extent that no invoice is so
specified, Sellers or Purchaser (whichever received the payment) shall contact
the account debtor and obtain its direction as to how the payment is intended to
be applied.
-37-
(d) Each party agrees that, in connection with Sellers' performance
of their obligations under the Excluded Sales Contracts, Purchaser, at Sellers'
request, will act as Sellers' agent in administering such contracts to the
extent reasonably necessary to enable Sellers to fulfill such obligations,
provided that Sellers reimburse Purchaser, quarterly in arrears or as otherwise
agreed by the parties, for all reasonable costs and expenses (including without
limitation cost of goods as set forth in Schedule C to the Manufacture and
Supply Agreement, finished product distribution expenses, trade terms and
chargebacks) incurred by Purchaser in performing such services.
(e) In the event that Purchaser reasonably believes that any of the
suppliers of API party to the API Supply Agreements identified in Part 2 of
Schedule I to the Manufacture and Supply Agreement are in breach under any of
such supply agreements with respect to API being supplied for the manufacture of
Purchaser's products, Sellers agree, at Purchaser's request and at Purchaser's
cost, to seek redress for such breach; provided, however, in the event that if
such breach exists with respect to API being supplied for the manufacture of
both Purchaser's and Sellers' products, then the costs of seeking such redress
shall be allocated by the parties accordingly; and provided, further, that in
the event Sellers reasonably believe that no breach exists, then Sellers agree
to assign to Purchaser, at Purchaser's request and at Purchaser's cost, to the
extent permitted by the terms of the applicable supply agreement, Sellers'
rights and obligations under such supply agreement insofar as necessary to allow
Purchaser to seek redress for such breach.
6.8 Sales and Transfer Taxes. The parties agree that the tax
------------------------
burden with respect to any personal property transfer taxes, sales, use or
similar taxes, if any, imposed on or in connection with the transactions
contemplated by this Agreement shall be borne by the party liable under the tax
laws of the applicable taxing jurisdiction. Certificates of exemption shall be
provided by the parties, if applicable.
6.9 Access to Records.
-----------------
(a) Each party agrees that upon reasonable request and as required to
respond to court order, subpoena, inquiry, investigation, audit or any other
proceeding of any governmental authority, it will provide to the other
reasonable access to information from the books and records, other than purchase
orders and invoices, in its possession relating to task or financial records of
the Business as it was operated by Sellers prior to the Closing Date. Each party
agrees to preserve such records in its possession for a period consistent with
its document retention policies and procedures followed in the regular course of
business. In addition, from and after the Closing, Purchaser shall provide
Sellers, and Sellers shall provide Purchaser, with access at reasonable times
and upon reasonable prior notice to such books and records acquired by
Purchaser, and, in the case of books and records retained by Sellers, to books
and records retained by Sellers, as are necessary for Sellers' or Purchaser's
tax, regulatory, reporting, accounting, legal or other reasonable purposes.
(b) For a period not to exceed five (5) years following Closing,
Sellers further agree, subject to reimbursement by Purchaser of any out-of-
pocket and any other reasonable expenses incurred by Sellers, to provide to
Purchaser and Purchaser's accountants, underwriters and other advisors such
financial and other information retained by Sellers relating to the Business
-38-
(including, as may be applicable, requesting Seller's accountants to provide
copies of their work papers), and such access to management, accounting and
legal personnel of Sellers, as Purchaser may reasonably request and as may
reasonably be required in order to facilitate Purchaser's preparation of one or
more registration statements (and/or blue sky filings) relating to any public
offering of equity or debt securities of Purchaser or other sales of such
securities. Sellers further agree, at Purchaser's expense, to make a good faith
request to Sellers' accountants to consent to the use of the financial reports
referred to in Section 4.1(e) to facilitate Purchaser's preparation of any
registration statement to be filed with the Securities and Exchange Commission.
6.10 Right of First Refusal/Right of First Offer.
-------------------------------------------
(a) If at any time prior to the tenth (10th) anniversary of the
Closing Date any of the Sellers or one of its Affiliates determines to sell to a
non-Affiliated third party the rights (including without limitation foreign
product registrations and foreign trademark rights) to an Exempted Product in an
Exempt Territory, it will first offer the right to purchase such rights to
Purchaser or its assignee at the same price and on the same terms it intends to
sell such rights to the third party. Purchaser or its assignee will have ninety
(90) days after receipt of any such offer to notify such Seller or its Affiliate
of its intent to purchase such rights on such terms. If Purchaser or its
assignee determines to purchase such rights on such terms, it will have 30 days
to do so; if Purchaser or its assignee determines not to purchase such rights,
Seller or its Affiliate will have the right to sell such rights to the third
party on such terms.
(b) If at any time prior to the tenth (10th) anniversary of the
Closing Date, any of the Sellers determines to enter into a material marketing
arrangement with a non-Affiliated third party with respect to any Exempted
Product in an Exempt Territory, then such Seller shall notify Purchaser or its
assignee of its desire to enter into a marketing agreement with respect to such
marketing rights and provide Purchaser or its assignee with an opportunity to
make a proposal for Purchaser or its assignee to acquire such marketing rights.
Sellers shall consider any proposal made by Purchaser or its assignee in good
faith but shall be under no binding obligation to enter into any marketing
arrangements with Purchaser or any such assignee (it being the intent of this
Section 6.10(b) only to afford Purchaser or its assignee a first right to
conduct negotiations with Sellers concerning marketing arrangements prior to
Sellers entering into discussions on such matters with other non-Affiliated
third parties).
(c) If within three (3) years following the Closing Date Sellers
shall not have achieved gross annual Product sales of $50,000 (not including any
sales to Affiliates) for any of Carbex, Narcan or Nubain in any Exempt Territory
where any such Product is not sold on the Closing Date, then such Product shall
cease to be an Exempted Product with respect to any such Exempt Territory where
such sales level was not achieved. With respect to any such Exempt Territory
where gross annual Product sales exceed $50,000 (not including any sales to
Affiliates), Sellers shall, from and after the date which is three years
following the Closing Date, pay Purchaser a 5% royalty on all sales above the
$50,000 threshold (and Sellers and Purchaser shall enter into a royalty
agreement with respect to such 5% royalty (i) which is in standard industry form
for each subject Product in the subject country and (ii) which requires the
reporting of sales information by
-39-
Sellers sufficient for Purchaser to confirm royalty calculations); provided,
however, that Sellers shall provide to Purchaser, upon each anniversary of the
Closing Date, until the third anniversary of the Closing Date, sales figures for
Carbex, Narcan and Nubain in each Exempt Territory where such Product is then
being sold, which sales figures shall detail gross annual sales (other than to
Affiliates) for the previous year for such Product in such Exempt Territory. In
the event Sellers hold a registered trademark with respect to any Product in any
country that ceases to be an Exempt Territory for such Product pursuant to the
terms of this Section 6.10(c), Sellers shall convey such trademark to Purchaser
in consideration of Purchaser's undertakings pursuant to this Agreement and
without further payment; provided that Purchaser shall bear the cost of any out-
of-pocket expenses associated with transferring such trademark rights.
(d) In addition to its other rights under this Section 6.10,
Purchaser shall have the option to purchase Sellers' rights to manufacture,
market, sell and distribute (i) Percocet and Percodan in any Exempt Territory
other than Canada, which option may be exercised at any time following the
Closing Date, and (ii) any Generic Product or Multi-Source Brand Product sold by
Sellers in Canada (including Percocet and Percodan), which option may be
exercised at any time following the third anniversary of the Closing Date. Any
such option shall be exercisable at the fair market value of the applicable
Product rights. The fair market value of Product rights with respect to any
country shall be such amount as is agreed upon between Sellers and Purchaser
within ninety (90) days following Sellers' receipt of Purchaser's notice to
exercise its purchase option with respect to the applicable Product in the
applicable country. In the event Sellers and Purchaser are unable to reach
agreement as to fair market value, then fair market value shall be determined by
an investment banking firm of international repute, not having a primary
relationship with any of the parties to this Agreement and having expertise with
respect to the valuation of rights such as the subject Product rights in the
subject territory, as shall be mutually agreed upon between Sellers and
Purchaser (Sellers, on the one hand, and Purchaser, on the other, to each bear
one-half of the cost of such valuation).
(e) The rights of Purchaser or its assignee under this Section 6.10
are subject to all rights of third parties under contractual arrangements in
place as of the date of this Agreement, as identified on Schedule 6.10(e).
6.11 Reliance On and Maintenance of Current NDAs and ANDAs. To the
-----------------------------------------------------
extent that Sellers' conduct of the Excluded Business is dependent on certain of
the NDAs or ANDAs in the form such NDAs or ANDAs exist on the Closing Date,
Purchaser hereby agrees to maintain such NDAs or ANDAs in such current form,
subject to continuing FDA approval, and to allow Sellers to rely on such NDAs or
ANDAs as necessary to carry on the Excluded Business; provided, however, that
the reasonable costs of maintaining such NDAs or ANDAs in such current form
shall be borne by Sellers in the event that Purchaser ceases to rely on such
NDAs or ANDAs, for whatever reason, in the conduct of its business. Purchaser
shall also provide such scientific and regulatory affairs assistance as Sellers
may reasonably request in connection with Sellers meeting regulatory
requirements in non-U.S. jurisdictions in connection with sales of Exempted
Products in their applicable Exempt Territories (subject to Sellers' reimbursing
Purchaser for any out-of-pocket and any other reasonable expenses incurred by
Purchaser in providing such assistance).
-40-
6.12 Einstein Project.
----------------
(a) The parties agree that, within 60 days of completion of Phase
II-b clinical studies relating to the compound or compounds (the "Compound or
Compounds") developed pursuant to DMPC's agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ College
of Medicine of Yeshiva University ("Einstein") dated August 30, 1996 (the
"Einstein Agreement"), DMPC will advise Purchaser whether or not DMPC will
proceed with development of the Compound or Compounds.
(b) If DMPC advises Purchaser that DMPC will not proceed with
development of the Compound or Compounds, Purchaser will have the option,
exercisable within 60 days of receipt of DMPC's notice, to agree to assume
DMPC's rights and obligations under the Einstein Agreement, to the extent DMPC
is able to obtain Einstein's consent to an assignment, in exchange for payment
to DMPC of the fair market value of such rights. In the event such consent is
not obtained, Purchaser shall have the option, exercisable within 60 days of
receipt of DMPC's notice of such failure to obtain consent, to agree to license
from DMPC, on standard commercial terms and at their fair market value, the
exclusive rights to the Compound or Compounds.
(c) The parties will negotiate in good faith to determine the fair
market value of such assignment rights or exclusive license rights, as the case
may be, provided that DMPC shall provide Purchaser with full access to all
available clinical data relating to the Compound or Compounds for the purpose of
aiding such determination. If agreement cannot be reached within 30 days of
Purchaser's election to assume or license such rights, fair market value will be
determined by an investment banking firm of nationally recognized stature
selected by the parties. The cost of such valuation will be shared equally by
the parties.
(d) In the event that Purchaser obtains a license as described
above, Purchaser shall have complete control over the Compound or Compounds from
development through commercialization, subject to Purchaser arranging for the
proper performance of any continuing obligations of DMPC as the nominal licensee
under the Einstein Agreement.
(e) If DMPC advises Purchaser that DMPC will proceed with
development of the Compound or Compounds, as provided above, DMPC will
concurrently provide Purchaser with (i) all available clinical data, (ii) DMPC's
Phase III development and commercialization plans and (iii) the amount of all
Phase I and Phase II costs and expenses (including milestone payments to
Einstein) incurred by DMPC to date, in connection with the Compound or
Compounds. Within 60 days of receipt of DMPC's notice and Phase III development
and commercialization plans, Purchaser will have the right to purchase a
participation interest of between 1% and 20% (as designated by EPI) of the
profits and losses of the Compound or Compounds (the "Participation
Percentage"), pursuant to an agreement to be negotiated in good faith and
entered into by the parties during such 60 day period, which agreement shall be
in a form reasonably agreed upon by DMPC and Purchaser prepared on the basis of
the terms set forth in Exhibit I hereto.
(f) If Purchaser does not elect to purchase a Participation
Percentage in the profits and losses of the Compound or Compounds within the
sixty (60) day period referenced in clause (e)
-41-
above, Purchaser will have no further rights with respect to the Compound or
Compounds, except that, whether or not Purchaser made such election, Purchaser
shall have the further option to assume DMPC's rights and obligations with
respect to the Compound or Compounds under the circumstance referenced in clause
(g) below.
(g) In the event that DMPC advises Purchaser that it will proceed
with development of the Compound or Compounds as provided above but thereafter
ceases such development, then Purchaser will have the option, exercisable within
60 days of receipt of DMPC's notice and on terms substantially similar to those
set forth in clauses (b) and (c) above, to assume DMPC's right and obligations
under the Einstein Agreement or, in the event Einstein's consent is not
obtained, to license exclusive rights to the Compound or Compounds.
6.13 Borrowings. Purchaser agrees that from the Closing Date and
----------
so long as any of the Notes (as defined in the Manufacture and Supply
Agreement), remains outstanding, or if Notes remain subject to issuance under
the Manufacture and Supply Agreement, it will not incur secured indebtedness in
excess of $250,000,000 in the aggregate outstanding at any one time having a
priority in the assets of Purchaser greater than or equal to the priority
therein of the interest of DMPC.
ARTICLE 7
Conditions to Closing; Closing
7.1 Conditions to Purchaser's Obligation to Close. Satisfaction of
---------------------------------------------
the following obligations will be a condition precedent to Purchaser's
obligation to close unless waived by Purchaser:
(a) Each of the representations and warranties of Sellers set forth
in this Agreement, without regard (solely for the purposes of this Section
7.1(a)) to references to Material Adverse Effect in such representations and
warranties, shall be true and correct as of the Closing Date as if such
representations and warranties were made on and as of the Closing Date (or, in
the case of any representation and warranty made as of a specified date, as of
such date), except where the failure to be true and correct would not,
individually or in the aggregate, have a Material Adverse Effect; all covenants
of Sellers with respect to matters to be performed by them, or any of them,
prior to Closing shall have been complied with in all material respects; and
Purchaser shall have received a certificate at Closing from an officer of DMPC
attesting to the foregoing;
(b) The provision to Purchaser of partnership resolutions of DMPC and
DuPont Pharma and a limited liability company resolution of Endo approving this
Agreement and the subject transactions, certified by appropriate officers of
Sellers;
(c) No order, stay, judgment or decree shall have been issued and no
action, suit or proceeding shall be pending before any court or any federal,
state or local governmental authority, and no investigation of any governmental
authority shall have been commenced (and be pending)
-42-
seeking to restrain, enjoin, invalidate or delay (or questioning the validity or
legality of) the transactions contemplated by this Agreement or seeking material
damages in connection therewith;
(d) If applicable, all waiting periods under the HSR Act shall have
expired or been terminated;
(e) All Required DEA/NYBCS Permits shall have been obtained;
(f) All items to be delivered pursuant to Section 7.5 shall have been
so delivered;
(g) The Business shall not have suffered a Material Adverse Effect,
including, solely for purposes of this Section 7.1(g), any change in results of
operations that is materially adverse to the Business taken as a whole
(excluding the effects of trends in the Business of which Purchaser has been
made aware);
(h) Each of the Ancillary Agreements shall have been executed and
delivered by each party thereto, including, as applicable, DuPont Pharma, and
such Agreements shall be in full force and effect;
(i) Purchaser shall have received an opinion or opinions from counsel
to Sellers (which may be or include staff counsel) to the effect of the matters
set forth in Schedule 7.1(i); and
(j) On or prior to Closing, Purchaser shall have received the
proceeds of the Bank Financing.
7.2 Conditions to Sellers' Obligation to Close. Satisfaction of
------------------------------------------
the following obligations will be a condition precedent to Sellers' obligation
to close unless waived by Sellers:
(a) Each of the representations and warranties of Purchaser set forth
in this Agreement, without regard (solely for the purposes of this Section
7.2(a)) to references to material adverse effect in such representations and
warranties, shall be true and correct as of the Closing Date as if such
representations and warranties were made on and as of the Closing Date (or, in
the case of any representation and warranty made as of a specified date, as of
such date), except where the failure to be true and correct, individually or in
the aggregate, would not have a material adverse effect on Purchaser's business,
assets or financial condition or on its ability to acquire the Purchased Assets
hereunder; all covenants of Purchaser with respect to matters to be performed by
it prior to Closing shall have been complied with in all material respects; and
Sellers shall have received a certificate at Closing from an officer of
Purchaser attesting to the foregoing;
(b) The provision by Purchaser to Sellers of a resolution of the
Board of Directors of Purchaser approving the subject transactions certified by
the corporate secretary (or analogous officer or person);
-43-
(c) No order, stay, judgment or decree shall have been issued and no
action, suit or proceeding shall be pending before any court or any federal,
state or local governmental authority, and no investigation of any governmental
authority shall have been commenced (and be pending) seeking to restrain,
enjoin, invalidate or delay (or questioning the validity or legality of) the
transactions contemplated by this Agreement or seeking material damages in
connection therewith;
(d) If applicable, all waiting periods under the HSR Act shall have
expired or been terminated;
(e) All Required DEA/NYBCS Permits shall have been obtained;
(f) Each of the Ancillary Agreements shall have been executed and
delivered by each party thereto, and such Agreements shall be in full force and
effect; and
(g) All items to be delivered pursuant to Section 7.4 have been so
delivered.
7.3 Closing Location. Closing of the transactions contemplated by
----------------
this Agreement and the Ancillary Agreements will take place on the Closing Date
at the offices of DMPC in Wilmington, Delaware or at such other place as the
parties may agree upon in writing.
7.4 Closing Deliveries to Sellers. At the Closing, Purchaser will
-----------------------------
deliver or cause to be delivered to Sellers the following:
(a) A wire transfer to DMPC in the amount of $260,000,000 and
otherwise in accordance with the terms set forth in Schedule 3.1 and a
promissory note for one-half of the value (as determined pursuant to Schedule
3.2) of the Transferred Inventory;
(b) The certificate referenced in Section 7.2(a);
(c) Each of the Ancillary Agreements, duly executed by Purchaser;
(d) An assignment and assumption agreement with respect to all
Assumed Contracts transferred pursuant to Section 2.1(e), duly executed by
Purchaser;
(e) Each confidentiality agreement contemplated by Section 6.3; and
(f) An assumption agreement providing for the assumption of the
Assumed Liabilities, duly executed by Purchaser.
7.5 Closing Deliveries to Purchaser. At the Closing, Sellers will
-------------------------------
deliver or cause to be delivered to Purchaser the following:
(a) The certificate referenced in Section 7.1(a);
-44-
(b) Each of the Ancillary Agreements, duly executed by DMPC and, as
applicable, DuPont Pharma;
(c) An assignment and assumption agreement with respect to all
Assumed Contracts transferred pursuant to Section 2.1(e), duly executed by DMPC
and Endo, as applicable;
(d) Copies of all transferable Permits transferred pursuant to
Section 2.1(h);
(e) Bills of Sale for Transferred Inventory and the Purchased Assets
duly executed by all applicable parties;
(f) Each confidentiality agreement contemplated by Section 6.3;
(g) An assignment of the Patents in form appropriate for filing in
the federal patent office;
(h) Assignments of the Trademarks in form appropriate for filing in
the relevant U.S. and foreign trademark offices;
(i) Appropriate documentation to transfer the DMFs and NDAs/ANDAs for
the Products;
(j) Distribution agreements with West Point Pharma relating to (i)
all West Point Pharma products distributed by Sellers on the date hereof and
(ii) generic carbidopa/levodopa, in forms reasonably agreed upon by Purchaser;
and
(k) A ▇▇▇▇ of sale, in the form attached as Exhibit H hereto,
evidencing Sellers' sale to Purchaser of all of Sellers' right, title and
interest in the Discontinued Products and certain patents relating to
Discontinued Products set forth in Exhibit F hereto and all intellectual
property and other rights related thereto.
ARTICLE 8
Indemnification
8.1 Indemnification Of Purchaser By Sellers. Sellers agree to
---------------------------------------
indemnify, defend, and hold harmless Purchaser and its Affiliates, their
respective stockholders, directors, officers, employees, agents or
representatives, and their respective successors and assigns, from and against
any and all Losses that may be sustained or suffered by Purchaser or its
Affiliates and that are caused by, based on or arise out of (i) any breach or
non-performance by Sellers of any representation or warranty of Sellers
contained in this Agreement or the certificate delivered by Sellers pursuant to
Section 7.1(a), (ii) the breach or non-performance by Sellers of any
undertakings, agreements, covenants or obligations of Sellers contained in this
Agreement or the certificate delivered by Sellers pursuant to Section 7.1(a),
(iii) any failure of Sellers to pay or satisfy when due any Retained
-45-
Liabilities, (iv) any business or other activities relating to the Business
conducted by Sellers on or prior to the Closing Date (but excluding any Assumed
Liabilities) or (v) any claim by a third party that Purchaser's use or
sublicense of any intellectual property or computer software licensed pursuant
to Section 2.5(a), as permitted therein, is in violation of the rights of such
third party.
8.2 Indemnification Of Sellers By Purchaser. Purchaser agrees to
---------------------------------------
indemnify, defend and hold harmless, Sellers and their Affiliates, their
respective stockholders, directors, officers, employees, agents or
representatives, and their respective successors and assigns, from and against
any and all Losses that may be sustained or suffered by Sellers, or any of them
or their respective Affiliates, and that are caused by, based on or arise out of
(i) any breach or non-performance by Purchaser of any representation or warranty
of Purchaser contained in this Agreement or the certificate delivered by
Purchaser pursuant to Section 7.2(a), (ii) the breach or non-performance by
Purchaser of any undertakings, agreements, covenants or obligations of Purchaser
contained in this Agreement or the certificate delivered by Purchaser pursuant
to Section 7.2(a), (iii) any failure of Purchaser to pay or satisfy when due any
Assumed Liabilities or (iv) any business or other activities relating to the
Business conducted by Purchaser after the Closing Date (but excluding any
Retained Liabilities).
8.3 Notice, Defense Of Indemnification Regarding Third Party Claims.
---------------------------------------------------------------
In the event that any legal proceeding shall be instituted or that any claim
or demand shall be asserted by any third party in respect of which
indemnification may be sought from an indemnifying party under the provisions of
Sections 8.1 or 8.2 or under Section 6.1(c), the indemnified party shall cause
prompt written notice of such claim, the circumstances thereof in reasonable
detail and the amount of the asserted damages to be given to the indemnifying
party. The failure on the part of the indemnified party to give such notice in
a reasonably prompt manner shall not relieve the indemnifying party of any
indemnification obligation hereunder unless, and only to the extent that, the
indemnifying party is materially prejudiced thereby. The defense of any such
claim or claims shall be undertaken by the indemnifying party and shall be under
its control and at its expense; provided, however, that counsel chosen by the
indemnifying party must be reasonably acceptable to the indemnified party; and
provided further, the indemnified party shall have the right, at its option and
at its own expense, to control jointly the defense of any such claim with the
indemnifying party if the indemnifying party determines to defend the same. If
the defense of any such claim is jointly controlled, as aforesaid, and if a
dispute shall arise as to the conduct of such defense that the parties or their
counsel shall be unable to settle, then such dispute shall be settled by counsel
selected by the indemnifying party, provided further that if the indemnified
party shall reasonably determine upon the advice of counsel that there is a
conflict of interest between the indemnified party and the indemnifying party
concerning any claim at issue such that it would be inappropriate under the
circumstances to have the indemnifying party control or participate in the
defense of any such claim, then the indemnified party shall have the right to
retain independent counsel at the reasonable expense of the indemnifying party
which counsel shall control the defense of any such claim. Subject to the
immediately preceding sentence, each party to this Agreement shall have the
right to participate and shall fully cooperate with the other in the defense of
any such claim. No claim for which indemnification is sought hereunder shall be
settled or compromised without the written consent of the indemnified party
which consent shall not be unreasonably withheld (except that
-46-
consent to any settlement that includes non-monetary damages affecting or
relating to Purchaser or the Business, on the one hand, or Sellers, on the
other, may be rejected by Purchaser or Sellers, as the case may be, unless the
settlement is reasonable in the context of Purchaser's or Sellers' respective
business perspective); provided, however, that if an indemnified party shall
refuse an offer of settlement or compromise approved by the indemnifying party
(that does not adversely affect the rights or obligations of the indemnified
party), then the maximum indemnification liability of the indemnifying party
with respect to the matter proposed to be settled or compromised shall be the
settlement amount set forth in the agreement of settlement or compromise
rejected by the indemnified party. Any offer of settlement or compromise shall
include as a term thereof the delivery by the claimant or plaintiff to the
indemnified party of a duly executed, written, unconditional release of the
indemnified party from all liability in respect of such action. Notwithstanding
the foregoing, the indemnified party shall have the sole right to defend, settle
or compromise any claim with respect to which it has agreed in writing to waive
its right to indemnification pursuant to this Agreement.
8.4 Survival. The representations and warranties made in this
--------
Agreement shall survive the Closing and remain in full force and effect for a
period of eighteen (18) months after the Closing Date; provided that the
representation in Section 4.1(a) hereof shall survive indefinitely and the
representations contained in Section 4.1(h) shall survive until the expiration
of the applicable statutes of limitations; and the corresponding obligation to
indemnify under Sections 8.1 and 8.2 for a breach of any of the representations
and warranties made in this Agreement shall expire at such stated times with
respect to such matters unless a claim has been made prior thereto. The
covenants and agreements of the parties set forth in this Agreement shall
survive indefinitely except as expressly set forth herein.
8.5 Limitations on Indemnification.
------------------------------
(a) The provisions for indemnification under Section 8.1(i) and
8.2(i), as the case may be, with respect to indemnification for the breach of
any of the representations and warranties contained in this Agreement other than
in Section 4.1(h) (which shall include any breach of contract claim relating to
any such breach of representation or warranty), as well as Sellers'
indemnification obligations under Section 8.1(v), shall be effective only when
the aggregate amount of all Losses for which indemnification is sought from
Sellers under Section 8.1(i) or 8.1(v) or Purchaser under Section 8.2(i), as the
case may be, exceeds $2,600,000 (the "Deductible"), in which case the
indemnified party shall be entitled to indemnification of the indemnified
party's Losses in excess thereof. The indemnification obligations of Sellers
pursuant to Section 8.1(i) or 8.1(v) or Purchaser pursuant to Section 8.2(i), as
the case may be, with respect to indemnification for the breach of any of the
representations and warranties contained in this Agreement (and, in the case of
Sellers, with respect to the matters referenced in Section 8.1(v)) shall be
effective only until the dollar amount paid by the indemnifying party in respect
of the Losses indemnified against under Sections 8.1(i) or 8.1(v), on the one
hand, or 8.2(i), on the other hand, aggregates to an amount equal to the cash
amount of the purchase price paid pursuant to Section 3.1 (the "Cap"), and
neither Sellers nor Purchaser shall have any liability whatsoever for breach of
any representation or warranty contained in this Agreement (and, in the case of
Sellers, liability under Section 8.1(v)) in excess of the Cap. Any Losses
caused by a breach of the covenants contained in this Agreement, or otherwise
arising
-47-
under Sections 8.1(ii), 8.1(iii) or 8.1(iv) and 8.2(ii), 8.2(iii) or 8.2(iv),
and, notwithstanding the foregoing provisions of this Section 8.5(a), any Losses
resulting from a violation of the representations set forth in Section 4.1(h),
shall be indemnified from the first dollar without regard to the Deductible or
the Cap.
(b) Purchaser and Sellers agree that any party to this Agreement may
seek damages constituting a Loss arising from the performance or non-performance
of this Agreement, including with respect to breach of contract or breach of
warranty pursuant to Articles 4 or 5 hereof; provided, however, that neither
party shall be entitled to recover punitive damages and, in the case of
Purchaser, damages constituting consequential damages shall be limited to
amounts compensating Purchaser for any loss in value of the Purchased Assets;
and provided, further, that there shall be no double recovery for any Loss (it
being the intent of the parties, for example, that if lost profits were a factor
in determining the loss in value of a Purchased Asset, Purchaser could not
separately recover for lost profits).
ARTICLE 9
Miscellaneous
9.1 Notices. Except as otherwise provided in Section 6.4(e), any
-------
notices or other communications required or permitted by this Agreement shall be
in writing and shall be delivered either by personal delivery, by nationally
recognized overnight courier service, by facsimile or other electronic means, by
first class mail or by registered or certified mail, return receipt requested,
addressed as follows:
If to Sellers, to:
-----------------
The DuPont Merck Pharmaceutical Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
-48-
If to Purchaser, to:
-------------------
Endo Pharmaceuticals Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
with copy to:
-------------
▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
- or to such other address as any party shall have previously designated to the
others by written notice given in the manner hereinabove set forth. Notices
shall be deemed given one day after being sent, if sent by overnight courier;
when delivered and receipted for, if hand delivered; when received, if sent by
facsimile or other electronic means or by first class mail; or when receipted
for (or upon the date of attempted delivery where delivery is refused or
unclaimed), if sent by certified or registered mail, return receipt requested.
9.2 Further Assurances. In addition to the acts and deeds recited
------------------
herein and contemplated to be performed, executed and/or delivered by either
Purchaser or Sellers, Purchaser and Sellers will perform, execute and/or deliver
or cause to be performed, executed and/or delivered at the Closing or, if
necessary, after the Closing, any and all further acts, deeds, instruments,
certificates, agreements and assurances as may, from time to time, be reasonably
required fully to effectuate the sale of the Business and Purchased Assets as
contemplated hereby.
9.3 Negotiation/Transaction Costs. Each of the parties will pay
-----------------------------
all costs and expenses incurred or to be incurred by it in negotiating and
preparing this Agreement. Further, without limitation of Section 5.6 but
subject to Section 6.8 as regards taxes, (i) Sellers will pay all costs relating
to the transfer of the Purchased Assets, including costs incurred in the
transfer of Permits and the costs associated with obtaining releases of Liens
and (ii) Purchaser will pay all costs incurred with respect to (x) obtaining the
Required DEA/NYBCS Permits, (y) its HSR Act filings and (z) its due diligence
and any financing it obtains.
9.4 Return of Documents. If for any reason whatsoever the
-------------------
transactions contemplated by this Agreement are not consummated, each party
shall return to the other all books, records and other information (including
copies, summaries and abstracts, if any) provided to it in contemplation of
such transaction, and shall not use or disclose the information contained in
such materials for any purpose.
-49-
9.5 Assignability. Neither Purchaser, on the one hand, nor Sellers,
-------------
on the other, may assign this Agreement, or its or their rights or obligations
hereunder, without the other's prior written consent, except that (i) a party
may assign this Agreement and its rights and obligations hereunder to an
Affiliate or to a successor to all or substantially all of the business or
assets of such party and (ii) Purchaser may assign this Agreement and its rights
hereunder to or for the account of the lenders providing the Bank Financing
solely and specifically for the purpose of securing such Bank Financing.
9.6 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, and all of such
counterparts together shall constitute one document.
9.7 Severability. If any term or other provision of this
------------
Agreement is determined to be invalid, illegal or unenforceable in a final
decision by a court of competent jurisdiction, the performance of the offending
provision will be excused, except that the parties will endeavor to agree upon
an equitable substitute provision in order to carry out, to the extent possible,
the intent and purpose of such offending provision. Any such invalidity,
illegality, or unenforceability will not affect any other provision of this
Agreement.
9.8 Entire Agreement. This Agreement, including its Schedules, and
----------------
the confidentiality agreements referenced in Section 6.3 constitute the entire
understanding between the parties with respect to the subject matter and
supersede all prior written and oral proposals, understandings, letters of
intent, agreements and representations, all of which are merged herein.
9.9 Modifications. No modification of this Agreement shall be
-------------
binding unless set forth in writing and signed by all parties.
9.10 Non-Waiver of Default. The failure of any party to insist, in
---------------------
any one or more instances, on the strict performance of any of the terms or
conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term or condition, and the obligations of the parties with respect
thereto shall continue in full force and effect. Any waiver of any terms of
this Agreement shall be in writing, and shall be executed by the party or
parties against whom such waiver is sought to be enforced.
9.11 GOVERNING LAW/CONSENT TO JURISDICTION. THIS AGREEMENT SHALL
-------------------------------------
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE.
9.12 Interpretation. This Agreement is between financially
--------------
sophisticated and knowledgeable parties and is entered into by the parties in
reliance upon the economic and legal bargains contained herein and shall be
interpreted and construed in a fair and impartial manner without regard to such
factors as the party who prepared (or caused the preparation of) this instrument
or the relative bargaining power or the parties.
-50-
9.13 Bulk Sales. Purchaser acknowledges that the Sellers have not
----------
taken, and do not intend to take, any action required to comply with any
applicable bulk sale or bulk transfer laws or similar laws. Sellers agree to
indemnify and hold Purchaser harmless against any claim, suit or action with
respect to, or Losses arising from, such non-compliance.
9.14 Publicity. Neither Purchaser nor Seller will, without the
---------
prior written consent of the other, issue any press release or make any other
public announcement or furnish any statement to any person concerning this
Agreement, except for (i) a joint press release to be issued in a form agreed
following the execution of this Agreement, (ii) disclosures made to attorneys,
consultants, accountants and other representatives of the parties in compliance
with the confidentiality obligations between and among Purchaser and Sellers,
(iii) disclosures to third parties (including, without limitation, governmental
agencies and regulatory bodies) whose consent is required for assignment of
contracts, licenses, permits, etc. or (iv) disclosures required by applicable
securities law.
9.15 No Third Party Rights. Nothing in this Agreement shall be
---------------------
construed to give any person or entity other than the parties hereto and their
permitted successors and assigns any legal or equitable right, remedy or claim
under this Agreement, and this Agreement shall be for the sole and exclusive
benefit of the parties hereto and their permitted successors and assigns.
-51-
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
in multiple counterparts as of the date first above written.
THE DUPONT MERCK
PHARMACEUTICAL COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Title: President and Chief Executive Officer
DUPONT MERCK PHARMA
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Title: Chief Financial Officer
ENDO LABORATORIES, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Title: Treaurer
ENDO PHARMACEUTICALS INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Title: President and Chief Executive Officer