Exhibit 10.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 24,
2004 (the "EFFECTIVE DATE"), is by and between ▇▇▇▇▇ LABORATORIES, INC., a Texas
corporation d/b/a ▇▇▇▇▇ Respiratory Therapeutics ("SELLER"), and CARDINAL HEALTH
PTS, LLC, a Delaware limited liability company ("PURCHASER").
A. Seller leases and operates a manufacturing plant located at ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (as further defined in Section
1.1.1(a), the "PLANT"; an index of defined terms is set forth in Section 8.16).
At the Plant, Seller is engaged in, among other things, developing,
manufacturing and selling ▇▇▇▇▇ Products. "▇▇▇▇▇ PRODUCTS" means all products
for which Seller now has or prior to Closing obtains the rights to market or
sell and specifically includes without limitation products currently marketed or
planned to be marketed under the Mucinex(R) brand, the ALLERx(R) brand, the
Aquatab(R) brand or any replacement or successor brand of such brands and also
includes any experimental (pre-commercial) product. Seller desires to divest
that portion of its business (the "TRANSFERRED BUSINESS") that relates solely or
primarily to the manufacture of ▇▇▇▇▇ Products.
B. Subject only to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth, Seller desires
to sell, and Purchaser desires to purchase, Seller's assets relating to the
Transferred Business.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
respective covenants, agreements, representations and warranties herein
contained, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 Agreement to Sell. At the Closing and except as otherwise specifically
provided in Section 2.3 hereof, Seller shall grant, sell, convey, assign,
transfer and deliver to Purchaser, upon and subject to the terms and conditions
of this Agreement, all right, title and interest of Seller in and to the
Purchased Assets, free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions and other encumbrances and defects of
title of any nature whatsoever except Permitted Liens.
1.1.1 Purchased Assets. The term "PURCHASED ASSETS" shall mean the
following business operations, assets, properties and rights of Seller existing
as of the date of the Closing, except as otherwise expressly provided in Section
1.1.2 or 2.3 hereof:
(a) All of Seller's interests in certain real property leased
by Seller and used in connection with the Transferred Business and located
at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, which interests,
together with the lease relating thereto (the "REAL PROPERTY LEASE") are
more particularly described on SCHEDULE 1.1.1(a) (the property described
in this Section 1.1.1(a) referred to as the "PLANT");
(b) All fixtures, installations, machinery, equipment and
spare parts, to the extent not constituting real property under applicable
law, vehicles, furniture, tools, office and laboratory equipment and other
personal property located at the Plant, including but not limited to those
identified in SCHEDULE 1.1.1(b) of the Disclosure Schedule (the personal
property transferred under this paragraph collectively referred to as the
"TANGIBLE PERSONAL PROPERTY");
(c) Seller's inventories of work in process (including bulk
(unpackaged) tablets), raw materials, packaging materials, other materials
and supplies held for use in the ordinary course of operating the Plant
and operating the Tangible Personal Property, including without limitation
all inventory (other than finished goods) at the Plant and in the
possession of contractors providing outsourcing services with respect to
that inventory, but excluding in each case obsolete goods, materials and
supplies and excluding inventories of ▇▇▇▇▇ Products packaged or shipped
prior to Closing (collectively, the "INVENTORY");
(d) All prepaid expenses and deposits relating to the
Transferred Business or the Plant other than the prepaid expenses and
deposits listed on SCHEDULE 1.1.2(g);
(e) Copies of all files, books, records, data, plans and other
information relating to the Purchased Assets or the Transferred Business,
including without limitation all manufacturing processes and procedures,
analytical procedures, quality assurance and control procedures, sampling
procedures, controlled documents, operational and environmental systems
and records, standard operating procedures, policies or other documents
relating to environmental, health and safety matters, customer and
supplier lists, equipment manuals and maintenance records, building and
equipment blueprints and specifications, drawings and designs, real estate
surveys and reports, abstracts of title, computer software, documentation
and related object and source code (to the extent owned or assignable by
Seller), and other data used or held for use in connection with the
operation of the Transferred Business (all of the foregoing items shall
collectively be referred to as the "BOOKS AND RECORDS"). The Seller shall
have a right to retain originals of all Books and Records. The parties
acknowledge and agree that they may determine additional items constitute
Books and Records pursuant to the foregoing definition, and each party
agrees to promptly inform the other party of any additional items that
such party believes constitute additional Books and Records;
(f) All of Seller's rights under each written or oral
contract, agreement, warranty relating to any Tangible Personal Property
or other Purchased Asset, lease, plan, instrument, registration, license,
permit or approval, or other document, commitment, arrangement,
undertaking, practice or authorization entered into primarily or
exclusively in connection with the Transferred Business or the Purchased
Assets, identified on SCHEDULE 3.1.17;
(g) All rights under express or implied warranties
relating to the Transferred Business or the Purchased Assets;
(h) All rights to use the information included in the Books
and Records and the right to use manufacturing processes, know how and
similar information or intellectual property whether included in the Books
and Records, transferred as a result of employment by Purchaser of
Transferring Employees or otherwise relating to the other Purchased Assets
and properly obtained by Purchaser, excluding only Seller's Proprietary
Rights as defined in 1.1.2(b) (such non-excluded rights are referred to as
"TRANSFERRED KNOW HOW"); and
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(i) All other properties and assets of every kind and nature,
real or personal, tangible or intangible, located at the Plant and owned
by Seller or its Affiliates and used or held for use exclusively or
primarily in connection with the Transferred Business and not otherwise
specifically excluded under Section 1.1.2. An "AFFILIATE" of a person is a
person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the person
specified.
1.1.2 Excluded Assets. Notwithstanding the foregoing, the Purchased
Assets shall not include any of the following (the "EXCLUDED ASSETS"):
(a) Those certain fixtures, installations, machinery,
equipment and spare parts, to the extent not constituting real property
under applicable law, vehicles, furniture, tools, office and laboratory
equipment and other personal property located at the Plant and identified
in SCHEDULE 1.1.2(a) of the Disclosure Schedule (Seller shall provide an
updated SCHEDULE 1.1.2(a) to Purchaser no less than five (5) business days
prior to the Closing Date which may identify additional excluded items,
provided however that such updated schedule shall not include assets that
are not on SCHEDULE 1.1.2(a) attached hereto which (x) relate to the
Transferred Business or (y) would cause the representation in clause (e)
of Section 3.1.13 to be inaccurate or (z) that were included on Schedule
1.1.1(a) as of the Effective Date and have a replacement cost in excess of
$5,000 with respect to any item or $15,000 in the aggregate unless Seller
can demonstrate to Purchaser's reasonable satisfaction that such assets
were purchased after the Balance Sheet Date for use by Seller at a
location other than the Plant);
(b) The patents and trademarks of Seller including those set
forth on SCHEDULE 1.1.2(b) of the Disclosure Schedule, Seller's rights to
market and sell ▇▇▇▇▇ Products, Seller Confidential Information that
relates solely to the ▇▇▇▇▇ Products ("SELLER'S PROPRIETARY RIGHTS");
(c) The contract rights relating to the Transferred Business
or the Plant and set forth on SCHEDULE 1.1.2(c) of the Disclosure
Schedule;
(d) The originals of the Books and Records;
(e) All tangible properties of Seller located at any location
other than the Plant that are not set forth on SCHEDULE 1.1.1(b) of the
Disclosure Schedule;
(f) All cash on hand and on deposit in banks, cash equivalents
and investments, and all accounts, notes and royalties receivable, and
other rights accruing before the Closing Date to receive cash including
contingent rights such as tax refunds;
(g) The prepaid expenses and deposits listed on SCHEDULE
1.1.2(g), which Seller shall update at least three business days prior to
Closing with the consent of Purchaser not to be unreasonably withheld;
(h) All tangible personal property disposed of or consumed in
the ordinary course of business between the Effective Date and the Closing
Date;
(i) The corporate seals, certificates of incorporation,
bylaws, qualifications to conduct business as a foreign corporation,
taxpayer and other identification numbers, minute books, stock books, tax
returns, books of account or other records having to do with the corporate
organization of Seller;
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(j) All insurance policies relating to the Transferred
Business, including policies relating to property, liability, business
interruption, health and workers' compensation and lives of officers of
Seller;
(k) Pension, profit sharing or savings plans and trusts and
the assets thereof and any other benefit plan set forth on SCHEDULE 3.1.19
of the Disclosure Schedule;
(l) Any contracts entered into by Seller or by which Seller or
any of the Purchased Assets is bound, other than the Assumed Contracts;
(m) Rights to enforce covenants and warranties not included in
the Purchased Assets;
(n) Insurance policies; and
(o) Seller's finished goods inventory as of the Closing Date.
1.2 Agreement to Purchase. At the Closing, Purchaser shall purchase the
Purchased Assets from Seller, upon and subject to the terms and conditions of
this Agreement and in reliance on the representations, warranties, covenants and
agreements of Seller contained herein, in exchange for the Purchase Price. In
addition, Purchaser shall assume at the Closing and agree to pay, discharge or
perform, as appropriate, the Assumed Liabilities. Except for the Assumed
Liabilities, Purchaser shall not assume or be responsible for any liabilities or
obligations of Seller or otherwise relating to any of the Purchased Assets.
1.3 The Purchase Price.
1.3.1 Payment of Purchase Price. The Cash Payment, the Inventory
Cost and the Upgrade Savings are hereinafter sometimes referred to,
collectively, as the "PURCHASE PRICE" and shall be paid as follows:
(a) Cash Payment. At the Closing, Purchaser shall pay to
Seller an aggregate amount equal to: (i) $5,000,000, (ii) plus amounts
incurred as of the Closing by Seller in connection with the purchase and
installation of the ▇▇▇▇▇▇ Engineering, Inc. tablet press that have been
approved by Purchaser in advance of incurring such amounts, (iii) plus
$152,000 paid by Seller as satisfaction in full of the indebtedness set
forth on SCHEDULE 1.3.1(a) and (iv) less the accrued but unpaid vacation
liability as of the Closing assumed by the Purchaser for the Transferring
Employees, an estimate of which as of the Effective Date is set forth on
SCHEDULE 1.3.1(a) which Seller shall update at least three business days
prior to Closing (the "CASH PAYMENT").
(b) Inventory Cost. At Closing, Purchaser and Seller shall
agree upon the ending inventory set forth on SCHEDULE 1.3.1(b), which
shall be based upon a physical inspection of all the inventory in the
Plant that shall be performed by the parties hereto, no more than five (5)
days prior to Closing and updated after the close of business on the day
before the Closing (the "CLOSING INVENTORY BALANCE"). Purchaser shall
adjust the line items on the Closing Inventory Balance at the end of each
month to reflect the inventory on hand at the end of each month. Purchaser
will pay Seller for inventory included in the Closing Inventory Balance
that is consumed each month after the Closing, until the entire Closing
Inventory Balance is consumed. Such payment shall be made
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within 30 days of the end of such month. For purposes of this Section
1.3.1(b), "consumed" means the monthly reduction in the Closing Inventory
Balance.
For example, but not by means of limitation, if at the beginning of
any month after the Closing, the Closing Inventory Balance for bulk
Guaifenesin is $80,000, work-in-process is $50,000, and Guifenesin held as
raw materials is $100,000, and the Closing Inventory Balance at the end of
such month, as adjusted for that month's usage, is $10,000 of bulk
Guaifenesin, $0 work-in-process and $20,000 for Guifenesin held as raw
materials, the Purchaser will be deemed to have consumed $70,000 of bulk
Guaifenesin, $50,000 work-in-process and $80,000 Guifenesin held as raw
materials. For the avoidance of doubt, once Purchaser has paid to Seller
an amount to reflect a reduction in a line item in the Closing Inventory
Balance, such item shall be fully paid for and Purchaser shall have no
further obligation to Seller with respect to the same (i.e., Purchaser
will not make additional payments to Seller for the same item that moves
from raw materials, to work-in-process and then to bulk product).
Purchaser shall use commercially reasonable efforts to use the inventory
included in the Purchased Assets prior to the use of any inventory
acquired after the Closing Date. The aggregate amount payable pursuant to
this Section 1.3.1(b) is referred to as "INVENTORY COST". Upon reasonable
notice the Seller shall have the right to review the Purchaser's records
related to the inventory and, at its expense, conduct an investigation of
the inventory records. If after such investigation the Seller disputes the
Purchaser's determination of the consumption of the inventory, the Seller
may invoke the provisions of Section 6.5 of this Agreement.
(c) Savings on Plant Upgrades. Within ninety (90) days after
the third anniversary of the Closing Date, Purchaser shall pay Seller an
amount equal to 50% of the excess, if any, of (i) $* over (ii) reasonable
actual out-of-pocket costs incurred by Purchaser and its Affiliates from
the Closing Date through the third anniversary of the Closing Date to
upgrade the Plant to provide for manufacturing in accordance with cGMP.
Any amount paid pursuant to subsection (a) above relating to the
satisfaction of indebtedness relating to the ▇▇▇▇▇▇ Press shall be treated
as a cost incurred by Purchaser under clause (ii) above. Any amount
payable pursuant to this Section 1.3.1(c) is referred to as the "Upgrade
Savings". For example, if Purchaser incurs $* of qualified costs to
upgrade the Plant, then Purchaser would owe Seller $* pursuant to this
Section 1.3.1(c), and if Purchaser incurred $* of qualified costs to
upgrade the Plant, then Purchaser would not owe Seller any amount pursuant
to this Section 1.3.1(c).
(d) Payment Method. All payments under this Agreement shall be
payable by wire transfer of immediately available funds to such account as
the receiving party shall designate in writing to the paying party.
1.3.2 Allocation of Purchase Price. The Purchase Price and the
Assumed Liabilities shall be allocated among the Purchased Assets acquired
hereunder in a manner to be determined by Purchaser prior to Closing in its
reasonable discretion with the consent of Seller, which consent shall not be
unreasonably withheld. Seller and Purchaser shall file all applicable federal,
state, local and foreign tax returns and forms, including, Form 8594, consistent
with such allocation.
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* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
1.4 Liabilities and Obligations of Seller.
1.4.1 Assumed Liabilities. At the Closing, Purchaser shall assume
and agree to pay, discharge or perform, as appropriate, the following, and only
the following, liabilities and obligations of Seller (the "ASSUMED
LIABILITIES"):
(a) all liabilities and obligations of Seller in respect of
the Assumed Contracts that are disclosed in the text of the Assumed
Contracts (including any exhibits or other attachments) as delivered to
Purchaser prior to the Effective Date and accrue subsequent to the
effective time of the Closing; provided, that, without limiting the
generality of the foregoing, Purchaser shall not, and does not, assume or
agree to pay, discharge or perform (i) any liabilities or obligations
required to be performed by Seller prior to the Closing Date, (ii) any
liabilities or obligations arising out of any breach by Seller of any
provision of any Assumed Contract prior to the Closing Date, or the date
of assignment if later, or (iii) amounts owed by Seller for goods
purchased by Seller, or services provided to Seller, prior to the Closing
Date;
(b) all liabilities and obligations of Seller in respect of
the Real Property Lease that are disclosed in the text of the Real
Property Lease (including any exhibits or other attachments) as delivered
to Purchaser prior to the Effective Date and accrue subsequent to the
effective time of the Closing; provided, that, without limiting the
generality of the foregoing, Purchaser shall not, and does not, assume or
agree to pay, discharge or perform (i) any liabilities or obligations
required to be performed by Seller prior to the Closing Date, or (ii) any
liabilities or obligations arising out of any breach by Seller of any
provision of the Real Property Lease prior to the Closing Date;
(c) all liabilities relating to the Transferred Business
accruing after the Closing;
(d) as set forth in Section 8.3, one-half of any federal,
state or local tax incident to or arising as a consequence of the
negotiation or consummation of this Agreement and the transactions
contemplated hereby by Seller;
(e) any liability or obligation arising after the Closing with
respect to any Plant Employees employed or engaged by Purchaser after the
Closing, including any liability for salaries, wages, payroll taxes,
severance pay entitlements, health, medical, retirement, vacation or
deferred compensation benefits or any other obligations or expenses
arising out of or relating to the employment by Purchaser of the Plant
Employees or Purchaser's termination of such employees. Purchaser shall
retain and shall assume and discharge all liabilities and costs under the
Consolidated Omnibus Budget Reconciliation Act, as amended ("COBRA")
(including liabilities for violations thereof) as to those employees Plant
Employees that commence employment with Purchaser immediately following
the Closing for all "qualifying events" (as defined in COBRA) occurring
with respect to those Plant Employees that commence employment with
Purchaser and their dependents after the Closing;
(f) all accrued but unpaid vacation determined as of the
Closing Date for the Transferring Employees (for clarification purposes,
Purchaser shall not incorporate such vacation expense for the Transferring
Employees into the cost of goods under the Supply Agreement);
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(g) any liability and obligation, including open purchase
orders that relate to the new ▇▇▇▇▇▇ Engineering, Inc. tablet press,
approved by Purchaser in writing prior to the Closing Date, that are not
incurred or paid as of the Closing Date; or
(h) those certain liabilities and obligations for inventory in
transit at Closing that are (x) set forth on SCHEDULE 1.4.1(h) as amended
no less than three business days prior to the Closing Date with the
consent (not to be unreasonably withheld) of the Purchaser and (y) not
included in the Closing Inventory Balance.
1.4.2 Liabilities and Obligations Retained by Seller. In no event,
however, shall Purchaser assume or incur, nor does Purchaser assume or incur,
any liability or obligation of Seller, under this Section 1.4 or otherwise, in
respect of any of the following:
(a) any malpractice, product liability or similar claim for
injury to person or property, regardless of when made or asserted, which
arises out of or is based upon any express or implied representation,
warranty, agreement or guarantee made by Seller, or alleged to have been
made by Seller, or which is imposed or asserted to be imposed by operation
of law, in connection with any service performed or product licensed,
sold, distributed, leased or manufactured by or on behalf of Seller on or
prior to the Closing Date, in each case including without limitation any
claim relating to any product delivered in connection with the performance
of such service and any claim seeking recovery for special, incidental or
consequential damages, including without limitation lost revenues or
income;
(b) any federal, state or local income or other tax (i)
payable with respect to operation of the Purchased Assets or the
Transferred Business on or prior to the Closing, or the other business,
assets, properties or operations of Seller or any of its subsidiaries, or
(ii) except as provided in Section 8.3, incident to or arising as a
consequence of the negotiation or consummation of this Agreement and the
transactions contemplated hereby by Seller;
(c) any liability or obligation under or in connection with
Excluded Assets;
(d) any liability or obligation relating to any present or
former employees, agents, independent contractors or consultants of
Seller, including any liability for accrued salaries, wages, payroll
taxes, severance pay entitlements, health, medical (including COBRA),
retirement, vacation or deferred compensation benefits or any other
obligations or expenses arising out of or relating to the employment by
Seller of its employees or Seller's termination of such employees except
in each case, as expressly provided for in Section 1.4.1 (e);
(e) any liability or obligation of Seller arising or incurred
in connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby and the fees and
expenses of counsel, accountants and other experts;
(f) any liability or obligation with respect to the return of
goods manufactured on or prior to the Closing Date by Seller and in the
possession of suppliers, distributors, resellers or customers; or
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(g) any other liability or obligation of Seller other than as
expressly set forth in this Section 1.4.1.
1.5 Proration of Certain Items. Payments in respect of the Real Property
Lease or equipment leases included in the Assumed Contracts in respect of the
month in which the Closing occurs and utility, water and sewer use charges shall
be apportioned and adjusted as of the Closing Date. Appropriate cash payments by
Seller or Purchaser, as the case may require, shall be made from time to time,
as soon as practicable after the facts giving rise to the obligation for such
payments are known, to give effect to the prorations provided for in this
Section 1.5.
ARTICLE II - CLOSING AND THIRD PARTY CONSENTS
2.1 Time and Place of Closing. Subject to the provisions of Section 8.1
hereof, the closing (the "CLOSING") of the transactions contemplated by this
Agreement shall be coordinated by ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ PLLC, counsel to the
Purchaser, and shall be effected by fax, courier, or other means, with or
without a physical meeting of the parties and shall take place at 10:00 A.M.,
local time, on April 1, 2004, or such other time or date as the parties may
mutually agree in writing. The date of the Closing is sometimes herein referred
to as the "CLOSING DATE." At the Closing, possession and operating control of
the Purchased Assets shall be delivered and/or tendered by Seller to Purchaser
and title to the Purchased Assets shall pass to Purchaser upon such delivery or
tender of the Purchased Assets.
2.2 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions herein contained:
(a) Seller shall deliver to Purchaser the following:
(i) a duly executed Lease Assignment and Assumption Agreement
(approved in writing by the owner of the Plant), ▇▇▇▇ of Sale and
Assignment and Assumption Agreement in substantially the forms
attached hereto as EXHIBITS ▇-▇, ▇-▇, and A-3 respectively;
(ii) actual possession and operating control of all of the
Purchased Assets;
(iii) a Commercial Services Agreement in substantially the
form of EXHIBIT B hereto (the "SERVICES AGREEMENT") duly executed by
Seller;
(iv) a Supply Agreement in substantially the form of EXHIBIT C
hereto (the "SUPPLY AGREEMENT") duly executed by Seller;
(v) a Quality Agreement in substantially the form of EXHIBIT D
hereto (the "QUALITY AGREEMENT") duly executed by Seller;
(vi) a Sublease Agreement in substantially the form of EXHIBIT
E hereto (the "SUBLEASE AGREEMENT") duly executed by Seller; and
(vii) a Transition Services Agreement in substantially the
form of EXHIBIT F hereto (the "TRANSITION AGREEMENT") duly executed
by Seller.
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The parties acknowledge that the terms of the Quality Agreement,
Sublease Agreement and Transition Agreement have not been fully negotiated
and remain subject to reasonable and customary changes prior to Closing.
(b) Purchaser shall deliver to Seller the following:
(i) the Cash Payment in accordance with Section
1.3.1(a) hereof;
(ii) a duly executed Services Agreement;
(iii) a duly executed Supply Agreement and Quality
Agreement;
(iv) a duly executed Assignment and Assumption
Agreement and Lease Assignment and Assumption
Agreement;
(v) a duly executed Sublease Agreement;
(vi) a duly executed Transition Agreement; and
(vii) updated SCHEDULES 1.1.2(a) and 3.1.18.
(c) At or prior to the Closing, the parties hereto shall also
deliver to each other the agreements, opinions, certificates and other
documents and instruments referred to in Article V hereof.
2.3 Third Party Consents. To the extent that Seller's rights under any
Assumed Contract or other Purchased Asset may not be assigned without the
approval, consent or waiver of another person, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful, and Seller shall use its reasonable
commercial efforts to obtain any such required approval(s), consent(s) and
waiver(s) as promptly as possible. SCHEDULE 2.3 of the Disclosure Schedule sets
forth and describes all of such approvals, consents or waivers. If any such
approval, consent or waiver shall not be obtained or if any attempted assignment
would be ineffective or would impair Purchaser's rights under the Assumed
Contract or other Purchased Asset in question so that Purchaser would not
acquire the benefit of all such rights and if Purchaser shall elect to effect
the Closing notwithstanding its rights under 5.1.6 to the contrary, Seller, to
the maximum extent permitted by law and the Assumed Contract or other Purchased
Asset, shall act after the Closing as Purchaser's agent in order to obtain for
it the benefit of all such rights thereunder and shall cooperate with Purchaser
in any other mutually agreeable arrangements to provide the benefit of all such
rights to Purchaser.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller hereby represents and
warrants to Purchaser that, except as set forth on a Disclosure Schedule
delivered to Purchaser with this Agreement, each of which exceptions shall
specifically identify the relevant subsection hereof to which it relates and
shall be deemed to be representations and warranties as if made hereunder (the
"DISCLOSURE SCHEDULE"):
3.1.1 Corporate Existence. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas.
Seller is duly qualified to do business and is in good standing as a foreign
corporation in New Jersey.
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3.1.2 Corporate Power; Authorization; Enforceable Obligations.
Seller has the corporate power, authority and legal right to execute, deliver
and perform this Agreement and the other agreements, documents and instruments
required to be delivered by Seller in connection with this Agreement. All
agreements, documents, and instruments required to be delivered by Seller
pursuant to this Agreement are sometimes collectively referred to hereinafter as
the "SELLER'S DOCUMENTS". The execution, delivery and performance by Seller of
this Agreement and of the Seller's Documents have been duly authorized by all
necessary corporate action on the part of Seller and its directors and
stockholders. The approval or authorization of this Agreement and the
transactions contemplated hereby by the shareholders of Seller is not required.
This Agreement has been, and the Seller's Documents will be, duly executed and
delivered on behalf of Seller by duly authorized officers of Seller, and this
Agreement constitutes, and the Seller's Documents when executed and delivered
will constitute, the legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, subject to any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights generally or to general
principles of equity.
3.1.3 Validity of Contemplated Transactions, Etc. The execution,
delivery and performance of this Agreement and each of Seller's Documents by
Seller does not and will not violate, conflict with or result in the breach (or
would result in a breach but for any requirement of notice or lapse of time or
both) of any term, condition or provision of, or require the consent (except as
set forth on SCHEDULE 3.1.3) of any other person under, (a) any existing law,
ordinance, or governmental rule or regulation to which Seller or any of the
Purchased Assets is subject, (b) any existing judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority which is applicable to Seller or any of the Purchased Assets,
(c) the certificate of incorporation and bylaws, as amended, of, or any
securities issued by, Seller, or (d) any mortgage, indenture, agreement,
contract, commitment, lease, plan, Authorization, or other instrument, document
or understanding, oral or written, by which any of the Transferred Business, the
Purchased Assets or the Purchaser may be bound or affected, or give any party
with rights thereunder the right to terminate, modify, accelerate or otherwise
change the existing rights or obligations of Seller thereunder. Except as
aforesaid, no Authorization, approval or consent of, and no registration or
filing with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery or performance of this
Agreement or any of the Seller's Documents by Seller.
3.1.4 No Third Party Rights. Except for this Agreement or agreements
disclosed on SCHEDULE 3.1.4, there are no existing agreements, options,
commitments or rights with, of or to any person to acquire any of Seller's
assets, properties or rights included in the Purchased Assets or any interest
therein.
3.1.5 [reserved]
3.1.6 Financial Information. All financial information provided by
the Seller to the Purchaser, including without limitation the balance sheet
dated December 31, 2003 (such balance sheet, the "BALANCE SHEET" and such date,
the "BALANCE SHEET DATE") and the other information listed on SCHEDULE 3.1.6
(collectively, the "FINANCIAL INFORMATION"):
(a) is in all material respects true, complete and correct;
10
(b) in the case of historical information, is in accordance
with the books and records of Seller;
(c) in the case of historical information, presents fairly the
results of operations for the periods then ending and other
information concerning the condition of the Plant and the other
Purchased Assets as of the respective dates thereof; and
(d) in the case of forecasts, represents the Seller's current
belief of the information for the periods covered thereby and is
based upon reasonable assumptions.
3.1.7 Title to Property; Absence of Encumbrances, etc.
(a) SCHEDULE 1.1.1(a) of the Disclosure Schedule sets forth a
complete and accurate description of the leased real property that
includes the Plant. A true and correct copy of the Real Property Lease has
been delivered to Purchaser. The Real Property Lease is valid, binding and
enforceable in accordance with its terms and is in full force and effect,
and there are no offsets or defenses by either landlord or tenant
thereunder. There are no existing defaults, and no events or circumstances
have occurred which, with or without notice or lapse of time or both,
would constitute defaults, under the Real Property Lease. The assignment
of the Real Property Lease by Seller to Purchaser will not (i) permit the
landlord to accelerate the rent or cause the lease terms to be
renegotiated; (ii) constitute a default thereunder; (iii) require the
consent of the landlord or any third party; or (iv) affect the
continuation, validity, or effectiveness thereof or the terms thereof.
(b) All water, sewer, gas, electric, telecommunications lines
and drainage facilities and all other utilities (the "UTILITIES")
necessary for the operation of the Plant are installed to supply the
Plant, are of adequate size and capacity for the operation of the Plant as
currently conducted by Seller and, to the knowledge of Seller, as intended
to be conducted by Purchaser (assuming Purchaser intends to use the Plant
at up to full capacity and full employment and assuming substantially the
same product mix as conducted by Seller), and all such Utilities are
validly connected and in use in the operation of the Plant.
(c) To the knowledge of Seller, the Plant has been constructed
and operated in compliance in all material respects with all applicable
federal, state and local laws, regulations, ordinances, standards and
orders, including, without limitation, all zoning laws, building codes,
regulations, ordinances, standards and orders.
(d) There is no pending or to the knowledge of Seller,
contemplated condemnation action with respect to the Plant, or any part
thereof. Seller has not received written notice of, and, to the Seller's
knowledge, there is no pending or contemplated change in any governmental
regulation or private restriction applicable to the Plant; any pending or
threatened judicial or administrative action or proceedings in any court
or before any governmental authority or arbitration board or tribunal; or
any such action or proceeding pending or threatened by adjacent landowners
or other persons, any of which would result in any material change in the
condition of the Plant, or any part thereof, or to the access to the
Plant. Seller has not received written notice of, nor, to
11
Seller's knowledge are there, any contemplated improvements to the Plant
by any public authority, the costs of which are to be assessed, as special
taxes or otherwise, against the Plant or the owner or operator thereof in
the future.
3.1.8 Inventory. The Inventory included on the Balance Sheet or
acquired since the date thereof was acquired and has been maintained in the
ordinary course of business; is of good and merchantable quality; is not
obsolete; is valued at an amount not in excess of the lower of cost or net
realizable value; is not subject to any writedown or write-off other than
reserves and allowances set forth on the Balance Sheet or, with respect to
Inventory acquired or produced since the date thereof, reserves and allowances
proportionate to the reserves and allowances for Inventory set forth on the
Balance Sheet; and is located at the Plant. As of the Closing, the Inventory
shall be of a type and quality useable by Purchaser in the ordinary course of
performing its obligations under the Supply Agreement. All items included in the
Inventory, (x) to the extent they constitute raw materials or packaging
materials, shall have been inspected and accepted by Seller in accordance with
the applicable specifications in effect as of the Closing Date, and (y) to the
extent they constitute work in process, shall have been manufactured in
accordance with the applicable specifications in effect as of the Closing Date.
3.1.9 Taxes and Tax Returns. Except as set forth on SCHEDULE 3.1.9,
all material federal, state, local and foreign tax returns, reports, statements
and other similar filings required to be filed by Seller (the "TAX RETURNS")
with respect to any federal, state, local or foreign taxes, assessments,
interest, penalties, deficiencies, fees and other governmental charges or
impositions (including without limitation all income tax, unemployment
compensation, social security, payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school and any other tax or similar
governmental charge or imposition under laws of the United States or any state
or political subdivision thereof or any foreign country or political subdivision
thereof) (the "TAXES"), have been timely filed (taking extensions into account)
with the appropriate governmental agencies in all jurisdictions in which such
Tax Returns are required to be filed and all such Tax Returns materially reflect
the liabilities of Seller for Taxes for the periods, property or events covered
thereby. All Taxes, including without limitation those which are called for by
the Tax Returns or heretofore or hereafter claimed to be due by any taxing
authority from Seller, have been properly accrued or paid (or, in the case of
any contested taxes, Seller has established an adequate reserve) and the amount
of accruals for Taxes recorded by Seller on its books is adequate to cover the
Tax liabilities of Seller. Seller has not received any notice of assessment or
proposed assessment in connection with any Tax Returns and to the Seller's
knowledge there are no pending tax examinations of or tax claims asserted
against Seller or any of the Purchased Assets. Seller has not extended, or
waived the application of, any statute of limitations of any jurisdiction
regarding the assessment or collection of any Taxes. There are no tax liens
(other than any lien for current Taxes not yet due and payable) on any of the
Purchased Assets. Seller has no knowledge of any basis for any additional
assessment of any Taxes. Seller has made all deposits required by law to be made
by it with respect to employees' withholding and other employment Taxes,
including without limitation the portion of such deposits relating to Taxes
imposed upon Seller. Except as set forth on Schedule 3.1.9, no sales, transfer
or similar taxes are payable to the State of Texas or, to Seller's knowledge, in
any other jurisdiction in connection with the sale of the Purchased Assets.
3.1.10 Books and Records. The Books and Records and the accounts of
Seller accurately and fairly reflect, in reasonable detail, all of the
transactions regarding the Plant, the
12
Transferred Business and the Purchased Assets. Seller has not engaged in any
transaction with respect to the Transferred Business, maintained any bank
account for the Transferred Business or used any of the funds of Seller in the
conduct of the Transferred Business except for transactions, bank accounts and
funds which have been and are reflected in Financial Information.
3.1.11 Existing Condition. Since the Balance Sheet Date, Seller has
not:
(a) incurred any liabilities in connection with the
Transferred Business, other than liabilities incurred in the ordinary
course of the Transferred Business consistent with past practice, or
discharged or satisfied any lien or encumbrance liabilities in connection
with the Transferred Business, or paid any liabilities, other than in the
ordinary course of the Transferred Business consistent with past practice,
or failed to pay or discharge when due any liabilities of which the
failure to pay or discharge has caused or will cause any material damage
or risk of material loss to it or the Purchased Assets or the Transferred
Business;
(b) sold, encumbered, assigned or transferred any material
assets or properties which would have been included in the Purchased
Assets if the Closing had been held on the Balance Sheet Date or on any
date since then, except for the sale of inventory in the ordinary course
of business consistent with past practice and the grant of licenses that
are in the ordinary course of business;
(c) mortgaged, pledged or subjected any of the Purchased
Assets to any mortgage, lien, pledge, security interest, conditional sales
contract or other encumbrance of any nature whatsoever, except for
Permitted Liens that are in the ordinary course of business;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan relating to the
Purchased Assets or the Transferred Business to which Seller is a party or
by which Seller is bound, or canceled, modified or waived any substantial
debts or claims relating to the Purchased Assets or the Transferred
Business held by Seller or waived any rights relating to the Purchased
Assets or the Transferred Business of substantial value, whether or not in
the ordinary course of business, except as set forth on SCHEDULE
3.1.11(d);
(e) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting the
Transferred Business or the prospects or condition (financial or
otherwise) of the Purchased Assets or the Transferred Business or (ii) of
any item or items carried on its books of account individually or in the
aggregate at more than $100,000, or suffered any repeated, recurring or
prolonged shortage, cessation or interruption of supplies or Utilities or
other services required to conduct the Transferred Business or operate the
Purchased Assets;
(f) suffered any material adverse change in the Transferred
Business, the Purchased Assets, or the prospects or condition (financial
or otherwise) of the Transferred Business or the Purchased Assets;
(g) received notice or had knowledge of any occurrence, event
or condition which is reasonably likely to have a material adverse effect
on the Transferred Business or the Purchased Assets or the prospects or
condition (financial or otherwise) thereof;
13
(h) made commitments or agreements for capital expenditures or
capital additions or betterments relating to the Transferred Business or
the Purchased Assets exceeding in the aggregate $100,000;
(i) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business
expenses) or loan to, any of the Plant Employees or made any increase in,
or any addition to, other benefits to which any such persons may be
entitled, except for annual salary increases or bonus awards made in the
ordinary course of business consistent with past practice; or
(j) changed any of the accounting principles followed by it or
the methods of applying such principles.
3.1.12 Title to Assets. Except as set forth on SCHEDULE 3.1.12 of
the Disclosure Schedule, Seller has good, valid and marketable title to all of
its properties and assets, real, personal and mixed, which would be included in
the Purchased Assets if the Closing took place on the Effective Date, which it
purports to own, and has good leasehold title to those properties and assets it
purports to lease, including without limitation all Tangible Personal Property,
all Inventory and, all Books and Records transferred hereunder or licensed to
Purchaser, free and clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and other encumbrances and defects of title of any
nature whatsoever, except for liens that are immaterial in character, amount,
and extent, and which do not detract in any manner from the value or interfere
with the present or proposed use of the Purchased Assets or conduct of the
Transferred Business (collectively, "PERMITTED LIENS").
3.1.13 Condition and Sufficiency of Assets. Except as set forth on
SCHEDULE 3.1.13, to Seller's knowledge, all equipment and other items of
tangible property and assets which would be included in the Purchased Assets if
the Closing took place on the Effective Date (a) are in good operating condition
and repair, subject to normal wear and maintenance, (b) are usable in the
regular and ordinary course of the Transferred Business, (c) are not in need of
maintenance or repair other than ordinary, recurring maintenance or repair, (d)
conform in all material respects to all applicable Regulations and
Authorizations relating to their use and operation, and (e) together with
intellectual property rights licensed to Purchaser under the Supply Agreement
constitute all of the assets reasonably needed by Purchaser to perform its
obligations under the Supply Agreement and for the continued conduct of the
Transferred Business after the Closing Date. No person other than Seller owns
any equipment or other items of tangible property or assets located at the Plant
or necessary to the operation of the Transferred Business, except for leased
items disclosed in SCHEDULE 3.1.17 of the Disclosure Schedule and items of
immaterial value.
3.1.14 Compliance with Regulations; Authorizations. Except as set
forth on SCHEDULE 3.1.14 of the Disclosure Schedule, since its inception, to the
knowledge of Seller, Seller has complied in all material respects with each, and
is not in violation of any, law, ordinance, governmental or regulatory rule or
regulation, judgment, decision or order, whether federal, state, local or
foreign, to which Seller with respect to the Transferred Business, the
Transferred Business, any of the Purchased Assets or any employees of Seller
engaged in the Transferred Business are subject, including without limitation
the Federal Food, Drug and Cosmetic Act, 21 U.S.C. Sections 301 (collectively,
"REGULATIONS"). Notwithstanding the foregoing, Seller has complied with each,
and is not in violation of any, Regulations except where such
14
failure to comply or violation would not have a materially adverse effect on the
Transferred Business or any of the Purchased Assets. No notice has been received
by the Seller and, to the Seller's knowledge, no review or investigation is
pending or threatened for any alleged violation by Seller or any of its
Affiliates of any Regulation. Seller owns, holds, possesses and lawfully uses in
the operation of the Transferred Business all franchises, licenses, permits,
easements, rights, applications, filings, registrations and other authorizations
(collectively, "AUTHORIZATIONS") which are necessary for the conduct of the
Transferred Business as now or previously conducted or for the ownership and use
of the Purchased Assets, all of which are listed and described in SCHEDULE
3.1.14 of the Disclosure Schedule, except where the failure to do so would not
have a materially adverse effect on the Transferred Business. Seller is not in
default, and Seller has not received any notice of any claim of default, and to
the knowledge of the Seller, no event has occurred or circumstance exists that
may reasonably give or serve as a basis for a default or the commencement of any
investigation, with respect to any Authorization. Except as set forth on
SCHEDULE 3.1.14, all such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of the material Authorizations and, to the knowledge of Seller, none of the
Authorizations will be adversely affected by consummation of the transactions
contemplated by this Agreement. No person other than Seller owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization which Seller owns, possesses or uses in the operation of the
Transferred Business. To Seller's knowledge, no Plant Employee has been
debarred, suspended or denied approval to participate in activities subject to
regulation by the Federal Food and Drug Administration or any comparable agency
of any foreign jurisdiction.
3.1.15 Litigation. Except as set forth on SCHEDULE 3.1.15, no
litigation, arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending against Seller or, to the knowledge of Seller, is threatened against
Seller which could reasonably be expected to have a materially adverse effect on
the Transferred Business, the Purchased Assets or the transactions contemplated
by this Agreement, nor to the knowledge of Seller is there any reasonably likely
basis for any such litigation, arbitration, investigation or proceeding, the
result of which could reasonably be expected to have a material adverse effect
on Seller, the Transferred Business, the Purchased Assets or the transactions
contemplated by this Agreement. Seller is not a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which would reasonably be expected to adversely affect Seller with respect to
the Transferred Business, the Purchased Assets or the transactions contemplated
by this Agreement.
3.1.16 Insurance. The assets, properties and operations of Seller
with respect to the Transferred Business and the Purchased Assets are insured
under various policies of property and casualty insurance, all of which are
described in SCHEDULE 3.1.16 of the Disclosure Schedule, which schedule
discloses (a) any and all policies covering general liability, excess liability,
product liability, workers' compensation, auto liability, foreign liability,
property damage, directors and officers liability, fiduciary liability,
employment practices liability, professional liability, errors and omissions
liability, or environmental liability of Seller or its employees, officers,
directors, property, or business, and (b) for each such policy the risks insured
against, insurer name, policy number, policy dates, occurrence and aggregate
coverage limits, retentions and deductible amounts, premium, broker name, and
whether the terms of such
15
policy provide for retrospective premium adjustments. All such policies are in
full force and effect in accordance with their terms, no notice of cancellation
has been received, and there is no existing default or event which, with the
giving of notice or lapse of time or both, would constitute a default
thereunder. All premiums to date have been paid in full. Seller has not been
refused any insurance, nor has its coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. SCHEDULE 3.1.16 of the Disclosure
Statement also contains a true and complete list of all outstanding bonds and
other surety arrangements issued or entered into by Seller in connection with
the Transferred Business or the Purchased Assets.
3.1.17 Agreements, Contracts and Commitments. SCHEDULE 3.1.17 of the
Disclosure Schedule contains accurate lists of the following agreements,
contracts, leases and other documents and understandings (whether written or
oral) to which Seller is a party or has rights with respect to the Transferred
Business or by which any of the Purchased Assets may be bound or affected:
(a) any agreement, contract or commitment with any Plant
Employee or consultant or advisor who provides services relating to the
Transferred Business or the Purchased Assets involving greater than
$50,000 per year or that includes severance or similar benefits;
(b) any agreement, contract or commitment for the future
purchase by Seller of products or services relating to the Transferred
Business which involves $50,000 or more;
(c) any agreement, contract or commitment by Seller to sell or
supply products or to perform services relating to the Transferred
Business which involves $50,000 or more or which relates to any warranty
provided by Seller;
(d) any partnership, joint venture, sales agency or similar
agreement, contract or commitment relating to the Transferred Business;
(e) any lease under which Seller is either a lessor or lessee
or relating to any property at which any of the Purchased Assets are
located;
(f) any deed of trust, mortgage, lien or other encumbrance
affecting any of the Purchased Assets;
(g) any agreement, contract or commitment for any capital
expenditure or leasehold improvement for the Transferred Business or the
Purchased Assets in excess of $50,000;
(h) any agreement, contract or commitment limiting or
restraining any Plant Employee from engaging or competing in any manner or
in any business, from disclosing any confidential information, from
misappropriating any trade secrets or from employing or soliciting the
employment of any person;
(i) any license, franchise, computer service, distributorship
or other agreement which relates in whole or in part to any software,
patent, trademark, trade name, service ▇▇▇▇ or copyright or to any ideas,
technical assistance or other know-how of third parties used by Seller in
the conduct of the Transferred Business;
16
(j) any license or other agreement relating in whole or in
part to any of Seller's patents, trademarks, copyrights, proprietary
software, ideas, or know-how used in the conduct of the Transferred
Business;
(k) any agreement containing covenants that in any way purport
to restrict the operation of the Transferred Business or limit the freedom
of the operator of the Transferred Business to engage in any line of
business or to compete with any person, including without limitation any
agreements containing any exclusive or semi-exclusive arrangements; and
(l) any other agreement, contract or commitment relating to
the Transferred Business not otherwise listed on SCHEDULE 3.1.17 of the
Disclosure Schedule and which either (w) continues over a period of more
than six months from the Effective Date, (x) exceeds $50,000 in value, (y)
is otherwise material to Seller, the Transferred Business or the Purchased
Assets or (z) contains termination or other provisions triggered by the
transactions contemplated by this Agreement.
Each of the agreements, contracts, commitments, leases, plans
and other instruments, documents and undertakings listed on SCHEDULE
3.1.17 of the Disclosure Schedule, or not required to be listed thereon
because of the amount thereof, under which Purchaser is acquiring rights
or obligations hereunder, except for those listed on SCHEDULE 1.1.2 of the
Disclosure Schedule or as otherwise set forth on the Disclosure Schedule,
is referred to herein as an "ASSUMED CONTRACT." To Seller's knowledge,
each Assumed Contract is valid and enforceable against the parties thereto
in accordance with its terms, subject to, as to enforcement, (i) to
bankruptcy, insolvency, reorganization, arrangement, moratorium, and other
laws of general applicability relating to or affecting creditor's rights,
(ii) to general principles of equity, whether such enforcement is
considered in a proceeding in equity or at law. With regard to each
Assumed Contract to which Seller is a party, Seller is, and to the
knowledge of Seller, all other parties thereto are, in compliance with the
provisions thereof; Seller is not, and to the knowledge of Seller, no
other party thereto is, in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained therein;
and to Seller's knowledge no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a material
default thereunder. Except as set forth and described in SCHEDULE 2.3 of
the Disclosure Schedule, no Assumed Contract requires a consent of any
party to its assignment in connection with the transactions contemplated
by this Agreement.
3.1.18 Additional Information.
(a) SCHEDULE 3.1.18(a) of the Disclosure Schedule contains
accurate lists of the following, all inventory, equipment, leasehold
improvements, furniture and fixtures of Seller included in the Purchased
Assets as of the Effective Date with a value of five thousand dollars
($5,000) or more, specifying such items as are owned and such as are
leased and, with respect to the owned property, specifying its aggregate
cost or original value and the net book value as of the Balance Sheet Date
and, with respect to the leased personal property as to which Seller is
lessee, specifying the identity of the lessor, the rental rate and the
unexpired term of the lease. Seller shall
17
provide an updated Schedule 3.1.18A to Purchaser no less than five (5)
business days prior to the Closing Date; and
(b) SCHEDULE 3.1.18(b) of the Disclosure Schedule contains
accurate lists of the following, the names and titles of and current (as
of January 1, 2004) annual base salary or hourly rate for each person
employed by Seller (directly or by way of an employee leasing or similar
arrangement) at the Plant as of the Effective Date (the "PLANT
EMPLOYEES"), and each temporary employee, leased employee, independent
contractor or other person providing services at the Plant, and together
with a statement of the full amount and nature of any other remuneration,
whether in cash or kind, paid to each such person during the most recent
fiscal year or payable to each such person in the future, including the
bonuses accrued for each such person and the vacation and severance
benefits to which each such person is entitled.
3.1.19 Employee Benefit Plans and Labor Matters.
(a) SCHEDULE 3.1.19 of the Disclosure Schedule contains a
complete list of all employee benefit plans, whether formal or informal,
whether or not set forth in writing, and whether covering one or more
Plant Employee, sponsored or maintained by Seller. Seller has delivered to
Purchaser accurate and complete copies of each such plan.
(b) With respect to any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (i)
no withdrawal liability, within the meaning of Section 4201 of ERISA, has
been incurred by Seller that remains unpaid or otherwise unsatisfied, (ii)
no liability to the Pension Benefit Guaranty Corporation has been incurred
by Seller, which liability has not been paid or otherwise satisfied, (iii)
no accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Internal Revenue
Code of 1986, as amended (the "CODE") has been incurred, (iv) all
contributions (including installments) to any plan required by Section 302
of ERISA and Section 412 of the Code have been timely made, and no
liability has been incurred under Code Section 4971; (v) each such plan
that is an employee welfare benefit plan under Section 3(1) of ERISA is
either unfunded, or is funded through an insurance contract and is not a
"welfare benefit fund" within the meaning of Code Section 419; (vi) no
plan has two or more contributing sponsors, at least two of whom are not
under common control, with the meaning of ERISA Section 4063 or Code
Section 413(c) (a "MULTIPLE EMPLOYER PLAN"), and Seller at no time within
the six years before the date hereof, has contributed to or been obligated
to contribute to any Multiple Employer Plan; (vii) Seller has not incurred
any liabilities under Code Sections 4980B or 9801, ET SEQ.; (viii) there
is not now and there are not existing circumstances that would give rise
to, any requirement for the posting of security with respect any such plan
or the imposition of any lien on the assets of Seller under ERISA or the
Code; and (ix) Seller has not announced or created any legally binding
commitment to create any additional employee benefit plans or to amend or
modify any existing employee benefit plan.
(c) Seller is not a party to any collective bargaining
agreement or any other agreement which determines the terms and conditions
of employment of any employee of Seller. No collective bargaining agent
has been certified as a representative
18
of any of the employees of Seller and to Seller's knowledge no
representation campaign or election is now in progress with respect to any
of the employees of Seller. Seller has not suffered any strike, slowdown,
picketing or work stoppage by any union or other group of employees
affecting the business of Seller; and to the knowledge of Seller, there
are no efforts underway or threats to effect any of same.
(d) Seller is in compliance in all material respects with all
federal, state and local laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and there is no unfair labor practice complaint against Seller
pending or, to the knowledge of Seller, threatened.
(e) No representations have been made by Seller or its
employees or agents to employees of Seller with respect to Purchaser's
intentions to employ, or not to employ, Seller's employees or with respect
to the conditions of any such employment.
3.1.20 Trade Relations. There exists no actual or, to the knowledge
of Seller, threatened termination, cancellation or limitation of, or any adverse
modification or change in, the business or business relationship of Seller with
any customer, reseller or distributor or any group of customers, reseller or
distributors whose purchases are individually or in the aggregate material to
the Transferred Business, or with any supplier relating to the Transferred
Business, and there exists no present condition or state of facts or
circumstances that would reasonably be expected to adversely affect the
Transferred Business or prevent Purchaser from conducting such business or
business relationships with any such customer, reseller or distributor, such
group of customers, reseller or distributors or any supplier in the same manner
as heretofore conducted by Seller. Seller has used reasonable efforts to keep
available for Purchaser the services of the customers, suppliers, employees and
contractors of Seller active in the conduct of the Transferred Business.
3.1.21 Intellectual Property.
(a) The intellectual property included in the Books and
Records and licensed to Purchaser under the Supply Agreement constitute
all of the copyrights, patents, trademarks, trade names, fictitious
business names, logos, service marks, mask works, computer software,
customer lists, trade secrets, designs, plans, processes, know-how,
inventions and other intellectual property rights that are required to
perform under the Supply Agreement and that are otherwise material to the
Transferred Business and Seller owns or has the right to use such
intellectual property free and clear of all liens, claims, charges or
encumbrances.
(b) Seller has not infringed upon or unlawfully or wrongfully
used any copyright, patent, trademark, and, to Seller's knowledge, Seller
has not infringed upon or unlawfully or wrongfully used any trade name,
service ▇▇▇▇, mask work, computer software or trade secret owned or
claimed by another person, where such infringement or use would have a
materially adverse effect on the Transferred Business, and Seller has not
received any notice of any claim of infringement or any other claim or
proceeding relating to any such copyright, patent, trademark, trade name,
service ▇▇▇▇, mask work, computer software or trade secret. Except as set
forth on SCHEDULE 3.1.21(b), no litigation is pending and no claim has
been made against Seller or, to the knowledge of Seller, is threatened,
which contests the right of Seller to sell or license to any person or use
intellectual property. To the knowledge of Seller, no employee or
consultant of
19
Seller is in violation of any requirement of law applicable to such
employee or consultant, or any term of any employment or consulting
agreement, any patent or invention disclosure agreement, any
non-competition or non-disclosure agreement, or any other contract or
agreement relating to the relationship of such employee or consultant with
Seller.
(c) Except as disclosed to potential acquirors covered by
non-disclosure agreements, none of the designs, plans, trade secrets,
source codes, inventions, processes, procedures, research records,
know-how and formulae of Seller with respect to the Transferred Business,
the value of which is contingent upon maintenance of confidentiality
thereof, has been disclosed, or is required to be disclosed, to any person
other than employees, consultants, representatives and agents of Seller,
all of whom are bound by confidentiality or non-disclosure agreements.
(d) To the knowledge of Seller, the computer software of
Seller included in the Books and Records (the "SOFTWARE") performs in all
material respects in accordance with the documentation and other written
materials used in connection with the Software, is in machine-readable
form, contains all current revisions of the Software, and includes all
object code and source code forms of the Software and all computer
programs, materials, processes, tapes and know-how related to the
Software.
(e) Seller is the sole owner of the Software and Seller has
obtained assignments of all rights in and to the Software from any
developers or other parties who held any rights in the Software. Seller
has no obligation to compensate any person for the development, use, sale
or exploitation of the Software nor has Seller granted to any other person
or entity any license, option or other rights to develop, use, sell or
exploit in any manner the Software, whether requiring the payment of
royalties or not.
3.1.22 Environmental Matters.
(a) Seller has obtained and holds all permits, licenses and
other Authorizations under Regulations relating to pollution or protection
of the environment, including Regulations relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including without limitation ambient air, surface water,
groundwater, or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes (collectively, "ENVIRONMENTAL
REGULATIONS").
(b) Seller is in compliance with all Environmental Regulations
and all terms and conditions of the permits, licenses and other
Authorizations issued under Environmental Regulations, and Seller also is
in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in Environmental Regulations or contained in any
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder. There is no civil, criminal
or administrative claim, action, demand, suit, proceeding, study or
investigation pending or, to the knowledge of Seller, threatened against
Seller relating to Environmental Regulations (an "ENVIRONMENTAL CLAIM").
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(c) Except as set forth on SCHEDULE 3.1.22, as of the Closing
Date, Seller has no knowledge of and has not received written notice of
any past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or prevent
compliance or continued compliance by Seller or the Transferred Business
with any Environmental Regulations or any order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, chemical, or
industrial, toxic or hazardous substance or waste at the Plant or the land
where the Plant is located.
(d) Seller represents and warrants as of the Closing Date
that:
(i) Seller has not, and has no knowledge of any other
person who has, caused any Release, threatened Release, or disposal of any
Hazardous Material at the Plant; to Seller's knowledge the Plant is not
adversely affected by any Release, threatened Release or disposal of a
Hazardous Material originating or emanating from any other property;
(ii) The Plant does not contain and has not contained
any: (a) underground storage tank, (b) material amounts of
asbestos-containing building material, (c) landfills or dumps, (d)
hazardous waste management facility as defined pursuant to RCRA or any
comparable state law, or (e) site on or nominated for the National
Priority List promulgated pursuant to CERCLA or any state remedial
priority list promulgated or published pursuant to any comparable state
law;
(iii) Seller has no material liability involving the
Plant or the land where the Plant is located for response or corrective
action, natural resource damage, or other harm pursuant to CERCLA, RCRA,
or any comparable state law; Seller is not subject to, has no notice or
knowledge of, and is not required to give any notice of any Environmental
Claim involving Seller or the land where the Plant is located; there are
no conditions or occurrences at the Plant which could reasonably be
expected to form the basis for an Environmental Claim against Seller or
the land where the Plant is located;
(iv) The Plant is not subject to any, and Seller has no
knowledge of any imminent restriction on the ownership, occupancy, use or
transferability of the land where the Plant is located in connection with
any (a) Environmental Regulation or (b) Release or disposal of a Hazardous
Material;
(v) To the knowledge of Seller, there are no conditions
or circumstances at the land where the Plant is located which would
reasonably be expected to pose a risk to the environment or the health or
safety of persons; and
(vi) Seller has provided or otherwise made available to
Purchaser any draft or final Phase I environmental site assessment or
similar report and any other material Environmental Record concerning
Seller and Plant which Seller possesses or which, to Seller's knowledge,
has been prepared.
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For purposes of this Section, the following terms shall have the following
meanings:
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 USC 9601 et seq., and any future amendments that
are made prior to the Closing.
"ENVIRONMENTAL RECORD" shall mean any document, correspondence, pleading,
report, assessment, analytical result, Authorization, or other record received
from or submitted to a governmental agency concerning a Hazardous Material,
compliance with an Environmental Regulation, or other environmental subject.
"HAZARDOUS MATERIAL" shall mean any substance, chemical, compound,
product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or
material which is hazardous or toxic and includes, without limitation, (a)
asbestos, polychlorinated biphenyls, and petroleum (including crude oil or any
fraction thereof) and (b) any such material classified or regulated as
"hazardous" or "toxic" pursuant to any environmental law.
"RCRA" shall mean the Solid Waste Disposal Act, as amended by the Resource
Conversation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 USC 6901 et seq., and any future amendments that are made prior to
the Closing.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the indoor or outdoor environment, including, without limitation, the
abandonment or discarding of barrels, drums, containers, tanks, and other
receptacles containing any Hazardous Material.
3.1.23 Restrictions. Seller is not a party to any Assumed Contract,
Authorization, judgment, order, writ, injunction, decree or award which
materially and adversely affects or, so far as Seller can now reasonably
foresee, may in the future be reasonably expected to materially and adversely
affect, the business operations, assets, properties, prospects or condition
(financial or otherwise) of the Transferred Business or the Purchased Assets
after consummation of the transactions contemplated by this Agreement.
3.1.24 Availability of Documents. Seller has made available to
Purchaser copies of all documents, including without limitation all agreements,
contracts, commitments, leases, plans, instruments, undertakings,
Authorizations, permits, licenses, patents, trademarks, trade names, service
marks, copyrights and applications therefor, listed in the Disclosure Schedule
or referred to herein. Such copies are true and complete and include all
amendments, supplements and modifications thereto or waivers currently in effect
thereunder.
3.1.25 Bulk Sales Laws. There is no bulk sales law or similar law in
Texas or that otherwise applies to the transactions contemplated by this
Agreement.
3.1.26 Completeness of Disclosure. No representation or warranty by
Seller in this Agreement nor in any Disclosure Schedule, certificate, statement,
document or instrument furnished or to be furnished to Purchaser pursuant
hereto, or in connection with the negotiation, execution or performance of this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make any statement herein or therein not misleading.
3.2 Representations and Warranties of Purchaser. Purchaser represents and
warrants to Seller as follows:
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3.2.1 Corporate Existence. Purchaser is a limited liability company
duly organized, validly existing and in good standing under the laws of the
state of Delaware and qualified to do business in Texas.
3.2.2 Corporate Power and Authorization. Purchaser has the corporate
power, authority and legal right to execute, deliver and perform this Agreement,
the Assignment and Assumption Agreement and the other agreements, documents and
instruments required to be executed and delivered by Purchaser in accordance
with the provisions hereof (collectively, the "PURCHASER'S DOCUMENTS"). The
execution, delivery and performance of this Agreement and Purchaser's Documents
by Purchaser have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by Purchaser and constitutes, and
Purchaser's Documents when executed and delivered will constitute, the legal,
valid and binding obligations of Purchaser enforceable against Purchaser in
accordance with their respective terms, subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally or to general principles of
equity.
3.2.3 Validity of Contemplated Transactions, Etc. The execution,
delivery and performance of this Agreement and Purchaser's Documents by
Purchaser does not and will not violate, conflict with or result in the breach
of any term, condition or provision of, or require the consent of any other
party to, (a) any existing law, ordinance, or governmental rule or regulation to
which Purchaser is subject, (b) any judgment, order, writ, injunction, decree or
award of any court, arbitrator of governmental or regulatory official, body or
authority which is applicable to Purchaser, (c) the certificate of incorporation
or bylaws of, or any securities issued by, Purchaser, or (d) any mortgage,
indenture, agreement, contract, commitment, lease, plan or other instrument,
document or understanding, oral or written, to which Purchaser is a party or by
which Purchaser is otherwise bound or affected. Except as aforesaid, no
authorization, approval or consent of, and no registration or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery and performance of this Agreement and Purchaser's
Documents by Purchaser.
3.2.4 Completeness of Disclosure. No representation or warranty by
Purchaser in this Agreement nor in any Disclosure Schedule, certificate,
statement, document or instrument furnished or to be furnished to Seller
pursuant hereto, or in connection with the negotiation, execution or performance
of this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to be stated herein
or therein or necessary to make any statement herein or therein not misleading.
3.3 Survival of Representations and Warranties. All representations and
warranties made by the parties in this Agreement or in any Disclosure Schedule,
certificate, statement, document or instrument furnished hereunder or in
connection with the negotiation, execution or performance of this Agreement
shall survive the Closing for a period of two years except for (i) the
representations and warranties set forth in Section 3.1.9, 3.1.19 and Section
3.1.22 hereof and the Disclosure Schedules thereto, which shall survive the
Closing for a period which terminates upon the lapse of the applicable statute
of limitations, and (ii) the representations and warranties set forth in
Sections 3.1.1 through 3.1.4, inclusive, Section 3.1.7 and Section 3.1.12 hereof
and the Disclosure Schedules thereto, which shall survive the Closing for five
years. Notwithstanding any investigation or audit conducted before or after the
Closing Date or the decision of any party to complete the Closing, each party
shall be entitled to rely upon the representations and warranties set forth
herein and therein, provided, however, each party shall
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have an obligation to inform the other party if it has actual knowledge of any
violation of a representation or warranty by the other party prior to Closing.
ARTICLE IV - AGREEMENTS PENDING CLOSING
4.1 Agreements of Seller Pending the Closing. Seller covenants and agrees
with Purchaser that, pending the Closing and except as otherwise agreed to in
writing by Purchaser:
4.1.1 Business in the Ordinary Course. Seller shall cause the
Transferred Business to be conducted solely in the ordinary course consistent
with past practice.
4.1.2 Existing Condition. Seller shall not cause nor permit
to occur any of the events or occurrences described in Section 3.1.11
hereof.
4.1.3 Maintenance of Physical Assets and Business Relations. Seller
shall continue to maintain and service the physical and intangible assets
included in the Purchased Assets in the same manner as has been its past
practice. Seller shall use its reasonable commercial efforts to maintain the
relations and goodwill with suppliers, customers, the workforce and any others
having business relations relating to the Transferred Business.
4.1.4 Legal Compliance. Seller shall comply in all material respects
with all Regulations and Authorizations and all other laws, regulations and
ordinances applicable to the Transferred Business, the Purchased Assets or
Seller.
4.1.5 Updated Disclosure Schedules. Seller shall promptly disclose
to Purchaser in writing any information contained in the representations and
warranties or the Disclosure Schedules which, because of an event occurring
after the Effective Date, is incomplete or is no longer correct as of all times
after the Effective Date until the Closing Date and shall, three days before the
Closing Date, document all such disclosures in an updated Disclosure Schedule.
Such updated Disclosure Schedule shall not be deemed to amend or supplement the
representations and warranties of Seller or the Disclosure Schedules thereto for
the purposes of Article V of this Agreement unless Purchaser shall have
consented thereto in writing.
4.1.6 Conduct of Business. Seller shall use reasonable efforts to
conduct the Transferred Business and operate the Purchased Assets in such a
manner that on the Closing Date the representations and warranties of Seller
contained in this Agreement shall be true as though such representations and
warranties were made on and as of such date. Furthermore, Seller shall cooperate
with Purchaser and use its reasonable commercial efforts to cause all of the
conditions to the obligations of Purchaser and Seller under this Agreement to be
satisfied on or prior to the Closing Date. In the event that Seller determines
that a condition is not reasonably likely to be so satisfied, Seller shall
promptly notify Purchaser of such determination.
4.1.7 Exclusive Rights. From and after the Effective Date until the
Closing or earlier termination of this Agreement pursuant to Section 8.1 hereof
and except as permitted by Section 8.1, neither Seller nor any of its
representatives will directly or indirectly solicit or engage in negotiations or
discussions with, disclose any of the terms of this Agreement to, accept any
offer from, furnish any information to, or otherwise cooperate, assist, or
participate with, any person (other than Purchaser and its representatives)
regarding any offer or proposal with respect to the acquisition by purchase,
merger, lease or otherwise of all or any part of the Transferred Business, any
of the Purchased Assets, or a material percentage of the capital stock of
Seller, and Seller shall promptly notify Purchaser of any such discussion, offer
or proposal.
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4.1.8 Access. At all reasonable times prior to Closing, Purchaser
and its representatives shall have the right, upon reasonable advance notice,
to: (a) examine, inspect, and review the Transferred Business and the Purchased
Assets and all books, contracts, agreements, commitments, records and documents
of every kind relating to the Transferred Business or the Purchased Assets,
other than such information relating solely to Excluded Assets; and (b)
interview Plant Employees, suppliers and customers (including prospective
customers) of Seller relating to the Transferred Business or the sale of ▇▇▇▇▇
Products. Seller shall cooperate with Purchaser and its representatives in
conducting the reviews and other activities described in this Section 4.1.8.
4.1.9 Press Releases. Except as required by applicable law, Seller
shall not make any public statement or release concerning this Agreement or the
transactions contemplated hereby except in accordance with Section 4.3. If
Seller determines that it shall be required by law to make disclosure of any
such information, Seller shall advise Purchaser as soon as reasonably
practicable and in any event prior to the making of such disclosure.
4.1.10 Pre-Closing Financial Statements. Seller shall cause to be
prepared and submitted to Purchaser at least ten business days prior to the
Closing Date (i) unaudited balance sheets of both the Seller and the Transferred
Business as of the last day of the month which immediately precedes the Closing
Date and (ii) detailed, unaudited income statements for both the Seller and the
Transferred Business for the period from the Balance Sheet Date through the last
day of the month which immediately precedes the Closing Date. Such statements
shall be prepared in accordance with the requirements for the Financial
Information described in Section 3.1.6 hereto and, to the extent reasonably
practicable, in accordance with generally accepted accounting principles
(excluding footnotes) consistently applied by Seller.
4.2 Agreements of Purchaser Pending the Closing. Purchaser covenants and
agrees with Seller that, pending the Closing and except as otherwise agreed to
in writing by Seller:
4.2.1 Actions of Purchaser. Purchaser shall cooperate with Seller
and use its reasonable commercial efforts to cause all of the conditions to the
obligations of Purchaser under this Agreement to be satisfied on or prior to the
Closing Date. In the event that Purchaser determines that a condition is not
reasonably likely to be so satisfied, Purchaser shall promptly notify Seller of
such determination.
4.2.2 Press Releases. Except as required by applicable law,
Purchaser shall not make any public statement or release concerning this
Agreement or the transactions contemplated hereby except in accordance with
Section 4.3. If Purchaser determines that it shall be required by law to make
disclosure of any such information, Purchaser shall advise Seller as soon as
reasonably practicable and in any event prior to the making of such disclosure.
4.3 Publicity. From time to time after the execution of this Agreement,
Purchaser and Seller may issue mutually acceptable joint or coordinated press
releases and shall reasonably cooperate with each other to coordinate and
approve any press release or employee briefings.
ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING
5.1 Conditions Precedent to Purchaser's Obligations. The obligation of
Purchaser under this Agreement to effect the Closing is subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent (unless waived in writing by Purchaser):
25
5.1.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of Seller contained in this Agreement or in
any Disclosure Schedule, certificate, statement, document or instrument
furnished to Purchaser hereunder or in connection with the negotiation,
execution or performance of this Agreement shall have been true in all material
respects on the Effective Date without regard to any updated Disclosure Schedule
furnished to Purchaser after the Effective Date and prior to the Closing, and
shall be true in all material respects on the Closing Date with the same effect
as though such representations and warranties were made as of such date.
5.1.2 Compliance with this Agreement. Seller shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
5.1.3 Closing Certificate. Purchaser shall have received a
certificate from Seller dated the Closing Date, certifying in such detail as
Purchaser may reasonably request that the conditions specified in Sections 5.1.1
and 5.1.2 hereof have been fulfilled in all material respects and certifying
that Seller has obtained all approvals, consents and waivers required with
respect to Seller or the Transferred Business by Section 5.1.7 hereof.
5.1.4 Opinion of Counsel for Seller Counsel for Seller shall have
delivered to Purchaser a written opinion, dated the Closing Date, in form and
substance reasonably satisfactory to Purchaser and its counsel.
5.1.5 No Threatened or Pending Litigation. On the Closing Date, no
material suit, action or other proceeding, or injunction or final judgment
relating thereto, shall be known by Seller or Purchaser, to be threatened or to
be pending before any court or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with the sale of ▇▇▇▇▇ Products or this Agreement or
the consummation of the transactions contemplated hereby, and no investigation
shall be known by Seller or Purchaser to be ongoing that might result in any
such suit, action or proceeding. In addition, the litigation referred to as
Celltech Pharmaceuticals, Inc. ▇. ▇▇▇▇▇ Laboratories, Inc. Civil Action No. 03
CV 6146 (U.S. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇) shall have been
finally resolved and dismissed in a manner satisfactory to Purchaser in its
discretion.
5.1.6 Approvals, Consents and Waivers. Seller shall have delivered
to Purchaser, or there shall otherwise have been obtained, all material
approvals, consents and waivers from governmental and other regulatory agencies,
customers, suppliers, lessors and other third parties which, in the reasonable
judgment of Purchaser, are necessary or required to consummate this Agreement
and the transactions contemplated hereby, including without limitation those set
forth on SCHEDULE 2.3 of the Disclosure Schedule and an estoppel certificate
from the lessor under the Real Property Lease consenting to the assumption of
such lease by Purchaser and representing that there are no outstanding claims
against the Seller under such lease. Seller shall also have obtained all
necessary corporate approvals and authorizations.
5.1.7 Material Adverse Changes. Between the Closing Date and the
Balance Sheet Date, there shall have been no change in the Transferred Business
or the Purchased Assets or the business, operations, prospects or condition
(financial or otherwise) thereof, that either alone or in the aggregate would
have a materially adverse effect on the Transferred Business.
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5.1.8 Removal of Liens. All encumbrances indicated to exist on or
with respect to any of the Purchased Assets by record searches made by Purchaser
prior to the Closing Date (specifically including, but not limited to, those
liens described on SCHEDULE 3.1.12 of the Disclosure Schedule) shall have been
removed, and Seller shall have provided evidence satisfactory to Purchaser of
such removal.
5.1.9 Financial Information. The financial information furnished to
Purchaser pursuant to Section 4.1.10 shall not reflect any material adverse
change in the business, operations, prospects or financial condition of the
Transferred Business or the Purchased Assets since the Balance Sheet Date.
5.1.10 Deliverables. Seller shall have delivered the items specified
in Section 2.2(a).
5.1.11 Payment of Certain Indebtedness. Seller shall have presented
Purchaser with evidence satisfactory to Purchaser that Seller has paid off the
indebtedness identified on Schedule 1.3.1(a).
5.1.12 Employment. At least one of the Transferring Employees
identified on SCHEDULE 5.1.12 shall have accepted employment offers from
Purchaser.
5.1.13 Active Ingredient. That certain supply agreement with
Boehringer Ingelheim Chemicals, Inc. set forth on Schedule 2.3 shall have been
amended in a manner that is reasonably satisfactory to Purchaser, provided,
however that if such amendment is not so amended, then such agreement shall not
be assigned hereunder and the Supply Agreement shall be amended to reflect that
Seller shall be responsible for providing Purchaser with the materials that are
currently provided to Seller pursuant to the supply agreement with Boehringer
Ingelheim Chemicals, Inc.
5.2 Conditions Precedent to the Obligations of Seller. The obligation of
Seller under this Agreement to effect the Closing are subject to the fulfillment
or satisfaction, prior to or at the Closing, of each of the following conditions
precedent (unless waived in writing by Seller):
5.2.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of Purchaser contained in this Agreement or
in any schedule, certificate, statement, document or instrument furnished to
Seller hereunder or in connection with the negotiation, execution or performance
of this Agreement shall be true in all material respects on the Closing Date
with the same effect as though such representations and warranties were made as
of such date.
5.2.2 Compliance with this Agreement. Purchaser shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
5.2.3. Opinion of Counsel for Purchaser. Counsel for Purchaser shall
have delivered to Seller a written opinion, dated the Closing Date, in form and
substance reasonably satisfactory to Seller and its counsel.
5.2.4 Hiring of Employees. Purchaser shall have made offers of
employment to all of the Plant Employees (the "TRANSFERRING EMPLOYEES"),
containing terms of employment with positions and salaries substantially similar
to their currently existing positions and salaries
27
and with employee benefits that are consistent with Purchaser's current
employment policies and practices.
5.2.5 Closing Certificate. Seller shall have received a certificate
from Purchaser dated the Closing Date certifying in such detail as Seller may
reasonably request that the conditions specified in Sections 5.2.1 and 5.2.2
hereof have been fulfilled.
5.2.6 No Pending Litigation. On the Closing Date, no suit, action or
other proceeding, or injunction or final judgment relating thereto, shall be
pending before any court or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit or invalidate the
transactions contemplated by this Agreement or the consummation of the
transactions contemplated hereby.
5.2.7 Approvals, Consents and Waivers. All material consents,
approvals, authorizations, registrations and filings required by any
governmental authority shall have been obtained prior to or at the Closing.
5.2.8 Sales and Use Tax Permits. Purchaser will obtain all necessary
permits from the Texas Comptroller of Accounts for Texas sales tax purposes
prior to the Closing Date.
ARTICLE VI - INDEMNIFICATION
6.1 General Indemnification Obligations of Seller. From and after the
Closing, subject to the limitations of Section 6.3 hereof, Seller shall
reimburse, indemnify and hold harmless Purchaser, all other Affiliates of
Cardinal Health, Inc. ("CARDINAL AFFILIATES") and their respective successors
and assigns and each of their respective officers, agents, directors,
shareholders, insurers and attorneys (each an "INDEMNIFIED PURCHASER PARTY")
against and in respect of any and all damages, losses, deficiencies,
liabilities, costs and expenses (including reasonable legal fees and expenses)
incurred or suffered by any Indemnified Purchaser Party that result from, relate
to or arise out of:
(a) any and all liabilities and obligations of Seller of any
nature whatsoever, except for those liabilities and obligations of Seller
which Purchaser specifically assumes pursuant to Section 1.4.1 of this
Agreement, the Assignment and Assumption Agreement, and the Lease
Assignment and Assumption Agreement;
(b) any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings or
investigations against any Indemnified Purchaser Party that relate to the
Seller, ▇▇▇▇▇ Products, the Transferred Business or the Purchased Assets
in which the principal event giving rise thereto occurred prior to the
Closing Date or which result from or arise out of any action or inaction
prior to the Closing Date of Seller or any director, officer, employee,
agent, representative, consultant or subcontractor of Seller, except for
those liabilities and obligations of Seller which Purchaser specifically
assumes pursuant to Section 1.4.1 of this Agreement, the Assignment and
Assumption Agreement, or the Lease Assignment and Assumption Agreement;
(c) any misrepresentation, breach of warranty or
nonfulfillment of any agreement, obligation or covenant on the part of
Seller under this Agreement or from any misrepresentation in or omission
from any Disclosure Schedule (including the update thereto delivered
pursuant to Section 4.1.5), certificate, statement, other document or
28
instrument furnished to Purchaser pursuant hereto or in connection with
the negotiation, execution or performance of this Agreement, the Services
Agreement or the Supply Agreement; and any and all actions, suits, claims,
proceedings, investigations, demands, assessments, audits, fines,
judgments, costs and other expenses, (including, without limitation,
reasonable legal fees and expenses) incident to any of the foregoing or to
the enforcement of this Section 6.1;
(d) any claim by any person employed by Seller with respect to
any matter occurring prior to the Closing, including without limitation,
the termination of such person's employment by Seller, and any severance
payments or obligations alleged to be imposed by contract or by law; or
(e) any liability or claim of any nature whatsoever relating
to the rights of Transferring Employees to acquire securities of Seller or
any other equity-related compensation arrangement between Seller and the
Transferring Employee, including without limitation claims relating to the
grant, exercise, modification, forfeiture or other termination of options
to purchase securities of Seller granted to any Transferring Employee,
whether or not such options or other arrangement are in effect as of the
Effective Date.
6.2 General Indemnification Obligation of Purchaser. From and after the
Closing, subject to the limitations of Section 6.3 hereof, Purchaser shall
reimburse, indemnify and hold harmless Seller and its successors or assigns and
their respective officers, agents, directors, shareholders, insurers and
attorneys (each an "INDEMNIFIED SELLER PARTY") against and in respect of any and
all damages, losses, deficiencies, liabilities, costs and expenses (including
reasonable legal fees and expenses) incurred or suffered by any Indemnified
Seller Party that result from, relate to or arise out of:
(a) any and all liabilities and obligations of Seller which
have been specifically assumed by Purchaser pursuant to Section 1.4.1 of
this Agreement, the Assignment and Assumption Agreement and the Lease
Assignment and Assumption Agreement;
(b) any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings or
investigations against any Indemnified Seller Party that relate to the
Purchaser, Transferred Business or the Purchased Assets in which the
principal event giving rise thereto occurred after the Closing Date or
which result from or arise out of any action or inaction after the Closing
Date of Purchaser or any shareholder, director, officer, employee, agent,
representative, consultant or subcontractor of Purchaser, except for those
liabilities or obligations which Seller is obligated to indemnify the
Indemnified Purchaser Parties pursuant to Section 6.1 hereof; or
(c) any misrepresentation, breach of warranty or
non-fulfillment of any agreement, obligation or covenant on the part of
Purchaser under this Agreement or from any misrepresentation in or
omission from any schedule, certificate, statement, document or instrument
furnished to Seller pursuant hereto or in connection with the negotiation,
execution or performance of this Agreement, the Services Agreement or the
Supply Agreement, and any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and
other expenses, (including,
29
without limitation, reasonable legal fees and expenses) incident to any of
the foregoing or to the enforcement of this Section 6.2.
6.3 Method of Asserting Claims, Etc. In the event that any claim or demand
for which Seller would be liable to an Indemnified Purchaser Party hereunder is
asserted against or sought to be collected from an Indemnified Purchaser Party
by a third party, the Indemnified Purchaser Party shall promptly notify Seller
of such claim or demand, specifying the nature of such claim or demand and the
amount or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim and demand)
(the "CLAIM NOTICE"). Seller shall have 30 days from the giving of the Claim
Notice in accordance with Section 8.8 hereof (the "NOTICE PERIOD") to notify the
Indemnified Purchaser Party, (A) whether or not it disputes its liability to the
Indemnified Purchaser Party hereunder with respect to such claim or demand and
(B) notwithstanding any such dispute, whether or not it desires, at its sole
cost and expense (subject to the limitation in Section 6.3(b) regarding an
Agreed Upon Settlement), to defend the Indemnified Purchaser Party against such
claim or demand.
(a) If Seller disputes its liability with respect to such
claim or demand or the amount thereof (whether or not Seller desires to
defend the Indemnified Purchaser Party against such claim or demand as
provided in paragraphs (b) and (c) below), such dispute shall be resolved
in accordance with Section 6.5 hereof. Pending the resolution of any
dispute by Seller of its liability with respect to any claim or demand,
such claim or demand shall not be settled (x) without the prior written
consent of the Indemnified Purchaser Party, which consent shall not be
unreasonably withheld and (y) by Purchaser or any Cardinal Affiliate
without having first provided Seller with written notice of the terms of
such settlement at least five days prior to the effective date of such
settlement.
(b) In the event that Seller notifies the Indemnified
Purchaser Party within the Notice Period that they desire to defend the
Indemnified Purchaser Party against such claim or demand then, except as
hereinafter provided, Seller shall have the right to defend the
Indemnified Purchaser Party by appropriate proceedings, which proceedings
shall be promptly settled or prosecuted by them to a final conclusion in
such a manner as to avoid any liability to Indemnified Purchaser Party for
such claim; provided, however, Seller shall not, without the prior written
consent of the Indemnified Purchaser Party, consent to the entry of any
judgment against the Indemnified Purchaser Party or enter into any
settlement or compromise which does not include, as an unconditional term
thereof, the giving by the claimant or plaintiff to the Indemnified
Purchaser Party of a release, in form and substance reasonably
satisfactory to the Indemnified Purchaser Party, from all liability in
respect of such claim or litigation. If any Indemnified Purchaser Party
desires to participate in any such defense or settlement, it may do so at
its sole cost and expense provided that such participation shall be under
the control of, and exclusively through, Seller. If, in the reasonable
opinion of the Indemnified Purchaser Party, any such claim or demand or
the litigation or resolution of any such claim or demand involves an issue
or matter which could have a materially adverse effect on the business,
operations, assets, properties or prospects of the Indemnified Purchaser
Party, including without limitation the administration of the tax returns
and responsibilities under the tax laws of any Indemnified Purchaser
Party, then the Indemnified Purchaser Party shall have the right to
control the defense or settlement of any such claim or demand after giving
notice to Seller of its intention to take control of
30
the defense or settlement of such claim or demand. If the Indemnified
Purchaser Party should elect to exercise such right, Seller shall have the
right to participate in the defense or settlement of such claim or demand
at its sole cost and expense provided that such participation shall be
under the control of, and exclusively through, such Indemnified Purchaser
Party; provided, that such claim or demand shall not be settled without
the prior written consent of the Seller, which consent shall not be
unreasonably withheld; provided further, that if the third party making
any such claim or demand has agreed or stated its willingness in writing,
to (x) settle such claim or demand in exchange solely for the payment of
money in an agreed upon amount ("AGREED UPON SETTLEMENT") which Seller is
willing to accept and agrees in writing to reimburse and indemnify
Indemnified Purchaser Party for and (y) unconditionally release the
Indemnified Purchaser Parties with respect to the applicable claim or
demand, but the Indemnified Purchaser Parties do not accept such
settlement, then in no event shall Seller be liable to reimburse or
indemnify Indemnified Purchaser Parties with respect to such claim or
demand in excess of the amount of such Agreed Upon Settlement plus the
amount of the Indemnified Purchaser Parties' reasonable costs and
out-of-pocket expenses incurred in connection with such claim or demand
through the date the Indemnified Purchaser Parties refused to accept the
Agreed Upon Settlement.
(c) (i) If Seller does not defend the Indemnified Purchaser
Party against such claim or demand, whether by not giving the
Indemnified Purchaser Party timely notice within the Notice Period
as provided above or the Indemnified Purchaser Party has taken over
control of such defense in accordance with the provisions of
subparagraph (b) above, then the amount of any such claim or demand,
or that portion thereof as to which such defense is unsuccessful, in
each case shall be conclusively deemed to be a liability of Seller
hereunder, unless Seller shall have disputed its liability to the
Indemnified Purchaser Party hereunder, as provided in paragraph (a)
above, in which event such dispute shall be resolved as provided in
Section 6.5 hereof.
(ii) In the event an Indemnified Purchaser Party should have a
claim against Seller hereunder that does not involve a claim or
demand being asserted against or sought to be collected from it by a
third party, the Indemnified Purchaser Party shall promptly send a
Claim Notice with respect to such claim to Seller. If Seller
notifies the Indemnified Purchaser Party within the Notice Period
that it disputes its liability with respect to such claim or demand,
such dispute shall be resolved in accordance with Section 6.5
hereof. If Seller does not notify the Indemnified Purchaser Party
within the Notice Period that they dispute such claim, the amount of
such claim shall be conclusively deemed a liability of Seller
hereunder.
(d) All claims for indemnification by an Indemnified Seller
Party under this Agreement shall be asserted and resolved under the
procedures set forth above substituting in the appropriate places
"Indemnified Seller Party" for "Indemnified Purchaser Party" and
variations thereof and "Purchaser" for "Seller" and variations thereof.
(e) All claims for indemnification for an alleged
misrepresentation or breach of warranty contained in Section 3.1 or
Section 3.2 hereof or in any Disclosure
31
Schedule, certificate, statement, document or instrument furnished under
this Agreement or in connection with the negotiation, execution or
performance of this Agreement shall be asserted during the period in which
any such representation or warranty survives pursuant to Section 3.3
hereof.
(f) No party shall bring a claim for indemnification under
this Section 6.3 unless the aggregate amount of all claims for such
indemnification exceeds $* , in which event the party may bring any
and all claims for such indemnification without regard to such dollar
threshold, including the first dollar of any and all claims for such
indemnification; provided, however, in no event shall a party's claims for
indemnification under this Section 6.3 exceed $* , in the
aggregate. Notwithstanding the foregoing, the limitations set forth in
this Section 6.3(f) shall not apply with respect to any claim pursuant to
Section 6.1(e).
6.4 Payment. Upon the determination of liability under Section 6.3 or 6.5
hereof, the appropriate party shall pay to the other, as the case may be, within
ten business days after such determination, the amount of any claim for
indemnification made hereunder. In the event that the indemnified party is not
paid in full for any such claim pursuant to the foregoing provisions promptly
after the other party's obligation to indemnify has been determined in
accordance herewith, it shall have the right, notwithstanding any other rights
that it may have against any other person, to setoff the unpaid amount of any
such claim against any amounts owed by it or its Affiliates under this Agreement
or any other agreements entered into pursuant to this Agreement, Seller's
Documents or Purchaser's Documents.
6.5 Dispute Resolution. If any Dispute arises between the parties, such
Dispute shall be presented to the respective presidents or senior executives of
Purchaser and Seller for their consideration and resolution. If such parties
cannot reach a resolution of the Dispute, then such Dispute shall be resolved by
binding alternative dispute resolution in accordance with the then existing
commercial arbitration rules of CPR Institute for Dispute Resolution, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. Arbitration shall be conducted in the
Morristown, NJ. "Dispute" means any dispute, controversy or disagreement between
the parties in connection with this Agreement. Nothing herein shall restrict the
right of a party to seek a preliminary injunction or other judicial relief if in
that party's judgment such judicial proceedings are necessary or appropriate to
avoid irreparable damage. All applicable statutes of limitation shall be tolled
while the procedures specified in this Section 6.5 are pending. The parties will
take all such actions, if any, which may be necessary or appropriate to
effectuate such tolling.
6.6 Other Rights and Remedies. The indemnification rights of the parties
under this Article VI are independent of and in addition to such other rights
and remedies as the parties may have at law or in equity or otherwise for any
misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including without limitation
the right to seek specific performance, an injunction, rescission or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
ARTICLE VII - POST CLOSING MATTERS
7.1 Employee Benefits. After the Closing Date, Purchaser shall make
available to each of the Plant Employees who accepts employment with Purchaser
that portion of all sick pay and accrued vacation time (or pay in lieu thereof)
which have been accrued on behalf of that employee as of the Closing Date, in
each case in accordance with such policies as Purchaser may
32
---------
* Omitted information is the subject of a request for confidential
treatment pursuant to Rule 406 under the Securities Act of 1933 and
has been filed separately with the Securities and Exchange Commission.
adopt from time to time. Seller shall be responsible for and shall promptly
discharge any liability or obligation for any other benefits (including the
arrangements, plans and programs set forth in SCHEDULE 3.1.19 of the Disclosure
Schedule), wages, salaries and other amounts which have been accrued on behalf
of that employee (or is attributable to expenses properly incurred by that
employee) as of the Closing Date or any worker's compensation claims related to
events occurring prior to the Closing, and Purchaser shall assume no liability
therefor. No portion of the assets of any plan, fund, program or arrangement,
written or unwritten, heretofore sponsored or maintained by Seller (and no
amount attributable to any such plan, fund, program or arrangement) shall be
transferred to Purchaser, and Purchaser shall not be required to continue any
such plan, fund, program or arrangement after the Closing Date. The amounts
payable on account of all benefit arrangements shall be determined with
reference to the date of the event by reason of which such amounts become
payable, without regard to conditions subsequent, and Purchaser shall not be
liable for any claim for insurance, reimbursement or other benefits payable by
reason of any event which occurs prior to the Closing Date. All amounts payable
by Seller directly to Plant Employees who accept employment with Purchaser, or
to any fund, shall be paid by Seller within 30 days after the Closing Date to
the extent that such payment is not inconsistent with the terms of such fund,
program, arrangement or plan. For all purposes, all employees of Seller who are
employed by Purchaser on or after the Closing Date shall be granted credit for
years of service with Seller.
7.2 Transferring Employees; Non-Solicitation. As of the Closing Date,
Purchaser shall have offered employment to, and Seller shall use its reasonable
commercial efforts to assist Purchaser in employing as new employees of
Purchaser, the Transferring Employees. As a condition to such employment by
Purchaser, Purchaser may require each Transferring Employee to pass a drug test
and background check and to execute and deliver to Purchaser the "Certificate of
Compliance with Cardinal's Business Ethics Program," the form of which
Certificate has previously been provided to Seller. Purchaser shall notify
Seller of the identity of the Transferring Employees prior to the Closing.
Seller shall terminate, effective as of the Closing Date, all employment or
contracting arrangements it has with any of the Transferring Employees. For a
period of six (6) months after the Closing Date, Seller shall not directly or
indirectly solicit employment of or offer employment to any (a) Transferring
Employee, (b) individual who is then an employee of Purchaser or any Affiliate
of Purchaser, or (c) Transferring Employee who has terminated employment with
Purchaser or any Affiliate of Purchaser without the consent of Purchaser or such
other Affiliate within 180 days of such solicitation or offer. For a period of
six (6) months after the Closing Date, Purchaser shall not directly or
indirectly solicit employment or offer employment to any person that is an
employee of Seller or any Affiliate of Seller immediately after the Closing (the
"NON-TRANSFERRING EMPLOYEES"), without the prior written consent of the Seller
or such other Affiliate within 180 days of such solicitation or offer. For a
period commencing six (6) months after the anniversary of the Closing Date and
expiring twelve (12) months after the anniversary of the Closing Date, neither
party will directly solicit for employment or offer employment to employees of
the other party; however, the Seller may hire Transferring Employees who respond
to general solicitations not targeted at the Transferring Employees, and the
Purchaser may hire Non-Transferring Employees who respond to general
solicitations not targeted at Non-Transferring Employees. If Seller provides
Purchaser with notice within 90 days after the Closing Date that a person set
forth on Schedule 7.2 is able to perform the function of the job previously
performed by such person on behalf of the Seller at
33
the Plant, the Purchaser shall offer employment to such person and shall
otherwise treat such person as a Transferring Employee.
7.3 Discharge of Obligations. From and after the Closing Date, Seller
shall pay and discharge, in accordance with past practice but not less than on a
timely basis, all obligations and liabilities of Seller that have not been
assumed by Purchaser under Section 1.4.1 of this Agreement, the Assignment and
Assumption Agreement and the Lease Assignment and Assumption Agreement. From and
after the Closing Date, the Purchaser shall pay and discharge, in accordance
with its past practice, all obligations of the Seller that have been assumed by
Purchaser under Section 1.4.1 of this Agreement, the Assignment and Assumption
Agreement and the Lease Agreement and Assumption Agreement.
7.4 Payments Received. Seller and Purchaser agree that after the Closing
they will hold and will promptly transfer and deliver to the other, from time to
time as and when received by them, any cash, checks with appropriate
endorsements (using their best efforts not to convert such checks into cash), or
other property that they may receive on or after the Closing which properly
belongs to the other party, including without limitation any insurance proceeds,
and will account to the other for all such receipts.
7.5 Further Assurances. Seller from time to time after the Closing, at
Purchaser's request, shall execute, acknowledge and deliver to Purchaser such
other instruments of conveyance and transfer and shall take such other actions
and execute and deliver such other documents, certifications and further
assurances as Purchaser may reasonably require in order to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Purchased Assets, or to better enable Purchaser to complete, perform or
discharge any of the liabilities or obligations assumed by Purchaser at the
Closing pursuant to Section 1.4.1 of this Agreement, the Assignment and
Assumption Agreement and the Lease Assignment and Assumption Agreement. Each
party hereto will cooperate with the other party and execute and deliver to the
other party such other instruments and documents and take such other actions as
may be reasonably requested from time to time by the other party as necessary to
carry out, evidence and confirm the intended purposes of this Agreement.
7.6 Specific Performance. The parties hereto recognize and agree that in
the event of a breach by Seller of this Article VII, money damages may not be an
adequate remedy to Purchaser and, even if money damages were adequate, it may be
impossible to ascertain or measure with any degree of accuracy the damages
sustained by Purchaser therefrom. Accordingly, if there should be a breach or
threatened breach by Seller of provisions of this Article VII, Purchaser may be
entitled to an injunction restraining Seller from any breach without showing or
proving actual damage sustained by Purchaser. Nothing in the preceding sentence
shall limit or otherwise affect any remedies that Purchaser may otherwise have
under applicable law.
ARTICLE VIII - MISCELLANEOUS
8.1 Termination.
(a) Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated by written notice of termination at any
time before the Closing Date only as follows:
(i) by mutual consent of Seller and Purchaser;
34
(ii) by Purchaser (A) at any time if the representations and
warranties of Seller made in connection with this Agreement were
incorrect in any material respect when made or at any time
thereafter, (B) upon written notice to Seller given at any time on
or after the day that is 120 days after the Effective Date (or such
later date as shall have been specified in a writing authorized on
behalf of Seller and Purchaser) if any of the conditions precedent
set forth in Section 5.1 hereof have not been met (unless the
failure of the conditions to have been met is solely due to
Purchaser's failure to comply with the terms of this Agreement, in
which case such period shall be extended for a reasonable time
sufficient to permit Seller to cause the condition to be met), or
(C) at any time if Seller shall have failed to perform or comply in
all material respects with all covenants, agreements and obligations
under this Agreement and Seller shall have failed to cure such
nonperformance or noncompliance within 30 days of the receipt from
Purchaser of written notice of such nonperformance or noncompliance;
and
(iii) by Seller, (A) at any time if the representations and
warranties of Purchaser made in connection with this Agreement were
incorrect in any material respect when made or at any time
thereafter, (B) upon written notice to Purchaser given at any time
on or after the day that is 120 days after the Effective Date (or
such later date as shall have been specified in a writing authorized
on behalf of Seller and Purchaser) if any of the conditions
precedent set forth in Section 5.2 hereof have not been met (unless
the failure of the condition to have been met is solely due to
Seller's failure to comply with the terms of this Agreement, in
which case such period shall be extended for a reasonable time
sufficient to permit Purchaser to cause the condition to be met), or
(C) at any time if Purchaser shall have failed to perform or comply
in all material respects with all covenants, agreements and
obligations under this Agreement and Purchaser shall have failed to
cure such nonperformance or noncompliance within 30 days of the
receipt from Seller of written notice of such nonperformance or
noncompliance or (D) by Seller by providing written notice that
Seller has entered into a binding agreement with a major
pharmaceutical company providing for the sale of all or a portion of
the Purchased Assets and/or the transfer of rights to manufacture
some or all of the ▇▇▇▇▇ Products in connection with the license or
sale of rights to market the ▇▇▇▇▇ Products.
(b) In the event of the termination of this Agreement pursuant to
the provisions of this Section 8.1, this Agreement (except for this
Section 8.1 and Sections 8.4 and 8.9 hereof which shall survive) shall
become void and have no effect, without any liability on the part of any
of the parties or their directors or officers or shareholders in respect
of this Agreement except as otherwise set forth in this Section 8.1.
(c) If this Agreement is terminated (i) by Purchaser pursuant to
Section 8.1(a)(ii), or (ii) by Seller pursuant to Section 8.1(a)(iii)(D),
then Seller shall immediately pay to Purchaser a termination fee (the
"TERMINATION FEE") in an amount equal to $500,000, in lieu of all other
remedies or damages; provided, however, the Seller shall not be required
to pay the Termination Fee if this Agreement is terminated pursuant to
Section 8.1(a)(i). The parties agree (1) the agreements contained in this
Section 8.1(c) are an integral part of the transactions contemplated by
this Agreement, (2) the foregoing
35
Termination Fee constitutes liquidated damages, not a penalty, and (3) the
Termination Fee is necessary because the termination of this Agreement in
a manner giving rise to the Termination Fee would result in substantial
damages to Purchaser which may be difficult to calculate accurately.
8.2 Brokers' and Finders' Fees.
(a) Seller shall pay all brokerage fees, finder's fees and other
commissions payable to any person in respect of this Agreement or the
consummation of the transactions contemplated hereby as a result of the
dealings, arrangements or agreements with any such person by Seller and
Seller agrees to indemnify and hold harmless Purchaser against any and all
claims, losses, liabilities and expenses which may be asserted against or
incurred by it as a result of the dealings, arrangements or agreements
with any such person by Seller.
(b) Purchaser represents and warrants that no brokerage fee,
finder's fee or other commission in respect of this Agreement or the
consummation of the transactions contemplated hereby is due by it to any
third party, and Purchaser agrees to indemnify and hold harmless Seller
against any and all claims, losses, liabilities and expenses which may be
asserted against or incurred by it as a result of Purchaser's dealings,
arrangements or agreements with or any such person.
(c) The limitations set forth in Section 6.3(f) shall not apply to
any breach of a representation, warranty, covenant or other agreement set
forth in this Article VIII.
8.3 Sales, Transfer and Documentary Taxes, Etc. Purchaser and Seller shall
each pay 50% of all federal, state and local sales, documentary and other
transfer taxes, if any, due as a result of the purchase, sale or transfer of the
Purchased Assets in accordance herewith and shall indemnify, reimburse and hold
harmless the other in respect of the liability for payment of or failure to pay
any such taxes or the filing of or failure to file any reports required in
connection therewith. For clarification, it is understood that any tax relating
to any gain recognized by Seller on the transfer of any of the Purchased Assets
shall be borne exclusively by Seller. Seller shall not be responsible for any
use tax or similar tax relating to the transfer of the Purchased Assets from
Texas to another jurisdiction.
8.4 Expenses. Except as provided for in Section 8.3, each party shall bear
its respective legal, accounting, and other costs and expenses associated with
the transactions contemplated by this Agreement (including without limitation
the costs of any accountants, attorneys, brokers and financial advisors).
8.5 Contents of Agreement; Parties in Interest; Etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except by
written instrument duly executed by each of the parties hereto. Except as
provided in Article VI and except for Affiliates of Purchaser which are intended
third party beneficiaries of this Agreement, this Agreement is not intended to
confer upon any other person not a party hereto any rights or remedies
hereunder. Any and all previous agreements and understandings between or among
the parties hereto regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement.
8.6 Assignment and Binding Effect. This Agreement may not be assigned by
Seller without the prior written consent of Purchaser. Purchaser may assign its
rights and obligations to
36
any Cardinal Affiliate (provided that the Purchaser shall remain liable to make
all required payments under this Agreement). Subject to the foregoing, all of
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of each party
hereto.
8.7 Waiver and Amendment. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party. No amendment of any provision of this
Agreement shall be valid unless it shall be in writing and signed by the
Purchaser and Seller.
8.8 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopier or
by registered or certified mail, postage prepaid, as follows:
If to Purchaser, to:
Cardinal Health PTS, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Vice President and Associate General Counsel,
Pharmaceutical Technologies & Services
With a required copy to:
If to Seller, to:
▇▇▇▇▇ Laboratories, Inc.
Colonial Court
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
With a required copy to:
Holland & Knight LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or to such other address or telecopier number as the addressee may have
specified in a notice duly given to the sender as provided herein. Such
notice, request, demand, waiver, consent, approval or other communication
will be deemed to have been given as of the date so delivered, telecopied or
mailed.
37
8.9 Confidential Information.
8.9.1 Cardinal Information. From and after the Effective Date,
Seller shall not disclose to any person (other than Purchaser or any Cardinal
Affiliate) in any manner, directly or indirectly, any confidential or
proprietary information or data of Purchaser or any Cardinal Affiliate whether
of a technical or commercial nature ("CONFIDENTIAL INFORMATION"), or use or
assist any person (other than any Cardinal Affiliates) to use, in any manner,
directly or indirectly, any Confidential Information, excepting only use of such
data or information as is at the time generally known to the public and which
did not become generally known through the breach of any provisions of this
Agreement. As used in this Agreement, Confidential Information includes but is
not limited to any and all (i) computer software proprietary to any Cardinal
Affiliate, together with all documentation for any such software; (ii)
confidential, proprietary or trade secret information submitted to any Cardinal
Affiliate in confidence by its suppliers, employees, consultants, customers or
others; (iii) information of any Cardinal Affiliate concerning operations,
customers or prospects, terms and conditions of sale and prices, technical
knowledge relating to customer requirements, and knowledge of markets for its
products and services; and (iv) subject to the successful consummation of the
Closing, all confidential, proprietary, and similar information of the
Transferred Business, other than information relating solely to the Excluded
Assets. Seller acknowledges that all information, whether falling within the
above definition or otherwise (unless specifically excepted above), shall be
presumed to be Confidential Information if any Cardinal Affiliate takes measures
designed to prevent it, in the ordinary course of business, from being available
to persons other than those selected by Cardinal Affiliates to have access
thereto for limited purposes. All information disclosed to Seller or its
Affiliates or to which Seller or its Affiliates obtains access, which such
person has reasonable basis to believe to be Confidential Information, or which
such person has reasonable basis to believe that any Cardinal Affiliate treats
as being Confidential Information, shall be presumed to be Confidential
Information. Notwithstanding the foregoing this Section 8.9.1 shall not restrict
Seller from using or disclosing information related to Purchaser or any Cardinal
Affiliate properly obtained in the course of other business relationships for
any proper purpose otherwise permitted.
8.9.2 Seller Information. From and after the Effective Date, the
Cardinal Affiliates shall not disclose to any person in any manner, directly or
indirectly, any confidential or proprietary information or data of Seller
whether of a technical or commercial nature ("SELLER CONFIDENTIAL INFORMATION"),
or use or assist any person (other than Seller or any of Seller's Affiliates) to
use, in any manner, directly or indirectly, any Seller Confidential Information,
excepting only use of such data or information as is at the time generally known
to the public and which did not become generally known through the breach of any
provisions of this Agreement. As used in this Agreement, Seller Confidential
Information includes but is not limited to any and all (i) computer software
proprietary to Seller, together with all documentation for any such software;
(ii) confidential, proprietary or trade secret information submitted to Seller
in confidence by its suppliers, employees, consultants, customers or others;
(iii) information of Seller or any of its Affiliates concerning operations,
customers or prospects, terms and conditions of sale and prices, technical
knowledge relating to customer requirements, and knowledge of markets for its
products and services; and (iv) all confidential, proprietary, and similar
information of the Transferred Business and the ▇▇▇▇▇ Products. Purchaser
acknowledges that all information, whether falling within the above definition
or otherwise, shall be presumed to be Seller Confidential Information if Seller
or any of its Affiliates takes measures
38
designed to prevent it, in the ordinary course of business, from being available
to persons other than those selected by Seller or its Affiliates to have access
thereto for limited purposes. All information disclosed to Cardinal Affiliates
or to which Cardinal Affiliates obtain access, which such person has reasonable
basis to believe to be Seller Confidential Information, or which such person has
reasonable basis to believe Seller or its Affiliates treats as being Seller
Confidential Information, shall be presumed to be Seller Confidential
Information. Effective upon the Closing, Seller Confidential Information which
relates solely to the Transferred Business shall become Confidential Information
of Purchaser and the provisions of Section 8.9.1 shall apply thereto and the
provisions of this Section 8.9.2 shall cease to apply thereto. Notwithstanding
the foregoing, this Section 8.9.2 shall not restrict Purchaser or any Cardinal
Affiliate from using or disclosing information related to Seller properly
obtained in the course of other business relationships for any proper purpose
otherwise permitted. Seller acknowledges the Purchaser and its Affiliates have
and continue to acquire and develop substantial know-how, expertise and
information relating to the pharmaceutical business and related industries
including without limitation relating to the manufacture of tablets and other
products. Nothing in this Agreement shall be deemed to restrict in any manner
the ability of Purchaser and its Affiliates to engage in manufacturing and
related activities whether through the use of Transferred Know How or otherwise.
The foregoing shall not be construed as a license to any patented intellectual
property of Seller.
8.10 Counterparts. This Agreement may be executed in two or more
counterparts that together shall constitute a single agreement.
8.11 Pronouns. All pronouns used in this Agreement shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person(s) may require.
8.12 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the State
of Delaware without regard to the principles of conflict of laws thereof.
8.13 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party.
8.14 Knowledge. For purposes of this Agreement, an individual shall be
deemed to have "knowledge" of a particular fact or other matter if such
individual is actually aware of such fact or other matter or if such person, in
the conduct of their duties, should have become aware of such fact or other
matter. Seller shall be deemed to have "knowledge" of a particular fact or other
matter that any individual who is serving as a director or executive officer of
such entity (or in any similar capacity) or any other person set forth on
SCHEDULE 8.14 has, or at any time had, knowledge of such fact or other matter.
8.15 Severability. If any provision of this Agreement, or the application
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder or
this Agreement and such provisions as applied to other persons, places and
circumstances shall not be effected thereby and remain in full force and effect
only if, after excluding the portion deemed to be unenforceable, the remaining
terms shall provide for the consummation of the transactions contemplated hereby
in substantially the same manner as originally set forth at the later of the
Effective Date was executed or last amended.
39
8.16 Definitions. The following terms are defined in the sections
indicated below:
Term Where Defined
▇▇▇▇▇ Products Recital A
Affiliate 1.1.1(i)
Agreed Upon Settlement 6.3 (b)
Agreement Introduction
Assumed Contract 3.1.17
Assumed Liabilities 1.4.1
Authorizations 3.1.14
Balance Sheet 3.1.6
Balance Sheet Date 3.1.6
Books and Records 1.1.1 (e)
Cardinal Affiliate 6.1
Cash Payment 1.3.1 (a)
CERCLA 3.1.22
Claim Notice 6.3
Closing 2.1
Closing Date 2.1
Closing Inventory Balance 1.3.1(b)
COBRA 1.4.1 (e)
Code 3.1.19(b)
Confidential Information 8.9.1
Disclosure Schedule 3.1
Effective Date Introduction
Environmental Claim 3.1.22 (b)
Environmental Record 3.1.22
Environmental Regulations 3.1.22 (a)
ERISA 3.1.19(b)
Excluded Assets 1.1.2
Financial Information 3.1.6
Hazardous Material 3.1.22
Indemnified Purchaser Party 6.1
Indemnified Seller Party 6.2
Inventory 1.1.1 (c)
Inventory Cost 1.3.1 (b)
Multiple Employer Plan 3.1.19(b)
Notice Period 6.3
Non-Transferring Employees 7.2
Permitted Liens 3.1.12
Plant Recital A and 1.1.1(a)
Plant Employees 3.1.18 (b)
Purchase Price 1.3.1
Purchased Assets 1.1.1
Purchaser Introduction
Purchaser's Documents 3.2.2
40
Quality Agreement 2.2(a)(v)
RCRA 3.1.22
Real Property Lease 1.1.1 (a)
Regulations 3.1.14
Release 3.1.22
Seller Introduction
Seller Confidential Information 8.9.2
Seller's Documents 3.1.2
Seller's Proprietary Rights 1.1.2(b)
Services Agreement 2.2(a)(iii)
Software 3.1.21 (d)
Sublease Agreement 2.2(a)(vi)
Supply Agreement 2.2 (a) (iv)
Tangible Personal Property 1.1.1 (b)
Tax Returns 3.1.9
Taxes 3.1.9
Termination Fee 8.1(c)
Transferred Business Recital A
Transferred Know How 1.1.1(h)
Transferring Employees 5.2.4
Transition Agreement 2.2(a)(vii)
Upgrade Savings 1.3.1 (c)
Utilities 3.1.7 (b)
[SIGNATURE PAGE FOLLOWS]
41
IN WITNESS WHEREOF, the undersigned have executed this Agreement, or have
caused this Agreement to be executed by their duly authorized officer, as of the
date first written above.
SELLER: PURCHASER:
▇▇▇▇▇ LABORATORIES, INC. CARDINAL HEALTH PTS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------- --------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇.▇▇▇▇▇▇
-------------------------- --------------------------------
Title: President and CEO Title: President, Modified Release Tech.
-------------------------- --------------------------------
42
Index of Exhibits
Exhibit A-1 Form of Lease Assignment and Assumption Agreement
Exhibit A-2 Form of ▇▇▇▇ of Sale
Exhibit A-3 Form of Assignment and Assumption Agreement
Exhibit B Form of Commercial Services Agreement
Exhibit C Form of Supply Agreement
Exhibit D Form of Quality Agreement
Exhibit E Form of Sublease Agreement
Exhibit F Form of Transition Services Agreement
43
Exhibit A-1
ASSIGNMENT AND ASSUMPTION AGREEMENT
AND LESSOR CONSENT
ASSIGNMENT AND ASSUMPTION AGREEMENT AND LESSOR CONSENT made as of April 1,
2004, by and among ▇▇▇▇▇ Laboratories, Inc., a Texas corporation d/b/a ▇▇▇▇▇
Respiratory Therapeutics (the "Assignor"), Cardinal Health PTS, LLC, a Delaware
limited liability company (the "Assignee"), and The Estate of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Deceased ("Lessor").
W I T N E S S E T H:
WHEREAS, CCP Investment Properties, Ltd., a Texas limited partnership
("Original Landlord") and Tenant have previously executed a document entitled
"Industrial Lease Agreement" (as amended as described below, the "Lease") with
regard to 71,108 square feet of lease space currently occupied by Assignor
located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ (the "Original Premises");
and
WHEREAS, Original Landlord and Assignor previously executed a document
entitled "Amendment to Industrial Lease Agreement" dated October 29, 1990, and
AEW # 14 Corporation, as successor landlord, and Tenant executed a document
entitled "Second Amendment to Industrial Lease Agreement" dated March 15, 1991,
both of said amendments relating to the security deposit due under the terms of
the Lease; and
WHEREAS, Metropolitan Life Insurance Company, as successor landlord
("Metropolitan"), and Assignor executed a document entitled "Third Amendment to
Industrial Lease Agreement" dated January 27, 1993 (the "Third Amendment") which
amendment added 36,020 square feet of "Expansion Premises" to the Original
Premises; and
WHEREAS, Metropolitan and Assignor executed a document entitled "Fourth
Amendment to Lease Agreement" dated July 27, 1993 (the "Fourth Amendment"),
which amendment added 3000 square feet of "Second Expansion Space" to the
Original Premises so that the premises covered by the Lease, as amended by the
Third Amendment and the Fourth Amendment, totaled a sum of 110,128 square feet
(the "Premises"); and
WHEREAS, Metropolitan and Assignor executed a document entitled "Fifth
Amendment to Industrial Lease Agreement" on January 19, 1995 (the "Fifth
Amendment") which amendment added 36,020 square feet of "Third Expansion Space"
to the Premises; and
WHEREAS, Assignor and Lessor agreed in a document entitled "Seventh
Amendment to Industrial Lease Agreement" dated June 1, 2002 (the "Seventh
Amendment") that the Third Expansion Space was no longer subject to the terms of
the Lease and to add 20,000 square feet to the Premises, so that as of June 1,
2002 the Premises consists of 130,128 square feet; and
WHEREAS, Metropolitan and Medeva Pharmaceuticals, Inc. ("Medeva"), as
successor to ▇▇▇▇▇ Laboratories, Inc., and ▇▇▇▇▇ Laboratories, Inc., an entity
then-new to the Lease and now being Assignor, executed a document entitled
"Partial Assignment and Sixth Amendment to
Industrial Lease Agreement" dated February 25, 1998, by which document, among
other matters, 1) Assignor assumed the terms of the Lease as to the Premises as
contemplated by the Fourth Amendment, 2) Medeva remained tenant under the Lease
as to the 36,020 of "Third Expansion Space" as discussed in the Fifth Amendment,
and as to which space the Lease has terminated, and 3) the Lease Term was
extended so as to terminate on January 31, 2006 (Terms used and not otherwise
defined herein shall have the meaning ascribed to them in the Lease); and
WHEREAS, pursuant to an Asset Purchase Agreement dated March 24, 2004,
Assignee is purchasing certain assets of the Assignor, including without
limitation, the Lease; and
WHEREAS, Assignor desires to assign its interests in the Lease to Assignee
and Assignee desires to assume the obligations of Assignor with respect to the
Lease; and
WHEREAS, the terms of the Lease require Lessor to consent to any
assignment of the Lease and Lessor desires to consent to such assignment.
NOW, THEREFORE, in consideration of the premises, which are incorporated
herein by reference, and of the terms, conditions and covenants set forth herein
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Assignment of Lease. As of the Effective Date, Assignor hereby
assigns, sells, transfers and delivers to Assignee all of the right, title and
interest of Assignor in the Lease to have and to hold the same, upon and subject
to the respective covenants, terms and conditions contained therein for the
remainder of the term thereof.
2. Assumption of Lease. Assignee hereby accepts the assignment of the
Lease and assumes and agrees to perform directly all of the respective duties
and obligations of Assignor thereunder that accrue from and after the Effective
Date and agrees to perform all of the respective covenants, terms and conditions
contained therein.
3. No Default; Other Representations. Lessor represents and warrants
that (a) neither it nor, to its knowledge, Assignor is in default under the
terms of the Lease and, to its knowledge, no fact exists that with the passage
of time or notice would constitute an event of default by either of them under
the Lease; and (b) the Premises and Building are in compliance in all material
respects with all federal or state laws, orders and regulations.
4. Consent of Lessor. Lessor hereby consents to the assignment and
assumption of the Lease by Assignee and Lessor and Assignee acknowledge that
this Assignment and Assumption Agreement constitutes an amendment to the Lease
substituting Assignee for Assignor for all purposes. Lessor agrees that from and
after the date hereof, both Assignor and ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., in his capacity as
guarantor, shall be, and hereby are, released from any and all claims, losses,
damages, liabilities, and obligations arising under or in connection with the
Lease, Lessor agreeing to look solely to Assignee as the sole tenant under the
Lease from and after the date hereof.
2
5. Effect of Agreement. This agreement shall be binding on and inure to
the respective benefit of each of the parties hereto and its respective
successors and assigns.
6. Severability. The invalidity or unenforceability of any provision of
the agreement shall not affect the validity or enforceability of any other
provision.
7. Modification. No provision of this agreement, including the
provisions of this paragraph, may be modified, deleted or amended in any manner
except by an agreement in writing executed by all of the parties hereto.
8. Construction. This agreement is executed and delivered in the State
of Texas and shall be construed and enforced in accordance with the laws of such
state.
9. Original Copies. This agreement is executed in more than one
counterpart, each of which shall be deemed an original.
10. Headings. The underlined headings herein are for convenience only
and shall not affect the interpretation of this agreement.
11. Notices. Section 26 of the Lease shall be amended to reflect that
the address for notice for Assignee shall be:
Cardinal Health, PTS, LLC
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attn: Legal Department
(THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
3
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties as of the date written above.
Witnesses: ▇▇▇▇▇ LABORATORIES, INC.
d/b/a ▇▇▇▇▇ RESPIRATORY THERAPEUTICS
---------------------------------
Print Name: By:
---------------------- ----------------------------------
Name:
Title:
---------------------------------
Print Name:
---------------------
---------------------------------- CARDINAL HEALTH PTS, LLC
Print Name:
---------------------
By:
----------------------------------
--------------------------------- Name:
Print Name: Title:
---------------------
--------------------------------- THE ESTATE OF ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, DECEASED
Print Name:
---------------------
By:
----------------------------------
--------------------------------- Name:
Title:
Print Name:
---------------------
4
Exhibit A-2
▇▇▇▇ OF SALE
KNOW ALL MEN BY THESE PRESENTS that, pursuant to the terms and conditions
of that certain Asset Purchase Agreement, dated as of March 24, 2004, by and
between ▇▇▇▇▇ Laboratories, Inc., a Texas corporation d/b/a ▇▇▇▇▇ Respiratory
Therapeutics ("Seller") and Cardinal Health PTS, LLC, a Delaware limited
liability company ("Purchaser") (the "Asset Purchase Agreement"), Seller, for
good and valuable consideration (the receipt and sufficiency of which is hereby
acknowledged), does hereby grant, sell, convey, assign, transfer and deliver
unto Purchaser to have, and to hold forever, the following (capitalized terms
used but not otherwise defined herein shall have the respective meanings given
to such terms in the Asset Purchase Agreement):
All of its right, title and interest in and to Purchased Assets that
can be transferred pursuant to an instrument of this kind including
without limitation the Inventory, the Tangible Personal Property
(including without limitation the items set forth on SCHEDULE
1.1.1(b) of the Disclosure Schedule) and copies of the Books and
Records, in each case free and clear of all mortgages, liens,
pledges, security interests, charges, claims, restrictions and other
encumbrances and defects of title of any nature whatsoever except
for Permitted Liens.
This ▇▇▇▇ of Sale is being executed in connection with, and is subject to
all representations, warranties, covenants and agreements set forth in the Asset
Purchase Agreement and shall neither add to nor detract from the Asset Purchase
Agreement.
Seller covenants and agrees, at all times and from time to time hereafter,
that it will make, do, execute and deliver such further instruments, acts,
consents, and assurances as Purchaser may reasonably request to more effectively
sell, convey, transfer to and vest in Purchaser all of the right, title and
interest in and to the Tangible Personal Property.
This ▇▇▇▇ of Sale shall be governed and controlled as to validity,
enforcement, interpretation, construction, effect and in all other respects by
the laws of Delaware. Except for the Asset Purchase Agreement and the other
closing documents executed by Seller and Purchaser pursuant to it, this ▇▇▇▇ of
Sale records the entire understanding between the parties regarding the sale and
purchase of the Inventory and Tangible Personal Property, and supersedes any
previous or contemporaneous agreement, understanding, or representation, oral or
written, by either of them.
Seller further covenants and agrees that the covenants herein contained
shall be binding upon its successors and assigns.
IN WITNESS WHEREOF, this ▇▇▇▇ of Sale has been duly executed and delivered
by a duly authorized officer of Seller on this 1st day of April, 2004.
SELLER:
▇▇▇▇▇ LABORATORIES, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Exhibit A-3
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into as of April
1, 2004, by and between ▇▇▇▇▇ Laboratories, Inc., a Texas corporation d/b/a
▇▇▇▇▇ Respiratory Therapeutics, ("Assignor"), and Cardinal Health PTS, LLC, a
Delaware limited liability company ("Assignee").
RECITALS
WHEREAS, Assignor and Assignee are parties to that certain Asset
Purchase Agreement, dated as of March 24, 2004, by and between Assignor and
Assignee (the "Asset Purchase Agreement"), pursuant to which Assignor is selling
to Assignee the Transferred Business, including the Purchased Assets, all as
more particularly described in the Asset Purchase Agreement; and
WHEREAS, pursuant to the terms and conditions of the Asset Purchase
Agreement, Assignor desires to assign and Assignee desires to assume the Assumed
Contracts, the Authorizations and the Assumed Liabilities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, Assignor and Assignee agree
as follows:
1. Assignment of Assumed Contracts, Authorizations and Assumed Liabilities.
Assignor hereby assigns and transfers to Assignee all of its right, title and
interest in and to the Assumed Contracts, the Authorizations and the Assumed
Liabilities.
2. Acceptance of Assignment and Assumption of Assumed Liabilities. Assignee
hereby agrees to and accepts the assignment under Section 1 above and, except as
provided in Section 1.4.2 of the Asset Purchase Agreement, hereby assumes and
covenants to keep, perform and fulfill from and after the date hereof the
executory portion of the terms, covenants, conditions and obligations of each of
the Assumed Contracts, the Authorizations and the Assumed Liabilities required
to be kept, performed and fulfilled from and after the date hereof by Assignor
thereunder, subject to, in the case of any Assumed Contract or Authorization
which requires consent to assignment, the receipt of any required consent.
3. Effectiveness; Conflicts. Assignor and Assignee acknowledge and agree that
the effectiveness of this Assignment and Assumption Agreement is contingent
upon, and subject to, the Closing. If any provision of this Assignment and
Assumption Agreement conflicts with any provision of the Asset Purchase
Agreement, the provision of the Asset Purchase Agreement shall control.
4. Successors and Assigns. This Assignment and Assumption Agreement shall inure
to the benefit of, and be binding upon, the respective successors and assigns of
the parties hereto. No further assignment shall relieve Assignee of primary
liability hereunder except as specifically agreed to in writing by the parties
hereto.
5. Amendment; Waiver. Neither this Assignment and Assumption Agreement, nor any
of the terms or provisions hereof, may be amended, modified, supplemented or
waived, except by a written instrument signed by the parties hereto (or, in the
case of a waiver, by the party granting such waiver). No waiver of any of the
provisions of this Assignment and Assumption Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver. No failure of any party hereto
to insist upon strict compliance by any other party with any obligation,
covenant, agreement or condition contained in this Assignment and Assumption
Agreement shall operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
6. Further Assurances. Each of the parties hereto, at all times and from time to
time hereafter, and upon every reasonable written request to do so by another
party hereto, shall make, do, execute and deliver, or cause to be made, done,
executed and delivered, all such further acts, deeds, assurances and things as
may be reasonably required in order to further implement and carry out the
intent and purpose of this Assignment and Assumption Agreement.
7. Counterparts. This Assignment and Assumption Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
8. Governing Law. This Assignment and Assumption Agreement shall be governed in
all respects, including validity, interpretation and effect, by the internal
laws of the State of Delaware without regard to the principles of conflict of
laws thereof.
9. Definitions. Capitalized terms used but not otherwise defined herein shall
have the respective meanings given to such terms in the Asset Purchase
Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
Executed as the day and year first above written.
ASSIGNOR: ASSIGNEE:
▇▇▇▇▇ LABORATORIES, INC. CARDINAL HEALTH PTS, LLC
By: By:
--------------------------- ---------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
Exhibit B
COMMERCIAL SERVICES AGREEMENT
This Commercial Services Agreement ("AGREEMENT"), dated as of April 1,
2004, is between Cardinal Health PTS, LLC, a Delaware limited liability company
("CARDINAL") and ▇▇▇▇▇ Laboratories, Inc., a Texas corporation d/b/a ▇▇▇▇▇
Respiratory Therapeutics ("▇▇▇▇▇").
RECITALS
WHEREAS, Cardinal and ▇▇▇▇▇ are parties to that certain Asset Purchase
Agreement (the "PURCHASE AGREEMENT") dated March 24, 2004, pursuant to which
▇▇▇▇▇ agreed to sell and Cardinal agreed to purchase certain assets on the terms
and conditions set forth therein; and
WHEREAS, in connection with the Purchase Agreement, Cardinal and ▇▇▇▇▇ are
entering into a Supply Agreement (the "SUPPLY AGREEMENT"), pursuant to which
Cardinal is agreeing to manufacture and sell and ▇▇▇▇▇ is agreeing to purchase
certain products on the terms and conditions set forth therein; and
WHEREAS, as a material inducement for Cardinal to consummate the
transactions contemplated by the Purchase Agreement and to commit to perform the
services contemplated by the Supply Agreement, ▇▇▇▇▇ has agreed that Cardinal
shall be ▇▇▇▇▇' preferred provider of marketing, sales, logistics, development,
analytical and other services and as a material inducement for ▇▇▇▇▇ to
consummate the transactions contemplated by the Purchase Agreement and to commit
to purchase products as contemplated by the Supply Agreement, Cardinal has
agreed to provide favorable pricing to ▇▇▇▇▇ for certain services, in each case
on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the promises
set forth in this Agreement, the parties agree as follows:
1. DEFINITIONS.
(a) "▇▇▇▇▇ PRODUCT" means all products for which ▇▇▇▇▇ now has or during
the term of this Agreement obtains the rights to market or sell including
without limitation products currently marketed under the Mucinex(R) brand, the
ALLERx(R) brand, the Aquatab(R) brand or any replacement or successor brand of
such brands and also includes any experimental (pre-commercial) product.
(b) "AFFILIATE" as applied to Cardinal or ▇▇▇▇▇ shall mean any legal
entity other than Cardinal or ▇▇▇▇▇, as the case may be, in whatever country
organized, controlling, controlled by or under common control with Cardinal or
▇▇▇▇▇. An entity is deemed to be in control of another entity (controlled
entity) if the former owns directly or indirectly at least fifty percent (50%),
or the maximum percentage allowed by law in the country of the controlled
entity, of the outstanding voting equity securities of the controlled entity (or
other equity or ownership interest if such controlled entity is other than a
corporation) or otherwise has the power to direct or cause the direction of the
management of the controlled entity.
(c) "COMMERCIAL OUTSOURCE ACTIVITY" means marketing, sales, logistics,
development, analytical and other services that support or are intended to
support the
commercialization of ▇▇▇▇▇ Products if such services (a) are services of the
type that Cardinal (together with its Affiliates) possesses (or can reasonably
be expected to possess within the applicable timeframe) the means to provide and
(b) are not Excluded Activities. Notwithstanding anything contained herein,
Commercial Outsource Activities do not include development or analytical
services provided by Cardinal with respect to Mucinex(R) or any Mucinex(R) line
extension pursuant to the Transition Services Agreement between ▇▇▇▇▇ and
Cardinal dated as of the date of this Agreement. Without limiting the generality
of the foregoing, a "Commercial Outsource Activity" includes: (i) product
formulation; (ii) product development (including activities to develop an
enhanced, next-generation or line extension of an ▇▇▇▇▇ Product); (iii)
manufacture of samples or products for clinical testing or commercial sale; (iv)
packaging of samples or products for clinical testing or commercial sale; (v)
supply or distribution of samples or products for clinical testing or commercial
sale; (vi) product sales and marketing services; (vii) funding or other
risk-sharing arrangement with respect to the conduct of clinical trials of an
▇▇▇▇▇ Product; and (viii) other goods or services related to the development,
manufacture or distribution of pharmaceutical or health care products of a type
regularly provided by Cardinal or its Affiliates.
(d) "EXCLUDED ACTIVITY" means services relating to an ▇▇▇▇▇ Product that
are performed by employees of ▇▇▇▇▇ in the ordinary course of business or
product sales and marketing services set forth in Section 1(c)(vi) performed by
a Major Pharmaceutical Enterprise that acquires exclusive rights to market the
relevant ▇▇▇▇▇ Product. For the avoidance of doubt, Excluded Activities, as that
term relates to a Major Pharmaceutical Enterprise or its Affiliates, do not
include any of those Commercial Outsource Activities set forth in Section 1(c)
other than Section 1(c)(vi).
(e) "MAJOR PHARMACEUTICAL ENTERPRISE" means (i) a company which, together
with its Affiliates, had worldwide annual revenues from the sale of prescription
and/or over the counter pharmaceutical, health care or personal care products in
excess of $2 billion during its most recently completed fiscal year and (ii) any
Affiliates of such company.
2. PREFERRED PROVIDER; GRANT OF RIGHT OF FIRST REFUSAL. During the term of
this Agreement, in connection with any proposed arrangement for Commercial
Outsource Activities required by ▇▇▇▇▇, Cardinal shall have a right of first
refusal, should ▇▇▇▇▇ seek to source any Commercial Outsource Activities with a
provider (other than Cardinal or its Affiliates), unless Cardinal (together with
its Affiliates) does not then possess (or cannot reasonably be expected to
possess within the applicable timeframe) the means to provide such Commercial
Outsource Activities to ▇▇▇▇▇. In connection with any Commercial Outsource
Services, ▇▇▇▇▇ shall submit to Cardinal a written request for a proposal
specifying ▇▇▇▇▇'▇ requirements for the Commercial Outsource Services, including
reasonably prescribed specifications, standards for materials, quality,
delivery, pricing and/or service support (the "PERFORMANCE REQUIREMENTS").
Within thirty (30) days of the receipt of ▇▇▇▇▇' Performance Requirements,
Cardinal shall submit a proposal to ▇▇▇▇▇ for the provision of the relevant
Commercial Outsource Services or such portion of such services as Cardinal
possesses (or can reasonably be expected to possess within the applicable
timeframe) the means to provide, proposed pricing and evidence of its ability to
satisfy the Performance Requirements (the "PROPOSAL"). The parties shall then
negotiate in good faith to reach agreement on applicable pricing and/or any
changes to the Performance Requirements and on a definitive agreement for the
Commercial Outsource Services. If the parties do not reach an agreement for the
provision of the Commercial Outsource Services within thirty (30) days of ▇▇▇▇▇'
receipt of the Proposal (each a "Rejected Commercial Outsource Service), then
▇▇▇▇▇ shall be free to source such Rejected Commercial Outsource Services with
an alternate provider (other than ▇▇▇▇▇ or its
2
Affiliates) so long as the material terms and/or conditions of the arrangement
with the alternate provider are more favorable to ▇▇▇▇▇ than the corresponding
material terms and/or conditions offered by Cardinal in the Proposal or the
subsequent negotiations between Cardinal and ▇▇▇▇▇.
3. REPRESENTATIONS AND WARRANTIES:
(a) DUE AUTHORIZATION. ▇▇▇▇▇ represents and warrants that this Agreement
has been duly authorized by all necessary corporate action on the part of ▇▇▇▇▇,
has been duly executed by a duly authorized officer of ▇▇▇▇▇ and constitutes a
valid and binding obligation of ▇▇▇▇▇. Cardinal represents and warrants that
this Agreement has been duly authorized by all necessary corporate action on the
part of Cardinal, has been duly executed by a duly authorized officer of
Cardinal and constitutes a valid and binding obligation of Cardinal.
(b) NO CONFLICTS. ▇▇▇▇▇ hereby represents and warrants that neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated by it will violate or result in any violation of or be
in conflict with or constitute a default under any term of the organizational
documents of ▇▇▇▇▇ or any agreement, instrument, judgment, decree, law, rule or
order applicable to ▇▇▇▇▇. Cardinal hereby represents and warrants that neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated by it will violate or result in any violation of or be
in conflict with or constitute a default under any term of the organizational
documents of Cardinal or any agreement, instrument, judgment, decree, law, rule
or order applicable to Cardinal.
4. MISCELLANEOUS.
(a) TERMINATION. This Agreement will terminate upon the earlier of (i) the
termination of the Supply Agreement or (ii) the mutual agreement of the Cardinal
and ▇▇▇▇▇.
(b) PARTIAL INVALIDITY. In the event one or more terms of this Agreement
are found to violate the provisions of any applicable statute, law or
regulation, the parties hereto shall negotiate in good faith to modify this
Agreement, but only to the extent necessary to make this Agreement valid and
enforceable, having full regard for applicable laws and the intent and purposes
of the parties entering into this Agreement.
(c) INDEPENDENT CONTRACTOR. The parties hereto are independent contractors
under this Agreement and neither of the parties hereto shall have any right or
authority to assume or create any obligations on behalf of, or in the name of
any other party hereto or to bind the other party hereto to any contract,
agreement or undertaking with any third party without the written consent of the
other party hereto.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties relating to the subject matter of this Agreement, and this
Agreement may not be amended or modified, unless such amendment or modification
is in writing and signed by a duly authorized representative of each party.
(e) ASSIGNABILITY. Neither party shall assign this Agreement other than to
Affiliates; however, in the event of any assignment, performance shall be
guaranteed by the assignor in form satisfactory to the other party.
(f) SUCCESSORS AND PERMITTED ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the permitted successors or permitted assigns of
Cardinal and
3
▇▇▇▇▇ respectively.
(g) NOTICES. Any and all notices provided for shall be sent to the
respective parties at the following addresses by certified or registered mail or
sent by a nationally-recognized overnight courier service:
If to Cardinal: Cardinal Health PTS, LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President, Modified Release Technologies
Facsimile No.: 732.537.6491
With a copy to: Cardinal Health PTS, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Vice President and Associate General
Counsel, Pharmaceutical Technologies & Services
Facsimile No.: 614.757.5051
If to ▇▇▇▇▇: ▇▇▇▇▇ Laboratories, Inc.
d/b/a ▇▇▇▇▇ Respiratory Therapeutics
Colonial Court
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., General
Counsel, Vice-President and Secretary
Facsimile No.: 908.879.9784
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: 973.503.5950
or to such other addresses as may be subsequently furnished by one party to the
other in writing. Any such notice shall be deemed effective from the date of
mailing.
(h) GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to its conflict
of laws provisions.
(i) COUNTERPARTS. This Agreement may be executed in multiple counterparts,
which may be delivered by facsimile, each of which shall have the force and
effect of an original.
(j) DESCRIPTIVE HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
4
NOW THEREFORE, on the date first above written, the parties have duly
executed this COMMERCIAL SERVICES AGREEMENT.
CARDINAL HEALTH PTS, LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
▇▇▇▇▇ LABORATORIES, INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
5
Exhibit C
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "AGREEMENT") made as of the 1st day of April,
2004 (the "EFFECTIVE DATE"), by and between Cardinal Health PTS, LLC, a Delaware
limited liability company ("CARDINAL"), and ▇▇▇▇▇ Laboratories, Inc., a Texas
corporation, d/b/a ▇▇▇▇▇ Respiratory Therapeutics ("▇▇▇▇▇").
RECITALS
1. Concurrent with executing this Agreement, Cardinal and ▇▇▇▇▇ are
completing the closing of that certain Asset Purchase Agreement between Cardinal
and ▇▇▇▇▇ dated March 24, 2004 ("ASSET PURCHASE AGREEMENT") providing for the
purchase by Cardinal from ▇▇▇▇▇ of certain assets related to manufacturing
activities.
2. In connection with the Asset Purchase Agreement, ▇▇▇▇▇ has agreed to
enter into this Agreement pursuant to which Cardinal will be the exclusive
supplier of certain drug products for ▇▇▇▇▇.
NOW, THEREFORE, in consideration of the premises, which are incorporated
herein by reference, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, it is agreed between the parties as
follows:
ARTICLE I - DEFINITIONS
1.1 "ACT" shall mean the Federal Food, Drug, and Cosmetic Act located at
21 U.S.C. Sections 301 to 397 (2000), as it may be amended from time to
time, and regulations promulgated thereunder.
1.2 "AFFILIATE" as applied to Cardinal or ▇▇▇▇▇ shall mean any legal
entity other than Cardinal or ▇▇▇▇▇, as the case may be, in whatever country
organized, controlling, controlled by or under common control with Cardinal or
▇▇▇▇▇. An entity is deemed to be in control of another entity (controlled
entity) if the former owns directly or indirectly at least fifty percent (50%),
or the maximum percentage allowed by law in the country of the controlled
entity, of the outstanding voting equity of the controlled entity (or other
equity or ownership interest if such controlled entity is other than a
corporation) or otherwise has the power to direct or cause the direction of the
management of the controlled entity.
1.3 "ALTERNATE FACILITY" shall mean a processing site of Cardinal or one
of its Affiliates other than the Facility, as designated by Cardinal and
approved by ▇▇▇▇▇, such approval not to be unreasonably withheld or delayed.
1.4 "BATCH" shall mean the regular manufacturing increment of Drug Product
pursuant to the Specifications.
1.5 "CGMPS" shall mean all applicable current Good Manufacturing Practices
promulgated by the FDA pursuant to the Act.
1.6 "CONTRACT YEAR" shall mean a twelve (12) consecutive month period
commencing on April 1, 2004, and each succeeding April 1 during the term of this
Agreement.
1.7 "DRUG PRODUCTS" shall mean any Mucinex(R), Mucinex(R) D, Mucinex(R) DM
products, AlleRx(R) products, Aquatab(R) products and any and all other
prescription or over-the-counter pharmaceutical or health-related products for
which ▇▇▇▇▇ has, as of the date hereof, the right to market or sell; provided,
however, that "Drug Products" shall exclude any and all liquid products for
which, as of the Effective Date, ▇▇▇▇▇ has the right to market or sell.
1.8 "FACILITY" shall mean Cardinal's manufacturing site located in Fort
Worth, Texas, or such other Cardinal facility designated by Cardinal and
approved in writing by ▇▇▇▇▇, such approval not to be unreasonably withheld or
delayed.
1.9 "FDA" shall mean the United States Food and Drug Administration, or
any successor entity thereto.
1.10 "NEW DRUG PRODUCTS" shall mean any prescription or over-the-counter
pharmaceutical or health-related products or product kits for which ▇▇▇▇▇
acquires the right to market or sell during the term of this Agreement.
1.11 "SPECIFICATIONS" shall mean the written specifications for the
manufacturing and packaging of the Drug Products attached hereto as Exhibit A
and made a part hereof, as such document may be revised by ▇▇▇▇▇ and agreed to
by Cardinal from time to time during the term of this Agreement.
1.12 "STARTING MATERIALS" shall mean (a) those consigned finished goods
components for inclusion in drug product kits, and (b) such other materials as
the parties hereto shall agree on in writing from time to time, which ▇▇▇▇▇
shall deliver to Cardinal.
1.13 "THIRD PARTY" means any person, firm or corporate body other than
Adams, Cardinal, an ▇▇▇▇▇ Affiliate or a Cardinal Affiliate.
ARTICLE II - OWNERSHIP OF PROPRIETARY
INFORMATION AND CONFIDENTIALITY
2.1 Grant of License. Subject to the terms and conditions hereinafter set
forth and except as otherwise provided herein, ▇▇▇▇▇ hereby grants Cardinal a
non-exclusive, worldwide, non-transferable, royalty-free license to use ▇▇▇▇▇'
intellectual property rights with respect to each of the Drug Products,
including without limitation ▇▇▇▇▇' patents, copyrights, trademarks, trade
secrets and know-how solely in connection with the performance by Cardinal of
the manufacturing services hereunder. Cardinal acknowledges that all right,
title and interest in the Drug Products and all ▇▇▇▇▇ Confidential Information
(as hereinafter defined) shall remain
2
vested solely in ▇▇▇▇▇. All rights not expressly granted to Cardinal herein are
hereby reserved by ▇▇▇▇▇ and such reserved rights may be exercised by ▇▇▇▇▇
concurrently with the rights licensed by Cardinal hereunder.
2.2 Retention of Intellectual Property Rights. ▇▇▇▇▇ acknowledges and
agrees that Cardinal owns certain intellectual property rights related to
Cardinal's manufacturing processes and that Cardinal is not transferring any
such rights to ▇▇▇▇▇.
2.3 Confidentiality.
(a) Whether or not disclosed prior to or after the date hereof,
▇▇▇▇▇ shall not disclose to any person (other than Cardinal or any Cardinal
Affiliate) in any manner, directly or indirectly, any confidential or
proprietary information or data of Cardinal or any Cardinal Affiliate whether of
a technical or commercial nature ("CONFIDENTIAL INFORMATION"), or use or assist
any person (other than any Cardinal Affiliates) to use, in any manner, directly
or indirectly, any Confidential Information, excepting only use of such data or
information as is at the time generally known to the public and which did not
become generally known through the breach of any provisions of this Agreement.
As used in this Agreement, Confidential Information includes but is not limited
to any and all (i) computer software proprietary to any Cardinal Affiliate,
together with all documentation for any such software, (ii) confidential,
proprietary or trade secret information submitted to any Cardinal Affiliate in
confidence by its suppliers, employees, consultants, customers or others, and
(iii) information of any Cardinal Affiliate concerning operations, customers or
prospects, terms and conditions of sale and prices, technical knowledge relating
to customer requirements, and knowledge of markets for its products and
services. ▇▇▇▇▇ acknowledges that all information, whether falling within the
above definition or otherwise (unless specifically excepted above), shall be
presumed to be Confidential Information if any Cardinal Affiliate takes measures
designed to prevent it, in the ordinary course of business, from being available
to persons other than those selected by Cardinal Affiliates to have access
thereto for limited purposes. All information disclosed to ▇▇▇▇▇ or its
Affiliates or to which ▇▇▇▇▇ or its Affiliates obtains access, which such person
has reasonable basis to believe to be Confidential Information, or which such
person has reasonable basis to believe that any Cardinal Affiliate treats as
being Confidential Information, shall be presumed to be Confidential
Information. Notwithstanding the foregoing, this Section 2.3(a) shall not
restrict ▇▇▇▇▇ from using or disclosing information related to Cardinal or any
Cardinal Affiliate properly obtained in the course of other business
relationships for any proper purpose otherwise permitted.
(b) Whether or not disclosed prior to or after the date hereof, the
Cardinal Affiliates shall not disclose to any person in any manner, directly or
indirectly, any confidential or proprietary information or data of ▇▇▇▇▇ whether
of a technical or commercial nature ("▇▇▇▇▇ CONFIDENTIAL INFORMATION"), or use
or assist any person (other than ▇▇▇▇▇ or any of ▇▇▇▇▇'▇ Affiliates) to use, in
any manner, directly or indirectly, any ▇▇▇▇▇ Confidential Information,
excepting only use of such data or information as is at the time generally known
to the public and which did not become generally known through the breach of any
provisions of this Agreement. As used in this Agreement, ▇▇▇▇▇ Confidential
Information includes but is not limited to any and all (i) computer software
proprietary to ▇▇▇▇▇, together with all documentation for any such software,
(ii) confidential, proprietary or trade secret information
3
submitted to ▇▇▇▇▇ in confidence by its suppliers, employees, consultants,
customers or others, and (iii) information of ▇▇▇▇▇ or any of its Affiliates
concerning operations, customers or prospects, terms and conditions of sale and
prices, technical knowledge relating to customer requirements, and knowledge of
markets for its products and services. Cardinal acknowledges that all
information, whether falling within the above definition or otherwise, shall be
presumed to be ▇▇▇▇▇ Confidential Information if ▇▇▇▇▇ or any of its Affiliates
takes measures designed to prevent it, in the ordinary course of business, from
being available to persons other than those selected by ▇▇▇▇▇ or its Affiliates
to have access thereto for limited purposes. All information disclosed to
Cardinal Affiliates or to which Cardinal Affiliates obtain access, which such
person has reasonable basis to believe to be ▇▇▇▇▇ Confidential Information, or
which such person has reasonable basis to believe ▇▇▇▇▇ or its Affiliates treats
as being ▇▇▇▇▇ Confidential Information, shall be presumed to be ▇▇▇▇▇
Confidential Information.
(c) Cardinal shall have no right to use Seller Proprietary Rights
(as such term is defined in the Asset Purchase Agreement) except as reasonably
necessary to perform its obligations hereunder, under an agreement relating to
New Drug Products or as otherwise authorized by ▇▇▇▇▇. ▇▇▇▇▇ acknowledges that
Transferred Know-How (as such term is defined in the Asset Purchase Agreement)
does not constitute ▇▇▇▇▇ Confidential Information and nothing in this Agreement
shall limit Cardinal's rights relating to Transferred Know-How.
ARTICLE III - SUPPLY OF DRUG PRODUCTS
AND NEW DRUG PRODUCTS
3.1 Supply of Drug Products. ▇▇▇▇▇ will purchase exclusively from
Cardinal, and Cardinal will be the exclusive, worldwide supplier to ▇▇▇▇▇ for,
all of ▇▇▇▇▇' and its Affiliates' requirements of Drug Products for the term of
this Agreement. Sales of Drug Products by Affiliates of ▇▇▇▇▇ or ▇▇▇▇▇'
development or marketing collaborators shall be deemed to be made by ▇▇▇▇▇ for
this purpose, and Cardinal may assign to those of its Affiliates approved in
writing by ▇▇▇▇▇, as appropriate, responsibilities for compliance or partial
compliance with Cardinal's responsibilities hereunder, such approval not to be
unreasonably withheld or delayed.
3.2 Supply of New Drug Products; *. Concurrent with the Closing under the
Asset Purchase Agreement, the parties are entering into a Commercial Services
Agreement (the "COMMERCIAL SERVICES AGREEMENT"). During the term of this
Agreement, in connection with the supply of any New Drug Product required by
▇▇▇▇▇, Cardinal shall be the exclusive supplier to ▇▇▇▇▇ of any such New Drug
Product unless Cardinal (together with its Affiliates) does not then possess (or
cannot reasonably be expected to possess within the applicable timeframe) the
means to supply such New Drug Product to ▇▇▇▇▇. * In connection
4
----------------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
with any New Drug Product, ▇▇▇▇▇ shall submit to Cardinal a written request for
a proposal specifying ▇▇▇▇▇'▇ requirements for the New Drug Product, including
reasonably prescribed specifications, standards for materials, quality,
delivery, pricing and service support which shall be substantially identical to
the corresponding terms of this Agreement except to the extent that the supply
of such New Drug Product mandates otherwise (the "PERFORMANCE REQUIREMENTS").
Within sixty (60) days of the receipt of ▇▇▇▇▇' Performance Requirements,
Cardinal shall submit a proposal to ▇▇▇▇▇ for the manufacture and supply of, and
provision of services in respect to, the New Drug Product including a production
plan (which shall include a milestone schedule for production of any required
testing and for commercial supply), proposed pricing and evidence of its ability
to satisfy the Performance Requirements (the "SUPPLY PROPOSAL"). The parties
shall then negotiate in good faith to reach agreement on applicable pricing
and/or any changes to the Performance Requirements and on a supply agreement for
the New Drug Product. Any such supply agreement shall include terms and
conditions that are substantially identical to the corresponding terms and
conditions set forth in this Agreement except (i) as provided above with respect
to Performance Requirements, (ii) for provisions herein that directly relate to
pricing based on profit sharing, (iii) Section 13.2(b) shall not apply, (iv)
compensation and appropriate representations shall be provided in the event that
Cardinal licenses or otherwise makes available to ▇▇▇▇▇ proprietary rights of
Cardinal (e.g., proprietary drug delivery systems), and (v) as otherwise agreed
by the parties. If the parties do not reach an agreement for the supply of the
New Drug Product within sixty (60) days of ▇▇▇▇▇' receipt of the Supply
Proposal, then any unresolved matters shall be deemed to be a Dispute subject to
resolution in accordance with Section 14.4. In the case of a New Drug Product or
a finished goods component of a New Drug Product (i.e., a kit) which Cardinal is
unable to manufacture, ▇▇▇▇▇ will be free to source such New Drug Product or
component, as the case may be, as a Starting Material from a Third Party. In
case of a finished goods component of a New Drug Product sourced from a Third
Party, ▇▇▇▇▇ will procure and provide such Starting Material on consignment for
inclusion by Cardinal in the kit.
3.3 Failure to Supply. In order to ensure continuity of supply, in the
event of a failure by Cardinal to supply Drug Products to ▇▇▇▇▇ for a period of
thirty (30) days, ▇▇▇▇▇ and its Affiliates shall be entitled to make or have
made a replacement supply of any affected Drug Product from a Third Party,
without incurring any liability under this Agreement. In such event, Cardinal
shall cooperate with ▇▇▇▇▇ and such Third Party to effectuate the royalty-free
and limited transfer of manufacturing know-how from Cardinal to ▇▇▇▇▇ or such
Third Party, as appropriate, to enable ▇▇▇▇▇ or the Third Party to manufacture
and package the affected Drug Product. Cardinal agrees to use commercially
reasonable efforts to enable ▇▇▇▇▇ or such Third Party to qualify and validate
the Third Party's facilities and to enable the Third Party to manufacture and
package the affected Drug Product(s). Notwithstanding the foregoing, the parties
hereto acknowledge and agree that no such recourse to a Third Party shall take
place so long as Cardinal or a Cardinal Affiliate shall have (x) a validated
Alternate Facility at which the affected Drug Product(s) is(are) able to be
readily manufactured and packaged in accordance with the Specifications, or (y)
safety stock inventory of the affected Drug Product(s), in the case of each of
(x) and (y), sufficient to meet any Purchase Order of ▇▇▇▇▇ for the Drug
Products pursuant to Section 4.2 hereof. If ▇▇▇▇▇ is forced to resort to a Third
Party supplier, Cardinal shall provide ▇▇▇▇▇ with sixty (60) days' prior written
notice of the date it will be able to re-commence manufacturing Drug Product.
Such Third Party shall be entitled to continue to
5
manufacture and supply normal quantities of the affected Drug Product(s) to
▇▇▇▇▇ until the expiration of such sixty (60) days' notice, upon which date
manufacturing and supply operations in respect of the affected Drug Product(s)
shall be transferred back to Cardinal and the royalty-free and limited transfer
of manufacturing know-how from Cardinal to ▇▇▇▇▇ or such Third Party shall be
terminated. In the event that ▇▇▇▇▇ obtains any Drug Product from a Third Party
upon occurrence of any manufacturing and/or supply interruption pursuant to this
Section 3.3, then Cardinal shall reimburse ▇▇▇▇▇ for the reasonable cost of such
Drug Product, including without limitation, the cost of validating the
manufacture and packaging of the Drug Products by or in connection with a Third
Party. Notwithstanding the foregoing, if Cardinal's inability to supply any Drug
Product is attributable to a breach by ▇▇▇▇▇ under the Asset Purchase Agreement
or is attributable to the fault of ▇▇▇▇▇ (including without limitation the
provision by ▇▇▇▇▇ of forecasts that do not provide Cardinal with a reasonable
opportunity to expand and validate production capacity), then ▇▇▇▇▇ shall bear
all costs and related expenses incurred by ▇▇▇▇▇ in connection with obtaining
such Drug Product from a Third Party. In the event that Cardinal's inability to
supply any Drug Product is attributable in part to the fault of ▇▇▇▇▇ and in
part to reasons other than the fault of ▇▇▇▇▇, then Cardinal shall be
responsible for that portion of the costs and related expenses incurred by ▇▇▇▇▇
that is reasonably allocable to the reasons other than the fault of ▇▇▇▇▇ and
▇▇▇▇▇ shall be responsible for the remaining costs and related expenses. For
clarification, costs borne by Cardinal under this Section shall not constitute
Cost of Goods for purposes of determining the sharing of Gross Profits and costs
borne by ▇▇▇▇▇ under this Section shall constitute Cost of Goods Sold for
purposes of determining the sharing of Gross Profits. For example, if Cardinal
bears the costs of a third party supplying Drug Products pursuant to this
Section 3.3, then the Cost of Goods for such Drug Products shall be deemed to be
zero and, accordingly, the Gross Profits for such Drug Products shall be equal
to the Net Sales of such Drug Products.
3.4 Designated Facility. Cardinal shall manufacture the Drug Products for
the worldwide market in the Facility or an Alternate Facility. Notwithstanding
the foregoing, the parties hereto agree that the requirement to validate an
Alternate Facility and the allocation of costs and expenses related thereto
shall be borne as follows:
(a) Cardinal shall validate an Alternate Facility for fluid bed drying
(with capacity reasonably comparable to the capacity for fluid bed drying at the
Facility) in accordance with the Specifications as soon as practicable after the
effective date of this Agreement. The cost of validating the Alternate Facility
for fluid bed drying shall be borne equally by the parties hereto.
(b) Cardinal shall validate an Alternate Facility at which the Drug
Products are able to be readily manufactured and packaged in accordance with the
Specifications (other than the fluid bed drying pursuant to Section 3.4(a)
above):
(i) if Cardinal, on its own accord and for reasons unrelated to
business decisions made by ▇▇▇▇▇, chooses to validate such Alternate
Facility, in which case Cardinal agrees to and shall bear the cost of such
validation,
(ii) if the forecasts under Section 4.1 hereof demonstrate
additional capacity at the Facility (located in Fort Worth) is required
for Cardinal to fulfill its obligations
6
to ▇▇▇▇▇ under this Agreement, or if ▇▇▇▇▇ requires increased production
capacity or desires such Alternate Facility for business reasons
determined by ▇▇▇▇▇ in its sole discretion, such that the Facility would
not be able to accommodate ▇▇▇▇▇'▇ requirements or Cardinal's obligations
to ▇▇▇▇▇ for the Drug Products or for such other business reasons of
▇▇▇▇▇, in which case ▇▇▇▇▇ agrees to and shall bear the cost of such
validation; or
(iii) if the parties, for reasons other than as provided in clauses
(i) and (ii) of this Section 3.4, mutually agree to arrange for Cardinal
or a Cardinal Affiliate to validate such Alternate Facility, in which case
the parties agree, in good faith, to negotiate the fair allocation of all
costs associated with such validation, and
(c) at ▇▇▇▇▇'▇ sole cost and expense, ▇▇▇▇▇ shall have the right, in its
sole discretion, to validate a facility of its own at which the Drug Products
are able to be readily manufactured and packaged in accordance with the
Specifications.
3.5 Regulatory Approval. ▇▇▇▇▇ will be solely responsible for and will
obtain all governmental approvals, permits and licenses necessary or desirable
in connection with the testing, marketing, sale, advertising or distribution of
the Drug Products in the United States and any other country.
ARTICLE IV - FORECASTS AND ORDERS
4.1 Forecasts. In order to assist Cardinal in planning production, ▇▇▇▇▇
shall provide Cardinal with a twelve (12) month rolling forecast of the
quantities of Drug Products required by ▇▇▇▇▇, by month, for the following
twelve (12) months. It is understood that such forecasts, after the third (3rd)
month, are intended to be good faith estimates only, and shall not be binding
upon ▇▇▇▇▇. Notwithstanding the foregoing, ▇▇▇▇▇ shall be bound to purchase from
Cardinal one hundred percent (100%) of those quantities of Drug Products set
forth in each such forecast as being ▇▇▇▇▇' requirements of Drug Products for
the first three (3) months of each twelve (12) month period. Further, the third
(3rd) month of any forecast may not vary by more than twenty percent (20%) of
the quantity reflected in the prior forecast for the same time period. Cardinal
shall be obligated to deliver, pursuant to Purchase Orders provided under
Section 4.2 of this Agreement, during the first two (2) months of a forecast up
to one hundred percent (100%) of ▇▇▇▇▇' estimated purchases for each of those
calendar months in the immediately preceding forecast and unless Cardinal so
informs ▇▇▇▇▇ that it would have problems in meeting ▇▇▇▇▇' forecasted
requirements, during the third month in any forecast, pursuant to Purchase
Orders provided under Section 4.2 of this Agreement, up to one hundred twenty
percent (120%) of ▇▇▇▇▇' estimated purchases for that calendar month as set
forth in the immediately preceding forecast. Cardinal shall further use
commercially reasonable efforts to comply with Purchase Orders for Products in
excess of such one hundred twenty percent (120%) amount; provided, however, that
such inability to supply amounts in excess of one hundred twenty percent (120%)
shall not constitute a breach of this Agreement by Cardinal. Cardinal shall, no
later than ten (10) business days after receipt of each such forecast, notify
▇▇▇▇▇ in writing of any prospective problems of which it is aware that might
prevent it from meeting ▇▇▇▇▇' forecasted order quantities or estimated delivery
dates.
7
4.2 Binding Purchase Orders. At least ninety (90) days prior to the date
on which ▇▇▇▇▇ desires to have Drug Product delivered, and together with each
forecast referenced in Section 4.1, an authorized representative of ▇▇▇▇▇ shall
furnish to Cardinal a binding purchase order (each, a "PURCHASE ORDER") for the
quantity (specified in terms of a whole number of Batches not less than an
amount agreed upon in writing in good faith for each Drug Product) of Drug
Products which ▇▇▇▇▇ shall purchase and Cardinal shall deliver. Cardinal shall,
within five (5) business days after its receipt of such Purchase Order,
acknowledge such receipt and confirm that the Purchase Order can be supplied.
Should Cardinal fail to do so, then the Purchase Order shall be deemed to have
been accepted by Cardinal. Each such Purchase Order shall designate the quantity
of Drug Products ordered and the date by which Cardinal must deliver the Drug
Products to ▇▇▇▇▇.
4.3 Excess Quantities; Changes in Purchase Requirements. Cardinal shall
use commercially reasonable efforts to accommodate any ▇▇▇▇▇ request for any
Drug Product in excess of the quantities described in any previously-submitted
Purchase Order, or for delivery of any Drug Product sooner than as otherwise
provided in such Purchase Order; provided that, except to the extent included in
the Cost of Goods, for quantities in excess of one hundred twenty percent (120%)
▇▇▇▇▇ shall bear any and all additional costs or expenses (including but not
limited to additional costs or expenses associated with transportation or
insurance related to shipping the Drug Products above such cost and expense
allocations set forth in Section 7.1 hereof) as a result of Cardinal's
compliance with such request. Should ▇▇▇▇▇' business conditions necessitate
reduction or delay in Purchase Order requirements, then Cardinal shall use
commercially reasonable efforts to implement such requested changes; provided
that ▇▇▇▇▇ shall bear any and all additional costs or expenses (including but
not limited to carrying costs or expenses associated with Raw Materials (as
defined in Section 6.2 hereof) or finished goods inventory and additional costs
or expenses associated with transportation or insurance related to shipping the
Drug Products above such cost and expense allocations set forth in Section 7.1)
as a result of Cardinal's compliance with such request. Notwithstanding the
foregoing, Cardinal shall not take any action in response to any such requests
which would result in charges to ▇▇▇▇▇ in addition to those set forth in the
respective Purchase Order without ▇▇▇▇▇' prior written consent. In the event
that ▇▇▇▇▇' actual requirements during the first three months of a forecast for
any Drug Product exceed the amounts specified in the Purchase Order(s) provided
for such Drug Product for such time period pursuant to Section 4.2 and Cardinal
and its Affiliates are unable to supply ▇▇▇▇▇ with such actual requirements for
such Drug Products, then ▇▇▇▇▇ may obtain the amount of Drug Product that
exceeds the amount that Cardinal and its Affiliates are able to supply from a
Third Party. In such event, Cardinal shall cooperate regarding the royalty-free
and limited transfer of manufacturing know-how as provided for in Section 3.3;
provided, however, that (i) for quantities in excess of the amounts specified in
the applicable Purchase Order(s) Cardinal shall not be responsible for any costs
or expenses associated with arranging for or procuring Drug Product from the
Third Party and (ii) Cardinal shall be entitled to receive its share of Gross
Profits related to such Drug Products in the manner provided for in Exhibit C.
ARTICLE V - MANUFACTURING
5.1 Specifications; Technical Assistance. ▇▇▇▇▇ has delivered to Cardinal
complete
8
and accurate Specifications as identified in Exhibit A hereto for each Drug
Product. On and from the Effective Date and for a period of eighteen (18) months
therefrom (the "TECHNICAL ASSISTANCE PERIOD"), ▇▇▇▇▇ shall provide Cardinal with
reasonable levels of technical assistance in respect of technical production
issues relating to the manufacture, quality control, and supply of the Drug
Products in accordance with the Specifications and the Production Procedures (as
defined in Section 5.2 hereof), all at no cost to Cardinal. ▇▇▇▇▇' obligations
under this Section 5.1 shall be limited to the assistance of certain specified
employees of ▇▇▇▇▇ which shall be located within the Facility during the
Technical Assistance Period. Any costs and expense incurred by ▇▇▇▇▇'▇ employees
for such training, including, without limitation, all travel and other expenses,
shall be borne by Cardinal. Should training be required at a location other than
at the Facility, the cost of such technical assistance from such ▇▇▇▇▇'▇
employees, including, for all reasonable travel, living and other expenses,
shall be borne by Cardinal. Any technical assistance provided by ▇▇▇▇▇ to
Cardinal hereunder shall not impede the conduct of business by ▇▇▇▇▇. Following
the expiration or earlier termination of the Technical Assistance Period, all
technical assistance to Cardinal by ▇▇▇▇▇ shall be charged at hourly rates
consistent with industry standards. Nothing in this Section 5.1 shall eliminate
or modify Cardinal's obligations to manufacture, package and supply the Drug
Products in accordance with this Agreement.
5.2 Quality Agreement. Cardinal shall manufacture all Drug Products in
accordance with the Specifications and the Quality Agreement (defined below). If
Cardinal or ▇▇▇▇▇ should wish to change any of the Specifications, such party
shall provide such proposed changes to the other at least ninety (90) days prior
to implementation. All such changes must be approved in writing by both parties
prior to being implemented and shall, if required, be subject to FDA approval.
In the event that regulatory action or applicable law require changes in the
Specifications then, subject to ▇▇▇▇▇' prior written agreement, Cardinal shall
use commercially reasonable efforts to implement such changes as soon as
reasonably practicable. Notwithstanding the foregoing, concomitantly with the
Closing under the Asset Purchase Agreement, the parties hereto agree to and
shall enter into a quality agreement in respect of the manufacture of the Drug
Products (the "QUALITY AGREEMENT"); it being understood that any inconsistencies
between this Section 5.2 and the Quality Agreement shall be governed by and
determined in accordance with this Agreement.
5.3 Compliance with Environmental Laws. Cardinal represents and warrants,
and shall take all actions reasonably necessary to ensure, that the Facility,
any Alternate Facility, the equipment and practices used to perform its
responsibilities under this Agreement by or on behalf of Cardinal, or any of
Cardinal's contractors of any rank (including, without limitation, environmental
or safety and health consultants or waste management or disposal firms) will be
during the term of this Agreement, in full compliance with all health, safety
and environmental laws, statutes, ordinances, regulations, rules, permits and
pronouncements. Cardinal assumes responsibility for disposing of any and all
waste generated during the performance of its responsibilities under this
Agreement (including, without limitation, during any manufacturing, storage and
transportation activities) in accordance with all legal and professional
standards. Notwithstanding anything to the contrary herein, (a) should Cardinal
and/or any Cardinal contractor fail to comply with the obligations set forth in
this Section 5.3, then Cardinal shall be solely responsible for any claims,
suits, or liabilities resulting therefrom (including, without limitation, those
based on strict liability and joint and several liability), and Cardinal shall
9
indemnify, defend and save ▇▇▇▇▇ (including all officers, directors, employees,
Affiliates and agents of ▇▇▇▇▇) harmless from and against any and all such
claims, suits, and liabilities; and (b) Cardinal shall indemnify, defend and
save ▇▇▇▇▇ (including all officers, directors, employees, Affiliates and agents
of ▇▇▇▇▇) harmless from and against any and all claims, suits, and liabilities
which arise directly or indirectly from the storage, release, transportation or
disposal of chemicals, raw materials, product, waste or any other substance by
Cardinal and/or any Cardinal contractor. Notwithstanding the foregoing, ▇▇▇▇▇
shall (x) be solely responsible for any claims, suits, or liabilities resulting
from any violation of any health, safety and environmental laws, statutes,
ordinances, regulations, rules, permits and pronouncements in respect of its
disposal of any and all waste generated by it (including, without limitation,
any claim, suit or liability based on strict liability and joint and several
liability) which occurred prior to the Closing (as defined in the Asset Purchase
Agreement), and (y) indemnify, defend and save Cardinal (including all officers,
directors, employees, Affiliates and agents of Cardinal) harmless from and
against any and all such claims, suits, and liabilities and against any and all
claims, suits, and liabilities which arise directly or indirectly from the
storage, release, transportation or disposal of chemicals, raw materials,
product, waste or any other substance by ▇▇▇▇▇ and/or any ▇▇▇▇▇ contractor which
occurred prior to the Closing (as defined in the Asset Purchase Agreement).
ARTICLE VI - MATERIALS; PRICING ADJUSTMENTS
6.1 Starting Materials. ▇▇▇▇▇ shall deliver the Starting Materials to
Cardinal free of charge to the Facility. Any customs duties and the like arising
from importation of any Starting Material to the Facility shall be borne by
▇▇▇▇▇. The risk of loss or damage of such Starting Materials shall remain with
▇▇▇▇▇ until the Starting Materials are received at the Facility, at which time
risk of loss or damage to the Starting Materials shall shift to Cardinal.
Cardinal shall be responsible for any loss or damage to the Starting Materials
while in Cardinal's custody other than as set forth herein. ▇▇▇▇▇ shall be
compensated for losses of any Starting Materials beyond agreed upon yield
tolerances, in an amount equal to ▇▇▇▇▇'▇ actual net cost to acquire such
Starting Materials.
6.2 Raw Materials. Cardinal shall purchase all raw and packaging
materials, other than the Starting Materials, necessary to process the Drug
Products (the "RAW MATERIALS"), and shall use only those Raw Materials suppliers
that are pre-approved by ▇▇▇▇▇ (specifically including any such suppliers
identified in the disclosure schedules to the Asset Purchase Agreement). Any new
supplier of Raw Materials proposed by Cardinal must be pre-approved in writing
by ▇▇▇▇▇ prior to utilizing any such materials sourced from a new supplier in
the processing of Drug Products, such pre-approval not to be unreasonably
withheld or delayed. All purchases of the Raw Materials shall be made according
to the Specifications for each Raw Material component used in the processing of
the Drug Products. Cardinal shall purchase and schedule deliveries of the Raw
Materials as needed to produce quantities of the Drug Products in accordance
with binding Purchase Orders and the forecasts.
6.3 Pricing Adjustments. ▇▇▇▇▇ and Cardinal shall confer on a regular
basis, but no less than annually, to consider whether new technologies or new
manufacturing methods may exist which likely would reduce Cardinal's cost of
manufacturing the Drug Products. Should any
10
such technologies and/or methods be identified, then the parties shall mutually
agree upon how to allocate the costs of developing and implementing such
technologies and/or methods prior to implementing and/or developing the same.
Cardinal shall use commercially reasonable efforts to minimize obsolescence
(caused by such new technology) by returning Raw Materials to the sources from
which they were acquired, if possible, and employing good faith efforts to use
such obsolete Raw Materials for other purposes, if possible. Cardinal shall
submit supporting documentation on all claims of obsolescence and statements for
reimbursement thereof, and, upon ▇▇▇▇▇' request, Cardinal shall deliver, at
▇▇▇▇▇'▇ sole cost and expense, all such Raw Materials to ▇▇▇▇▇ upon
reimbursement to Cardinal for the net cost to acquire such obsolete Raw
Materials.
ARTICLE VII - SHIPPING; PACKAGING
7.1 Shipping. Title to the Drug Products and all risk of loss or damage to
the Drug Products shall be allocated as follows:
(a) Delivery to Cardinal Affiliate. The parties desire for one of
Cardinal's Affiliates located in Grapevine, Texas and/or Lavergne, Tennessee to
distribute the Drug Products for ▇▇▇▇▇. In the event that such Cardinal
Affiliate is providing distribution services in respect of the Drug Products,
then title to the Drug Products, and all risk of loss or damage in respect
thereto, shall pass to ▇▇▇▇▇ upon delivery of the Drug Products CIP (as such
term is defined and used in Incoterms 2000, ICC Official Rules for
Interpretation of Trade Terms (the "INCOTERMS 2000 RULES") to Cardinal's
Affiliate in Grapevine, Texas or Lavergne, Tennessee; it being understood that
Cardinal shall pay required insurance costs and the cost of carriage to bring
the Drug Products from the Facility to the Cardinal Affiliate location in
Grapevine, Texas and that Cardinal and ▇▇▇▇▇ shall each bear fifty percent (50%)
of the insurance costs and the cost of carriage to bring the Drug Products from
the Facility to the Cardinal Affiliate location in Lavergne, Tennessee.
(b) Delivery to Third Party. In the event that ▇▇▇▇▇ uses a Third Party to
distribute the Drug Products, then title to the Drug Products, and all risk of
loss or damage in respect thereto, shall pass to ▇▇▇▇▇ upon delivery of the Drug
Products FCA (as such term is defined and used in the Incoterms 2000 Rules) at
Cardinal's Facility. Upon the reasonable request of ▇▇▇▇▇, Cardinal shall
arrange for shipment of Drug Products on a freight collect basis at the sole
cost and expense of ▇▇▇▇▇.
▇▇▇▇▇ will specify its required mode of transportation and the freight forwarder
in each Purchase Order. All shipments of the Drug Products shall be accompanied
by an invoice, dated as of the date on which delivery of the Drug Products is
made to the carrier, listing the number of such Purchase Order, the item number,
the quantity and the unit price for the Drug Products, the total invoice amount
and such other information as may be required in the relevant Purchase Order or
in additional written directions provided by ▇▇▇▇▇ that are not in conflict with
the terms of this Agreement. Any shipment of Drug Products shall be in
accordance with the Specifications. If Cardinal fails to deliver the Drug
Products in the quantities ordered in any Purchase Order within * days
of the date specified in such Purchase Order, then ▇▇▇▇▇ shall be entitled, as
liquidated damages, and not a penalty, to a discount of * percent (*%) off
11
-------------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been
filed separately with the Securities and Exchange Commission.
the price of the late-delivered Drug Products for each week that delivery is
delayed, up to a maximum discount of * percent (*%).
7.2 Packaging. Cardinal shall ship and deliver the Drug Products in such
containers and primary and secondary packaging and with such container closure
system and labeling as set forth in, and in compliance with, the Specifications.
All printed components for Drug Products shall be in accordance with the artwork
and content thereof approved by ▇▇▇▇▇ in writing. ▇▇▇▇▇ shall have the right to
require any special or varied packaging or labeling that it believes is
reasonably necessary to meet any regulatory requirements. Should any component
of any Drug Product packaging or labeling be rendered obsolete by artwork or
other Specification changes, ▇▇▇▇▇ shall reimburse Cardinal at actual
procurement cost for any components affected by such changes which have been
purchased to enable Cardinal to fulfill its obligations with respect to the most
recent forecast estimate. Any such costs relating to obsolescence shall be
factored into the Cost of Goods sold.
ARTICLE VIII - RECORDS; TESTING; INSPECTION
8.1 Records. Cardinal shall make available to ▇▇▇▇▇ all processing
records, documentation and information reasonably requested by ▇▇▇▇▇: (a) to
assist ▇▇▇▇▇ in determining whether any delivery complies fully with the
Specifications and the requirements of this Agreement ; (b) to assist ▇▇▇▇▇ in
obtaining any and all regulatory approvals necessary to market the Drug
Products; and (c) to enable ▇▇▇▇▇ to comply with any statutory or regulatory
requirements, or with a request by any governmental or regulatory authority.
Before, during and after manufacturing of each Batch hereunder, Cardinal shall,
with respect to such manufacturing: (i) record and keep on file all Batch
Records (as hereinafter defined) documentation, as well as samples of materials
supplied by ▇▇▇▇▇ or Cardinal and used in manufacturing the Drug Products; (ii)
monitor, record and retain documentation of the manufacturing conditions and
environment; and (iii) keep such records for such periods of time as are
required in the Specifications, the cGMPs and any other legal requirements. For
purposes hereof, "BATCH RECORDS" means an analytical report (Certificate of
Analysis) that Cardinal agrees to warrant as accurate to a reasonable degree of
scientific certainty, a quality assurance yield analysis, quality assurance
assay release report, and a copy of all production mix change/deviations and/or
quarantine reports, if used, all prepared in conformance with the cGMPs.
8.2 Testing. Cardinal shall test or cause to be tested as set forth on
Exhibit B each Batch of the Drug Products produced pursuant to this Agreement
before delivery to ▇▇▇▇▇. Following ▇▇▇▇▇' receipt of the Drug Products, ▇▇▇▇▇
may, at its cost and expense, test samples of each Batch of the Drug Products to
confirm that all the applicable standards and requirements contained in the
Specifications have been met.
8.3 Inspection; Acceptance. ▇▇▇▇▇ shall accept any delivery of Drug
Products hereunder unless ▇▇▇▇▇ determines in its reasonable opinion that the
delivery does not comply with the terms of the relevant Purchase Order, the
Specifications, and with the requirements of this Agreement. ▇▇▇▇▇ shall inspect
all Drug Products delivered hereunder within thirty (30) days
12
------------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
of its receipt of the Drug Products and all required documentation. ▇▇▇▇▇ shall
provide Cardinal with written notice of its acceptance or rejection of the
delivery within thirty (30) days of receipt of the Drug Products and all
required documentation. Any notice of rejection shall specify the reason(s)
therefor. Except in the event of any investigation, corrective action or
retesting of a delivery, should ▇▇▇▇▇ fail to provide Cardinal with written
notice of its acceptance or rejection of the delivery within thirty (30) days of
receipt of the Drug Products and all required documentation, then the delivery
shall be deemed to have been accepted by ▇▇▇▇▇ on the thirtieth (30th) day after
delivery. If ▇▇▇▇▇ so notifies Cardinal that any such delivery, or any part
thereof, is rejected, then, at ▇▇▇▇▇' option and as its sole remedy, (a)
Cardinal shall, at no additional charge, deliver replacement Drug Products to
▇▇▇▇▇ as soon as reasonably practicable thereafter (but, in any event, within
ninety (90) days after the initial notification by ▇▇▇▇▇); or (b) refund to
▇▇▇▇▇ any amounts paid to Cardinal in connection with such rejected delivery; it
being understood that any costs incurred by Cardinal associated with rejected
Drug Products shall not be included in the Cost of Goods except as set forth in
Section 8.4.
8.4 Rejection. In the event that there is a dispute as to the
justification for the rejection of any Batch of the Drug Products by ▇▇▇▇▇
pursuant to Section 8.3 hereof, after sixty (60) calendar days of analysis and
good faith negotiations, if the parties have failed to agree that such rejection
was justified, then the parties shall employ Quintiles Laboratories, located in
Kansas City, Missouri (the "INDEPENDENT LABORATORY") to resolve the matter. The
parties hereto agree that the employment of the Independent Laboratory and the
process of determining whether the rejection of any Drug Product was justified
shall operate independently of, and in parallel with, Section 8.3 of this
Agreement. Such Independent Laboratory shall test samples of the rejected Drug
Product and review records and test data previously developed by the parties
relating to the Drug Product to ascertain whether the Drug Product was actually
off-Specification and/or the root basis for the alleged failure of such Drug
Product to meet the Specifications. The findings of the Independent Laboratory
shall be binding on both parties. If the Drug Product is found to be within
Specifications, or the reason that the Drug Product was found to be
off-Specification was the result of ▇▇▇▇▇' negligence, ▇▇▇▇▇ shall pay the costs
of the tests and the Independent Laboratory and, for the purposes of paying
Cardinal, shall be deemed to have accepted the Batch in question (in addition to
the costs of the replacement Drug Product) and shall pay to Cardinal the cost of
the wrongfully rejected Drug Product with interest as provided for in Section
9.1 accruing from the date that payment was originally due on such Drug
Product.. If the Drug Product was found to be off-Specification as a result of
manufacturing, or was otherwise the result of Cardinal's negligence or failure
to comply with Cardinal's representations and warranties under Section 11.1,
Cardinal shall pay the costs of the tests and the Independent Laboratory, and,
at ▇▇▇▇▇' option, the costs of preparing, inspecting, packaging and delivering
to ▇▇▇▇▇ the replacement Drug Product.
ARTICLE IX - FEES AND TERMS OF SALE
9.1 Payment. In consideration of the satisfactory manufacture and delivery
to ▇▇▇▇▇ of the ordered quantities of the Drug Products, ▇▇▇▇▇ shall pay
Cardinal for all Drug Products accepted by ▇▇▇▇▇ pursuant to Section 8.5 of this
Agreement in accordance with the terms and conditions set forth in Exhibit C
hereto and subject to adjustment in accordance with this Agreement. All payments
under this Agreement shall be payable by wire transfer of immediately available
funds to such account as the receiving party shall designate in writing to the
paying party. In the event that any payment due under this Agreement is not made
when due,
13
the amount due shall accrue interest beginning on the fifth (5th) day following
the date on which such payment was due, calculated at the annual rate equal to
the higher of one percent (1.0%) per month or two percent (2%) above the thirty
(30)-day LIBOR for U.S. dollars reported in the Wall Street Journal for the due
date, calculated from the due date until paid in full. Such payment when made
shall be accompanied by all interest so accrued.
9.2 Taxes. ▇▇▇▇▇ shall bear the cost of any taxes of any kind, nature or
description whatsoever applicable to the sale of any Drug Products by Cardinal
to ▇▇▇▇▇ (except for any taxes based upon the income of Cardinal or its
employees), unless ▇▇▇▇▇ is exempt from such taxes and provides to Cardinal, at
the time of the submission of any Purchase Order, tax exemption certificates or
permits acceptable to the appropriate taxing authorities.
9.3 Inconsistent Terms. Purchase Orders and invoices issued pursuant to
this Agreement and any other directions or instructions issued by either ▇▇▇▇▇
or Cardinal shall be consistent with this Agreement, and any additional terms or
conditions stated in any such Purchase Orders, invoices or other directions or
instructions shall not be binding upon the parties hereto unless separately
agreed to by the receiving party in writing. In the event of an inconsistency
between any such Purchase Orders, invoices or other directions or instructions
and the terms and conditions of this Agreement, the terms and conditions of this
Agreement shall prevail.
ARTICLE X- RIGHT OF INSPECTION AND AUDIT
10.1 Inspections. During the term of this Agreement, duly-authorized
employees, agents and representatives of ▇▇▇▇▇ shall be granted access upon at
least twenty-four (24) hours prior notice and at reasonable times during regular
business hours to only the portion of the Facility or any Alternate Facility, as
the case may be, where Cardinal manufactures the Drug Products for the purpose
of inspecting and verifying that Cardinal is manufacturing, packaging, storing,
disposing of and transporting the Drug Products in accordance with cGMPs and the
Specifications. For purposes of this Section 10.1 and Section 10.2,
duly-authorized agents and representatives shall be required to sign Cardinal's
standard Confidential Disclosure Agreement prior to being allowed access to
Cardinal's Facility or any Alternate Facility. ▇▇▇▇▇ representatives shall have
no responsibility for supervision of Cardinal employees performing the
manufacture, packaging, storage, disposal or transportation operations
themselves. The inspection rights set forth in this Article X are for the
purpose of determining Cardinal's compliance with the terms of this Agreement.
Cardinal shall make available to ▇▇▇▇▇ all records and reports pursuant to
Section 8.1. Such records and reports shall be subject to the confidentiality
obligations under Section 2.3 of this Agreement. Upon reasonable prior written
notice to Cardinal, ▇▇▇▇▇ shall have the right to conduct inventory
reconciliation audits and other audits in respect of any Starting Materials as
reasonably required for its internal control, at ▇▇▇▇▇' sole cost and expense,
and at times reasonably acceptable to Cardinal so as to avoid any disruption to
Cardinal's business operations at the Facility or Alternate Facility. If, as a
result of any such inspection, ▇▇▇▇▇ concludes that Cardinal is not in material
compliance with any of its obligations hereunder, it shall so notify Cardinal in
writing, specifying such areas of noncompliance in reasonable detail. Cardinal
shall provide to ▇▇▇▇▇, within thirty (30) days of ▇▇▇▇▇' request, a written
response to ▇▇▇▇▇' notice including, if applicable, an action plan for
14
those areas of material noncompliance with which Cardinal agrees, or in the
alternative a written statement setting forth Cardinal's disagreement with
▇▇▇▇▇'▇ conclusion that there has been noncompliance.
10.2 Inspections by Regulatory Authorities. Cardinal shall inform ▇▇▇▇▇ in
writing within twenty-four (24) hours of any notification to Cardinal of any
site visits to Cardinal's Facility, or Alternate Facility, as the case may be,
by the FDA, state or federal regulatory agencies or any other governmental or
regulatory agency, relating, directly to the manufacture of the Drug Products,
and shall provide to ▇▇▇▇▇ all materials or the portion thereof directly related
thereto. For routine inspections, ▇▇▇▇▇ shall have no right to participate in
any site visits. In the event of a pre-approval inspection related to a New Drug
Product, ▇▇▇▇▇ shall have the option of participating in any site visit by any
governmental or regulatory agency, if the site visit relates directly to the
manufacturing, storage, disposal and transportation of the Drug Products. Should
▇▇▇▇▇ not participate in the site visit, Cardinal shall report in writing the
results of the visit to ▇▇▇▇▇ within seven (7) days of the occurrence thereof.
In the event that any such governmental or regulatory agency finds that the site
is deficient or unsatisfactory in any respect, Cardinal shall cure all material
deficiencies within such cure period as ordered by the government or regulatory
agency. If all deficiencies are not cured within the required time frame, ▇▇▇▇▇
shall have the option to immediately terminate this Agreement, without
liability.
10.3 Audits.
(a) By ▇▇▇▇▇. ▇▇▇▇▇ shall have the right, without cause, no more than one
(1) time in any twelve (12) month period upon reasonable notice and during
normal business hours, to review records of Cardinal at the Facility, or to have
a third-party consultant review such records of Cardinal, as may be necessary to
verify the accuracy of the amounts invoiced to ▇▇▇▇▇ hereunder; provided,
however, that ▇▇▇▇▇ shall have additional rights of review and audit as shall be
necessary to the extent that ▇▇▇▇▇ shall have a reasonable basis and need for
such additional reviews and audits. Should such review disclose any overpayment
by ▇▇▇▇▇, then, at ▇▇▇▇▇' option, Cardinal shall either refund to ▇▇▇▇▇ the
amount of such overpayment, or issue to ▇▇▇▇▇ a credit in the amount of such
overpayment. ▇▇▇▇▇ shall pay all fees of the accountants or other personnel
performing such verification unless it discloses any overstatement of amounts
invoiced of more than two percent (2%), in which case Cardinal shall bear all
reasonable costs of the audit.
(b) By Cardinal. Cardinal shall have the right, without cause, no more
than one (1) time in any twelve (12) month period upon reasonable notice and
during normal business hours, to review such records of ▇▇▇▇▇, or to have a
third-party consultant review such records of Cardinal, as may be necessary to
verify the accuracy of the amounts paid by ▇▇▇▇▇ to Cardinal hereunder;
provided, however, that Cardinal shall have additional rights of review and
audit as shall be necessary to the extent that Cardinal shall have a reasonable
basis and need for such additional reviews and audits. Should such review
disclose any underpayment by ▇▇▇▇▇, then, at Cardinal's sole option, ▇▇▇▇▇ shall
either pay to Cardinal the amount of such underpayment, or Cardinal may setoff
the amount of such overpayment against any amounts owed by Cardinal or one of
its Affiliates to ▇▇▇▇▇ or one of its Affiliates. Cardinal shall pay all fees of
the accountants or other personnel performing such verification unless it
discloses any
15
understatement of amounts invoiced of more than two percent (2%), in which case
▇▇▇▇▇ shall bear all reasonable costs of the audit.
ARTICLE XI - WARRANTIES
11.1 Cardinal Warranties. Cardinal represents and warrants that:
(a) subject to Section 11.4, at the time of shipment hereunder, the Drug
Product supplied by it hereunder shall meet the Specifications
(b) subject to Section 11.4, the Drug Product supplied by it hereunder
shall be manufactured in accordance with cGMPs and the Specifications;
(c) subject to Section 11.4, it shall perform its obligations hereunder in
compliance with all applicable federal, state and local laws and regulations,
including without limitation the Act, FDA's then cGMPs, and any and all health,
safety and environmental laws and regulations applicable to Cardinal's
operations and performance hereunder;
(d) all Drug Products furnished to ▇▇▇▇▇ hereunder shall have been
manufactured in all material respects in accordance with the terms of the
Quality Agreement;
(e) the title conveyed on all Drug Products furnished to ▇▇▇▇▇ hereunder
shall be good, and its transfer rightful, and the Drug Products shall be
delivered free from any security interest or other lien or encumbrance, other
than claims for payment under Section 9.1 hereof, provided that Cardinal makes
no representation with respect to any lien or other encumbrance relating to
Starting Materials delivered to Cardinal to be held on consignment;
(f) it owns the its intellectual property or has the right to use its
intellectual property in the course of its performance hereunder (provided,
however, that Cardinal makes no representation regarding the Transferred
Know-How (as defined in the Asset Purchase Agreement)); and
(g) it is free to enter into this Agreement; and, it has, and will
continue to have, the legal power, authority and right to perform its
obligations hereunder.
THE LIMITED WARRANTY SET FORTH IN THIS SECTION 11.1 IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY AND
ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR THE WARRANTIES
EXPRESSED IN THIS SECTION 11.1, CARDINAL MAKES NO OTHER WARRANTY, EITHER EXPRESS
OR IMPLIED, WITH RESPECT TO THE DRUG PRODUCT. IN ADDITION, CARDINAL HEREBY
DISCLAIMS LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF ANY
EXPRESS OR IMPLIED WARRANTY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY
AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO
DRUG PRODUCT.
16
11.2 ▇▇▇▇▇ Warranties. ▇▇▇▇▇ represents and warrants that:
(a) the Starting Materials supplied by it hereunder shall meet the
Specifications;
(b) it shall perform its obligations hereunder in compliance with all
applicable federal, state and local laws and regulations, including without
limitation the Act, FDA's then cGMPs, and any and all health, safety and
environmental laws and regulations applicable to its performance hereunder;
(c) it has, and shall have, good, complete and valid rights to the Drug
Products and Starting Materials. To its knowledge, after reasonable due
diligence, there are no patents owned by others related to the Starting
Materials or Drug Products which would be infringed or misused by Cardinal's
performance of the Agreement and, to its knowledge, no trade secrets or other
proprietary rights of others related to the Starting Materials or Drug Products
which would be infringed or misused by Cardinal's performance of this Agreement;
(d) the title conveyed on all Starting Materials furnished to Cardinal
hereunder shall be good, and its transfer rightful, and the Starting Materials
shall be delivered free from any security interest or other lien or encumbrance;
and
(e) it owns its intellectual property or has the right to use its
intellectual property in the course of its performance hereunder; and
(f) it is free to enter into this Agreement; and, it has, and will
continue to have, the legal power, authority and right to grant the exclusive
rights set forth in Section 3.1 hereof and to perform its obligations hereunder.
THE LIMITED WARRANTY SET FORTH IN THIS SECTION 11.2 IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY AND
ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR THE WARRANTIES
EXPRESSED IN THIS SECTION 11.2, ▇▇▇▇▇ MAKES NO OTHER WARRANTY, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE DRUG PRODUCTS. IN ADDITION, ▇▇▇▇▇ HEREBY DISCLAIMS
LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF ANY EXPRESS OR
IMPLIED WARRANTY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY AND ANY
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE DRUG
PRODUCTS.
11.3 Recalls. In the event (a) any government authority issues a request,
directive or order that any Drug Product be recalled, or (b) a court of
competent jurisdiction orders such a recall, or (c) ▇▇▇▇▇ reasonably determines
after consultations with Cardinal that a Drug Product should be recalled because
the Drug Product does not conform to the Specifications, the parties shall take
all appropriate corrective actions. Cardinal shall be responsible for Cardinal's
and ▇▇▇▇▇' expenses of the recall to the extent such recall results from the
breach of Cardinal's warranties under this Agreement, PROVIDED, HOWEVER,
CARDINAL SHALL NOT BE
17
LIABLE IN ANY EVENT FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
INCLUDING, WITHOUT LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO BUSINESS
REPUTATION RESULTING FROM SUCH RECALL. ▇▇▇▇▇ shall be responsible for all ▇▇▇▇▇'
and Cardinal's expenses of the recall to the extent that such recall results
from a cause other than Cardinal's breach of its warranties under this
Agreement, PROVIDED, HOWEVER, ▇▇▇▇▇ SHALL NOT BE LIABLE IN ANY EVENT FOR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO BUSINESS REPUTATION RESULTING
FROM SUCH RECALL. In the event that such recall results from the joint
negligence of ▇▇▇▇▇ and Cardinal, each party shall be responsible for the
expenses of recall in direct proportion to each party's percentage of fault as
determined jointly by the parties, PROVIDED, HOWEVER, THAT NEITHER PARTY SHALL
BE LIABLE IN ANY EVENT FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO
BUSINESS REPUTATION RESULTING FROM SUCH RECALL. In the event of an FDA-initiated
nationwide recall where the scope of the recall is directed at all products
containing any of the active ingredients in the Drug Product and where the
purpose of such recall is not attributable to the fault of either ▇▇▇▇▇ or
Cardinal, ▇▇▇▇▇ shall be responsible for all ▇▇▇▇▇ and Cardinal expenses of the
recall, PROVIDED, HOWEVER, THAT NEITHER PARTY SHALL BE LIABLE IN ANY EVENT FOR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOST REVENUES OR PROFITS OR DAMAGES TO BUSINESS REPUTATION RESULTING
FROM SUCH RECALL. For the purposes of this Agreement, the expenses of recall
shall include, without limitation, the expenses of notification or destruction
or return of the recalled Drug Product and ▇▇▇▇▇' or Cardinal's total,
unrecoverable, actual, internal costs for manufacturing and shipping the Drug
Product that was later subject to recall.
11.4 Transition. As contemplated by Section 1.3.1(c) of the Asset Purchase
Agreement, the parties acknowledge that upgrades to the Facility located in Fort
Worth may be required. Accordingly, it is acknowledged that Cardinal's
warranties as of the Effective Date shall be limited to manufacturing Drug
Products at the Fort Worth Facility in accordance with the same standards to
which such Drug Products were manufactured by ▇▇▇▇▇ during the period from
January 1, 2004 through the Effective Date. Thereafter during the Term, as and
when upgrades to the Fort Worth Facility are implemented and improvements to the
manufacturing process are mutually approved and implemented, Cardinal shall
warrant that Drug Products supplied at the Fort Worth Facility hereunder are
manufactured in accordance with the then-applicable Specifications. After the
date that mutually approved improvements to the manufacturing process are
implemented, but in any event no later than the second anniversary of the
Closing under the Asset Purchase Agreement (or, in the case of improvements that
require the cooperation of ▇▇▇▇▇ and/or the approval of regulatory authorities,
such later date as necessary to obtain such cooperation and/or approval), the
warranties in Section 11.1(a), (b) and (c) shall no longer be qualified by this
Section 11.4.
ARTICLE XII - INDEMNIFICATION; INSURANCE
18
12.1 Indemnity by Cardinal. Cardinal shall indemnify and hold ▇▇▇▇▇,
▇▇▇▇▇' Affiliates, their agents, employees, officers, directors and permitted
successors and assigns (collectively, the "▇▇▇▇▇ INDEMNITEES") harmless from and
against any and all liabilities, losses, claims, demands, damages, costs,
expenses, settlement made or reasonably approved by Cardinal, royalty fees, and
judgments (including reasonable attorneys' fees and other costs of litigation),
however caused and/or on any theory of liability (collectively, "CLAIMS"),
incurred by or rendered against the ▇▇▇▇▇ Indemnitees for personal injury,
sickness, disease or death or other damages which arise out of:
(a) the negligence or intentional misconduct of Cardinal with respect to
its activities and those of the Cardinal Indemnitees (as defined in Section 12.2
below) under this Agreement, including, but not limited to its manufacturing,
handling and delivery of Drug Product, except to the extent such Claims result
from the breach, negligence or intentional misconduct of ▇▇▇▇▇ or the ▇▇▇▇▇
Indemnitees;
(b) the breach by Cardinal of its warranty obligations under this
Agreement;
(c) any Claim regarding a work-related injury to any Cardinal employee;
(d) any Claim that any of Cardinal's intellectual property (excluding
Transferred Know How) infringes any patent, trade secret, trademark, copyright,
or other proprietary interest; and/or
(e) any other action or omission by Cardinal or the Cardinal Indemnitees
relating to this Agreement, or breach by Cardinal of its obligations under this
Agreement.
12.2 Indemnity by ▇▇▇▇▇. ▇▇▇▇▇ shall indemnify and hold Cardinal,
Cardinal's Affiliates, their agents, employees, officers, directors and
permitted successors and assigns (collectively, the "CARDINAL INDEMNITEES")
harmless from and against any and all Claims incurred by or rendered against the
Cardinal Indemnitees for personal injury, sickness, disease or death or other
damages which arise out of:
(a) the packaging, use, sale or other distribution of Drug Product by
▇▇▇▇▇, or any ▇▇▇▇▇ Indemnitee or licensee, including, without limitation, any
personal injury or product liability claims (under any theory of product
liability, including, but not limited to, actions in the form of tort, warranty
or strict liability); except to the extent that any of the foregoing results
from the breach, negligence or intentional misconduct of Cardinal or the
Cardinal Indemnitees;
(b) the breach by ▇▇▇▇▇ of its warranty obligations under this Agreement;
(c) any other action or omission by ▇▇▇▇▇ or the ▇▇▇▇▇ Indemnitees
relating to this Agreement, or breach by ▇▇▇▇▇ of its obligations under this
Agreement;
(d) any Claim regarding a work-related injury to any ▇▇▇▇▇ employee;
19
(e) any Claim that any Starting Materials, Drug Products or ▇▇▇▇▇
Intellectual Property or Transferred Know How infringes any patent, trade
secret, trademark, copyright, or other proprietary interest; and/or
(f) any actions, errors, omissions, misrepresentations, or breach of
obligations made by or on behalf of ▇▇▇▇▇ or the ▇▇▇▇▇ Indemnitees relating to
any documentation provided to and/or required by U.S. Customs Service or
comparable foreign agencies relating to the Drug Product.
12.3 Cooperation. ▇▇▇▇▇ and Cardinal agree to cooperate with each other in
the defense of any claims made by Third Party(ies) to which this Article XII
applies. If either of the parties wishes to exercise its right to be indemnified
under Sections 12.1 and 12.2, such rights will be subject to the party seeking
indemnity:
(a) promptly notifying the indemnifier of the claim to be indemnified;
(b) allowing the indemnifier, if the indemnifier so requests, to conduct
and control (at the cost and expense of the indemnifier) the defense of such a
claim and any related settlement negotiations; and
(c) affording all reasonable assistance to the indemnifier (at the cost
and expense of the indemnifier) and making no admission prejudicial to the
defense of such a claim.
12.4 Lost Profits; Damage to Business Reputation. IN NO EVENT SHALL ▇▇▇▇▇
OR CARDINAL BE LIABLE TO THE OTHER FOR LOST PROFITS, OR ANY CONSEQUENTIAL,
SPECIAL, INCIDENTAL OR INDIRECT DAMAGES OR DAMAGES TO BUSINESS REPUTATION.
12.5 Insurance.
(a) During the Term of this Agreement, Cardinal shall obtain and maintain
the following insurance with limits not less than those specified below:
(i) Commercial General Liability insurance with a limit of Five
Million Dollars ($5,000,000) per occurrence;
(ii) Products and Completed Operations Liability insurance with a
limit of Five Million Dollars ($5,000,000) per occurrence;
(iii) Worker's Compensation and Employers Liability Insurance with
statutory limits for Workers' Compensation and Employers'
Liability limits of One Million Dollars ($1,000,000) per
accident; and
(iv) Professional Services Liability insurance with a Two Million
Dollar ($2,000,000) limit per claim.
20
In lieu of insurance, Cardinal may self-insure any or a portion of the
required insurance. In the event that any of the required policies of insurance
are written on a claims-made basis, then such policies shall (i) be maintained
during the entire term of this Agreement and (ii) be maintained for a period of
not less than three (3) years following the termination or expiration of this
Agreement. Cardinal shall waive subrogation rights against ▇▇▇▇▇ for workers'
compensation benefits and shall obtain a waiver from any insurance carriers with
which Cardinal carries workers' compensation insurance releasing their
subrogation rights against ▇▇▇▇▇. ▇▇▇▇▇ shall be named as an additional insured
under the Commercial General Liability and Products and Completed Operations
Liability insurance policies as respects ▇▇▇▇▇'▇ liability for damages arising
from the services provided under this Agreement. Such additional insured status
shall end upon the termination or expiration of this Agreement unless the
policies are written on a claims-made basis when such additional insured status
will continue for the period of time Cardinal is required to maintain such
insurance under the terms of this Agreement. Cardinal shall furnish certificates
of insurance to ▇▇▇▇▇ evidencing the required insurance and additional insured
status as soon as practicable after the Effective Date and within thirty (30)
days after renewal of such policies. Such certificates shall state that
Cardinal's insurers will endeavor to provide thirty (30) days written notice of
any cancellation prior to the policy(ies) expiration date(s). Each insurance
policy that is required under this Section 12.5(a) shall be obtained from an
insurance carrier with an A.M. Best rating of at least A-VII.
(b) During the Term of this Agreement, ▇▇▇▇▇ shall obtain and maintain the
following insurance with limits not less than those specified below:
(i) Commercial General Liability insurance with a limit of Five
Million Dollars ($5,000,000) per occurrence;
(ii) Products and Completed Operations Liability insurance with a
limit of Five Million Dollars ($5,000,000) per occurrence;
(iii) Worker's Compensation and Employers Liability Insurance with
statutory limits for Workers' Compensation and Employers'
Liability limits of One Million Dollars ($1,000,000) per
accident; and
(iv) All Risk Property Insurance, including transit coverage, in an
amount equal to full replacement value covering ▇▇▇▇▇'▇
property while it is at Cardinal's Facility or in transit to
or from Cardinal's Facility.
In the event that any of the required policies of insurance are written on
a claims-made basis, then such policies shall (i) be maintained during the
entire term of this Agreement, (ii) be maintained for a period of not less than
three (3) years following the termination or expiration of this Agreement. ▇▇▇▇▇
shall waive subrogation rights against Cardinal for workers' compensation
benefits and shall obtain a waiver from any insurance carriers with which ▇▇▇▇▇
carries workers' compensation insurance releasing their subrogation rights
against Cardinal. Cardinal Health, Inc. and its subsidiaries and affiliates
shall be named as additional insureds under the Commercial General Liability and
Products and Completed Operations Liability insurance policies as respects
Cardinal's liability for damages arising from the services provided
21
under this Agreement. Such additional insured status shall end upon the
termination or expiration of this Agreement unless the policies are written on a
claims-made basis when such additional insured status will continue for the
period of time ▇▇▇▇▇ is required to maintain such insurance under the terms of
this Agreement. ▇▇▇▇▇ shall furnish certificates of insurance to Cardinal
evidencing the required insurance and additional insured status as soon as
practicable after the Effective Date and within thirty (30) days after renewal
of such policies. Such certificates shall state that ▇▇▇▇▇'▇ insurers will
endeavor to provide thirty (30) days written notice of any cancellation prior to
the policy(ies) expiration date(s). Each insurance policy which is required
under this Section 12.5(b) shall be obtained from an insurance carrier with an
A.M. Best rating of at least A-VII.
ARTICLE XIII - TERM AND TERMINATION
13.1 Term. Unless earlier terminated as provided for herein, this
Agreement shall take effect as of the Closing (as defined in the Asset Purchase
Agreement) and shall run for an initial term of ten (10) years ending on March
31, 2014 (the "INITIAL TERM"). This Agreement may be renewed for one or more
additional periods of one Contract Year, provided that negotiations for renewal
are commenced by the parties at least six (6) months prior to expiration of the
Initial Term, or any extension thereof, and the parties agree in writing to
terms of renewal no less than six (6) months prior to the expiration of the
Initial Term, or any extension thereof. The Initial Term and any renewal period
shall be deemed the "TERM" of this Agreement.
13.2 Termination.
(a) Cardinal or ▇▇▇▇▇, as the case may be, shall have the right to
immediately terminate this Agreement if: (i) the other party files a petition in
bankruptcy, or enters into an agreement with its creditors, or applies for or
consents to the appointment of a receiver or trustee, or makes an assignment for
the benefit of creditors, or suffers or permits the entry of an order
adjudicating it to be bankrupt or insolvent and such order is not discharged
within thirty (30) days; (ii) if the other party materially breaches any of the
non-monetary provisions of this Agreement or the Commercial Services Agreement
and such breach is not cured within thirty (30) days after the giving of written
notice, the party claiming the breach shall have the right to terminate this
Agreement; (iii) if the other party materially breaches any of the monetary
provisions of this Agreement and such breach is not cured within twenty (20)
days after the giving of written notice, the party claiming the breach shall
have the right to terminate this Agreement; (iv) Cardinal is unable on *
consecutive occasions to supply the same Drug Product in accordance with Section
4.2 hereof; (v) Cardinal is unable to cure any supply and/or manufacturing
problem in accordance with Section 3.3 hereof within * years of the
commencement of such problem; or (vi) if any required license, permit or
certificate required of the other party is not approved and/or issued, or is
revoked (including, but not limited to the FDA), by any applicable governmental
regulatory authority; provided that such other party may no longer appeal such
decision or reapply or otherwise pursue such permit, license or certificate.
(b) ▇▇▇▇▇ shall have the right to terminate this Agreement upon twelve
(12) months prior written notice to Cardinal provided that on or before the
termination date, subject to the terms and conditions set forth herein, ▇▇▇▇▇
shall pay Cardinal a termination fee (the
22
----------
* Omitted information is the subject of a request for confidential
treatment pursuant to Rule 406 under the Securities Act of 1933 and has been
filed separately with the Securities and Exchange Commission.
"TERMINATION FEE") equal to the sum of (1) the net book value (as defined below)
of the assets acquired under the Asset Purchase Agreement, including any capital
improvements to such assets made prior to the effective date of termination,
however, subject to appropriate adjustment to the extent that Cardinal has
disposed of, replaced or improved upon any assets acquired under the Asset
Purchase Agreement, (2) all documented and reasonable costs incurred by Cardinal
to terminate such business including without limitation severance costs, and (3)
Five Million Dollars ($5,000,000). Upon payment of the Termination Fee, Cardinal
will convey to ▇▇▇▇▇ title to all of the equipment and assets included in the
calculation of net book value under clause (1) above with appropriate warranties
as to title. ▇▇▇▇▇ and Cardinal agree that if ▇▇▇▇▇ terminates this Agreement
prior to the expiration of the term, the amount of damages would be difficult to
ascertain. Therefore, the parties further agree that the Termination Fee
constitutes liquidated damages and is not a penalty. Notwithstanding the
foregoing, the obligation to convey assets shall not restrict Cardinal's right
to replace or otherwise dispose of such assets; it being understood, however,
that any such conveyances or dispositions shall proportionately require
adjustments to the net book value calculation under clause (1) above. For
purposes of this Section 13.2, net book value shall be determined in accordance
with Cardinal's normal carrying values for acquired assets and United States
General Accepted Accounting Principles ("GAAP"); provided, however, that such
values shall be adjusted to reflect accelerated depreciation taken by Cardinal
for billing purposes under this Agreement.
13.3 Duties Upon Termination.
(a) ▇▇▇▇▇' Duties. In the event ▇▇▇▇▇ terminates this Agreement (other
than as a result of a breach of this Agreement by Cardinal) or if Cardinal
terminates this Agreement under Section 13.2 hereof, ▇▇▇▇▇ will be required to
pay Cardinal for the direct cost of all materials, including but not limited to
Raw Materials, purchased by Cardinal pursuant to binding Purchase Orders, and
all expenses incurred by Cardinal in connection with returning all remaining
inventories of the Drug Product and Starting Materials to ▇▇▇▇▇. ▇▇▇▇▇ shall
specify the location in the continental United States to which delivery, at
▇▇▇▇▇' expense, of the foregoing is to be made.
(b) Cardinal's Duties. In the event Cardinal terminates this Agreement
(other than as a result of a breach of this Agreement by ▇▇▇▇▇) or if ▇▇▇▇▇
terminates this Agreement under Section 13.2 hereof, Cardinal, at its expense,
will be required to return all remaining inventories of the Drug Product to
▇▇▇▇▇. ▇▇▇▇▇ shall specify the location in the continental United States to
which delivery, at Cardinal's expense, of the foregoing is to be made.
Proprietary Information exchanged between ▇▇▇▇▇ and Cardinal shall be promptly
returned upon termination of the Agreement. In addition, Cardinal shall
reimburse ▇▇▇▇▇ for all costs and related out-of-pocket expenses incurred by
▇▇▇▇▇ in obtaining the Drug Products from any Third Party above and beyond the
amount ▇▇▇▇▇ would have paid Cardinal for the same Drug Products through the end
of the then-current Initial Term or any renewal term, as the case may be,
including without limitation, the cost of validating the manufacture and
packaging of the Drug Products at a Third Party's facilities. In order to permit
▇▇▇▇▇ to make a smooth transition to a new supplier of the Drug Products, in the
event that this Agreement should terminate for any reason, then ▇▇▇▇▇ shall be
permitted, in its discretion, to continue to submit Purchase Orders to Cardinal
23
in accordance with Section 4.2, and Cardinal shall continue to supply the Drug
Products to ▇▇▇▇▇ in accordance with such Purchase Orders and this Agreement,
for a period of one hundred twenty (120) days after the termination of this
Agreement, and this Agreement shall remain in effect with respect to such
Purchase Orders until the expiration or termination of the Purchase Orders.
(c) Profit Sharing.
(i) If ▇▇▇▇▇ terminates this Agreement pursuant to Section 13.2(b)
and pays the Termination Fee, ▇▇▇▇▇' obligation to share
profits from any Drug Products as provided for in Exhibit C
shall apply to any saleable inventory or work-in-process
manufactured by Cardinal as of the date of termination.
(ii) If this Agreement is terminated as a result of a breach by
Cardinal, then ▇▇▇▇▇' obligations to share profits from any
Drug Products as provided in Exhibit C shall apply to any Drug
Products sold during the Initial Term or the applicable
renewal term, provided, however, that for purposes of
determining Gross Profit under Exhibit C, the Cost of Goods
Sold shall be the higher of (A) the amount ▇▇▇▇▇ would have
paid Cardinal for the same Drug Products or (B) the actual
cost paid by ▇▇▇▇▇ for the Drug Products after the termination
date. Cardinal shall offset the profit sharing component
against the amounts, if any, payable to ▇▇▇▇▇ under Section
13.3(b) above. However, in no event shall the profit sharing
result in a net payment or liability owing from ▇▇▇▇▇ to
Cardinal. ▇▇▇▇▇ shall use all commercially reasonable efforts
to minimize the actual cost paid by ▇▇▇▇▇ for Drug Products
during the period for which Cardinal has obligations under
this Section 13.3(c)(ii).
(iii) If this Agreement is terminated as a result of a breach by
▇▇▇▇▇, then ▇▇▇▇▇' obligations to share profits from any Drug
Products as provided in Exhibit C shall apply to any Drug
Products sold during the Initial Term or the applicable
renewal term; provided, however, that for purposes of
determining Gross Profit under Exhibit C, the Cost of Goods
Sold shall be the amount ▇▇▇▇▇ would have paid Cardinal for
the same Drug Products. In addition, if, after a termination
as a result of ▇▇▇▇▇' breach, ▇▇▇▇▇ is able to procure Drug
Products at a cost less than the amount ▇▇▇▇▇ would have paid
Cardinal for the same Drug Product (the "Third Party Actual
Cost"), Cardinal shall be entitled to the difference between
the amount ▇▇▇▇▇ would have paid Cardinal for the same Drug
Product and the Third Party Actual Cost for the Initial Term
or the applicable renewal term.
13.4 Continuing Obligations. The rights and obligations of each of the
parties with respect to payment obligations incurred prior to termination and as
set forth in Section 2.1 (second and third sentences only), Section 2.2, Section
2.3, Section 8.1, Article IX, Section 10.3, Article XI, Article XII, Article
XIII, Section 14.1, and Section 14.3 of this Agreement shall continue
notwithstanding the termination of this Agreement for any reason.
24
ARTICLE XIV - MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey without regard to its
conflict of laws provisions.
14.2 Export of Finished Product. ▇▇▇▇▇ acknowledges that all Drug Products
provided by Cardinal hereunder are subject to the U.S. export control laws and
regulations. ▇▇▇▇▇ will not export, re-export or otherwise dispose of Drug
Product provided pursuant to this Agreement except in strict compliance with the
letter and spirit of U.S. export laws and regulations, including but not limited
to the laws and regulations administered by the Bureau of Export Administration
of the U.S. Department of Commerce, the Office of Foreign Assets Control of the
U.S. Department of the Treasury and the Office of Defense Trade Controls of the
U.S. Department of State.
14.3 Notices. Any and all notices provided for shall be sent to the
respective parties at the following addresses by certified or registered mail or
sent by a nationally-recognized overnight courier service:
If to Cardinal: Cardinal Health PTS, LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President, Modified Release Technologies
Facsimile No.: 732.537.6491
With a copy to: Cardinal Health PTS, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Vice President and Associate General
Counsel, Pharmaceutical Technologies & Services
Facsimile No.: 614.757.5051
If to ▇▇▇▇▇: ▇▇▇▇▇ Laboratories, Inc.
d/b/a ▇▇▇▇▇ Respiratory Therapeutics
Colonial Court
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.,
General Counsel
Facsimile No.: 908.879.9784
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
25
Facsimile No.: 973.503.5950
or to such other addresses as may be subsequently furnished by one party to the
other in writing. Any such notice shall be deemed effective from the date of
mailing.
14.4 Dispute Resolution. If there is a dispute, controversy or claim
arising out of or related to this Agreement, including but not limited to any
claim of breach, termination or invalidity (any such controversy, claim, or
dispute, a "DISPUTE"), the parties hereto shall use good faith efforts to
attempt to resolve such claim in accordance with this Section 14.4. The parties
will promptly seek to resolve any such claim by negotiations between executives
of the parties and an authorized representative of each party shall meet at
least once to attempt to resolve any such dispute. Either party may initiate
this procedure by requesting the other to meet within fifteen days after the
date of such request, with such meeting to be held in Morristown, New Jersey, or
such other location as may be mutually agreed. If the dispute is not resolved
within twenty (20) days after the initial meeting, the parties agree first to
try in good faith to settle the dispute by mediation administered by the CPR
Institute for Dispute Resolution under its Commercial Mediation Rules before
resorting to arbitration, litigation, or some other dispute resolution
procedure. If the dispute has not been resolved pursuant to such mediation
within sixty (60) days after the commencement of mediation, or if either party
will not participate in mediation, then either party may initiate litigation.
Nothing herein shall restrict the right of a party to seek a preliminary
injunction or other judicial relief if in that party's judgment such judicial
proceedings are necessary or appropriate to avoid irreparable damage. All
applicable statutes of limitation shall be tolled while the procedures specified
in this Section 14.4 are pending. The parties will take all such actions, if
any, which may be necessary or appropriate to effectuate such tolling.
14.5 Equitable Relief. Notwithstanding the foregoing, the remedy at law
for any breach of the provisions of this Agreement may be inadequate, and,
accordingly, an aggrieved party seeking equitable relief or remedies for such a
breach shall have the right and is hereby granted the privilege, in addition to
all other remedies at law or in equity, to proceed directly in a court of
competent jurisdiction to seek temporary or preliminary equitable relief.
14.6 Partial Invalidity. In the event one or more terms of this Agreement
are found to violate the provisions of any applicable statute, law or
regulation, the parties hereto shall negotiate in good faith to modify this
Agreement, but only to the extent necessary to make this Agreement valid and
enforceable, having full regard for applicable laws and the intent and purposes
of the parties entering into this Agreement.
14.7 Independent Contractor. The parties hereto are independent
contractors under this Agreement and neither of the parties hereto shall have
any right or authority to assume or create any obligations on behalf of, or in
the name of any other party hereto or to bind the other party hereto to any
contract, agreement or undertaking with any third party without the written
consent of the other party hereto.
14.8 Entire Agreement. This Agreement (together with the Asset Purchase
Agreement, Commercial Services Agreement and Quality Agreement) and all Exhibits
constitute the entire
26
agreement between the parties relating to the subject matter of this Agreement,
and this Agreement may not be varied except in writing signed by a duly
authorized representative of each party. This Agreement may be executed in
multiple counterparts, which may be delivered by facsimile, each of which shall
have the force and effect of an original.
14.9 Assignability. Neither party shall assign this Agreement other than
to Affiliates; however, in the event of any assignment, performance shall be
guaranteed by the assignor in form satisfactory to the other party.
14.10 Successors and Permitted Assigns. This Agreement shall be binding
upon and inure to the benefit of the permitted successors or permitted assigns
of Cardinal and ▇▇▇▇▇ respectively.
14.11 Force Majeure. Each of the parties shall be excused from the
performance of its obligations in the event such performance is prevented by a
cause beyond the reasonable control of such party, including without limitation,
act of God; regulation or law of any government or any agency thereof, including
any government, court-ordered or voluntary recall not attributable to the fault
of ▇▇▇▇▇ or Cardinal; war; terrorism; insurrection or civil commotion;
destruction of production facilities or materials by earthquake, fire, flood or
storm; labor disturbance involving non-Cardinal and/or non-Cardinal Affiliate
employees; epidemic; or failure of suppliers (which ▇▇▇▇▇ has required Cardinal
to use in connection with the performance of its obligations hereunder), public
utilities or common carriers. Such excuse shall continue as long as the
condition preventing the performance continues, plus thirty (30) days after the
termination of such condition. Excused non-performance shall not include any
act, omission or circumstance arising from the negligent or willful act of the
party claiming excused non-performance, or lying within such party's reasonable
commercial ability to prevent.
14.12 Announcements. Neither party shall, without the other party's prior
written consent, make any announcement, press release or other disclosure
regarding this Agreement or that any business relationship exists between the
parties.
14.13 Trademarks. Except for use on the Drug Products as provided in the
Specifications, Cardinal shall not use ▇▇▇▇▇' trademarks, service marks, ▇▇▇▇▇'
name or logos on any other goods or products, or on any advertising or
promotional materials, without first obtaining the prior written consent of
▇▇▇▇▇.
14.14 UN Convention on Contracts. The parties hereby expressly disclaim
the application of the UN Convention on Contracts for the International Sale of
Goods with respect to this Agreement.
[signature page follows]
27
IN WITNESS WHEREOF, the parties have caused this Agreement to be entered
into by their duly authorized representatives as of the day and year first set
forth above.
CARDINAL HEALTH PTS, LLC ▇▇▇▇▇ LABORATORY, INC.
d/b/a
▇▇▇▇▇ RESPIRATORY THERAPEUTICS
By: By:
--------------------------- ---------------------------
Its: Its:
-------------------------- --------------------------
28
EXHIBIT A
SPECIFICATIONS FOR DRUG PRODUCTS
29
EXHIBIT B
TESTING PERFORMED BY CARDINAL ON DRUG PRODUCTS
30
EXHIBIT C
FEES
Cardinal shall receive a portion of the Gross Profits of the sale of
the Drug Products as further described below:
(i) "GROSS PROFITS (OR GP)" is defined as follows: ▇▇▇▇▇' Net Sales,
Less Cost of Goods and freight and other logistics costs.
"COST OF GOODS" means the fully burdened manufacturing costs
of Cardinal, determined using the same cost accounting methodology used by ▇▇▇▇▇
as set forth in the financial information referenced in the Asset Purchase
Agreement and, to the extent applicable, in accordance with GAAP, and shall
expressly include any costs associated with materials rendered obsolete due to a
change in Specifications including as provided for in Section 7.2. For the
avoidance of doubt, Cost of Goods shall also include the depreciation of the
cost of the ▇▇▇▇▇▇ Press purchased by ▇▇▇▇▇ and paid for by Cardinal, over a
three year period beginning upon the date when the ▇▇▇▇▇▇ Press is put into
regular use for commercial production. To the extent that Cardinal utilizes one
of its Affiliates for manufacture or packaging of Drug Products under this
Agreement, Cardinal agrees that there shall be no inter-company ▇▇▇▇-up included
in the Cost of Goods. The parties hereto agree that after the first Contract
Year a scrap materials rate shall be established and adjusted annually for each
Drug Product. After the first Contract Year, Cost of Goods shall not include
more than the scrap materials rate, except with respect to any materials that
are rendered obsolete due to a change in Specifications which shall be taken
into account in determining Cost of Goods.
"NET SALES" means the aggregate amount invoiced by ▇▇▇▇▇ or
its Affiliates or any of its sublicensees to a Third Party distributor (who is
not a sublicensee), agent, contractor or end user for the sale of the Drug
Product LESS: (a) credits, refunds and allowances separately and actually
credited to customers for defective, spoiled, damaged, outdated, and returned
products, (b) offered and taken trade volume and cash discounts and rebates
(including coupons and government charge-backs) in amounts customary to the
trade, (c) sales, excise, value added, turnover, use, and other like taxes, and
customs duties, paid, absorbed or allowed excluding net income tax, to the
extent invoiced, and (d) the royalties payable to J-Med Pharmaceuticals, Inc.
("J-MED") for the AlleRx(TM) dose pack product ("ALLERX(TM)"). The amounts of
any deductions taken pursuant to clauses (a)-(d) shall be determined from books
and records maintained in accordance with GAAP, consistently applied. Net Sales
shall not include revenue received by ▇▇▇▇▇ (or any of its Affiliates) from
transactions with an Affiliate, where the Drug Product in question will be
resold to an independent Third Party distributor, agent or end user by the
Affiliate where such revenue received by the Affiliate from such resale is
included in Net Sales.
(ii) Gross Profits from all Drug Products shall be shared as set
forth below:
31
Annual Gross Profit Tier ▇▇▇▇▇' Share Cardinal's Share
------------------------ ------------ ----------------
$* *% *%
$* *% *%
$* *% *%
$* *% *%
$* *% *%
$* *% *%
$* *% *%
Over $* *% *%
The above profit share percentages apply separately to each
Gross Profits Tier. For example, if the aggregate Gross Profits from all Drug
Products for a Contract Year are $*, then ▇▇▇▇▇ would be entitled to *% of the
first $* (i.e., $*) of Gross Profit and to *% of the final $* (i.e., $*),
resulting in the Gross Profit being divided as follows: ▇▇▇▇▇ would receive $*
and Cardinal would receive $*. For clarification, any royalties or similar
payments to Third Parties including in respect of intellectual property rights
or contractual obligations (excepting pre-existing royalties payable to J-Med on
AlleRx(TM)) shall be solely the responsibility of ▇▇▇▇▇ and shall be payable
from ▇▇▇▇▇' share of the Gross Profits described above and shall not be included
in the calculation of Cost of Goods or Net Sales.
(iii) Cardinal shall receive annual minimum payments (which are
fully creditable against Cardinal's share of Gross Profits) for each of the
first three Contract Years, as follows:
Year 1 $4 million
Year 2 $3 million
Year 3 $3 million
For interim billing purposes, Cardinal will ▇▇▇▇ ▇▇▇▇▇ for each shipment of the
Drug Products in accordance with Cardinal's standard billing practices at Cost
of Goods (including a prorated portion of the charge for the ▇▇▇▇▇▇ Press)
multiplied by the following factors:
Year 1 *%
Year 2 *%
Year 3 and after *%
(iv) At the end of each calendar quarter, a true-up calculation will
be made and the applicable party will be compensated for the shortfall or excess
difference between the required share of Gross Profit and what has been billed
to ▇▇▇▇▇, provided that if the amount billed to ▇▇▇▇▇ exceeds the amount
properly required to be paid, the excess will be reflected as an adjustment on
invoices for the next period(s) rather than resulting in a refund payable to
▇▇▇▇▇.
---------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
32
(v) It is understood that while the above amounts and percentages
are based on annual values, there will be adjustments to accommodate quarterly
profit share calculations and payments.
(vi) Each party shall have the right to periodically engage a
mutually agreed independent accounting firm to audit the other party's records
for purposes of determining compliance with this Exhibit C.
(vii) Cardinal shall supply ▇▇▇▇▇ with samples of the Drug Products
(including D and DM) at a price equal to the Cost of Goods to manufacture such
samples provided that the volume of such samples provided by Cardinal does not
exceed * percent (*%) of the total volume of such Drug Product manufactured by
Cardinal under this Agreement on an annual basis (the "SAMPLE FLOOR"). The price
for any samples of such Drug Products that exceed the Sample Floor shall be an
amount equal to (a) * multiplied by (b) Cardinal's Cost of Goods to manufacture
such Drug Products. For clarification, the Drug Product constitutes a sample
only if it is conspicuously marked as such in accordance with the applicable
Specifications and is not marketed or sold by ▇▇▇▇▇, its Affiliates or
sublicenses for commercial sale.
33
--------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been
filed separately with the Securities and Exchange Commission.
Exhibit D
QUALITY AGREEMENT
This Quality Agreement defines the duties of Cardinal Health PTS, LLC
("Cardinal") and ▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") for the contract
pharmaceutical manufacture of those certain Products as defined in that certain
Supply Agreement dated April 1, 2004, by and between Cardinal and ▇▇▇▇▇
("Product"). In particular, this Quality Agreement clearly states who is
responsible for the cGMP aspects of manufacturing and specifies the way in which
the party releasing Product for sale ensures that the Product complies with the
approved Product Specifications (defined below) and the Marketing Authorizations
(defined below).
This Quality Agreement takes the form of a detailed checklist of all the
activities associated with pharmaceutical production, analysis, release, and
distribution. Responsibility for each activity is assigned to either Cardinal
Health PTS, LLC ("Cardinal") or ▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") in the
appropriate box in the Delegation Responsibility Checklist that follows.
In order to provide better quality assurance, Cardinal Health PTS, LLC
("Cardinal") will perform the activities defined herein in accordance with
Standard Operating Procedures (defined below) to the extent that a Standard
Operating Procedure is applicable to such activity. In the event of a conflict
between the terms of this Quality Agreement and a Standard Operating Procedure,
the Standard Operating Procedure shall control.
This Agreement is subject to the terms of a supply, manufacturing or other
similar type of agreement between Cardinal Health PTS, LLC ("Cardinal") and
▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") ("Supply Agreement"). In the event of a
conflict between this Quality Agreement and the Supply Agreement, the Supply
Agreement shall control.
This Quality Agreement is intended to comply with the guidance and directives
set forth in (i) FDA Guidance for Industry, Cooperative Manufacturing
Arrangements for Licensed Biologics, August, 1999 and (ii) Commission Directive
91/356/EEC of 13 June 1991, laying down the principles and guidelines of good
manufacturing practice for medicine products for human use.
▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") Cardinal Health PTS, LLC
("Cardinal")
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Position: Position:
------------------------- ---------------------------
Name: Name:
------------------------- ---------------------------
Signature: Signature:
------------------------- ---------------------------
Date: Date:
------------------------- ---------------------------
Position: Position:
------------------------- ---------------------------
Name: Name:
------------------------- ---------------------------
Signature: Signature:
------------------------- ---------------------------
Date: Date:
------------------------- ---------------------------
2
For purposes of this Quality Agreement, the following definitions shall apply:
A. "API" shall mean the active pharmaceutical ingredient used in the
manufacture of the Product as identified in the Specifications.
B. "Applicable Laws" means all laws, ordinances, rules and regulations within
the Territory applicable to the Processing of Product and the obligations
of Cardinal Health PTS, LLC ("Cardinal") or ▇▇▇▇▇ Laboratories, Inc.
("▇▇▇▇▇"), as the context requires, including, without limitation, (i) all
applicable federal, state and local laws and regulations of each
Territory; (ii) the U.S. Federal Food, Drug and Cosmetic Act, and (iii)
the "GMPs". Applicable Laws shall also include all laws, ordinances, rules
and regulations applicable in Territories added to this Quality Agreement
after the Effective Date of this Agreement, solely to the extent ▇▇▇▇▇
Laboratories, Inc. ("▇▇▇▇▇") or its designee has provided written copies
of such laws to SP prior to SP's Processing Product under this Quality
Agreement. Copies of all laws shall be in the English language.
C. "Facilities" means any Cardinal Health PTS, LLC ("Cardinal") facilities.
D. "FDA" shall mean the United States Food and Drug Administration, and any
successor entity thereto.
E. "GMPs" mean the current Good Manufacturing Practices for Finished
Pharmaceuticals promulgated by the FDA, as amended from time to time. GMPs
shall also include good manufacturing practice regulations promulgated by
a Regulatory Authority in a Territory added to this Agreement after the
Effective Date of this Quality Agreement, solely to the extent ▇▇▇▇▇ or
its designee has provided written copies of such regulations to Cardinal
prior to Cardinal's Processing Product under this Quality Agreement.
Copies of all laws shall be in the English language.
F. "Marketing Application" shall mean an application for marketing
authorization which has not yet been approved by the FDA or other
Regulatory Authority, including without limitation, FDA New Drug
Application, FDA Abbreviated New Drug Application, and other similar
marketing applications promulgated by Regulatory Authorities.
G. "Marketing Authorizations" shall mean any approved application for
marketing authorization, including without limitation, FDA New Drug
Application, FDA Abbreviated New Drug Application, and other similar
marketing authorizations promulgated by Regulatory Authorities.
H. "Process" or "Processing" means the sterile compounding, filling,
producing and/or packaging of the Raw Materials into Product in accordance
with the Specifications and the terms and conditions set forth in the
Supply Agreement and this Quality Agreement.
I. "Product" shall mean the Product identified on the first page of this
Quality Agreement.
J. "Regulatory Authority" shall mean the FDA and any other Regulatory
Authority within a Territory involved in regulating any aspect of the
development, manufacture, market approval, sale, distribution, packaging
or use of the Product.
3
K. "Specifications" means the procedures, requirements, standards, quality
control testing, other data and scope of services set forth in the Supply
Agreement.
L. "Standard Operating Procedures" shall mean the standard operating
procedures in effect at Cardinal Health PTS, LLC ("Cardinal") that have
been approved by Cardinal Health PTS, LLC ("Cardinal") Quality Assurance
department and that are applicable to the Processing.
M. "Territories" shall mean the United States of America and any other
country that the parties agree in writing to add to this Quality Agreement
from time to time.
RESPONSIBILITY DELEGATION CHECKLIST
RESPONSIBILITIES ▇▇▇▇▇ CARDINAL
LABORATORIES, HEALTH
INC. PTS, LLC
("▇▇▇▇▇") ("CARDINAL")
----------------------------------------------------------------------------------------------
1. REGULATORY AUTHORIZATIONS & GMP COMPLIANCE
1.1 Will maintain all licenses, registrations and other X
authorizations as are required to operate a GMP
pharmaceutical manufacturing facility under the
Applicable Laws.
1.2 Will maintain and operate the Facility in compliance with X
the GMPs and all other Applicable Laws.
1.3 Will Process the Product in accordance with approved X
manufacturing batch records, the GMPs and all other
Applicable Laws.
1.4 Will prepare, maintain and update the Marketing X
Authorizations in accordance with all Applicable Laws.
1.5 Will provide Cardinal Health PTS, LLC ("Cardinal") with X
copies of those portions of the Marketing Applications
that are applicable to the Processing prior to submission
of such Marketing Applications to the applicable
Regulatory Authority.
1.6 Will provide Cardinal Health PTS, LLC ("Cardinal") with X
copies of those portions of the approved Marketing
Authorizations that are applicable to the Processing.
1.7 Will meet all drug listing filing requirements for all X
Product and packaging configurations processed at the
Facilities.
1.8 Is not debarred under the U.S. Generic Drug Enforcement X
Act of 1992 and does not employ or use the services of
any individual who is debarred or who has engaged in
activities that could lead to being debarred.
1.9 Will prepare and submit post-marketing annual reports to X
the FDA and the other Regulatory Authorities in
accordance with Applicable Laws.
4
RESPONSIBILITIES ▇▇▇▇▇ CARDINAL
LABORATORIES, HEALTH
INC. PTS, LLC
("▇▇▇▇▇") ("CARDINAL")
----------------------------------------------------------------------------------------------
1.10 Will provide ▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") with the X
following information to be included in the post
marketing annual report:
- Stability data for the Product in accordance with the
applicable stability protocol, including any
non-conforming data.
- Other information that may be required.
- Change control information for all changes implemented
during the preceding year.
2. REGULATORY ACTIONS & INSPECTIONS
2.1 Will promptly notify ▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") X
of any FDA or other Regulatory Authority notice of
inspection or inspection of the Facilities directly
relating to the Product.
2.2 Will promptly notify the other party of any FDA or other X X
Regulatory Authority investigation relating to the
Product.
2.3 Will provide copies of any FDA Form 483s, Warning Letters X
or the like from applicable Regulatory Authorities within
48 hours of receipt and subsequent response(s) relating
to the Product.
2.4 Will promptly notify the other party of any Regulatory X X
Authority request for Product samples or Product batch
records.
2.5 Will notify the other party of any requests for X X
information, notices of violations or other communication
from a Regulatory Authority relating to environmental,
occupational health and safety compliance, relating
directly to the Product.
3. COMPLIANCE OF SPECIFICATIONS WITH MARKETING AUTHORIZATIONS
& CHANGE CONTROL
3.1 Will ensure that all Specifications contained in the X X
Supply Agreement and master batch record comply with the
Marketing Authorizations, as amended from time to time,
and will certify such in writing to the other party.
3.2 Will submit any proposed changes to the Specifications to X X
the other party for review and approval, prior to the
implementation of such changes and the submission of any
such changes to the Regulatory Authorities.
3.3 Will notify ▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") of any X
proposed changes to the Facilities or the Processing that
may impact the Product.
3.4 Will act as liaison with Regulatory Authorities for the X
approval, maintenance and updating of Product
Specifications in the Marketing Authorizations.
5
RESPONSIBILITIES ▇▇▇▇▇ CARDINAL
LABORATORIES, HEALTH
INC. PTS, LLC
("▇▇▇▇▇") ("CARDINAL")
----------------------------------------------------------------------------------------------
4. MATERIALS
4.1 Will be responsible for maintenance of Specifications, X
procurement, storage, sampling and testing and release of
the API.
4.2 Will be responsible for retaining reference samples of X
active ingredient(s), including samples for periodic
re-tests, for three years beyond product expiry date.
4.3 Will perform identification testing of API. X
4.4 Will be responsible for maintenance of Specifications, X
procurement, storage, sampling, testing and release of
raw materials.
4.5 Will qualify raw material suppliers providing raw X X
materials used in the Product to ensure full compliance
with GMPs and Applicable Laws.
4.6 Will store API and raw materials in accordance with the X
Specifications while at the Facilities.
4.7 Retains reference samples of raw materials, including X
samples of periodic re-tests, for one year beyond product
expiry date.
4.8 Will dispose of product waste and any special waste X
related to the Processing of the Product.
5. PRODUCTION & VALIDATIONS
5.1 Will approve process validation protocols and receive X
copies of completed validation reports.
5.2 Will be responsible for maintenance, qualifications and X
validation of the Facility, equipment, and processes
associated with Processing the Product.
5.3 Will manufacture and test the Product at the Facilities X
in accordance with the Product master batch record, the
Standard Operating Procedures referenced therein, and the
Specifications.
5.4 Will be responsible for visual inspection of finished X
Product.
5.5 Will be responsible for labeling Product in accordance X
with the Specifications, and applicable portions of 21
CFR 610.60 through 610.65.
5.6 Will be responsible to prepare and approve all artwork, X
inserts, labeling and packaging.
5.7 Will be responsible for packaging Product in accordance X
with the Specifications.
6
RESPONSIBILITIES ▇▇▇▇▇ CARDINAL
LABORATORIES, HEALTH
INC. PTS, LLC
("▇▇▇▇▇") ("CARDINAL")
----------------------------------------------------------------------------------------------
5.8 Will review and approve the original Master Batch Record X X
for each Product.
Will review and approve Change Control Documents for X X
batch records.
Will review and approve Change Control Documents for X X
SOPs that are in the NDA.
5.9 Will be responsible for testing Product and supplying a X
Certificate of Analysis to the other party.
5.10 Will be responsible to release Product to the Market in X
accordance with the Product Specification.
5.11 Is responsible for investigating, resolving and X
documenting all adverse events and deviations from the
master batch record and Specifications.
5.12 Will review and approve major deviation reports. X X
6. Audits
6.1 Will be entitled to conduct one quality audit of Cardinal X
Health PTS, LLC ("Cardinal") per calendar year to evaluate
quality control and testing processes.
6.2 Will conduct internal audits of quality control and X
testing processes, in accordance with the GMPs and
applicable Standard Operating Procedures.
7. LOT CODES & EXPIRATION DATING
7.1 Will assign Product Lot Code. X
7.2 Will assign Expiration Date according to the procedure X
provided by ▇▇▇▇▇.
8. SAMPLES
8.1 Will be responsible for Product sampling in accordance X
with GMPs and Applicable Laws and as otherwise agreed to
by the parties in the master batch record for the Product.
8.2 Will retain finished Product samples in accordance with X
Applicable Laws.
8.3 Will retain stability samples in accordance with X
Applicable Laws.
7
RESPONSIBILITIES ▇▇▇▇▇ CARDINAL
LABORATORIES, HEALTH
INC. PTS, LLC
("▇▇▇▇▇") ("CARDINAL")
----------------------------------------------------------------------------------------------
9. TESTING & ANALYSIS
9.1 Will perform product stability testing according to X
Supply Agreement, Product Specifications and applicable
Cardinal Health PTS, LLC ("Cardinal") protocols.
9.2 Will investigate all out-of-Specification test results X
("OOS") and provide documentation relating to such
investigations with the batch record applicable to the
batch containing the OOS test result.
9.3 Will promptly notify the other party of any recall and/or X X
confirmed stability failure of the Product that might be
attributed to Processing the Product.
10. RELEASE
10.1 Will be responsible for final release of Product. X
11. RECORDS
11.1 Will provide the released batch record documentation for X
each batch of Product, which shall include the following:
- A statement that the lot was manufactured, packaged
and tested in accordance with cGMPs, identifies the
master batch record documents, and lists any incident
reports and investigations associated with the batch.
- A certificate of analysis covering all Regulatory
Authority and compendial tests.
- The signature of the QA Representative who released
the batch.
- A copy of the batch record.
- The Cardinal Batch Release form.
11.2 Will store the master record, batch records and all other X
documentation related to the Product for the minimum
period required by all Applicable Laws.
11.3 Will provide copies of all documentation necessary for X X
the other party to respond to inquiries by Regulatory
Authorities.
12. STORAGE
12.1 Will store the API at the facilities in accordance with X
the API Specifications until manufacture of the Product.
12.2 Will store the finished Product in accordance with the X
Specifications pending release of the Product.
8
RESPONSIBILITIES ▇▇▇▇▇ CARDINAL
LABORATORIES, HEALTH
INC. PTS, LLC
("▇▇▇▇▇") ("CARDINAL")
----------------------------------------------------------------------------------------------
12.3 Responsible to ensure storage of the Product in X
accordance with the Specifications following delivery of
such Product to ▇▇▇▇▇ Laboratories, Inc.
13. SAFETY
13.1 Will maintain safety/hazard and handling data on the X
Product and API.
13.2 Will maintain safety/hazard and handling data on the raw X
materials.
13.3 Will provide safety/hazard and handling data for new X
products and materials.
14. COMPLAINTS
14.1 Will assist ▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") in X
investigating and resolving all medical and non-medical
product complaints.
14.2 Will provide ▇▇▇▇▇ Laboratories, Inc. ("▇▇▇▇▇") with any X
information relating to the Processing of the Product
that is necessary to address a Product complaint or
adverse drug event.
14.3 Will collect and log all information relating to X
complaints and adverse drug events.
14.4 Will investigate all complaints and adverse drug events. X
14.5 Will issue all reports and follow up corrective action X
relating to complaints and adverse drug events.
15. RECALL, FIELD ALERTS AND PRODUCT WITHDRAWAL
15.1 Responsible for decision to initiate recall or Product X
withdrawal.
15.2 Communicates decision to initiate recall to Cardinal X
Health PTS, LLC ("Cardinal").
15.3 Responsible for notification of recall or Product X
withdrawal to appropriate regulatory agencies.
15.4 Responsible for management of recall or Product X
withdrawal.
Responsible for reconciliation of returned Product X
following recall or Product Withdrawal.
15.5 Will issue and follow up on FDA Field Alerts. X
15.6 Will provide copies of the CMC section of the NDAs and X
Annual Reports.
9
Exhibit E
SUBLEASE AGREEMENT AND LESSOR CONSENT
AGREEMENT OF SUBLEASE AND LESSOR CONSENT (this "SUBLEASE AGREEMENT") made
as of the 1st day of April, 2004 by and among ▇▇▇▇▇ Laboratories, Inc., a Texas
corporation d/b/a ▇▇▇▇▇ Respiratory Therapeutics (the "SUBLESSEE"), Cardinal
Health PTS, LLC, a Delaware limited liability company (the "SUBLESSOR"), and The
Estate of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Deceased ("LESSOR").
W I T N E S S E T H:
WHEREAS, CCP Investment Properties, Ltd., a Texas limited partnership
("ORIGINAL LANDLORD") and Sublessee have previously executed a document entitled
"Industrial Lease Agreement" (as amended as described below, the "LEASE") with
regard to 71,108 square feet of lease space currently occupied by Sublessor
located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ (the "ORIGINAL PREMISES");
and
WHEREAS, Original Landlord and Sublessee previously executed a document
entitled "Amendment to Industrial Lease Agreement" dated October 29, 1990, and
AEW # 14 Corporation, as successor landlord, and Sublessee executed a document
entitled "Second Amendment to Industrial Lease Agreement" dated March 15, 1991,
both of said amendments relating to the security deposit due under the terms of
the Lease; and
WHEREAS, Metropolitan Life Insurance Company, as successor landlord
("METROPOLITAN"), and Sublessee executed a document entitled "Third Amendment to
Industrial Lease Agreement" dated January 27, 1993 (the "THIRD AMENDMENT") which
amendment added 36,020 square feet of "Expansion Premises" to the Original
Premises; and
WHEREAS, Metropolitan and Sublessee executed a document entitled "Fourth
Amendment to Industrial Lease Agreement" dated July 27, 1993 (the "FOURTH
AMENDMENT"), which amendment added 3,000 square feet of "Second Expansion Space"
to the Original Premises so that the premises covered by the Lease, as amended
by the Third Amendment and the Fourth Amendment, totaled a sum of 110,128 square
feet; and
WHEREAS, Metropolitan and Sublessee executed a document entitled "Fifth
Amendment to Industrial Lease Agreement" on January 19, 1995 (the "FIFTH
AMENDMENT") which amendment added 36,020 square feet of "Third Expansion Space"
to the Premises; and
WHEREAS, Metropolitan and Medeva Pharmaceuticals, Inc. ("MEDEVA"), as
successor to ▇▇▇▇▇ Laboratories, Inc., and ▇▇▇▇▇ Laboratories, Inc., an entity
then-new to the Lease and now being Sublessee, executed a document entitled
"Partial Assignment and Sixth Amendment to Industrial Lease Agreement" dated
February 25, 1998, by which document, among other matters, 1) Sublessee assumed
the terms of the Lease as to the Premises as contemplated by the Fourth
Amendment, 2) Medeva remained tenant
under the Lease as to the 36,020 of "Third Expansion Space" as discussed in the
Fifth Amendment, and as to which space the Lease has terminated, and 3) the
Lease Term was extended so as to terminate on January 31, 2006 (Terms used and
not otherwise defined herein shall have the meaning ascribed to them in the
Lease); and
WHEREAS, Sublessee and Lessor agreed in a document entitled "Seventh
Amendment to Industrial Lease Agreement" dated June 1, 2002 (the "SEVENTH
AMENDMENT") that the Third Expansion Space was no longer subject to the terms of
the Lease and to add 20,000 square feet to the Premises, so that as of June 1,
2002 the Premises consisted of 130,128 square feet (the "PREMISES"); and
WHEREAS, pursuant to an Assignment and Assumption Agreement and Lessor
Consent dated March 24, 2004, Sublessee assigned all of its rights and
obligations under the Lease to Sublessor and Sublessor assumed all of such
obligations; and
WHEREAS, Sublessee desires to sublease from Sublessor approximately 7,500
square feet of space in the Building plus approximately 1,040 square feet or
warehouse space and Sublessor desires to sublease such space to Sublessee; and
WHEREAS, Lessor desires to consent to such sublease.
NOW, THEREFOR, in consideration of the premises, which are incorporated
herein by reference, and of the terms, conditions and covenants set forth herein
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Subleased Premises. Sublessor hereby sublets to Sublessee, and
Sublessee hereby subleases from Sublessor, approximately 8,540 square feet of
209,088 space located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ (the "SUBLEASED
PREMISES"), as further described on EXHIBIT A, attached hereto and incorporated
herein by reference.
2. Term of Sublease.
The initial term (the "TERM") of this Sublease Agreement shall
commence on April 1, 2004 (the "COMMENCEMENT DATE"), and shall end on the
earliest to occur of: (i) January 31, 2006; or (ii) the date of termination
under that certain Supply Agreement dated of even date herewith between
Sublessor and Sublessee; or (iii) the date on which Sublessor discontinues
manufacturing operations in the Premises under the Lease. If the Commencement
Date is a date other than the first day of a calendar month or if this Sublease
Agreement terminates on a date other than the last day of a calendar month, then
the monthly payments of rent due hereunder for such month or months shall be
prorated based on the number of days in such month that occur during the Term.
Possession of the Subleased Premises shall be delivered to Sublessee on the
Commencement Date.
2
3. The Lease.
(a) Sublessor represents and warrants that it has full right, power
and authority under the Lease to enter into this Sublease Agreement, subject to
Lessor's consent.
(b) Except for ▇▇▇▇▇▇▇▇▇▇ ▇, ▇(▇), ▇(▇), ▇, ▇, (▇▇▇▇▇▇▇ at the end
of the fourth sentence), 10 (except the last paragraph of Paragraph 10, which is
incorporated) 14, the third, fourth and fifth paragraphs of Paragraph 15,
Paragraphs 26, 31, 41, 42, 43 and 44, and ▇▇▇▇▇▇▇▇ ▇, ▇-▇ and C of the Lease,
and to the extent not otherwise inconsistent with the agreements expressed in
this Sublease Agreement or applicable only to the original parties to the Lease,
the terms, provisions, covenants and conditions of the Lease are hereby
incorporated herein by reference, modified by the terms of this Sublease or
otherwise as appropriate in the circumstances so as to make such incorporated
terms, provisions, covenants and conditions applicable only to the subleasing
hereunder by Sublessee of the Subleased Premises. For the avoidance of doubt and
in furtherance of the foregoing: (i) Sublessor shall perform its covenants and
obligations under the Lease which do not require for their performance
possession of the Subleased Premises (including, without limitation, the
obligation to maintain in full force and effect all insurance required of
Sublessor as "tenant" under the Lease) and which are not otherwise to be
performed by Sublessee on behalf of Sublessor; and (ii) Sublessee shall perform
all affirmative covenants, and shall refrain from performing any act which is
prohibited by the negative covenants, of the Lease, where the obligation to
perform or refrain from performing is by its nature imposed upon the party in
possession of the Subleased Premises. Subject to the foregoing, Sublessee shall
be subject to, bound by and comply with all of said terms, provisions, covenants
and conditions of the Lease with respect to the Subleased Premises, shall
satisfy same in accordance with the Lease in favor and for the benefit of both
Sublessor and Lessor, and shall not do, suffer or permit anything to be done
which might result in an event of default under the Lease or cause the Lease to
be terminated or forfeited, it being understood and agreed that wherever in the
Lease the word "Tenant" appears, for the purposes of this Sublease Agreement the
word "Sublessee" shall be substituted, and wherever in the Lease the word
"Landlord" appears, for the purposes of this Sublease Agreement, the word
"Lessor" (and, as applicable hereunder, "Sublessor") shall be substituted; that
Sublessor shall have and may exercise all rights and remedies granted to Lessor
by the Lease; and that, without limitation of the foregoing or any other rights
and remedies Sublessor has or may have, upon the breach of any of said terms,
provisions, conditions or covenants of the Lease by Sublessee or upon the
failure of Sublessee to pay Rent or comply with any of the terms, provisions,
conditions or covenants of this Sublease Agreement, Sublessor may exercise any
and all rights and remedies granted to Lessor by the Lease. In the event of any
conflict between this Sublease Agreement and the Lease, the terms of this
Sublease Agreement shall control (unless such conflict would cause a default
under the Lease). Whenever the provisions of the Lease incorporated as
provisions of this Sublease Agreement require the written consent of Lessor,
said provisions shall be construed to require the written consent of both Lessor
and Sublessor. Sublessee hereby acknowledges that it has read and is familiar
with all the terms of the Lease, and agrees that this Sublease Agreement is
3
subordinate and subject to the Lease and that any termination thereof shall
likewise terminate this Sublease Agreement. In addition to the foregoing:
(a) The exculpation and release of Sublessor and the indemnity in
favor of Sublessor and Sublessor's agents and employees in Paragraph 11 of the
Lease include, and Sublessor shall not be liable to Sublessee for, any injury,
damage, loss, liability, claims, suits, costs, and expenses that would otherwise
be covered by such Paragraph 11, EVEN IF THE FOREGOING RESULT FROM AND/OR ARE
CAUSED IN PART OR WHOLE BY THE NEGLIGENCE (BUT NOT THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT) OF SUBLESSOR.
(b) Sublessee does not require a Non-Disturbance Agreement
pursuant to Paragraph 12 of the Lease.
(c) The exculpation and release of Sublessor in Paragraph 19(c) of
the Lease includes, and Sublessor shall not be liable to Sublessee for, any
damages that would otherwise be covered by such Paragraph 19(c), EVEN IF THE
FOREGOING RESULT FROM AND/OR CAUSED IN PART OR WHOLE BY THE NEGLIGENCE (BUT NOT
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF SUBLESSOR.
(d) The waiver of claims and subrogation in Paragraph 24 of the
Lease include any rights of recovery, claim, action or cause of action that
would otherwise be covered by such Paragraph 24, EVEN IF THE FOREGOING RESULT
FROM AND/OR ARE CAUSED IN PART OR WHOLE BY THE NEGLIGENCE (BUT NOT THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE PARTY (PARTIES) BENEFITING FROM
PARAGRAPH 24.
(e) It shall be the obligation of Lessor (i) to provide or cause to
be provided all services to be provided by Lessor under the terms of the Lease
and (ii) to satisfy all obligations and covenants of Lessor made in the Lease.
Sublessee acknowledges that Sublessor shall be under no obligation to provide
any such services or satisfy any such obligations or covenants, subject to
Section 4(c) below.
(f) Sublessee's obligations with respect to maintenance, repair, and
replacement (including, without limitation, those arising pursuant to Section
8(b) of the Lease, as incorporated herein) shall be limited to those items
located on the interior of the Subleased Premises only, and shall specifically
exclude, without limitation, those components of building-wide systems that are
located within the Subleased Premises but which also serve the remaining
portions of the Premises under the Lease.
4. Occupancy.
(a) Sublessee shall use and occupy the Subleased Premises in
accordance with the uses set forth in Section 1(g) of the Lease. Sublessee has
conducted an inspection, or been afforded the opportunity to inspect, the
Subleased Premises and
4
shall accept the Subleased Premises "AS IS," "WHERE IS," and "WITH ALL FAULTS"
and without any representation or warranty of suitability or habitability or of
any other kind. Sublessor is not required to make any repairs or alterations to
prepare the Subleased Premises for Sublessee's occupancy.
(b) Subject to Section 3(b) hereof, Sublessee covenants that it will
occupy the Subleased Premises in accordance with the terms of the Lease and will
not suffer to be done or omit to do any act that may result in a violation of or
a default under any of the terms and conditions of the Lease, or render
Sublessor liable for any charge or expense arising out of, by reason of, or
resulting from, Sublessee's failure to perform or observe any of the terms and
conditions of the Lease pertaining to the Subleased Premises. Subject to Section
3(b) hereof, Sublessor covenants and agrees that it will timely pay all rent and
other sums due under the Lease, and will not otherwise suffer to be done or omit
to do any act that may result in a violation of or a default under any of the
terms and conditions of the Lease.
(c) Sublessee agrees that Sublessor shall not be required to perform
any of the covenants or obligations of Lessor under the Lease and, insofar as
any of the covenants and obligations of Sublessor hereunder are required to be
performed under the Lease by Lessor thereunder, Sublessee acknowledges that
Sublessor shall be entitled to look to Lessor for such performance. Sublessor
hereby grants to Sublessee the right to receive all of the services and benefits
with respect to the Subleased Premises which are to be provided by Lessor under
the Lease. Any default or failure of performance by Lessor shall not affect this
Sublease Agreement or waive or defer any of Sublessee's obligations hereunder,
except to the extent that such default or failure of such performance excuses
Sublessor's performance under the Lease; provided, however, that in the event of
any such default or failure of performance by Lessor, Sublessor shall take such
action as may reasonably be required, under the circumstances, to secure such
performance upon Sublessee's written request therefor and at Sublessee's cost
and expense.
(d) Sublessor shall not agree to an amendment to the Lease which
would have a material adverse effect on Sublessee's occupancy of the Subleased
Premises or its use of the Subleased Premises for their intended purposes as of
the effective date of this sublease, unless Sublessor shall first obtain
Sublessee's prior written approval thereof, which approval shall not be
unreasonably withheld or delayed.
5. Rent.
(a) Sublessee shall pay to Sublessor as Basic Rental as for the
Subleased Premises during the Term of this Sublease Agreement the amount set
forth below:
Period Monthly Rent
------ ------------
Commencement Date to Expiration $6,118.13
5
In addition to the Basic Rental, Sublessee shall also pay to Sublessor all
Additional Rent payable by Sublessor under the Lease including self insurance
costs, to the extent allocable to the Subleased Premises. For purposes of
calculating such Additional Rent, Sublessee's "proportionate share" shall be a
fraction, the numerator of which is the space contained in the Subleased
Premises (8,540 square feet as of the Commencement Date) and the denominator of
which is the entire space contained in the Building (209,088 square feet).
The respective amounts set forth above shall be paid on or before the 1st
day of each month of the Term. If Sublessee fails or refuses to pay any
installment of Basic Rental within five (5) business days after the date such
installment is due, or Additional Rent within fifteen (15) business days after
Sublessee's receipt of written demand therefor, Sublessor shall be entitled to
collect a late charge equal to five percent (5%) multiplied by the amount of the
late payment to compensate Sublessor for the additional expense involved in
handling delinquent payments and not as interest. If the payment of a late
charge required by this Section is found to constitute interest notwithstanding
the contrary intention of Sublessor and Sublessee, the late charge shall be
limited to the maximum amount of interest that lawfully may be collected by
Sublessor under applicable law, and if any payment is determined to exceed such
lawful amount, the excess shall be applied to any unpaid rent then due and
payable hereunder and/or credited against the next succeeding installment of
rent payable hereunder. If all rent payable hereunder has been paid in full, any
excess shall be refunded to Sublessee.
(b) Intentionally Deleted.
6. Sublessor Rights and Obligations. Upon reasonable advance notice,
Sublessor shall be granted access to the Subleased Premises at all times.
Sublessor shall not unreasonably interfere with Sublessee's operations in the
Subleased Premises in connection with any such access.
7. Sublessee Rights and Obligations. Sublessee shall be obligated to
provide the insurance required under the Lease as it relates to the Subleased
Premises and shall name the Sublessor and Lessor as additional insureds under
its policies. Sublessee is obligated to provide proof of such insurance to
Sublessor on or before the Commencement Date and upon request at any time during
the Term (but not more frequently than annually). Sublessee acknowledges that
Sublessor will not provide insurance for the Subleased Premises, unless a
failure to so provide such insurance would result in a default under the Lease.
8. Casualty, Condemnation and/or Termination. If the whole or any part of
the Subleased Premises shall be taken or condemned in any manner by any
competent authority for any public or quasi-public use, or if the Lessor under
the Lease shall terminate the Lease as provided in the Lease by reason of
casualty or otherwise as permitted therein, in any such event, the term of this
Sublease Agreement shall cease and terminate as of the date of vesting of title
or such condemnation or termination, as the case may be. If the Lease is not
terminated as a result of any casualty loss and Sublessor
6
is entitled under the Lease to a rent abatement or other concession as a result
thereof, then Sublessee shall be entitled to Sublessee's "proportionate share"
of such abatement or concession unless the effect on the Subleased Premises of
such casualty loss shall be substantially disproportionate to the amount of such
abatement or concession, in which event the parties shall equitably adjust the
abatement or concession as between themselves, based upon the relative impact of
the casualty loss.
9. No Assignment or Subletting. Sublessee, for itself, its successors and
assigns, expressly covenants that it shall not assign, mortgage or encumber this
Sublease Agreement, or sublet, or suffer or permit the Subleased Premises or any
part thereof to be used by others except as provided under the Lease, without
the prior written consent of Lessor and Sublessor.
10. Quiet Enjoyment. Sublessor covenants and agrees with Sublessee that,
provided Sublessee pays and performs all of its covenants, agreements and
obligations under this Sublease Agreement, Sublessee may peaceably and quietly
enjoy the Subleased Premises, subject, nevertheless, to the terms and conditions
of this Sublease Agreement and the Lease.
11. Sublessor. The term "Sublessor" as used in this Sublease Agreement
refers to the Tenant under the Lease at the time in question, so that if the
Lease shall be assigned, such covenants, conditions and agreements shall be
binding upon each successor assignee.
12. Indemnity.
(a) Sublessee shall indemnify and hold Sublessor harmless from and
against any all claims and liabilities arising from Sublessee's improvements to
and use of the Subleased Premises, and from the conduct of Sublessee's business
and from any activity, work or thing done, suffered or permitted by Sublessee in
or about the Subleased Premises and shall further indemnify and hold Sublessor
harmless from and against any and all claims and liabilities arising from any
breach or default in the performance of any obligation on Sublessee's part to be
performed under the terms of this Sublease Agreement, or arising from any
negligence of Sublessee, or any of Sublessee's agents, and from and against any
and all costs, attorney's fees, expenses and liabilities incurred in the defense
of any such claim or any action or proceeding brought thereon. If any action or
proceeding is brought against Sublessor by reason of any such claim, Sublessee,
upon notice from Sublessor, shall defend the same at Sublessee's expense
utilizing counsel reasonably satisfactory to Sublessor. Sublessee, as a material
part of the consideration hereunder to Sublessor, hereby assumes all risk of
damage to property or injury to persons, in, upon or about the Subleased
Premises arising from any cause (INCLUDING THE NEGLIGENCE OF SUBLESSOR AND
EXCLUDING ONLY THE GROSS NEGLIGENCE OF SUBLESSOR) and Sublessee hereby waives
all claims in respect thereof against Sublessor. The foregoing agreement to
indemnify and hold harmless Sublessor from and against claims and liabilities
includes any such claims and liabilities asserted by Lessor against Sublessor.
7
(b) Sublessor shall indemnify and hold Sublessee harmless from and
against any all claims and liabilities arising from the conduct of Sublessor's
business and from any activity, work or thing done, suffered or permitted by
Sublessor in or about the Premises under the Lease (but excluding the Subleased
Premises) and shall further indemnify and hold Sublessee harmless from and
against any and all claims and liabilities arising from any breach or default in
the performance of any obligation on Sublessor's part to be performed under the
terms of this Sublease Agreement or the Lease, or arising from any negligence of
Sublessor, or any of Sublessor's agents, and from and against any and all costs,
attorney's fees, expenses and liabilities incurred in the defense of any such
claim or any action or proceeding brought thereon. If any action or proceeding
is brought against Sublessee by reason of any such claim, Sublessor, upon notice
from Sublessee, shall defend the same at Sublessor's expense utilizing counsel
reasonably satisfactory to Sublessee. Sublessor, as a material part of the
consideration hereunder to Sublessee, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises under the Lease
(but excluding the Subleased Premises) arising from any cause (INCLUDING THE
NEGLIGENCE OF SUBLESSEE AND EXCLUDING ONLY THE GROSS NEGLIGENCE OF SUBLESSEE)
and Sublessor hereby waives all claims in respect thereof against Sublessee. The
foregoing agreement to indemnify and hold harmless Sublessee from and against
claims and liabilities includes any such claims and liabilities asserted by
Lessor against Sublessee.
13. Broker's Commission. Each party represents to the other that it has
not dealt with any brokers in connection with this transaction, and each
representing party will indemnify the other party and hold such other party
harmless from and against any and all claims of any broker with respect to a
commission or fee in connection with this Sublease Agreement who purports to
have acted with or on behalf of the indemnifying party.
14. Miscellaneous Costs. Sublessee shall reimburse Sublessor for the legal
and other expenses incurred by Lessor in connection with the review of this
Sublease Agreement within thirty (30) days of receipt of an invoice therefor.
15. Attorney's Fees. If Sublessor, or Sublessee shall commence an action
against the other arising out of or in connection with this Sublease Agreement,
the prevailing party shall be entitled to recover its costs of suit and
reasonable attorney's fees.
16. Consent of Lessor Under Lease. Lessor hereby consents to this Sublease
Agreement. Lessor's consent shall be deemed to evidence Lessor's agreement that
Sublessee shall be entitled to the benefit of any waiver of claims and waiver of
subrogation rights for damage to Lessor's property contained within the Lease
for the benefit of Sublessor, to the same extent as if such waivers were
originally made in favor of Sublessee.
8
17. Notices. Any and all notices that are or may be required to be given
pursuant to the terms of this Sublease Agreement or the Lease shall be sent by
Certified Mail, Return Receipt Requested or overnight courier service to the
parties hereto at their respective addresses set forth below. Any notice given
pursuant to this Sublease Agreement shall be in writing and will be deemed given
to a party when (a) received or rejected by addressee, if sent by Certified
Mail, Return Receipt Requested or (b) the next business day following deposit
with a nationally recognized overnight courier service.
SUBLESSOR: SUBLESSEE:
Cardinal Health PTS, LLC ▇▇▇▇▇ Laboratories, Inc. d/b/a
14 School House Road ▇▇▇▇▇ Respiratory Therapeutics
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Legal Department Telecopier No: (908)
879-9784
LESSOR:
The Estate of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
c/o_______________________
18. Binding Effect. The covenants, conditions and agreements contained
herein shall be binding upon and inure to the benefit of Sublessor and Sublessee
and their respective heirs, executors, administrators, successors and permitted
assigns.
19. Governing Law. This Sublease Agreement is entered into in the State of
Texas, and its validity and interpretation shall be construed in accordance with
the laws of that State.
9
IN WITNESS WHEREOF, Sublessor, Sublessee and Lessor have each caused this
Sublease Agreement to be executed by its duly authorized partner or officer and
the appropriate corporate seals have been hereunto affixed all as of the day and
year first written.
SUBLESSOR:
ATTEST: CARDINAL HEALTH PTS, LLC
By: __________________ [Corporate Seal] By: ____________________ (Seal)
Its: __________________ Its: ____________________
SUBLESSEE:
ATTEST: ▇▇▇▇▇ LABORATORIES, INC., D/B/A
▇▇▇▇▇ RESPIRATORY THERAPEUTICS
By: __________________ [Corporate Seal] By: ____________________ (Seal)
Its: __________________ Its: ____________________
LESSOR:
ATTEST: THE ESTATE OF ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
DECEASED
By: __________________ [Seal] By: ____________________ (Seal)
Its: __________________ Its: ____________________
10
Exhibit F
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (the "AGREEMENT") is made and entered
into as of April 1, 2004 (the "EFFECTIVE DATE") by and between ▇▇▇▇▇
Laboratories, Inc., a Texas corporation d/b/a ▇▇▇▇▇ Respiratory Therapeutics
("▇▇▇▇▇"), and Cardinal Health PTS, LLC, a Delaware limited liability company
("CARDINAL").
W I T N E S S E T H:
▇. ▇▇▇▇▇ and Cardinal are party to that certain Asset Purchase Agreement
(the "PURCHASE AGREEMENT") dated as of March 24, 2004 whereby Cardinal is
acquiring certain tangible and intangible property from ▇▇▇▇▇ (the "TRANSFERRED
BUSINESS"); and
▇. ▇▇▇▇▇ and Cardinal, in connection with the Transferred Business, wish
to enter into an arrangement whereby each party will provide certain services to
the other on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
respective covenants, agreements, representations and warranties herein
contained, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
1. Provision of Services. To facilitate an orderly transition of
operations of the Transferred Business, ▇▇▇▇▇ shall perform and provide to
Cardinal the services described in Section A of Part I of the Schedule of
Services attached hereto as EXHIBIT A (the "SCHEDULE OF SERVICES") and Cardinal
shall perform and provide to ▇▇▇▇▇ the services described in Section B of Part I
and in Part II of the Schedule of Services. Cardinal shall have no obligation to
provide such services in a manner that would disrupt normal manufacturing
activities. Cardinal shall provide ▇▇▇▇▇ with advance notice of plans to move
services of the type provided under this Agreement to a location other than the
Fort Worth, Texas facility where the Transferred Business is conducted.
2. Charges for Services. The (a) charge for the services in Part II of the
Schedule of Services to be provided by Cardinal shall be equal to *% of
Cardinal's cost of providing the services or as otherwise agreed by the parties,
(b) charge for services provided to ▇▇▇▇▇ by Cardinal through ▇▇▇ ▇▇▇▇▇▇▇▇ shall
be equal to Cardinal's cost for such services and (c) charge for customer
shipping performed by Cardinal on behalf of ▇▇▇▇▇, if any, shall be equal to
Cardinal's customary charge for such services. Except as provided in the
preceding sentence, neither party to this Agreement be shall be charged for the
services provided by the other under Part I of the Schedule of Services.
3. Term; Termination.
3.1 Term. (a) With respect to those services set forth on Part I of the
Schedule of Services, the term of this Agreement shall commence on the Effective
Date and shall continue,
-------------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
subject to earlier termination as provided herein, for a term of 90 days and
thereafter shall continue on a month to month basis unless terminated by either
party.
(b) With respect to those services set forth on Part II of the
Schedule of Services, the term of this Agreement shall commence on the Effective
Date and shall continue until the later of (I) the date Cardinal discontinues
commercial manufacturing operations at the Plant or (II) September 30, 2005.
3.2 Termination. After the initial term (as set forth in Section 3.1(a)),
either party may terminate this Agreement upon thirty (30) days written notice
to the other party. If a party shall materially breach this Agreement and shall
have failed to cure such breach or undertake substantial efforts towards the
cure of the breach within thirty (30) days of the receipt from the other party
of written notice of such material breach, the non-breaching party may terminate
this Agreement.
4. Miscellaneous.
4.1 Successors and Assigns. Cardinal may assign its rights and obligations
(a) to any Cardinal Affiliate (as defined in the Purchase Agreement), or (b) in
connection with any merger, stock exchange or sale of any part of its business
to an assignee that provides reasonably satisfactory business and financial
assurances to ▇▇▇▇▇ and that expressly assumes the obligations of Cardinal
hereunder, in which case such assignment shall constitute a release of Cardinal
of its obligations with respect to this Agreement. ▇▇▇▇▇ may assign its rights
and obligations (a) to any Affiliate (as defined in the Purchase Agreement) of
▇▇▇▇▇, or (b) in connection with any merger, stock exchange or sale of any part
of its business to an assignee that provides reasonably satisfactory business
and financial assurances to Cardinal and that expressly assumes the obligations
of ▇▇▇▇▇ hereunder, in which case such assignment shall constitute a release of
▇▇▇▇▇ of its obligations with respect to this Agreement. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of each party hereto.
4.2 Notice. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopier or
by registered or certified mail, postage prepaid, as follows:
If to Cardinal, to:
Cardinal Health PTS, LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Legal Department
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If to ▇▇▇▇▇, to:
▇▇▇▇▇ Laboratories, Inc.
Colonial Court
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
or to such other address or telecopier number as the addressee may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, demand, waiver, consent, approval or other communication will be deemed
to have been given as of the date so delivered, telecopied or mailed.
4.3 Counterparts; Pronoun. This Agreement may be executed in two or more
counterparts which together shall constitute a single agreement. All pronouns
used in this Agreement shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identity of the person(s) may require.
4.4 Confidentiality. From time to time ▇▇▇▇▇ and Cardinal may provide
confidential business and technical information to one another either by design
or inadvertently as a result of the provision of services under this Agreement.
All such information (i) disclosed by one party to the other or (ii) discovered
by one party about the other or about the customers, prospective customers,
suppliers and others having business dealings with the other (collectively,
"Confidential Information") shall be kept confidential by the party receiving or
discovering such Confidential Information and the party receiving or discovering
such Confidential Information shall not make use of the Confidential
Information, except to discharge its obligations under this Agreement or any
other agreement between ▇▇▇▇▇ and any Cardinal Affiliate (as defined in the
Purchase Agreement). Neither party shall disclose any Confidential Information
of the other to any person or firm unless previously authorized in writing to do
so; provided, however, that the party receiving any Confidential Information may
disclose same to its responsible officers, employees, agents and representatives
who require said information in order to perform its obligations under this
Agreement or any other agreement between ▇▇▇▇▇ and any Cardinal Affiliate,
provided that said persons shall have assumed like obligations of
confidentiality. Any other provision hereof to the contrary notwithstanding, it
is expressly understood and agreed by the parties hereto that the obligations of
confidence and non-use herein assumed shall not apply to any information which:
(a) is lawfully, at the time of disclosure or thereafter so becomes, a part of
the public domain; (b) was otherwise in the receiving party's lawful possession
prior to disclosure; (c) is hereafter lawfully disclosed to the receiving party
by a third party who is not in violation of an obligation of confidentiality to
the disclosing party relative to said information; or (d) is, by mutual
agreement of the parties hereto, released from a confidential status. Upon
reasonable request, each of ▇▇▇▇▇ and Cardinal shall cause any of its employees,
contractors, agents or representatives to execute an agreement binding such
person to confidentiality provisions substantially identical to the foregoing.
The provisions of this Section 5.3 shall survive the expiration or earlier
termination of this Agreement for a period of ten years. Nothing in this
Agreement shall restrict either party from using or disclosing information
related to the other party properly obtained in the course of other business
relationships for any proper purpose
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otherwise permitted. ▇▇▇▇▇ acknowledges Cardinal and the Cardinal Affiliates
have and continue to acquire and develop substantial know-how, expertise and
information relating to the pharmaceutical business and related industries
including without limitation relating to the manufacture of tablets and other
products. Nothing in this Agreement shall be deemed to restrict in any manner
the ability of Cardinal and the Cardinal Affiliates to engage in manufacturing
and related activities. The foregoing shall not be construed as a license to any
patented intellectual property of ▇▇▇▇▇. In the event of a conflict between this
Section 4.4 and Section 8.9 of the Purchases Agreement, the terms of the
Purchase Agreement will govern.
4.5 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the State
of Delaware without regard to the principles of conflict of laws thereof.
4.6 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party.
4.7 Severability. If any provision of this Agreement, or the application
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder or
this Agreement and such provisions as applied to other persons, places and
circumstances shall not be effected thereby and remain in full force and effect
only if, after excluding the portion deemed to be unenforceable, the remaining
terms shall provide for the consummation of the transactions contemplated hereby
in substantially the same manner as originally set forth at the later of the
date of this Agreement was executed or last amended.
4.8 Entire Agreement. This Agreement, along with the Schedule hereto,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof, as distinguished from any other contractual arrangements
between the parties, and this Agreement supersedes and renders null and void any
and all other prior oral or written agreements, understandings, or commitments
pertaining to the subject matter hereof. No amendment hereof shall be deemed
valid unless in writing and signed by the parties hereto, and no discharge of
the terms hereof shall be deemed valid unless by full performance by the parties
hereto or by a writing signed by the parties hereto.
4.9 Waiver of Breach. The waiver of any of the provisions of this
Agreement by any party shall be limited to the particular instance involved and
shall not be deemed to be a continuing waiver or to waive any other rights of
the same or any other terms of this Agreement.
[Signature page follows]
4
IN WITNESS WHEREOF, the parties hereto have duly executed this Transition
Services Agreement under seal as of the day and year first above written.
▇▇▇▇▇ LABORATORIES, INC. CARDINAL HEALTH PTS, LLC
By: By:
--------------------------------- ---------------------------------
Name: Name:
------------------------------ -------------------------------
Title: Title
------------------------------ -------------------------------
5
EXHIBIT A
SCHEDULE OF SERVICES
Part I - Mutual Services
▇. ▇▇▇▇▇ Services for Cardinal
Information Technology Support
Transition of financial control systems
Transition of Telephone and data transmission services
Transition of email server
Shipping to Customers
Transition of Utilities
Mail Transfer Support
Services of ▇▇▇▇ ▇▇▇▇▇▇ (10 hours per week)
B. Cardinal Services for ▇▇▇▇▇
Transition of financial control systems
Information Technology Support
Return Product Shipment (▇▇▇▇▇ to pay shipping charges)_
Electronic file transfer support
Mail Transfer Support
Services of ▇▇▇▇ ▇▇▇▇ (10 hours per week)
Part II -- Cardinal Services for ▇▇▇▇▇
Cardinal shall provide development services relating to Mucinex(R), Mucinex(R)
D, Mucinex(R) DM products and line extensions of such products of the type
performed by ▇▇▇▇▇ personnel at
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the Fort Worth facility prior to the closing of the Purchase Agreement as
provided for below (the "PRODUCTS"). For clarification, these services consist
primarily of stability testing, method development and validation, formulation
support and raw material testing.
Process
▇▇▇▇▇ will submit a project development request with proposed completion
milestones for Products. Cardinal shall review each such request and provide
▇▇▇▇▇ with a statement of work ("SOW") setting forth the proposed activities, a
projected timeline and budget, and such other matters as the parties may agree.
Following ▇▇▇▇▇' written approval of an SOW, Cardinal shall undertake to perform
the services set forth in the SOW on the terms and conditions set forth therein.
Upon mutual approval, each SOW shall be incorporated into this Agreement. In the
event of any conflict between the terms of an SOW and this Agreement, the terms
of the SOW shall prevail.
Guidelines
It is understood that Cardinal will make appropriate technical staff available
for discussions as necessary or appropriate to perform the requested services
and that Cardinal shall, upon reasonable request, comply with ▇▇▇▇▇' requests
for data in support of filings/submissions or other related FDA requests and
afford ▇▇▇▇▇ reasonable opportunity to participate in any investigations
relating to ▇▇▇▇▇' Products.
Nothing in this Agreement shall obligate ▇▇▇▇▇ to use Cardinal as ▇▇▇▇▇'
exclusive provider of services of the type described in this Services Schedule.
If Cardinal is unable to perform particular analyses or other services requested
by ▇▇▇▇▇ for Products, Cardinal may, with the consent of ▇▇▇▇▇ not to be
unreasonably withheld, send samples to a third party for testing or analysis or
otherwise engage a third party to subcontract services contemplated by this
Agreement. Otherwise, ▇▇▇▇▇ may engage a third party to provide such services.
▇▇▇▇▇' inspection and audit rights relating to services described above shall be
conducted pursuant to the same terms and conditions as set forth in the Supply
Agreement entered into concurrent with this Agreement.
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