Exhibit 10.3
AFFILIATION AND DISTRIBUTION AGREEMENT,
DATED AS OF ___________ ___, 2002,
BY AND BETWEEN
ICN PHARMACEUTICALS, INC.
AND
RIBAPHARM INC.
AFFILIATION AND DISTRIBUTION AGREEMENT
This AFFILIATION AND DISTRIBUTION AGREEMENT (the "Agreement") is made and
entered into as of _________ ___, 2002, by and between ICN Pharmaceuticals,
Inc., a Delaware corporation ("ICN"), and Ribapharm Inc., a Delaware corporation
and a wholly owned subsidiary of ICN ("Ribapharm"). Certain capitalized terms
used herein are defined in Section 1 of this Agreement.
RECITALS
WHEREAS, the Board of Directors of ICN has determined that it would be in
the best interests of ICN and its stockholders to separate certain assets and
businesses from ICN;
WHEREAS, ICN has caused Ribapharm to be incorporated in order to effect
such separation;
WHEREAS, ICN has, pursuant to resolutions of its Board of Directors
adopted on August 7, 2000 and February 7, 2002 (the "ICN Contribution
Resolutions"), contributed to Ribapharm, certain assets (the "Contributed
Assets"), including its nucleoside analog library, and subject to certain
consents, the Exclusive License and Supply Agreement between ICN and
Schering-Plough Ltd. dated July 28, 1995, as amended (the "Schering-Plough
License");
WHEREAS, Ribapharm has previously filed the IPO Registration Statement (as
herein defined) with the Securities and Exchange Commission but it has not yet
become effective;
WHEREAS, immediately following the consummation of the Initial Public
Offering (as herein defined), ICN will own in excess of 80% of the outstanding
shares of Ribapharm Common Stock (as defined below);
WHEREAS, ICN currently intends to divest itself, following the Initial
Public Offering, of its entire ownership of Ribapharm by distributing in the
Distribution (as herein defined) all of its shares of Ribapharm Common Stock to
holders of ICN Common Stock;
WHEREAS, ICN and Ribapharm intend that the Distribution will be tax-free
to ICN and its stockholders under Section 355 and related provisions of the
Code (as defined in the Tax Sharing Agreement);
WHEREAS, in the Tax Sharing Agreement to be made and entered into by ICN
and Ribapharm concurrent with this Agreement, ICN and Ribapharm have provided
for and agreed upon the allocation between the parties of liabilities for Taxes
arising prior to, as a result of, and subsequent to the Distribution, and have
provided for and agreed upon other matters relating to Taxes; and
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WHEREAS, the parties hereto have determined that in order to accomplish
the objectives of the Initial Public Offering and the Distribution and to
facilitate the consummation thereof, it is necessary and desirable to
restructure certain intercompany relationships, provide working capital
financing to Ribapharm, allocate certain liabilities and provide for certain
indemnification, all as set forth herein;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereby agree
as follows:
1. DEFINITIONS.
"Abandonment Notice" has the meaning set forth in Section 3.4.
"Affiliate" means a Ribapharm Affiliate or an ICN Affiliate, as the case
may be.
"Annual Financial Statements" has the meaning set forth in Section
5.1(v).
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as
amended, 11 U.S.C. Section 101, et seq. as amended from time to time, and any
successor act thereto.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions located in the State of California or London, England
are authorized or obligated by law or executive order to close.
"Claim" has the meaning set forth in Section 6.5.
"Commitment" means the obligation of ICN to make loans to Ribapharm from
time to time in an aggregate principal amount not to exceed $60,000,000
(Sixty Million dollars) at any time outstanding.
"Contribution" means the transfer of certain assets by ICN to Ribapharm
pursuant to the ICN Contribution Resolutions.
"Contributed Assets" has the meaning set forth in the recitals.
"Control" means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Controlled" has the meaning correlative to the definition of "Control."
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"Disputes" has the meaning set forth in Section 7.1.
"Dispute Notice" means written notice of any dispute between ICN and
Ribapharm arising out of or relating to this Agreement, which shall set forth,
in reasonable detail, the nature of the dispute.
"Distribution" means the distribution after the Initial Public Offering
by ICN of all of ICN'S shares of Ribapharm Common Stock to ICN stockholders.
"Distribution Date" means any date or dates, as the case may be,
determined by ICN, in its sole and absolute discretion, to be a date on which
shares of Ribapharm Common Stock held by ICN are distributed in connection with
the Distribution.
"Event of Default" has the meaning set forth in Section 2.6(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Expiration Date" means August 31, 2002.
"GAAP" means generally accepted accounting principles, consistently
applied.
"ICN Affiliate" means a Person that, directly or indirectly through one or
more intermediaries, is Controlled by ICN (other than Ribapharm and any
Subsidiary of Ribapharm).
"ICN Annual Statements" has the meaning set forth in Section 5.1(v).
"ICN Business" means the business or operations of ICN or any ICN
Affiliate, including, in all cases, any predecessor entities, but excluding the
Ribapharm Business.
"ICN Public Filings" has the meaning set forth in Section 5.1(xiv).
"ICN's Auditors" has the meaning set forth in Section 5.1(v).
"ICN Transfer Agent" means the American Stock Transfer and Trust Company
or any other Person that acts as the transfer agent and registrar for the ICN
Common Stock.
"Indemnifying Party" means a Person that is obligated to provide
indemnification under this Agreement.
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"Indemnitee" means a Person that is entitled to seek indemnification under
this Agreement.
"Indemnity Payment" means an amount that an Indemnifying Party is required
to pay to an Indemnitee under this Agreement.
"Initial Public Offering" means the initial public offering by ICN of
shares of Ribapharm Common Stock as contemplated by the IPO Registration
Statement.
"Insurance Proceeds" means the payment received by an insured from an
insurance carrier or paid by an insurance carrier on behalf of the insured, net
of any applicable premium adjustment and tax effect.
"IPO Registration Statement" means the Registration Statement on Form S-1,
Registration No. 333-39350, of Ribapharm, as supplemented and amended from time
to time.
"IRS Private Letter Ruling" has the meaning set forth in the Tax Sharing
Agreement.
"LIBOR Rate" means, for any day, the rate for six-month U.S. Dollar
deposits which appears on Telerate Page 3750 (as defined in the International
Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange
Definitions), or such page as may replace Telerate Page 3750, as of 11:00 a.m.
(London time) on such date, or, if such day is not a Business Day, then the
immediately preceding Business Day (or if not so reported then from another
recognized source or interbank quotation).
"Loans" has the meaning set forth in Section 2.1.
"Losses" means all losses, liabilities, claims, obligations, demands,
judgments, damages, dues, penalties, assessments, fines (civil or criminal),
costs, liens, expenses, forfeitures, settlements, or fees, reasonable attorneys'
fees and court costs, of any nature or kind, whether or not the same would
properly be reflected on a balance sheet, and "Loss" means any of these.
"Notice" means any notice, request, claim, demand, or other communication
under this Agreement.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Pre-Distribution Period" means the period of time from the date hereof
until completion of the Distribution.
"PwC" has the meaning set forth in Section 5.1(iii).
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"Qualified Options and Convertibles" means options to acquire Ribapharm
Capital Stock (which are not exercisable until after the earlier of (i)
September 30, 2003 or (ii) completion of the Distribution) and securities
convertible into Ribapharm Capital Stock (which are not convertible until
completion of the distribution).
"Quarterly Financial Statements" has the meaning set forth in Section
5.1(iv).
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of the date hereof by and between Ribapharm and ICN.
"Regulation S-K" means Regulation S-K of the General Rules and Regulations
promulgated by the SEC, as in effect from time to time, and any successor
thereto.
"Regulation S-X" means Regulation S-X of the General Rules and Regulations
promulgated by the SEC, as in effect from time to time, and any successor
thereto.
"Request" has the meaning set forth in Section 6.5.
"Ribapharm Affiliate" means a Person that, directly or indirectly through
one or more intermediaries, is Controlled by Ribapharm.
"Ribapharm Business" means any business or operations of Ribapharm or any
Ribapharm Affiliates, including, in all cases, any predecessor entities.
"Ribapharm Capital Stock" means all classes or series of capital stock of
Ribapharm authorized by Ribapharm's Certificate of Incorporation.
"Ribapharm Common Stock" means the Common Stock, par value $.01 per share,
of Ribapharm.
"Ribapharm Public Filings" has the meaning set forth in Section
5.1(vii).
"Ribapharm Subsidiary" means all direct or indirect subsidiaries of
Ribapharm.
"Ribapharm's Auditors" has the meaning set forth in Section 5.1(a)(iii).
"Ribapharm's Certificate of Incorporation" means Ribapharm's Amended and
Restated Certificate of Incorporation, as in effect upon the closing of the
Initial Public Offering.
"Ribapharm Transfer Agent" means the American Stock Transfer and Trust
Company or any other Person that acts as the transfer agent and registrar for
the Ribapharm Common Stock.
"SEC" means the United States Securities and Exchange Commission or any
successor agency.
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"Section 355(e) Event" has the meaning set forth in the Tax Sharing
Agreement.
"Securities Act" means the Securities Act of 1933, together with the rules
and regulations promulgated thereunder, and any successor thereto.
"Separate Counsel" has the meaning set forth in Section 6.4(b).
"Service Agent" means (i) for ICN, The Corporation Trust Company, with
offices on the date hereof at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and (ii) for Ribapharm, The Corporation Trust Company,
with offices on the date hereof at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Subsidiary" means with respect to any specified Person, any corporation
or other legal entity of which such Person or any of its Subsidiaries Controls
or owns, directly or indirectly, more than 50% of the stock or other equity
interest entitled to vote with respect to the election of members to the board
of directors or similar governing body; provided, however, that for the purposes
of this Agreement, neither Ribapharm nor any of the Subsidiaries of Ribapharm
shall be deemed to be Subsidiaries of ICN or of any of the Subsidiaries of ICN.
"Tainting Event" has the meaning set forth in the Tax Sharing Agreement.
"Tax" or "Taxes" has the meaning set forth in the Tax Sharing Agreement.
"Tax Opinion" means a favorable opinion from ICN'S counsel regarding the
federal income tax consequences, under Section 355 and related provisions of
the Code (as defined in the Tax Sharing Agreement), of the Distribution.
"Tax-Related Losses" means (i) all federal, state and local Taxes
(including interest and penalties thereon) imposed pursuant to any settlement,
final determination, judgment or otherwise; (ii) all accounting, legal and other
professional fees, and court costs incurred in connection with such taxes; and
(iii) all costs and expenses that may result from adverse tax consequences to
ICN payable by ICN or ICN Affiliates.
"Tax Sharing Agreement" means the Tax Sharing Agreement between ICN and
Ribapharm dated as of the date hereof.
"Third-Party Claim" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person other than ICN or any ICN Affiliate or Ribapharm or any
Ribapharm Affiliate which gives rise to a right of indemnification hereunder.
"Underwriting Agreement" means the Underwriting Agreement, by and
among ICN, Ribapharm and the underwriters named therein relating to the Initial
Public Offering.
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"Voting Stock" means with respect to any Person, all classes and series of
the capital stock of such Person entitled to vote generally in the election of
directors.
2. WORKING CAPITAL FACILITY
2.1. REVOLVING CREDIT.
(a) Subject to the terms and conditions of this Section 2, and provided
that no Event of Default has occurred and is continuing, ICN agrees to make
loans (the "Loans") to Ribapharm from time to time prior to the Expiration Date
in an aggregate principal amount not to exceed at any time the Commitment. The
Loans shall be evidenced by a note in the form of Exhibit 1 to be executed and
delivered by Ribapharm upon the making of the initial Loan. Subject to the terms
and conditions of this Section 2, Ribapharm may borrow under this Section 2.1,
prepay any Loans as contemplated by Section 2.3(b) and reborrow under this
Section 2.1.
(b) Ribapharm may borrow hereunder from ICN at any time prior to the
Expiration Date upon giving to ICN advance notice of the date of borrowing and
the amount to be borrowed.
2.2. INTEREST.
(a) Ribapharm shall pay interest on the aggregate amount of the Loans
outstanding, calculated in accordance with the provisions of Section 2.2(b),
payable monthly in arrears on the last day of each calendar month.
(b) The rate of interest payable on the aggregate amount of the Loans with
respect to each day the Loans are outstanding shall be at an annual rate of
LIBOR Rate plus 200 basis points. Interest shall be computed upon the actual
number of days elapsed.
2.3. REPAYMENT OF THE LOAN AND CANCELLATION.
(a) Ribapharm undertakes to repay in full the amount of the Loans
outstanding hereunder, together with all interest accrued and outstanding
thereon, no later than December 31, 2003.
(b) Ribapharm, without premium or penalty and on two (2) days prior notice
to ICN of its intention to do so, may, at any time and from time to time, prepay
to ICN part or all of the aggregate amount of the Loans outstanding, together
with all interest accrued and outstanding thereon, to the date of such
repayment. Except as contemplated by clause (c) of this Section 2.3, the
prepayment of the Loans shall not reduce the amount of the Commitment.
(c) Ribapharm shall have the right at any time or from time to time to
terminate in whole or in part that part of the Commitment not drawn down by it
by giving prior notice thereof to ICN specifying the amount of the Commitment to
be terminated and the effective date thereof.
2.4. PAYMENT PROVISIONS.
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(a) If any payment due to be made by Ribapharm in accordance with this
Section 2 is to be made on a day which is not a Business Day, such payment shall
be made to ICN on the next succeeding Business Day, the sums to be paid being in
all instances calculated by reference to the actual date of payment.
(b) Ribapharm shall not be entitled to deduct or set off any amounts which
may be owed or claimed to be owed to it by ICN from any amounts payable by
Ribapharm to ICN under this Section 2.
(c) All payments by Ribapharm shall be made directly to ICN or as ICN
shall otherwise notify Ribapharm in writing.
2.5. NOTIFICATION. Ribapharm hereby covenants with ICN that from and after the
date hereof and for so long as any amount remains unpaid in respect of principal
of, or interest on, the outstanding borrowings or otherwise pursuant to this
Section 2, it will give ICN prompt notice in writing of the occurrence of any
Event of Default.
2.6. DEFAULT.
(a) An "Event of Default" shall mean any of the following:
(i) Ribapharm fails to pay when due any principal of, or interest
on, the Loans or any other amounts payable under this Section 2, and shall fail
to make such payments within fifteen (15) Business Days of written notification
thereof by ICN; or
(ii) an order is made or an effective resolution is passed for
winding up Ribapharm other than for the sole purpose of a merger or
consolidation; or
(iii) Ribapharm shall default in the payment when due of any
principal of or interest on any of its other indebtedness having an aggregate
principal amount of at least $3 million or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
indebtedness shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such indebtedness having an aggregate principal amount of at
least $3 million to become due, or to be prepaid in full (whether by redemption,
purchase or otherwise), prior to its stated maturity; or
(iv) Ribapharm shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(v) Ribapharm shall (a) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (b) make a general
assignment for the benefit of its creditors, (c) commence a voluntary case under
the Bankruptcy Code, (d) file a petition seeking to take advantage of any
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other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (e) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code, or (f) take any corporate action
for the purpose of effecting any of the foregoing; or
(vi) A proceeding or case shall be commenced, without the
application or consent of Ribapharm, in any court of competent jurisdiction,
seeking (a) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (b) the appointment of a trustee,
receiver, custodian, liquidator or the like of Ribapharm or of all or any
substantial part of its assets, or (c) similar relief in respect of Ribapharm
under any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 or more days; or an order for relief against Ribapharm shall be entered in an
involuntary case under the Bankruptcy Code.
(b) Upon the occurrence of an Event of Default specified in Section
2.6(a)(v) or Section 2.6(a)(iv), or upon delivery of notice thereof in writing
by ICN after the occurrence of any other Event of Default, the Commitment shall
terminate (if then in existence) and the aggregate amount of the Loans at that
time outstanding shall be declared immediately due and payable with interest
thereon to the date of actual payment. Any such termination and declaration
shall be effective and binding on Ribapharm.
2.7 FACILITY COSTS. Ribapharm agrees to reimburse ICN for the actual costs and
expenses (including reasonable legal fees) reasonably incurred by ICN in
connection with the enforcement or attempted enforcement of, or the preservation
or attempted preservation of, any of its rights under this Section 2. These
costs and expenses shall become due as soon as notice thereof has been served on
Ribapharm and shall be paid by Ribapharm within fifteen (15) Business Days
thereof.
3. THE DISTRIBUTION.
3.1. THE DISTRIBUTION. ICN currently intends, following the consummation of the
Initial Public Offering, to complete the Distribution as promptly as
practicable after receipt of an IRS Private Letter Ruling. Notwithstanding the
foregoing, ICN may, in its sole discretion, complete the Distribution following
receipt of a Tax Opinion. ICN intends to complete the Distribution through
means of a distribution that qualifies as a tax-free spin-off under Section 355
and related provisions of the Code (as defined in the Tax Sharing Agreement).
ICN shall, in its sole and absolute discretion, determine whether to proceed
with the Distribution and the timing of and conditions to the consummation of
the Distribution. In addition, ICN may at any time and from time to time until
the completion of the Distribution modify or change the terms of the
Distribution by accelerating or delaying the timing of the consummation of the
Distribution. Ribapharm shall cooperate with ICN in all respects to accomplish
the Distribution and shall, at ICN's direction, promptly take any and all
actions necessary or desirable to effect the
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Distribution, including, without limitation, the registration under the
Securities Act and the Exchange Act, as required under applicable law of
Ribapharm Common Stock on an appropriate registration form or forms to be
designated by ICN. ICN shall select in its sole discretion, in connection with
the Distribution, such investment banker(s) and manager(s), financial printer,
solicitation and/or exchange agent and outside counsel to effect the
Distribution as it deems necessary or desirable; provided that nothing herein
shall prohibit Ribapharm from engaging (at its own expense) its own financial,
legal, accounting and other advisors in connection with the Distribution.
3.2. CERTAIN STOCKHOLDER MATTERS. From and after the distribution of Ribapharm
Common Stock in connection with any transaction(s) included as part of the
Distribution and until such Ribapharm Common Stock is duly transferred in
accordance with applicable law, Ribapharm shall regard the Persons receiving
Ribapharm Common Stock in such transaction(s) as record holders of Ribapharm
Common Stock in accordance with the terms of such transaction(s) without
requiring any action on the part of such Persons. Ribapharm agrees that, subject
to any transfers of such stock, (a) each such holder shall be entitled to
receive all dividends payable on, and exercise voting rights and all other
rights and privileges with respect to, the shares of Ribapharm Common Stock then
held by such holder and (b) each such holder shall be entitled, without any
action on the part of such holder, to receive one or more certificates
representing, or other evidence of ownership of, the shares of Ribapharm Common
Stock then held by such holder. ICN shall cooperate, and shall instruct the ICN
Transfer Agent to cooperate, with Ribapharm and the Ribapharm Transfer Agent,
and Ribapharm shall cooperate, and shall instruct the Ribapharm Transfer Agent
to cooperate, with ICN and the ICN Transfer Agent, in connection with all
aspects of the Distribution and all other matters relating to the issuance and
delivery of certificates representing, or other evidence of ownership of, the
shares of Ribapharm Common Stock distributed to the holders of ICN Common Stock
in connection with any transaction(s) included as part of the Distribution.
Following the Distribution, ICN shall instruct the ICN Transfer Agent to deliver
to the Ribapharm Transfer Agent true, correct and complete copies of the stock
and transfer records reflecting the holders of ICN Common Stock receiving shares
of Ribapharm Common Stock in connection with any transaction(s) included as part
of the Distribution.
3.3. FURTHER ASSURANCES REGARDING THE DISTRIBUTION. In addition to the actions
specifically provided for elsewhere in this Agreement, Ribapharm shall, at ICN's
direction, use all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things commercially
reasonably necessary, proper or expeditious under applicable laws, regulations
and agreements in order to consummate and make effective the Distribution as
promptly as reasonably practicable. Without limiting the generality of the
foregoing, Ribapharm shall, at ICN's direction, cooperate with ICN, and execute
and deliver, or use all commercially reasonable efforts to cause to have
executed and delivered, all instruments, including instruments of conveyance,
assignment and transfer, and to make all filings with, and to obtain all
consents, approvals or authorizations of, any domestic or foreign governmental
or regulatory authority requested by ICN in order to consummate and make
effective the Distribution.
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3.4. ABANDONMENT OF THE DISTRIBUTION. The parties expressly acknowledge and
agree that ICN is not obligated in any respect to proceed with or complete the
Distribution and that ICN may, in its sole and absolute discretion, at any time
abandon its plans to proceed with or complete the Distribution. In the event
that ICN so determines that it no longer intends to proceed with or complete the
Distribution, ICN shall provide to Ribapharm a written notification of such
determination (an "Abandonment Notice"). Effective as of the date of the
Abandonment Notice, (a) provided that no Distribution Date has yet occurred,
Sections 3.3, 5.2 and 5.3 of this Agreement shall terminate, become null and
void and have no further force and effect (it being expressly understood and
agreed by the parties that such sections shall remain in full force and effect
in the event that a Distribution Date has occurred on or prior to the date of
the Abandonment Notice) and (b) ICN's rights, and Ribapharm's obligations, set
forth in the Registration Rights Agreement shall immediately become effective.
4. EXPENSES AND PRIOR RELATIONSHIP.
4.1. EXPENSES GENERALLY. Except as otherwise provided in this Agreement, all
costs and expenses of either party hereto in connection with this Agreement
shall be paid by the party that incurs such costs and expenses.
4.2. CERTAIN EXPENSES RELATING TO THE INITIAL PUBLIC OFFERING. ICN shall be
liable for all costs, fees and expenses relating to the Initial Public Offering,
including the costs and expenses of financial, legal, accounting and other
advisers.
4.3. CERTAIN EXPENSES RELATING TO THE DISTRIBUTION. ICN shall liable for all
costs, fees and expenses relating to the Distribution; provided that Ribapharm
shall be responsible for the payment of (a) the costs, fees and expenses of all
of Ribapharm's financial, legal, accounting and other advisors incurred in
connection with the Distribution if such financial, legal, accounting and other
advisors are not concurrently engaged by ICN and (b) any internal fees, costs
and expenses incurred by Ribapharm or any Ribapharm Affiliate in connection with
the Distribution.
4.4 PRIOR RELATIONSHIP. Ribapharm, with respect to Ribapharm and all of the
Ribapharm Affiliates, and ICN, with respect to ICN and all of the ICN
Affiliates, agree to take all commercially reasonable action to discontinue
their respective uses as promptly as is commercially reasonable of any printed
material that indicates an ownership or other relationship between or among ICN
and Ribapharm or any of their respective Affiliates that has changed as a result
of the Initial Public Offering, the Distribution or any other transactions
contemplated hereby; provided that this Section 4.4 shall not prohibit the use
of printed material containing appropriate and accurate references to such
relationship.
5. ADDITIONAL COVENANTS.
5.1. FINANCIAL STATEMENTS COVENANTS. For so long as ICN is required to
include in its consolidated financial statements Ribapharm's results of
operations, (determined in accordance with GAAP):
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(i) Ribapharm shall, and shall cause each Ribapharm Affiliate to,
maintain a fiscal year which commences on January 1 and ends on December 31 of
each calendar year.
(ii) Ribapharm shall deliver to ICN all schedules consistent with
ICN's corporate closing requirements and in a time consistent with ICN's
corporate closing schedule.
(iii) Except to the extent required by law (including SEC rules and
regulations), Ribapharm shall cause PricewaterhouseCoopers, LLP ("PwC") to be
retained as the independent certified public accountants to audit its
consolidated financial statements ("Ribapharm's Auditors") unless (x) Ribapharm
receives the prior written consent of ICN (which consent will not be
unreasonably withheld if Ribapharm has demonstrated to ICN that it is justified
in not retaining PwC by reason of any action or inaction of PwC), (y) ICN no
longer uses PwC to audit its consolidated financial statements or (z) PwC
resigns as Ribapharm's Auditors. If PwC ceases to be Ribapharm's Auditors, then
Ribapharm shall retain independent certified public accountants of nationally
recognized standing as Ribapharm's Auditors.
(iv) As soon as practicable, and in any event within 35 days after
the end of each of the first three fiscal quarters in each fiscal year of
Ribapharm (but in no event later than five days before Ribapharm intends to file
its Quarterly Financial Statements (as defined below) with the SEC), Ribapharm
shall deliver to ICN drafts of (A) the consolidated financial statements of
Ribapharm (and notes thereto) for such periods and for the period from the
beginning of the current fiscal year to the end of such quarter, setting forth
in each case in comparative form for each such fiscal quarter of Ribapharm the
consolidated figures (and notes thereto) for the corresponding quarter and
periods of the previous fiscal year and all in reasonable detail and prepared in
accordance with Regulation S-X, and (B) a discussion and analysis by management
of Ribapharm's consolidated financial condition and results of operations for
such fiscal period, including, without limitation, an explanation of any
material adverse change from the immediately preceding fiscal quarter, all in
reasonable detail and prepared in accordance with Item 303(b) of Regulation S-K.
The information set forth in (A) and (B) above is herein referred to as the
"Quarterly Financial Statements." No later than the earlier of (x) two Business
Days prior to the date Ribapharm files its Quarterly Report on Form 10-Q with
the SEC or otherwise makes its Quarterly Financial Statements publicly available
or (y) two Business Days prior to the date on which ICN has notified Ribapharm
that it intends to file its Quarterly Report on Form 10-Q with the SEC (but in
no event earlier than the 5th day before ICN's Quarterly Report on Form 10-Q is
required to be filed with the SEC), Ribapharm shall deliver to ICN the final
form of the Quarterly Financial Statements certified by the chief financial
officer of Ribapharm as presenting fairly, in all material respects, the
consolidated financial condition and results of operations of Ribapharm;
provided that ICN and Ribapharm financial representatives shall actively consult
with each other regarding any changes (whether or not substantive) which
Ribapharm may consider making to its Quarterly Financial Statements and related
disclosures prior to the actual filing of its Quarterly Report on Form 10-Q with
the SEC.
(v) Ribapharm shall use its reasonable best efforts to enable
Ribapharm's Auditors to complete their audit such that they will date their
opinion on Ribapharm's audited annual financial statements on the same date that
ICN's independent certified public accountants ("ICN's
12
Auditors") date their opinion on ICN's audited annual financial statements (the
"ICN Annual Statements"), and to enable ICN to meet its timetable for the
printing, filing and public dissemination of the ICN Annual Statements. To this
end, Ribapharm shall deliver to ICN as soon as practicable, and in any event
within 75 days after the end of each fiscal year of Ribapharm (but in no event
later than ten days before Ribapharm intends to file its Annual Financial
Statements (as defined below) with the SEC), (A) drafts of the consolidated
financial statements of Ribapharm (and notes thereto) for such year, setting
forth in each case in comparative form the consolidated figures (and notes
thereto) for the previous fiscal year and all in reasonable detail and prepared
in accordance with Regulation S-X and (B) a discussion and analysis by
management of Ribapharm's consolidated financial condition and results of
operations for such year, including, without limitation, an explanation of any
material adverse change from the immediately preceding fiscal year, all in
reasonable detail and prepared in accordance with Item 303(a) of Regulation S-K.
The information set forth in (A) and (B) above is herein referred to as the
"Annual Financial Statements." Ribapharm shall deliver to ICN all revisions to
such drafts as soon as any such revisions are prepared or made. No later than
the earlier of (1) five Business Days prior to the date Ribapharm files its
Annual Report on Form 10-K with the SEC or otherwise makes its Annual Financial
Statements publicly available or (2) five Business Days prior to the date on
which ICN has notified Ribapharm that it intends to file its Annual Report on
Form 10-K with the SEC (but in no event earlier than the 5th day before ICN's
Annual Report on Form 10-K is required to be filed with the SEC), Ribapharm
shall deliver to ICN the final form of the Annual Financial Statements certified
by the chief financial officer of Ribapharm as presenting fairly, in all
material respects, the financial condition and results of operations of
Ribapharm and its Subsidiaries; provided that ICN and Ribapharm financial
representatives shall actively consult with each other regarding any changes
(whether or not substantive) which Ribapharm may consider making to its Annual
Financial Statements and related disclosures prior to the actual filing of its
Annual Report on Form 10-K with the SEC. The Annual Financial Statements shall
also be accompanied by an opinion thereon by Ribapharm's independent certified
public accountants.
(vi) Ribapharm shall deliver to ICN all Quarterly and Annual
Financial Statements of each Ribapharm Affiliate (which (a) Ribapharm
consolidates for financial accounting purposes and (b) is itself required to
file financial statements with the SEC or otherwise make such financial
statements publicly available) with such financial statements to be provided in
the same manner and detail and on the same time schedule as those financial
statements of Ribapharm required to be delivered to ICN pursuant to this Section
5.1.
(vii) Ribapharm shall, and shall cause each Ribapharm Affiliate
which files information with the SEC, to deliver to ICN: (A) as soon as the same
are prepared, substantially final drafts of: (x) all reports, notices and proxy
and information statements to be sent or made available by Ribapharm or any
Ribapharm Affiliate to their security holders, (y) all regular, periodic and
other reports to be filed under Sections 13, 14 and 15 of the Exchange Act
(including Reports on Forms 10-K, 10-Q and 8-K and Annual Reports to
Shareholders), and (z) all registration statements and prospectuses to be filed
by Ribapharm or any Ribapharm Affiliate with the SEC or any securities exchange
pursuant to the listed company manual (or similar requirements) of such exchange
(collectively, the documents identified in clauses (x), (y) and (z)
13
are referred to herein as "Ribapharm Public Filings"), and (B) as soon as
practicable, but in no event later than one Business Day prior to the date the
same are printed, sent or filed, whichever is earliest, final copies of all such
Ribapharm Public Filings; provided that Ribapharm may continue to revise such
Ribapharm Public Filings prior to the filing thereof in order to make
corrections and changes which corrections and changes shall be delivered by
Ribapharm to ICN as soon as practicable; and, provided, further, that ICN and
Ribapharm financial representatives shall actively consult with each other
regarding any changes (whether or not substantive) which Ribapharm may consider
making to any of its Ribapharm Public Filings and related disclosures prior to
any anticipated filing with the SEC.
(viii) With reasonable promptness, Ribapharm shall deliver to ICN
such additional financial and other information and data with respect to
Ribapharm and its Subsidiaries and their business, properties, financial
positions, results of operations and prospects as from time to time may be
reasonably requested by ICN.
(ix) ICN agrees to provide to Ribapharm all information relating to
ICN or any ICN Affiliate that Ribapharm reasonably requests in connection with
any Ribapharm Public Filings or that, in the judgment of Ribapharm's legal
staff, is required to be disclosed or incorporated by reference therein under
any law, rule or regulation. ICN agrees that such information shall be provided
by ICN in a timely manner on the dates reasonably requested by Ribapharm (which
may be earlier than the dates on which ICN otherwise would be required hereunder
to have such information available) to enable Ribapharm to prepare, print and
release all Ribapharm Public Filings on such dates as Ribapharm shall determine.
If and to the extent reasonably requested by Ribapharm, ICN agrees that it shall
diligently and promptly review all drafts of such Ribapharm Public Filings and
prepare in a diligent and timely fashion any portion of such Ribapharm Public
Filing pertaining to ICN or any ICN Affiliate.
(x) Ribapharm shall authorize Ribapharm's Auditors to make available
to ICN's Auditors both the personnel who performed or are performing the annual
audit of Ribapharm and work papers related to the annual audit of Ribapharm, in
all cases within a reasonable time prior to the date of Ribapharm's Auditors'
opinion on Ribapharm's audited financial statements, so that ICN's Auditors are
able to perform the procedures they consider necessary to take responsibility
for the work of Ribapharm's Auditors as it relates to ICN's Auditors' report on
ICN's statements, all within sufficient time to enable ICN to meet its timetable
for the printing, filing and public dissemination of the ICN Annual Statements.
(xi) Ribapharm shall provide ICN's internal auditors access to
Ribapharm's and its Subsidiaries, books and records so that ICN may conduct
reasonable audits relating to the financial statements provided by Ribapharm
pursuant hereto as well as to the internal accounting controls and operations of
Ribapharm and its Subsidiaries.
(xii) Ribapharm shall give ICN as much prior notice as reasonably
practical of any proposed determination of, or any significant changes in, its
accounting estimates or accounting principles from those in effect on the date
hereof. Ribapharm will consult with ICN and, if
14
requested by ICN, Ribapharm will consult with ICN's independent public
accountants with respect thereto.
(xiii) Ribapharm shall, and shall cause each Ribapharm Affiliate to,
maintain a system of internal accounting controls that will provide reasonable
assurance that (A) Ribapharm's and such Ribapharm Affiliate's books, records and
accounts fairly reflect all transactions and dispositions of assets and (B) the
specific objectives of accounting control are achieved.
(xiv) Ribapharm shall cooperate fully, and cause its accountants to
cooperate, with ICN to the extent reasonably requested by ICN in the preparation
of ICN's public earnings releases, Quarterly Reports on Form 10-Q, Annual
Reports to Shareholders, Annual Reports on Form 10-K, any Current Reports on
Form 8-K and any other proxy, information and registration statements, reports,
notices, prospectuses and any other filings made by ICN with the SEC, any
national securities exchange or otherwise made publicly available (collectively,
"ICN Public Filings"). Ribapharm agrees to provide to ICN all information
relating to Ribapharm or any Ribapharm Affiliate that ICN reasonably requests in
connection with any ICN Public Filings or that, in the judgment of ICN's legal
staff, is required to be disclosed or incorporated by reference therein under
any law, rule or regulation. Such information shall be provided by Ribapharm in
a timely manner on the dates reasonably requested by ICN (which may be earlier
than the dates on which Ribapharm otherwise would be required hereunder to have
such information available) to enable ICN to prepare, print and release all ICN
Public Filings on such dates as ICN shall determine. Ribapharm shall cause its
accountants to consent to any reference to them as experts in any ICN Public
Filings required under any law, rule or regulation. If and to the extent
reasonably requested by ICN, Ribapharm shall diligently and promptly review all
drafts of such ICN Public Filings and prepare in a diligent and timely fashion
any portion of such ICN Public Filing pertaining to Ribapharm or any Ribapharm
Affiliate. Prior to any printing or public release of any ICN Public Filing, an
appropriate executive officer of Ribapharm shall, if requested by ICN, certify
that the information relating to Ribapharm, any Ribapharm Affiliate or the
Ribapharm Business in such ICN Public Filing is accurate, true and correct in
all material respects. Unless required by law, rule or regulation, Ribapharm
shall not publicly release any financial or other information which conflicts
with the information with respect to Ribapharm, any Ribapharm Affiliate or the
Ribapharm Business that is included in any ICN Public Filing without ICN's prior
written consent. Prior to the release or filing thereof, ICN shall provide
Ribapharm with a draft of any portion of a ICN Public Filing containing
information relating to Ribapharm, any Ribapharm Affiliate or the Ribapharm
Business and shall give Ribapharm an opportunity to review such information and
comment thereon; provided that ICN shall determine in its sole discretion the
final form and content of all ICN Public Filings.
(xv) ICN agrees that it shall cooperate fully, and cause its
accountants to cooperate fully, with Ribapharm to the extent reasonably
requested by Ribapharm in the preparation of any Ribapharm Public Filings.
(xvi) Prior to the release or filing thereof, Ribapharm shall
provide ICN with a draft of any portion of a Ribapharm Public Filing containing
information relating to ICN or any
15
ICN Affiliate and shall give ICN an opportunity to review such information and
comment thereon; provided that Ribapharm shall determine in its sole discretion
the final form and content of all Ribapharm Public Filings.
Nothing in this Section 5.1 shall require Ribapharm to violate any agreement
with any of its customers regarding the confidentiality of commercially
sensitive information relating to that customer or its business; provided that
in the event that Ribapharm would otherwise be required under this Section 5.1,
but for such agreement, to disclose any such information, Ribapharm shall use
all commercially reasonable efforts to seek to obtain such customer's consent to
the disclosure of such information.
5.2. OTHER COVENANTS.
(a) Ribapharm hereby covenants and agrees that, for so long as ICN
beneficially owns at least 10% of the outstanding shares of Ribapharm Common
Stock, Ribapharm shall not, without the prior written consent of ICN (which it
may withhold in its sole and absolute discretion), take, or cause to be taken,
directly or indirectly, any action, including making or failing to make any
election under the law of any state, which has the effect, directly or
indirectly, of restricting or limiting the ability of ICN to freely sell,
transfer, assign, pledge or otherwise dispose of shares of Ribapharm Common
Stock or would restrict or limit the rights of any transferee of ICN as a holder
of Ribapharm Common Stock. Without limiting the generality of the foregoing,
Ribapharm shall not, without the prior written consent of ICN (which it may
withhold in its sole and absolute discretion), take any action, or take any
action to recommend to its stockholders any action, which would among other
things, limit the legal rights of, or deny any benefit to, ICN as a Ribapharm
stockholder in a manner not applicable to Ribapharm stockholders generally.
(b) Ribapharm hereby covenants and agrees that, following the
Distribution, Ribapharm will be solely responsible for issuing and delivering
any shares of Ribapharm Common Stock due upon conversion of ICN's 6 1/2%
convertible subordinated notes due 2008.
(c) ICN hereby covenants and agrees that, for so long as it shall be
the majority stockholder of Ribapharm, to observe any fiduciary obligations that
it may have under applicable law to Ribapharm's other stockholders.
5.3 TAX-FREE SPIN-OFF. Ribapharm hereby covenants and agrees until the
earlier of (i) September 30, 2003 and (ii) completion of the Distribution,
Ribapharm shall not, without the prior written consent of ICN (which ICN may
withhold in its sole and absolute discretion), (A) issue any shares of Ribapharm
Capital Stock if, after giving effect to such issuances, ICN would cease to own
stock possessing at least 80% of the total combined voting power of all classes
of Ribapharm Capital Stock entitled to vote and at least 80% of the total number
of shares of each class of outstanding non-voting Ribapharm Capital Stock or (B)
take, or cause to be taken, any action, or do, or cause to be done, anything
which will prevent the Distribution from qualifying, or will cause the
Distribution to fail to qualify, as a tax-free spin-off under Section 355 of the
Code (as defined in the Tax Sharing Agreement). ICN and Ribapharm agree that ICN
may apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other injunctive
relief to prevent any breach of this Section 5.3. This Section 5.3 shall
terminate, become null and void and have no further force and effect if ICN
takes any action that has the effect that ICN ceases to beneficially own at
least 80% of the outstanding shares of Ribapharm Capital Stock (excluding
Qualified Options and Convertibles) and at least 80% of the number of shares of
each class of outstanding non-voting Ribapharm Capital Stock or otherwise
becomes ineligible under US tax laws from being able to affect the
Distribution on a tax-free basis.
16
5.4 ALLOCATION OF BENEFITS COVENANT. In connection with the Distribution,
Ribapharm understands that ICN is considering various adjustments to ICN's
existing stock option plans. To the extent that ICN determines, in its sole
discretion, to equitably allocate existing employee and director options to
acquire shares of ICN Common Stock between new options to acquire ICN Common
Stock and options to acquire Ribapharm Common Stock, ICN and Ribapharm hereby
agree to enter into an agreement, prior to the completion of the Distribution,
to reflect such allocation.
5.5. TAX SHARING AGREEMENT COVENANT. ICN and Ribapharm hereby covenant and
agree to enter into a Tax Sharing Agreement, concurrent with this Agreement, to
provide for and agree upon the allocation between the parties of liabilities for
Taxes arising prior to, as a result of, and subsequent to the Distribution, and
to provide for and agree upon other matters relating to Taxes.
5.6. NOTICES UNDER SCHERING-PLOUGH LICENSE AGREEMENT COVENANT. For so long
as ICN has any obligations under the Exclusive License and Supply Agreement
between ICN and Schering-Plough Ltd. dated July 28, 1995, as amended, Ribapharm
covenants to promptly provide copies of any notices received by Ribapharm
to ICN.
6. INDEMNIFICATION.
6.1. INDEMNIFICATION BY RIBAPHARM. Subject to Section 6.3, Ribapharm shall
indemnify, defend and hold harmless ICN, all ICN Affiliates and each of their
respective directors, officers and employees (in their capacities as such), from
and against:
(a) all Losses relating to, arising out of, or due to, directly or
indirectly, any breach by Ribapharm or any Ribapharm Affiliate of any of the
provisions of this Agreement;
(b) all Losses relating to, arising out of, or due to, directly or
indirectly, any incorrect, inaccurate or incomplete financial and other
information provided by Ribapharm or any Ribapharm Affiliate to ICN pursuant to
Section 5.1 of this Agreement; and
(c) all Losses that result from any Third-Party Claim arising out of the
business or operation of the Ribapharm Business.
6.2. INDEMNIFICATION BY ICN. Subject to Section 6.3, ICN shall indemnify,
defend, and hold harmless Ribapharm, all Ribapharm Affiliates, and each of their
respective directors, officers and employees (in their capacities as such), from
and against:
(a) all Losses relating to, arising out of, or due to, directly or
indirectly, any breach by ICN or any ICN Affiliate of any of the provisions of
this Agreement;
(b) all Losses relating to, arising out of, or due to, directly or
indirectly, any incorrect, inaccurate or incomplete financial and other
information provided by ICN or any ICN Affiliate to Ribapharm pursuant to
Section 5.1 of this Agreement;
(c) all Losses relating to, arising out of, or due to, directly or
indirectly, any expenses, monetary judgment or settlement incurred in connection
with the pending civil lawsuit by the SEC against ICN and related parties in the
United States District Court for the Central District of California, the plea
settling the US Attorney's Office investigation in the United States District
Court for the Central
17
District of California or the litigation involving the Republic of Serbia, the
Federal Republic of Yugoslavia and the State Health Fund of Serbia relating to
ICN's interest in ICN Yugoslavia; and
(d) all Losses that result from any Third-Party Claim arising out of the
business or operation of the ICN Business.
6.3. OTHER LIABILITIES.
(a) Except as provided in Section 6.4, this Section 6 shall not be
applicable to any Tax-Related Losses, which shall be governed by the Tax Sharing
Agreement.
(b) This Section 6 shall not be applicable to any Losses relating to,
arising out of, or due to any breach of the provisions of any other contract,
agreement or understanding between ICN or any ICN Affiliate, on the one hand,
and Ribapharm or any Ribapharm Affiliate, on the other hand, which Losses shall
be governed by the terms of such contract, agreement or understanding.
6.4. PROCEDURE FOR INDEMNIFICATION INVOLVING THIRD-PARTY CLAIMS.
(a) Notice of Claim. If any Indemnitee receives notice of the assertion of
any Third-Party Claim with respect to which an Indemnifying Party is obligated
under this Agreement to provide indemnification, such Indemnitee shall give such
Indemnifying Party notice thereof (together with a copy of such Third-Party
Claim, process or other legal pleading) promptly after becoming aware of such
Third-Party Claim; provided, however, that the failure of any Indemnitee to give
notice as provided in this Section shall not relieve any Indemnifying Party of
its obligations under this Section 6, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice. Such
notice shall describe such Third-Party Claim in reasonable detail.
(b) Obligation of Indemnifying Party. An Indemnifying Party, at such
Indemnifying Party's own expense and through counsel chosen by such Indemnifying
Party (which counsel shall be reasonably acceptable to the Indemnitee), may
elect to defend any Third-Party Claim. If an Indemnifying Party elects to defend
a Third-Party Claim, then, within ten Business Days after receiving notice of
such Third-Party Claim (or sooner, if the nature of such Third-Party Claim so
requires), such Indemnifying Party shall notify the Indemnitee of its intent to
do so, and such Indemnitee shall cooperate in the defense of such Third-Party
Claim. Such Indemnifying Party shall pay such Indemnitee's reasonable
out-of-pocket expenses incurred in connection with such cooperation. Such
Indemnifying Party shall keep the Indemnitee reasonably informed as to the
status of the defense of such Third-Party Claim. After notice from an
Indemnifying Party to an Indemnitee of its election to assume the defense of a
Third-Party Claim, such Indemnifying Party shall not be liable to such
Indemnitee under this Section 6 for any legal or other expenses subsequently
incurred by such Indemnitee in connection with the defense thereof other than
those expenses referred to in the preceding sentence; provided, however, that
such Indemnitee shall have the right to employ one law firm as counsel, together
with a separate local law firm in each applicable jurisdiction ("Separate
Counsel"), to represent such Indemnitee in any action or group
18
of related actions (which firm or firms shall be reasonably acceptable to the
Indemnifying Party) if, in such Indemnitee's reasonable judgment at any time,
either a conflict of interest between such Indemnitee and such Indemnifying
Party exists in respect of such claim, or there may be defenses available to
such Indemnitee which are different from or in addition to those available to
such Indemnifying Party and the representation of both parties by the same
counsel would be inappropriate, and in that event the reasonable fees and
expenses of such Separate Counsel shall be paid by such Indemnifying Party (it
being understood, however, that the Indemnifying Party shall not be liable for
the expenses of more than one Separate Counsel (excluding local counsel) with
respect to any Third-Party Claim (even if against multiple Indemnitees)). If an
Indemnifying Party elects not to defend against a Third-Party Claim, or fails to
notify an Indemnitee of its election as provided in this Section 6.4 within the
period of ten Business Days described above, the Indemnitee may defend,
compromise, and settle such Third-Party Claim and shall be entitled to
indemnification hereunder (to the extent permitted hereunder) on an as incurred
basis; provided, however, that no such Indemnitee may compromise or settle any
such Third-Party Claim without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the Indemnifying Party shall not, without the
prior written consent of the Indemnitee, (i) settle or compromise any
Third-Party Claim or consent to the entry of any judgment which does not include
as an unconditional term thereof the delivery by the claimant or plaintiff to
the Indemnitee of a written release from all liability in respect of such
Third-Party Claim or (ii) settle or compromise any Third-Party Claim in any
manner that would be reasonably likely to have a material adverse effect on the
Indemnitee.
(c) Joint Defense of Certain Claims. Notwithstanding the provisions of
Section 6.4(b), ICN and Ribapharm shall jointly control the defense of, and
cooperate with each other with respect to defending, any Third-Party Claim with
respect to which each party is claiming that it is entitled to indemnification
under Section 6.1 or 6.2. If either ICN or Ribapharm fails to defend jointly any
such Third-Party Claim, the other party shall solely defend such Third-Party
Claim and the party failing to defend jointly shall use all commercially
reasonable efforts to cooperate with the other party in its defense of such
Third-Party Claim; provided, however, that neither party may compromise or
settle any such Third-Party Claim without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed. All costs
and expenses of either party in connection with, and during the course of, the
joint control of the defense of any such Third-Party Claim shall be initially
paid by the party that incurs such costs and expenses. Such costs and expenses
shall be reallocated and reimbursed in accordance with the respective
indemnification obligations of the parties on a periodic basis (but in no event
later than the conclusion of the defense of such Third-Party Claim).
6.5. PROCEDURE FOR INDEMNIFICATION NOT INVOLVING THIRD-PARTY CLAIMS. If
any Indemnitee desires to assert against an Indemnifying Party any claim for
indemnification under this Section 6 other than a Third-Party Claim (a "Claim"),
the Indemnitee shall deliver to the Indemnifying Party notice of its demand for
satisfaction of such Claim (a "Request"), specifying in reasonable detail the
amount of such Claim and the basis for asserting such Claim. Within 30 days
after the Indemnifying Party has been given a Request, the Indemnifying Party
shall either (i) satisfy the Claim requested to be satisfied in such Request by
19
delivering to the Indemnitee payment by wire transfer or a certified or bank
cashier's check payable to the Indemnified Party in immediately available funds
in an amount equal to the amount of such Claim, or (ii) notify the Indemnitee
that the Indemnifying Party contests such Claim by delivering to the Indemnitee
a Dispute Notice, stating that the Indemnifying Party objects to such Claim and
specifying in reasonable detail the basis for contesting such Claim. Any dispute
described in clause (ii) of this Section 6.5 shall be subject to the provisions
of Section 7.1.
6.6. EXCLUSIVE REMEDIES. Except for the right to pursue equitable
remedies, the remedies provided in this Section 6 shall be deemed the sole and
exclusive remedies of the parties with respect to the subject matters of the
indemnification provisions of this Section 6.
7. MISCELLANEOUS.
7.1. DISPUTE RESOLUTION. Resolution of any and all disputes arising from
or in connection with this Agreement other than the provisions of Section 5.3,
whether based on contract, tort, or otherwise (collectively, "Disputes"), shall
be exclusively governed by and settled in accordance with the provisions of this
Section 7.1. The parties hereto shall use all commercially reasonable efforts to
settle all Disputes without resorting to mediation, arbitration, litigation or
other third party dispute resolution mechanisms. If any Dispute remains
unsettled, the parties hereby agree to mediate such Dispute using a mediator
reasonably acceptable to all parties involved in such Dispute. If the parties
are unable to resolve such dispute through mediation, each Party will be free to
commence litigation proceedings for the resolution thereof. No Party shall be
entitled to consequential, special, exemplary or punitive damages.
7.2. AUTHORITY. Each of the parties hereto represents and warrants to the
other that (a) it has the corporate power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement by it has been duly authorized by all necessary corporate action, (c)
it has duly and validly executed and delivered this Agreement, and (d) this
Agreement is a legal, valid and binding obligation, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equity principles. The representations and warranties
contained in this Section 7.2 shall survive the execution and delivery hereof
until the expiration of all applicable statutes of limitations.
7.3. COMPLETE AGREEMENT. Except as otherwise set forth in this Agreement,
this Agreement and the exhibits hereto shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede all prior agreements and understandings, whether written or oral,
between the parties with respect to such subject matter.
7.4. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California (without giving effect to
the conflict of laws principles thereof) as to all matters, including matters of
validity, construction, effect, performance and remedies.
20
7.5. NOTICES. All Notices and other communications hereunder shall be in
writing and shall be delivered in person, by telecopy, by express or overnight
mail delivered by a nationally recognized air courier (delivery charges
prepaid), or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
(a) If to ICN, to:
ICN Pharmaceuticals, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(b) If to Ribapharm, to:
Ribapharm Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery or when delivery is refused. Any notice or communication sent by
telecopy or by air courier shall be deemed effective on the first Business Day
at the place at which such notice or communication is received following the day
on which such notice or communication was sent.
7.6. AMENDMENT AND MODIFICATION. This Agreement may not be amended or
modified in any respect except by a written agreement signed by both of the
parties hereto.
7.7. BINDING EFFECT; ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon the parties hereto and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Except
with respect to a merger of either party with another Person, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party hereto without the prior written consent of the other
party.
7.8. THIRD PARTY BENEFICIARIES. The Indemnitees and their respective
successors shall be third party beneficiaries of the indemnification provisions
of Section 6, as applicable, and shall be entitled to enforce those provisions
and in connection with such enforcement shall be subject to Section 7.1, in each
such case as fully and to the same extent as if they were parties to this
Agreement. Except as provided in the previous sentence, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, and no Person (other than as provided in the
previous sentence) shall be deemed a third party beneficiary under or by reason
of this Agreement.
21
7.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The Agreement may be
executed by facsimile signature.
7.10. WAIVER. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the party against which such
waiver is to be asserted. Unless otherwise expressly provided in this Agreement,
no delay or omission on the part of any party in exercising any right or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any right or privilege under this Agreement
operate as a waiver of any other right or privilege under this Agreement nor
shall any single or partial exercise of any right or privilege preclude any
other or further exercise thereof or the exercise of any other right or
privilege under this Agreement. No failure by either party to take any action or
assert any right or privilege hereunder shall be deemed to be a waiver of such
right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.
7.11. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.12. REMEDIES. Each of ICN and Ribapharm shall be entitled to enforce its
rights under this Agreement specifically, to recover damages and costs
(including reasonable attorneys' fees) caused by any breach of any provision of
this Agreement (including, without limitation, Section 5.3) and to exercise all
other rights existing in its favor. Each of ICN and Ribapharm acknowledges and
agrees that under certain circumstances the breach by ICN or any of its
Affiliates or Ribapharm or any of its Affiliates of a term or provision of this
Agreement will materially and irreparably harm the other party, that money
damages will accordingly not be an adequate remedy for such breach and that the
non-defaulting party, in its sole discretion and in addition to its rights under
this Agreement and any other remedies it may have at law or in equity, may apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any breach of the provisions of this Agreement.
7.13. PERFORMANCE. Each of the parties hereto shall use all commercially
reasonable efforts to cause to be performed all actions, agreements and
obligations set forth herein to be performed by any Affiliate of such party.
7.14. REFERENCES; CONSTRUCTION. The section and other headings and
subheadings contained in this Agreement and the exhibits hereto are solely for
the purpose of reference, are not part of the agreement of the parties hereto,
and shall not in any way affect the
22
meaning or interpretation of this Agreement or any exhibit hereto. All
references to days or months shall be deemed references to calendar days or
months. Unless the context otherwise requires, any reference to a "Section"
"Exhibit" shall be deemed to refer to a section of this Agreement. The words
"hereof," "herein" and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. Whenever the words "include," or "including" are used in this
Agreement, unless otherwise specifically provided, they shall be deemed to be
followed by the words "without limitation." This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing the document to be drafted.
7.15 EFFECTIVENESS. This Agreement shall become effective upon the time of
purchase of the Firm Shares, as defined in the Underwriting Agreement, by and
among ICN, Ribapharm and the underwriters named therein relating to the Initial
Public Offering.
8. ROYALTY PAYMENTS
Ribapharm and ICN hereby agree as follows regarding Ribapharm's and ICN's
respective rights to royalties under the Exclusive License and Supply Agreement
between ICN Pharmaceuticals, Inc. and Schering-Plough Ltd., dated July 28, 1995,
as amended (the "Schering-Plough License"):
(a) ICN will be entitled to the royalty payment pursuant to the Schering-Plough
License for sales of ribavirin in the first quarter of 2002;
(b) Ribapharm and ICN will divide between them on a pro rata basis, based on the
closing date of the Initial Public Offering, the royalty payment pursuant to the
Schering-Plough License for sales of ribavirin in the second quarter of 2002;
(c) Ribapharm will be entitled to all royalty payments pursuant to the
Schering-Plough License Agreement for sales of ribavirin after the second
quarter of 2002;
(d) Ribapharm will be entitled to any royalty payments pursuant to the
Schering-Plough License Agreement withheld by Schering-Plough Ltd. related to
sales under indigent patient marketing programs; and
(e) to the extent that one party hereto receives all or any part of a royalty
payment pursuant to the Schering-Plough License Agreement to which it is not
entitled pursuant to sections (a) through (d) hereof, including any advance
royalty payments received from Schering-Plough Ltd., that party shall promptly
remit the amount that it received but was not entitled to pursuant to sections
(a) through (d) hereof to the other party in immediately available funds.
9. THIRD PARTY DISPUTES RELATING TO RIBAVIRIN. Ribapharm and ICN hereby agree
that as of and from the closing date of the Initial Public Offering until the
Distribution Date, Ribapharm, acting through its board of directors, and ICN
will have joint control over the management and direction of all disputes with
third parties related to Ribapharm's rights to ribavirin, including without
limitation, ICN's existing patent litigation against Geneva Pharmaceuticals,
Inc. and Geneva Pharmaceuticals Technology Corporation and Teva Pharmaceuticals
USA and the dispute with Schering-Plough related to royalty payments on sales
under indigent patient marketing programs pursuant to the Schering-Plough
License. As of and after the Distribution Date, Ribapharm will assume sole
control over the management and direction of all disputes with third parties
related to Ribapharm's rights to ribavirin, including without limitation, ICN's
existing patent litigation against Geneva Pharmaceuticals, Inc. and Geneva
Pharmaceuticals Technology Corporation and Teva Pharmaceuticals USA and the
dispute with Schering-Plough related to royalty payments on sales under indigent
patient marketing programs pursuant to the Schering-Plough License.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date and year first written above.
RIBAPHARM INC.
By:
-------------------------------------
Name:
Title:
ICN PHARMACEUTICALS, INC.
By:
-------------------------------------
Name:
Title:
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EXHIBIT I
[FORM OF NOTE]
REVOLVING CREDIT NOTE
Costa Mesa, California
$___________ _________, 2002
FOR VALUE RECEIVED, the undersigned, Ribapharm Inc., a Delaware
corporation ("Ribapharm"), hereby unconditionally promises to pay to the order
of ICN Pharmaceuticals, Inc., a Delaware corporation ("ICN"), in lawful money of
the United States of America and in immediately available funds, the principal
amount of ___________ DOLLARS ($__________), or such lesser amount as shall
equal the aggregate unpaid principal amount of all loans made by ICN to
Ribapharm pursuant to Section 2 of the Affiliation Agreement (as hereinafter
defined), on the dates and in the amounts specified in the Affiliation
Agreement. Ribapharm further agrees to pay interest in like money at ICN's
principal office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in the Affiliation
Agreement.
The holder of this note is authorized to endorse on the schedule annexed
hereto and made a part hereof or on a continuation thereof which shall be
attached hereto and made a part hereof the date and amount of each loan of ICN
to Ribapharm pursuant to Section 2 of the Affiliation Agreement and the date and
amount of each payment or prepayment of principal thereof. Each such endorsement
shall constitute prima facie evidence of the accuracy of the information
endorsed. The failure to make any such endorsement (or any error therein) shall
not affect the obligations of Ribapharm in respect of any Loan under the
Affiliation Agreement.
This note (a) is the note referred to in the Affiliation and Distribution
Agreement dated as of __________ __, 2002 (as amended, restated, supplemented or
otherwise modified from time to time, the "Affiliation Agreement"), by and
between Ribapharm and ICN, (b) is subject to the provisions of the Affiliation
Agreement and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Affiliation Agreement.
Upon the occurrence of any one or more Events of Default, all amounts then
remaining unpaid on this note shall become, or may be declared to be,
immediately due and payable, all as provided in the Affiliation Agreement.
All parties now and hereafter liable with respect to this note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest, notice of acceleration and intent to accelerate,
and all other notices of any kind.
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Unless otherwise defined herein, terms defined in the Affiliation
Agreement and used herein shall have the meanings given to them in the
Affiliation Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF CALIFORNIA (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPALS THEREOF) AS TO ALL MATTERS, INCLUDING MATTERS OF VALIDITY,
CONSTRUCTION, EFFECT, PERFORMANCE AND REMEDIES.
RIBAPHARM INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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Schedule to Note
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Date Loan Principal Amount of Unpaid Notation
Made Amount Principal Paid Principal Made By
or Paid of Loan Balance
of Note
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