| |
·
|
Litigation:
Absence of pending or threatened litigation other than as
disclosed.
|
| |
·
|
Absence
of Changes since December 31, 2007: Except
(i) as reflected in the Company’s unaudited consolidated balance sheet at
December 31, 2007 or liabilities described in any notes, (ii) for
liabilities incurred in the ordinary course of business or in connection
with the asset purchase agreement or the transactions contemplated
thereby, or (iii) performance obligations under contracts required
in
accordance with their terms, or performance obligations, to the
extent
required under applicable laws, in each case to the extent arising
after
the date of signing of the asset purchase agreement, since December
31,
2007 no seller or any other subsidiary of the Company has any material
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a
financial
statement or in the notes thereto. Since December 31, 2007 the
business of
the sellers has been conducted only in the ordinary course consistent
with
past practice and there has not been any change in the accounting
methods,
principles or practices of any seller or any other subsidiary of
the
Company.
|
The
Company specifically notes, however, that since October 25, 2007, Wells Fargo
Bank has limited the financing available to sellers under the terms of its
Loan
Agreement with sellers dated February 9, 2006, as amended, as modified by
its
forbearance agreements with sellers and, as a result of this limited financing,
the sellers have experienced certain difficulties in obtaining raw materials
and
inventory items necessary to the operation of their business, which has had
a
materially adverse effect on the operations, inventory, sales, margins and
financial condition of the business, and have resulted in sellers’ operation of
the business in a manner which is not consistent with past practice, all
as more
particularly described in the Disclosure Memorandum.
| |
·
|
Ordinary
Course:
Except as described in the preceding paragraph, from December 31,
2007 to
the date of signing of the asset purchase agreement: (i) the sellers’
business has been operated in the ordinary course, consistent with
past
practice; (ii) there has been no event, change or development which,
individually or in the aggregate, has had a material adverse effect
on the
sellers, their business or their ability to perform their obligations
under the asset purchase agreement; and (iii) there has not been
any
damage, destruction or casualty loss to the physical properties
of any
seller or any of their suppliers.
|
| |
·
|
Intellectual
Property: The
sellers and other subsidiaries of the Company whose intellectual
property
is being sold own all of the intellectual property to be transferred
to
Amneal, free and clear of any liens or restrictions of any kind
(other
than permitted liens). To the Company’s knowledge, there is no
unauthorized use, disclosure, infringement or misappropriation
of any
sellers’ intellectual property by any third party. No seller owes any
royalties or other payments to third parties in respect of any
sellers’
intellectual property.
|
The
Company and
Interpharm, Inc. have also made various additional customary representations
and
warranties in the asset purchase agreement and real estate contract with
respect
to following matters, among other things:
|
|
§ |
capitalization
of the sellers;
|
|
|
§ |
matters
related to the Company’s auditors;
|
|
|
§ |
accuracy
of the sellers’ books and records;
|
| |
§
|
approval
by the Company’s stockholders and Board of Directors of the sale
agreements;
|
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§
|
that
sellers have not effected any securitization or “off-balance sheet
arrangements” since May 30, 2003;
|
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§
|
the
condition of and compliance with law of the Real Property and sellers’
manufacturing facilities;
|
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§
|
the
identification, to the Company’s knowledge, of product liability, product
defect, warranty, breach of contract or other similar claims related
to
the products made by sellers since May 30,
2003,
|
| |
§
|
the
sufficiency of the assets being sold for the operation of the business
as
presently conducted and proposed to be
conducted;
|
| |
§
|
the
timely payment of all taxes and the accuracy and completeness of
tax
returns;
|
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§
|
clear
title to the Real Property and no ownership of real property other
than
the Real Property;
|
| |
§
|
the
interest of the Company and its subsidiaries in leases and
subleases;
|
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§
|
the
ownership by the Company and its subsidiaries of personal property
(tangible and intangible) free and clear of liens (except for permitted
liens);
|
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§
|
the
possession by the Company and its subsidiaries of all permits necessary
to
conduct their business;
|
| |
§
|
compliance
with laws, including environmental laws and
regulations;
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§
|
the
identification of material contracts and that such contracts are
binding
and in full force and effect;
|
| |
§
|
employee
benefit plan compliance and related
matters;
|
| |
§
|
identification
of employees and status of employee
relations;
|
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§
|
the
identification of insurance policies and contracts for the benefit
of the
Company and its subsidiaries and that such policies are in full
force and
effect and are adequate for the business
conducted;
|
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§
|
that
all accounts receivable set forth in the December 31, 2007 consolidated
balance sheet of the Company and its subsidiaries represent, and
all
accounts receivable accruing through the closing date of the asset
purchase agreement will represent, valid and bona fide sales to
third
parties in the ordinary course of business, subject to no known
defenses,
set-offs or counterclaims and are collectible and will be collected
in
accordance with their terms at their recorded amounts, subject
to any
appropriate reserves reflected in the December 31, 2007 consolidated
balance sheet (such representation being made only as to receivables
which
shall be assigned to Amneal);
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§
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the
inventory and product warranties of the Company and its
subsidiaries;
|
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§
|
the
identification of material customers of and suppliers to the Company
and
its subsidiaries;
|
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§
|
Food
and Drug Administration compliance and other regulatory
matters;
|
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§
|
insolvency
or bankruptcy of the sellers;
|
| |
§
|
absence
of material misstatements or omissions in asset purchase agreement;
|
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§
|
that
the information presented in this Information Statement is true
and
correct in all material respects.
|
The
representations and warranties made by Amneal cover the following topics
as they
relate to Amneal:
| |
§
|
organization
and good standing;
|
| |
§
|
authorization,
execution and delivery of the asset purchase agreement and related
by
Amneal;
|
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§
|
no
violation of Amneal’s articles of organization or any statute, rule,
regulation, order or decree of any public body or authority by
which
Amneal or its properties or assets are bound as a result of the
execution
and delivery of the asset purchase agreement and ancillary documents
and
the consummation of the transactions contemplated
thereby;
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| |
§
|
no
consent, approval or other authorization of any Governmental Authority
or
third party being required as a result of or in connection with
the
execution and delivery of the asset purchase agreement and the
ancillary
documents or the consummation by Amneal of the transactions contemplated
thereby;
|
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§
|
the
ultimate parent entity of Amneal having as of the date of the asset
purchase agreement less than $126.2 million in annual net sales
and less
than $126.2 million in total assets;
|
| |
§
|
Amneal
having the wherewithal to fully fund and pay the purchase price
for the
assets being purchased by the buyers and paying when due all of
the
assumed liabilities; and
|
| |
§
|
to
Amneal’s knowledge, it has no knowledge of APR, LLC outside of the
information in the public domain or as disclosed to Amneal by the
Company
or Cameron Reid.
|
Operation
of the Company’s Business Pending Closing
During
the period between the signing of the original agreement and the closing
of the
asset sale as contemplated by the asset purchase agreement, the Company shall
use all commercially reasonable and good faith efforts to preserve its goodwill,
rights, property, assets and business, to keep available to itself and Amneal
its employees, and to preserve and protect its relationships with its employees,
officers, advertisers, suppliers, customers, creditors and others having
business relationships with it. Without the prior written consent of Amneal,
the
Company has agreed that until the closing it shall do the following:
| |
§
|
maintain
its corporate existence;
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§
|
except
as otherwise expressly provided in the asset purchase agreement,
conduct
its business only in the ordinary course consistent with the manner
conducted as of the date of signing of the original agreement;
and
|
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§
|
operate
in such a manner as to assure that the representations and warranties
of
the Company set forth in the asset purchase agreement will be true
and
correct as of the Closing Date with the same force and effect as
if such
representations and warranties had been made on and as of the Closing
Date.
|
In
addition, during the period between the signing of the original agreement
and
the closing of the asset sale as contemplated by the asset purchase agreement,
without Amneal’s prior written consent (which consent shall not be unreasonably
withheld or conditioned, and the request for which shall be timely responded
to), the Company shall not, among other things:
| |
§
|
change
its method of management or operations in any material respect
(including,
without limitation, accelerating receivables, delaying payments
or
liquidating assets, except in the ordinary course of business consistent
with past practices);
|
| |
§
|
dispose
of or acquire any assets or properties or make any commitment to
do so,
other than sales of inventory or acquisitions of raw materials,
excipients
or API, in each case in the ordinary course of business consistent
with
past practice;
|
| |
§
|
incur
indebtedness for borrowed money, other than advances from Amneal
or, after
all $1,500,000 of the advances from Amneal under Interpharm, Inc.’s loan
and security agreement with Amneal have been advanced, up to $200,000
(on
substantially similar terms and the same interest rate as such
advances
from Amneal) in additional unsecured debt, provided that such unsecured
debt is necessary for and used only for the sellers’ business operations
and additional indebtedness to Wells Fargo Bank, N.A. under the
Company’s
existing lines of credit as in effect on the date of signing of
the
original agreement);
|
| |
§
|
make
any loans or advances, assume, guarantee or endorse or otherwise
become
responsible for the obligation of any other person, or subject
any of its
properties or assets to any lien;
|
| |
§
|
make
any change in the compensation paid or payable to any employee
or
director, except in the ordinary course of business and consistent
with
past practice;
|
| |
§
|
pay
or agree to pay any bonus or similar payment (other than success
bonuses
payable contingent upon the closing of the asset purchase agreement);
|
| |
§
|
enter
into any new contract involving payments by or to any sellers in
excess of
$5,000 per contract (and not more than $50,000 in the aggregate
for all
such contracts);
|
| |
§
|
make
any change in its accounting practices or
procedures;
|
| |
§
|
change
by more than ten percent (10%) its customer pricing, rebates, prebates,
chargebacks, returns or discounts (on a per customer, per SKU basis)
of
any product;
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| |
§
|
modify,
amend, cancel or terminate any contract to be assumed by
Amneal;
|
| |
§
|
promote,
change the job title of, or otherwise alter in any material respect
the
responsibilities or duties of, any of its employees, except in
the
ordinary course of business and consistent with past
practice;
|
| |
§
|
issue
any additional equity securities, options, warrants or other arrangements
or commitments obligating any seller to issue any membership interests
or
other securities, except for stated
exceptions;
|
| |
§
|
make
an assignment for the benefit of creditors or admit in writing
its
inability to pay its debts as they mature; or consent to or acquiesce
in
the appointment of a trustee or receiver for any seller or any
property
thereof; or permit any bankruptcy reorganization, debt arrangement,
or
other proceeding under any bankruptcy or insolvency law to be instituted
by or against any seller; or consent to any involuntary petition
filed
pursuant to or purporting to be pursuant to any bankruptcy, reorganization
or insolvency law of any jurisdiction; or be adjudicated
bankrupt;
|
| |
§
|
make
any payment or distribution with respect to its equity securities,
whether
by way of redemption, dividend, distribution or otherwise;
or
|
| |
§
|
take
any other action which would be reasonably expected to have a Material
Adverse Effect on its business or the affairs, assets, condition
(financial or otherwise) or prospects, or could adversely affect
or
detract from the value of its assets or the business, except as
required
by law.
|
Between
the date of signing of the asset purchase agreement and the Closing Date,
the
Company and Amneal shall each use their commercially reasonable efforts to
(i)
obtain promptly all such third party approvals and consents as are necessary
or
appropriate to the consummation of the transactions contemplated thereby,
(ii)
cause all conditions to the obligations of Amneal under the asset purchase
agreement over which it is able to exercise influence or control to be satisfied
prior to the Closing Date, and (iii) obtain promptly and timely comply with
all
requisite statutory, regulatory or court approvals, third party releases
and
consents, and other requirements necessary for the valid and legal consummation
of the transactions contemplated thereby.
On
or
promptly after the closing the sellers will cooperate in transferring to
Amneal
the new drug applications and ANDAs required to manufacture, market and sell
finished dosage forms of each Product in the United States, its territories,
commonwealths and possessions filed by or on behalf of any Seller with the
FDA
and any amendments or supplements thereto which were filed on behalf of any
Seller on or prior to the Closing Date (the “Registrations”). Until the
Registrations have been transferred to Amneal, Amneal shall act as the
regulatory agent for all Registrations pending before the FDA and shall be
responsible for maintaining them at its sole cost and expense and Amneal
shall
have responsibility for all communications with FDA and corresponding foreign
bodies relating to the sellers’ products.
The
sellers have agreed that for a period of 91 days after the closing date,
the
sellers shall not file or enter into any bankruptcy proceeding or liquidation,
or convene a meeting of its creditors, or have a receiver appointed over
all or
part of their assets, or take or suffer any similar action in consequence
of
their debt. The Company has also agreed that it will not make any payment
or
distribution with respect to its equity securities to the Majority
Stockholders or any holders of the Common Stock until more than 90 days after
the Closing Date.
The
sellers have also agreed (a) to make Amneal an additional insured on the
Company’s tail liability insurance policy, (b) that the Company will dismiss
certain pending claims, and
(c)
prior to the closing the Company shall remove certain hazardous materials
from
its facilities and resolve certain EPA violations to Buyer’s reasonable
satisfaction.
Access
and Information
Prior
to the closing of the asset sale, the Company must provide Amneal and its
representatives and agents such access to the books and records of the Company
and its subsidiaries and furnish to Amneal and its representatives and agents
such financial and operating data and other information with respect to the
business and the properties of sellers as they may reasonably request from
time
to time.
No
Solicitation of Alternative Transactions
Until
the asset sale has been completed or the asset purchase agreement has been
terminated, the Company and its subsidiaries and the Majority Stockholders
have
agreed to, and have agreed to cause their respective directors, officers,
managers, partners, shareholders, members, employees, consultants, contractors,
representatives, agents, accountants, bankers, attorneys and other advisors
(collectively, “Representatives”) to, cease any activities, discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal (defined as any inquiry, proposal, offer or expression of interest
by
any third party relating to a merger, consolidation or other business
combination involving any seller, or any purchase of more than 20% of the
consolidated assets of sellers or more than 20% of the outstanding shares
of
capital stock or membership interests any seller ) and each seller and each
Majority Stockholder shall not, and shall cause its respective Representatives,
not to, directly or indirectly, (i) solicit, participate in, initiate or
encourage (including by way of furnishing information), or take any other
action
designed or reasonably likely to facilitate or encourage, any inquiries or
the
making of any proposal that constitutes, or may reasonably be expected to
lead
to, any Acquisition Proposal or (ii) participate in any discussions or
negotiations (including by way of furnishing information) regarding any
Acquisition Proposal.
However,
the asset purchase
agreement also provides that if, at any time before the date on which the
definitive Information Statement is filed with the SEC (which date was ______,
2008), the Company’s Board of Directors determines in good faith, after
consultation with outside counsel and a financial advisor of nationally
recognized reputation, that such action is, or is reasonably likely to be,
necessary in order to comply with its fiduciary duties under law and that
such
Acquisition Proposal is reasonably likely to lead to a superior proposal
for the
common stockholders of Company as compared to the transactions contemplated
by
the sale agreements, and if done for the sole purpose of increasing sums
available for distribution to the Company’s common stockholders, then, in such
case, Company may, in response to an Acquisition Proposal (which term is
defined
as described in the preceding paragraph except that all references to 20%
are changed to 50% for purposes of this current paragraph) not solicited
after April 11, 2008 and which is submitted in writing by such Person to
the
Board of Directors of Company after April 11, 2008 and subject to compliance
with non-solicitation sections of the asset purchase agreement (and provided
that Company
has complied in all respects with its obligations under such section) (x)
furnish information with respect to the Company and its subsidiaries (other
than
the terms of the asset purchase agreement, the letter of
intent dated April 11, 2008 between the Company and Amneal Pharmaceuticals,
LLC
or any discussions or negotiations regarding any of the foregoing) to the
person
making such Acquisition Proposal (or its designated representatives) pursuant
to
a confidentiality and standstill agreement, provided that any such information
has been or contemporaneously is provided to representatives of Amneal,
(y) participate in discussions or negotiations regarding such Acquisition
Proposal, and (z) terminate the asset purchase agreement (subject to certain
rights of Amneal to make a matching offer and payment of the break-up fee
and expenses described below).
No
Acquisition Proposal
was submitted to the Company’s Board of Directors prior to the filing of this
Information Statement with the SEC.
Conditions
Precedent to the Closing of the Asset Sale
Conditions
Precedent to Obligations of Amneal. The
obligations of Amneal to complete the asset sale are subject to the satisfaction
or waiver of each of the following closing conditions, among others:
| |
§
|
No
inquiry, action, suit or proceeding shall have been asserted, threatened
or instituted (i) in which it is sought to restrain or prohibit
the
carrying out of the transactions contemplated by the asset purchase
agreement or to challenge the validity of such transactions or
(ii) which
could reasonably be expected to have, if adversely determined,
a Material
Adverse Effect;
|
| |
§
|
The
Company and the Escrow Agent shall have entered into the Escrow
Agreement;
|
| |
§
|
Each
representation and warranty of Company contained in the asset purchase
agreement, the Disclosure Memorandum and in any schedule to the asset
purchase agreement shall be true and correct in all respects (in
the case
of any representations or warranties containing any materiality
or
material adverse effect qualifiers) or in all material respects
(in the
case of any representations or warranties without any materiality
or
material adverse effect qualifiers) on and as of the date of the
asset
purchase agreement and on and as of the Closing Date, and each
of the
covenants and agreements in the asset purchase agreement on the
part of
Company to be complied with or performed on or before the Closing
Date
shall have been complied with and
performed.
|
| |
§
|
The
Company shall have obtained and delivered to Amneal evidence of
approval
by the board of directors and the stockholders of each seller of
the
transactions contemplated by the asset purchase agreement and copies
of
all consents, approvals or permits required to be obtained for
the
consummation of the asset sale and no such consents or consents,
approvals
or permits shall have been withdrawn or
suspended;
|
| |
§
|
The
DEA has issued to Amneal a controlled substances license for the
facility
at 75 Adams Avenue, Hauppauge, New York by July 16,
2008;
|
| |
§
|
Amneal
shall have received a non-disclosure, non-solicitation and non-competition
agreement from each seller;
|
| |
§
|
since
December 31, 2007, there shall not have been (i) any change resulting
in a
material adverse effect on the sellers, their business or their
ability to
perform their obligations under the asset purchase agreement, or
(ii) any damage, destruction or loss affecting the assets, properties,
business, operations or condition of Company or any other seller
or the
Company’s business, whether or not covered by insurance, which
could reasonably be expected to result in a material adverse effect
on
the sellers, their business or their ability to perform their obligations
under the asset purchase agreement, or (iii) any inspection of the
Real Property by the FDA which discloses items that could reasonably
be
expected to materially and adversely effect Amneal’s ability to
manufacture at the Real Property any products which individually
or in the
aggregate, have resulted in revenues to the Company of in excess
of $5
million in the twelve months prior to the closing and which have
been
approved by the FDA;
|
| |
§
|
the
Company shall have procured “tail-coverage” on the claims-made products
liability insurance policies covering each seller on such terms
as may be
reasonably satisfactory to Amneal, and Amneal shall be named as
additional
insured thereon;
|
| |
§
|
the
Company shall have resolved, to Amneal’s reasonable satisfaction, all
violations raised by the U.S. Environmental Protection Agency in
its
Notice of Violation to Company dated October 4, 2007 with respect
to its
facility at 50 Horseblock Road in Yaphank, New York and any other
real
property owned or leased by any
seller;
|
Each
of the conditions listed above is solely for the benefit of Amneal and may
be
waived by Amneal without notice, liability or obligation to any
person.
Conditions
Precedent to Obligations of the Company. The
Company’s obligations to complete the asset sale are subject to the satisfaction
or waiver of each of the following conditions at or prior to the closing
of the
transactions contemplated by the asset purchase agreement:
| |
§
|
No
inquiry, action, suit or proceeding shall have been asserted, threatened
or instituted (i) in which it is sought to restrain or prohibit
the
carrying out of the transactions contemplated by the asset purchase
agreement or to challenge the validity of such transactions, other
than
those asserted, threatened or instituted by the Sellers or Majority
Stockholders;
|
| |
§
|
Each
representation and warranty of Amneal contained in the asset purchase
agreement and in any schedule shall be true and correct in all
respects (in the case of any representations or warranties containing
any
materiality or material adverse effect qualifiers) or in all material
respects (in the case of any representations or warranties without
any
materiality or material adverse effect qualifiers) on and as of
the date
of the agreement and on and as of the Closing Date and Amneal shall
have
complied with and performed each of the covenants and agreements
required by the sale agreements;
|
| |
§
|
all
material authorizations, consents, approvals, waivers and releases,
if
any, necessary for Amneal to consummate the transactions contemplated
by
the asset purchase agreement shall have been obtained by Amneal,
including
the resolution of all comments of the SEC to this Information Statement
and the Company shall have mailed this Information
Statement;
|
| |
§
|
Amneal
and the Escrow Agent shall have entered into the Escrow Agreement;
and
|
| |
§
|
the
closing of the sale of the Real Property pursuant to the real estate
contract shall have occurred.
|
Each
of
the conditions listed above is solely for the benefit of the Company and
may be
waived by the Company without notice, liability or obligation to any
person.
Termination,
Amendments and Waivers
At
any time prior to the closing, the sale agreements may be terminated, among
other things, by reason of the following:
• by
mutual
written consent of Amneal and the Company;
• by
either
party if the closing shall not have occurred on or before September 16,
2008; provided,
however,
that at
the time of such notice the party exercising such termination right shall
have
complied in all material respects with its obligations under the sale
agreements;
•
by
Amneal, upon written notice to Company, if any of Amneal’s conditions to its
obligations to close shall not have been fulfilled in all material respects
at
the time at which the closing would otherwise occur or if satisfaction of
such a
condition is or becomes impossible, provided
that at
the time of such notice Amneal must have complied in all material respects
with
its obligations under the asset purchase agreement; and provided,
further,
that
the Company shall have ten (10) days after the date such notice is sent by
Amneal in which to fulfill such conditions not fulfilled unless satisfaction
of
such a condition is or becomes impossible;
• by
the
Company, upon written notice to Amneal, if any of the Company’s conditions to
its obligations to close shall not have been fulfilled in all material respects
at the time at which the Closing would otherwise occur or if satisfaction
of
such a condition is or becomes impossible, provided
that at
the time of such notice the Company must have complied in all material respects
with its obligations under the asset purchase agreement; and provided,
further,
that
Amneal shall have ten (10) days after the date such notice is sent by the
Company in which to fulfill such conditions not fulfilled unless satisfaction
of
such a condition is or becomes impossible;
§ by
the
Company, in connection with Company’s entering into a definitive agreement to
effect an Acquisition Proposal provided that Company has complied, with the
terms of the asset purchase agreement regarding the Company’s entertaining
Acquisition Proposals described in the section entitled “No Solicitation of
Alternative Transactions” above and provided,
further,
that an
election by Company to terminate the asset agreement for such reason shall
not
be effective until Company shall have paid Amneal a Break-up Fee described
below
and reimbursed Amneal’s out of pocket costs and expenses plus paid Amneal an
amount equal to all advances made by Amneal to the Company under the loan
agreement described in the section “Loan and Security Agreement” above.
§ by
Amneal, if (i) Company enters into a definitive agreement to effect an
Acquisition Proposal, (ii) the Company’s Board of Directors recommends that
Company’s shareholders accept or approve any Acquisition Proposal or
(iii) the Company’s Board of Directors withdraws or modifies, in a manner
material and adverse to the Company, its recommendation regarding the
transactions contemplated by the asset purchase agreement, in any case,
regardless of whether Company has complied with the provisions of the asset
purchase agreement relating to the Company’s entertaining Acquisition
Proposals.
§ automatically,
if a DEA controlled substances license for the facility at 75 Adams Avenue,
Hauppauge, New York 11788 and the Real Property has not been issued to Amneal
by
July 16, 2008 and Amneal and the Company do not mutually agree to extend
the
closing date of the sale agreements or Amneal waives the condition that it
be
issued such a license prior to the closing.
The
Company shall be required to immediately reimburse Amneal for all advances
made
by Amneal to Interpharm, Inc. under the loan and security agreement in
the event
of a termination of the asset purchase agreement (i) by Amneal due to a
failure
to satisfy all of Amneal’s closing conditions, (ii) by either party if the
closing does not occur on or prior to September 16, 2008, (iii) by mutual
agreement of the parties, (iv) if a DEA controlled substances license for
the
facility at 75 Adams Avenue, Hauppauge, New York and the Real Property
has not
been issued to Amneal by July 16, 2008, and the Company and Amneal do not
agree
to extend the closing date or waive the condition, (v) if the real estate
contract is terminated by Amneal in accordance with its terms and (vi)
for any
of the reasons set forth in the subsection entitled “Break-up Fee” immediately
below.
In
the
event of any termination of the asset purchase agreement by the Company
due to a
failure to satisfy all of the Company’s closing conditions after ten days prior
notice to Amneal, all advances made by Amneal to Interpharm, Inc. under
the loan
and security agreement shall be retained as liquidated damages and the
Company
and Interpharm, Inc. shall have no further claims against any of the sellers
under the sale agreements or arising from such agreements.
If
the asset purchase
agreement is terminated (a) by the Company because it enters into a definitive
agreement to effect an Acquisition Proposal in accordance with the provisions
set forth in the asset purchase agreement allowing it to respond to certain
Acquisition Proposals, (b) by Amneal, if either the Company for any reason
enters into a definitive agreement to effect an Acquisition Proposal, the
Company’s Board of Directors recommends that the Company’s shareholders accept
or approve any Acquisition Proposal or the Company’s Board of Directors
withdraws or modifies, in a manner material and adverse to the Company the
Board
of Directors’ approval and recommendation of the asset sale agreements, or (c)
by the Company because the sale agreements have has not been closed
prior to September 16, 2008 and within twelve months after such termination
the
Company enters into a definitive agreement with respect to, or consummates
an
Acquisition Proposal, then the Company must pay Amneal a break-up fee in
an
amount equal to 4% of the purchase price for the asset sale, reimburse Amneal’s
out of pocket costs and expenses plus pay Amneal an amount equal to all advances
made by Amneal to the Company under the loan and security agreement. The
foregoing amounts are payable immediately after the occurrence of the applicable
event which triggers the termination of the asset purcase agreeent.
Indemnification
and Escrow
The
Company is obligated to indemnify the buyers and their representatives
from, against and in respect of any and all Losses (defined as damages, losses,
obligations, liabilities, claims, deficiencies, costs, taxes, penalties,
fines,
interest, monetary sanctions and expenses (including amounts paid in settlement
and reasonable attorneys fees and costs) suffered, sustained, incurred or
required to be paid by any of them by reason of or in the following
circumstances:
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§
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any
representation or warranty made by the Company in the
sale agreements being
untrue or incorrect in any respect;
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§
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any
failure by the Company to observe or perform its covenants and
agreements
set forth in the sale agreements;
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§
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any
liability of any seller to the extent it is not assumed by the
buyers;
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§
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any
taxes of any seller or with respect to the business for all periods
prior
to the closing date, and any tax liability of any seller or the
Company’s
shareholders arising in connection with the transactions contemplated
by
the asset purchase agreement;
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§
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any
failure of any seller to have good, verified marketable title to
the
assets to be sold to Amneal free and clear of all liens (other
than
permitted liens);
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§
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any
challenge to the transactions contemplated by the asset purchase
agreement
by any shareholder of the Company;
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§
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all
reasonable attorneys fees and other losses in connection with pending
litigation (other than litigation that Amneal agrees to assume)
against
the assets to be sold under the asset purchase
agreement;
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§
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any
failure by an employee of the sellers or an agent, consultant or
contractor or subcontractor involved in the development, support,
customization, maintenance or modification of any intellectual
property of
the sellers to either (i) be a party to an enforceable arrangement
or
agreement with the sellers according sellers effective, exclusive
and
original ownership of all tangible and intellectual property arising
or
(ii) have executed appropriate instruments of assignment in favor
of
sellers conveying to sellers effective and exclusive ownership
of all such
property;
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§
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brokers
fees, commissions or similar payments to Greiner-Maltz Company
of Long
Island or any of its affiliates with respect to the sale of the
Real
Property or otherwise;
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§
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any
failure by the Company to pay costs required to be paid by the
Company
under the asset purchase agreement to remedy deficiencies which
Amneal has
notified the Company would be an impediment to the transfer to
Amneal of
the DEA controlled substances license for the facility at 75 Adams
Avenue,
Hauppauge, New York; and
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§
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any
costs of product recalls which occur within 180 days after the
closing
date for product lots which were manufactured prior to the closing
date.
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The
Company will not be
liable for any indemnification claims made by the buyers or their
representatives unless the aggregate amount of Losses incurred by them is
in
excess of $250,000, in which case the Company is liable for the entire amount
of
the damages (i.e., from the first dollar).
Amneal
is obligated
to indemnify the Company and its Representatives from, against and in respect
of
any and all Losses suffered, sustained, incurred or required to be paid by
any
of them by reason of or in the following circumstances:
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§
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any
representation or warranty made by Amneal in or pursuant to the
asset
purchase agreement being untrue or incorrect in any respect;
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§
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any
failure by Company to observe or perform its covenants and agreements
set
forth in the asset purchase agreement or any other ancillary
document;
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§
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Amneal’s
failure to discharge any assumed liabilities;
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§
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the
operation of Amneal or the conduct of Amneal’s business following the
Closing, including, without limitation, any loss, liability, obligation,
lien, damage, cost or expense arising from products produced or
processed
by Amneal after the Closing, provided that the act that gives rise
to said
Losses does not arise from a breach by any seller of any of the
asset
purchase agreement or ancillary
documents.
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The
maximum amount of Losses incurred by a party for which any party shall be
liable
for indemnification
under the sale agreements shall not exceed $3.5
million.
Escrow
Agreement
Amneal,
Kashiv, the Company, Interpharm, Inc. and Sovereign Bank, as a third-party
escrow agent (the "Escrow Agent") will enter into an Escrow Agreement dated
on
or before the closing.
At
the closing, $3.5 million of the purchase price (the "Escrow Fund") will
be
placed in escrow and held by the Escrow Agent for the purpose of securing
the
indemnification obligations of the Company and Interpharm, Inc. set forth
in the
asset purchase agreement and real estate contract. The Escrow Fund shall
be held
as trust funds and shall not be subject to any lien, attachment, trustee
process
or any other judicial process of any creditor of any party, and shall be
held
and disbursed solely for the purposes and in accordance with the terms of
the
Escrow Agreement.
Ancillary
Agreements
Restrictive
Covenant Agreement
It
is a condition precedent to the closing of the asset sale that the Company
and
Interpharm, Inc. enter into a Restrictive Covenant Agreement (the "Noncompete
Agreement"). Under the terms of the Noncompete Agreement, each of the Company
and Interpharm, Inc. will agree that for a period of five years from the
Closing
Date of the asset purchase agreement, it shall not, without Amneal’s prior
written consent, directly or indirectly
(i) be
Materially Interested in any business or activity which competes or endeavors
to
compete with the manufacture and sale of any of Products, (ii) in relation
to
any business or activity which is in competition with any of the Products,
deal,
negotiate or contract with any Client or Prospective Client, or canvass,
solicit
or endeavor to take away from the Buyer the business or custom of any Client
or
Prospective Client, or assist any third party to do so or (iii) endeavor
to
entice away from Amneal, or in any way seek to affect the terms of business
on
which Amneal deals with, any person who or which on the Closing Date of the
asset purchase agreement or at any time during the 12 month period immediately
preceding the Closing Date was an agent or distributor of any seller or a
supplier of goods or services to any seller under the asset purchase agreement,
or assist any third party to do so.
For
purposes of the
Noncompete Agreement, “Materially Interested” is defined as being directly or
indirectly employed, appointed or engaged by or in any manner concerned or
interested whether as partner, shareholder, member or otherwise, save for
the
ownership for investment purposes only of not more than 1% or less of any
class
of publicly traded equity and “products” is defined as having the same
definition as the term in the asset purchase agreement, namely, all products
of
the sellers approved, pending approval and in development by any seller,
whether
or not discontinued or previously marketed.
In
addition, under
the Noncompete Agreement each of the Company and Interpharm, Inc. will agree
that for a period of two years after the Closing Date of the asset purchase
agreement, it shall not, without Amneal’s prior written consent, directly or
indirectly, solicit or endeavor to entice away from Amneal, or employ or
engage,
any person who was on the Closing Date, or at any time during the 12 month
period immediately preceding the Closing Date, a director or Employee (as
such
term is defined in the asset purchase agreement) of any seller and hired
by
Amneal on or after the Closing Date, or assist any third party to do so.
In
addition, each of the Company and Interpharm, Inc. will agree at all times
from
and after the Closing Date, it: (i) will at all times hold in strictest
confidence all of the sellers’ proprietary and confidential information, (ii)
will not, without Amneal’s prior written consent, directly or indirectly, use
(other than as an employee of Amneal) or disclose to any person any such
confidential information or (iii) make
critical, negative or disparaging remarks about the sellers’ business or Amnel
or its affiliates, or their respective officers, directors, shareholders,
managers, members, partners employees or representatives.
Loan
and Security Agreement
Simultaneously
with the execution of the asset purchase agreement Amneal and Interpharm,
Inc.
entered into a loan and security agreement (the “loan and security agreement”)
providing for Amneal to make an initial loan to Interpharm Inc. of $500,000
and
up to 4 additional loans of $250,000 each on the last business day of each
of
the four weeks after the initial loan is made. Interest on the outstanding
principal of the loans made pursuant to the loan agreement accrues at the
rate
of 6% per annum. The loans are secured by a security interest, subordinate
to
the security interest held by Wells Fargo and the holders of certain
subordinated notes of the Company, in the accounts, equipment, inventory,
general tangibles and all other assets of Interpharm, Inc. and the proceeds
of
such collateral. The loans are repayable after the termination of the asset
purchase agreement, but if the asset sale is consummated, the outstanding
principal and accrued interest on the loans shall be credited against the
purchase price for the asset sale and the loans shall then be deemed
discharged.
Interpharm,
Inc. shall have no obligation to repay the loans if the asset purchase
agreement is terminated by the Company due to a failure to satisfy the closing
conditions of the sellers and in certain other situations.
As
of May
27, 2008 Amneal had loaned an aggregate of $1,500,000 to Interpharm, Inc.
under
the loan agreement.
Proceeds
Sharing Agreement
On
May 1,
2008, Aisling Capital II, L.P. and Tullis-Dickerson Capital Focus III, L.P.
(together, the "Series D-1 Holders"), Ravis Holdings I, LLC ("Ravis Holdings"),
P&K Holdings, LLC ("P&K Holdings"), Dr. Maganlal K. Sutaria, Perry
Sutaria, Raj Holdings I, LLC ("Raj Holdings", and together with Perry Sutaria,
and Dr. Maganlal K. Sutaria, the "Series A-1 Holders", and the Series A-1
Holders together with the Series D-1 Holders, the "Preferred Holders"), Raj
Sutaria, Ravi Sutari and Bhupatalal K. Sutaria, entered into an Amended and
Restated Proceeds Sharing Agreement (the "Proceeds Sharing
Agreement").
As
a
condition to entering into the Proceeds Sharing Agreement, each of the Majority
Stockholders executed and delivered to the Company a signed written consent
of
stockholders approving the asset purchase agreement and the asset sale. In
the
Proceeds Sharing Agreement the Majority Stockholders also agreed to refrain
from
exercising any dissenter rights or rights of appraisal under applicable law
with
respect to the asset sale and vote in favor of the asset sale at any regular
or
special meeting of stockholders (or vote by written consent). In addition,
under
the Proceeds Sharing Agreement, each of the Series D-1 Holders agreed, severally
and not jointly, that, if, as a result of the asset sale, it receives
distributions from the Company based on its holdings of the Series D-1 Preferred
Stock in excess of $6,500,000 (the “Excess Amount”), such Series D-1 Holder
shall direct the Company to distribute or shall itself distribute, the Excess
Amount to all holders of the Common Stock on a pro rata basis; provided,
that,
the Excess Amount distributed to the holders of Common Stock may not exceed
$3,000,000.
Pursuant
to the Proceeds Sharing Agreement, the Preferred Holders agreed, severally
and
not jointly, that, if, as a result of the asset sale, the Series D-1 Holders
receive distributions from the Company based on their holdings of the Series
D-1
Preferred Stock in excess of $2,000,000, each Preferred Holder shall pay
to
Bhupatlal K. Sutaria such Preferred Holder’s pro rata share of $850,000, except
that if Bhupatlal K. Sutaria receives aggregate proceeds with respect to
his
shares of common stock in an amount greater than $250,000, then any such
excess
amount shall reduce, dollar for dollar, the aggregate amount of $850,000
payable
to him as described earlier in this sentence.
The
Preferred Holders agreed, severally and not jointly, that, if, as a result
of
the asset sale, the Series D-1 Holders receive distributions from the Company
based on their holdings of the Series D-1 Preferred Stock in excess of
$2,000,000, each Preferred Holder shall pay to Raj Sutaria such Preferred
Holder’s pro rata share of $350,000, except that if Raj Sutaria receives
aggregate proceeds with respect to his shares of common stock in an amount
greater than $200,000, then any such excess amount shall reduce, dollar for
dollar, the aggregate amount of $350,000 payable to him as described earlier
in
this sentence.
Except
with respect to the
expiration of the 20-calendar day period from the dissemination of this
Information Statement to the Company’s stockholders until the asset sale may be
consummated, the parties are not aware of any governmental or regulatory
approvals required in connection with the consummation of the asset sale.
CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The
following is a summary of the material U.S. federal income tax consequences
to
the Company upon the asset sale. The discussion does not cover all aspects
of
U.S. federal income taxation and does not address state, local, foreign or
other
tax laws. The summary is based on the tax laws of the United States, including
the Internal Revenue Code of 1986, as amended, its legislative history, existing
and proposed regulations thereunder, published rulings and court decisions,
all
as currently in effect and all subject to change at any time, possibly with
retroactive effect.
The
asset
sale does not generate any U.S. federal income tax consequences to the
stockholders of the Company. The Company, on the other hand, will recognize
gain
or loss on the sale of its assets to Amneal. The Company’s gain or loss with
respect to each asset sold will equal the difference between the portion
of the
purchase price allocable to that asset and the Company’s basis in that asset.
The amount of purchase price generally allocated to each asset will be
determined based on the fair market value of that particular asset.
Any
ordinary income or capital gain recognized for federal income tax purposes
may
be offset by any available capital loss carryforwards. At December 31, 2007
the
Company has remaining Federal net operating losses of $44,053,000 available
through 2027. We believe that these net operating losses will be sufficient
to
offset any gains realized upon consummation of the asset sale.
ACCOUNTING
TREATMENT OF THE ASSET SALE
The
asset sale will be
accounted for as a sale of assets transaction. At the closing of the asset
sale,
any excess in the purchase price received by the Company, less transaction
expenses, if any, over the net book value of the net assets sold will be
recognized as a gain.
STOCKHOLDER
CONSENT TO THE ASSET SALE
Under
Section 228 of
the Delaware Law, unless otherwise provided in a corporation's certificate
of
incorporation, any action required to be taken at any annual or special meeting
of stockholders, or any action that may be taken at any annual or special
meeting of stockholders, may be taken without a meeting, without prior notice
and without a vote, if a written consent to that action is signed by
stockholders having not less than the minimum number of votes that would
be
necessary to authorize or take that action at a meeting at which all shares
were
present and vote.
As
of May 2, 2008, there were
(i) 66,738,426 shares of our Common Stock, (ii) 277,000 shares of Series
C
Preferred, (iii) 4,855,389 shares of Series A-1 Preferred and (iv) 20,825
shares
of Series D-1 Preferred issued and outstanding. Under Delaware Law and the
terms
of our Certificate of Incorporation, as amended and as currently in effect,
the
asset sale requires the approval of the majority of the outstanding Common
Stock
and Voting Preferred Stock voting together as a single class. The holders
of the Common Stock and Series C Preferred have one vote per share. The holders
of Series D-1 have one vote per share of Common Stock into which such
holders’ shares of D-1 Preferred are then convertible. The shares of Series
D-1 Preferred outstanding as of May 2, 2008 are convertible into 21,052,632
shares of Common Stock. Accordingly, the approval of holders of shares of
Common Stock, Series C Preferred Stock and Series D-1 Preferred
Stock entitled to cast 44,034,030 votes, voting together as a single class,
is required to approve the asset sale. The Majority Stockholders, constituting
the holders of a majority of the outstanding Common Stock and Voting Preferred
Stock, voting together as a single class, have executed written consents
approving the asset purchase agreement and the real estate contract and
approving the transactions contemplated by each of those agreements in
accordance with Section 228 of Delaware Law.
Accordingly,
in accordance with Delaware Law and the Certificate of Incorporation of the
Company, as amended and currently in effect, the holders of a majority of
the
outstanding shares of Common Stock and Voting Preferred Stock, voting as a
single class, have approved the asset sale and the asset purchase agreement.
The
actions by written consent are sufficient to approve the sale and the other
transactions contemplated by the asset purchase agreement and the real estate
contract without any further action or vote of the stockholders of the Company.
Accordingly, no other actions are necessary to approve the asset sale, and
no
such actions are being requested. The members of Amneal and Kashiv are not
required to approve the asset sale.
Pursuant
to Section 228 of the Delaware Law, the Company is delivering the
accompanying notice of the stockholders' consent to all holders of the Company’s
common stock as of May 2, 2008 who did not participate in the action by written
consent.
FINANCING
OF THE ASSET SALE
The
asset sale is not conditioned on any financing arrangements by Amneal and
the
consideration to be received by the Company at the closing will be immediately
available funds.
OPINION
OF HOULIHAN LOKEY
On
May 7,
2008, Houlihan Lokey rendered a written opinion to the Board of Directors,
to
the effect that, as of May 7, 2008 and
based
upon and subject to the procedures followed, assumptions made, qualifications
and limitations on the review undertaken and other matters considered by
Houlihan Lokey in preparing its opinion, the consideration to be received
by the
sellers in the asset sale was fair, from a financial point of view, to the
sellers.
Houlihan
Lokey’s opinion was directed to the Board of Directors and only addressed the
fairness from a financial point of view of the consideration to be received
by
the sellers in the asset sale and does not address any other aspect or
implication of the asset sale. The summary of Houlihan Lokey’s opinion in this
information statement is qualified in its entirety by reference to the full
text
of its written opinion, which is included as Annex C to this information
statement and sets forth the procedures followed, assumptions made,
qualifications and limitations on the review undertaken and other matters
considered by Houlihan Lokey in preparing its opinion. We encourage our
stockholders to read carefully the full text of Houlihan Lokey’s written
opinion.
However,
neither Houlihan Lokey’s opinion nor the summary of its opinion and the related
analyses set forth in this information are intended to be, and do not constitute
advice or a recommendation to the Board of Directors or any stockholder as
to
how to act with respect to the asset sale or related matters.
In
arriving at its opinion, Houlihan Lokey, among other things:
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reviewed
the following agreements and
documents:
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– the
original asset purchase agreement;
– the
first
amendment;
– the
real
estate contract;
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·
|
reviewed
certain publicly available business and financial information relating
to
the Company that Houlihan Lokey deemed to be
relevant;
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·
|
reviewed
certain information relating to the current and future operations,
financial condition and prospects of the Company made available
to
Houlihan Lokey by the Company, including (a) financial projections
for the
fiscal year ending June 30, 2009, prepared by the management of
the
Company, relating to the Company as a going concern, (b) cash flow
projections for the thirteen week period ending June 20, 2008 (together,
the “Projections”) and (c) a liquidation analysis prepared by the
management of the Company (the “Liquidation
Analysis”);
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·
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spoke
with certain members of the management of the Company regarding
the
business, operations, financial condition and prospects of the
Company,
the asset sale and related matters, including management’s views of the
operational and financial risks and uncertainties attendant with
not
pursuing the asset sale;
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·
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reviewed
the current and historical market prices and trading volume for
Company
Common Stock;
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·
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reviewed
a certificate addressed
to Houlihan Lokey from senior management of the Company which contained,
among other things, representations regarding the accuracy of the
information, data and other materials (financial or otherwise)
provided to
Houlihan Lokey by or on behalf of the Company;
and
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·
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conducted
such other financial studies, analyses and inquiries and considered
such
other information and factors as Houlihan Lokey deemed
appropriate.
|
Houlihan
Lokey relied upon and assumed, without independent verification, the accuracy
and completeness of all data, material and other information furnished, or
otherwise made available to it, or that it discussed or reviewed, or that
was
publicly available, and did not assume any responsibility with respect to
such
data, material and other information. In addition, management of the Company
advised Houlihan Lokey, and Houlihan Lokey assumed, that the Projections
and
Liquidation Analysis reviewed by Houlihan Lokey were reasonably prepared
in good
faith on bases reflecting the best currently available estimates and judgments
of management as to the future financial results and condition of the Company
(or the future results of any liquidation thereof) and Houlihan Lokey expressed
no opinion with respect to such projections, analysis or the assumptions
on
which they are based. Houlihan Lokey noted that the Projections and Liquidation
Analysis are subject to significant uncertainty, particularly in light of
the
Company’s recent financial performance, current financial condition, current and
prospective access to capital, current and prospective liquidity and unfavorable
future prospects. In this regard, Houlihan Lokey relied upon and assumed
that
the Company is unable to obtain financing in an amount or on terms that will
allow the Company to continue as a going concern and therefore, absent the
asset
sale, the Company will have no alternative other than to seek protection
under
U.S. bankruptcy laws, which would likely result in a liquidation of the Company.
Houlihan Lokey relied upon and assumed, without independent verification,
that
there had been no material change in the business, assets, liabilities,
financial condition, results of operations, cash flows or prospects of the
Company since the date of the most recent financial statements provided to
Houlihan Lokey, and that there was no information or any facts that would
make
any of the information reviewed by Houlihan Lokey incomplete or misleading.
Houlihan Lokey did not consider any aspect or implication of any transaction
to
which the Company or any of its security holders may be a party (other than
as
specifically described in its opinion with respect to the asset
sale).
Houlihan
Lokey relied upon and assumed, without independent verification, that (a)
the
representations and warranties of all parties to the agreements listed above
and
all other related documents and instruments that are referred to those
agreements are true and correct, (b) each party to all such agreements and
other
related documents and instruments will fully and timely perform all of the
covenants and agreements required to be performed by such party, (c) all
conditions to the consummation of the asset sale will be satisfied without
waiver thereof, and (d) the asset sale will be consummated in a timely manner
in
accordance with the terms described in the agreements and documents provided
to
Houlihan Lokey, without any amendments or modifications. Houlihan Lokey also
relied upon and assumed, without independent verification, that (i) the asset
sale will be consummated in a manner that complies in all respects with all
applicable federal and state statutes, rules and regulations, and (ii) all
governmental, regulatory, and other consents and approvals necessary for
the
consummation of the asset sale will be obtained and that no delay, limitations,
restrictions or conditions will be imposed or amendments, modifications or
waivers made that would result in an adverse effect on the amount or timing
of
receipt of the consideration. The Company informed Houlihan Lokey that (i)
it
has very little or no unrestricted cash on hand, (ii) financial projections
that
represent the best currently available estimates and judgments of the Company
management as to the future financial results and operations of the Company
exist only through June 30, 2009, and (iii) as referred to above, the Company
was unable to obtain financing sufficient to continue as a going concern.
As a
result, in reaching the conclusion in its opinion, Houlihan Lokey did not
perform a discounted cash flow analysis. In addition, Houlihan Lokey reviewed
data regarding publicly traded companies in the same industry as the Company
and
recent change of control transactions involving companies in the same industry
as the Company. However, because of (i) the Company’s lack of financing,
(ii) the lack of publicly traded companies in the same industry as the
Company facing similar going concern issues, and (iii) the lack of recent
change of control transactions involving companies in the same industry as
the
Company facing similar going concern issues, Houlihan Lokey did not rely,
in
whole or in part, on either a comparable public companies analysis or a
comparable mergers and acquisitions transaction analysis in reaching the
conclusion set forth in its opinion.
Furthermore,
in connection with its opinion, Houlihan Lokey was not requested to make,
and
did not make, any physical inspection or independent appraisal or evaluation
of
any of the assets, properties or liabilities (fixed, contingent, derivative,
off-balance-sheet or otherwise) of any of the sellers or any other party,
nor
was Houlihan Lokey provided with any such appraisal or evaluation, other
than
(a) the Liquidation Analysis, and (b) certain appraisals relating to
the Real Property and the machinery and equipment of the sellers (collectively,
the “Appraisals”). Houlihan Lokey relied upon and assumed, without independent
verification, the accuracy of the conclusions set forth in the Liquidation
Analysis and the Appraisals, and assumed that the assumptions, estimates
and
conclusions contained in the Liquidation Analysis accurately reflect the
outcome
of an orderly liquidation of the sellers’ assets. Houlihan Lokey is not a real
estate, machinery or equipment appraisal firm, and did not express any opinion
with respect to such subject matter. If the conclusions set forth in the
Appraisals and the Liquidation Analysis are not accurate, the conclusion
set
forth in the Houlihan Lokey opinion could be materially affected. Houlihan
Lokey
did not estimate, and expressed no opinion regarding, the liquidation value
of
any entity or asset. Houlihan Lokey noted, however, that the Liquidation
Analysis reflects the belief of management of the Company that the liquidation
value of the Company’s assets is substantially lower that the amount of the
consideration. Houlihan Lokey did not undertake any independent analysis
of any
potential or actual litigation, regulatory action, possible unasserted claims
or
other contingent liabilities, to which the Company is or may be a party or
is or
may be subject, or of any governmental investigation of any possible unasserted
claims or other contingent liabilities to which any of the sellers is or
may be
a party or is or may be subject. Houlihan Lokey assumed, with the Company’s
consent, that the consideration will not be reduced pursuant to Schedule
2.3(c)
of the asset purchase agreement by more than $5 million as a result of any
liability assumed by the buyers related to pending litigation.
Houlihan
Lokey was not requested to, and did not, (a) initiate or participate in any
discussions or negotiations with, or solicit any indications of interest
from,
third parties with respect to the asset sale, the assets, businesses or
operations of any of the sellers, or any alternatives to the asset sale,
(b)
negotiate the terms of the asset sale, or (c) advise the Board of Directors
or
any other party with respect to alternatives to the asset sale. In reaching
its
conclusion, Houlihan Lokey considered the status of the Company’s ongoing
negotiations with its lenders with respect to the Company’s defaults on the
covenants of its credit facilities and Houlihan Lokey’s discussions with Company
management as to the Company’s financing alternatives and recent efforts to
raise additional capital and seek other strategic alternatives, including
a
potential sale of the Company and/or its assets. The opinion was necessarily
based on financial, economic, market and other conditions as in effect on,
and
the information made available to Houlihan Lokey as of, the date of the opinion.
Houlihan Lokey did not undertake, and is under no obligation, to update,
revise,
reaffirm or withdraw this opinion, or otherwise comment on or consider events
occurring after May 7, 2008.
Houlihan
Lokey’s opinion was furnished for the use and benefit of the Board of Directors
in connection with the exercise of its fiduciary duties, and may not be relied
on by any other person or used for any other purpose without Houlihan Lokey’s
prior written consent. The opinion should not be construed as creating any
fiduciary duty on the part of Houlihan Lokey to any party. The opinion was
not
intended to be, and does not constitute, a recommendation to the Board of
Directors, any security holder or any other person as to how to act with
respect
to any matter relating to the asset sale.
Houlihan
Lokey was not requested to opine as to, and the opinion does not express
an
opinion as to or otherwise address: (i) the underlying business decision
of any
of the sellers, their respective security holders or any other party to proceed
with or effect the asset sale, (ii) the terms of any arrangements,
understandings, agreements or documents related to, or the form or any other
portion or aspect of, the asset sale or otherwise (other than the consideration
to the extent expressly specified in the opinion), including the terms of
the
Proceeds Sharing Agreement, (iii) the fairness of any portion or aspect of
the asset sale to the holders of any class of securities, creditors or other
constituencies of any of the sellers, or to any other party, including the
terms
of the Proceeds Sharing Agreement, except as set forth in the opinion,
(iv) the relative merits of the asset sale as compared to any alternative
business strategies that might exist for any of the sellers or any other
party
or the effect of any other transaction in which any of the sellers or any
other
party might engage, (v) the fairness of any portion or aspect of the asset
sale
to any one class or group of any of the sellers’ or any other party’s security
holders vis-à-vis any other class or group of any of the sellers’ or such other
party’s security holders (including without limitation (a) the allocation
of any consideration amongst or within such classes or groups of security
holders, whether pursuant to the Proceeds Sharing Agreement, or otherwise,
(b) the allocation of the consideration amongst the sellers, or
(c) the allocation of the consideration amongst the assets purchased in the
asset sale), (vi) whether or not any of the sellers, their respective security
holders or any other party is receiving or paying reasonably equivalent value
in
the asset sale, (vii) the solvency, creditworthiness or fair value of any
of the
sellers or any other participant in the asset sale under any applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance or similar matters,
or
(viii) the fairness, financial or otherwise, of the amount or nature of any
compensation to or consideration payable to or received by any officers,
directors or employees of any party to the asset sale, any class of such
persons
or any other party, relative to the consideration or otherwise. Furthermore,
no
opinion, counsel or interpretation was intended by Houlihan Lokey in matters
that require legal, regulatory, accounting, insurance, tax or other similar
professional advice. Houlihan Lokey assumed that such opinions, counsel or
interpretations have been or will be obtained from the appropriate professional
sources. Furthermore, Houlihan Lokey relied, with the Company’s consent, on the
assessment by the Company and its advisers, as to all legal, regulatory,
accounting, insurance and tax matters with respect to the sellers and the
asset
sale.
In
preparing its opinion to the Board of Directors, Houlihan Lokey performed
a
variety of analyses, including those described below. The summary of Houlihan
Lokey’s analyses is not a complete description of the analyses underlying
Houlihan Lokey’s opinion. The preparation of a fairness opinion is a complex
process involving various quantitative and qualitative judgments and
determinations with respect to the financial, comparative and other analytical
methods employed and the adaptation and application of these methods to the
unique facts and circumstances presented. As a consequence, neither a fairness
opinion nor its underlying analyses is readily susceptible to summary
description. Houlihan Lokey arrived at its opinion based on the results of
all
analyses undertaken by it and assessed as a whole and did not draw, in
isolation, conclusions from or with regard to any individual analysis,
methodology or factor. Accordingly, Houlihan Lokey believes that its analyses
and the following summary must be considered as a whole and that selecting
portions of its analyses, methodologies and factors or focusing on information
presented in tabular format, without considering all analyses, methodologies
and
factors or the narrative description of the analyses, could create a misleading
or incomplete view of the processes underlying Houlihan Lokey’s analyses and
opinion. Each analytical technique has inherent strengths and weaknesses,
and
the nature of the available information may further affect the value of
particular techniques.
In
performing its analyses, Houlihan Lokey considered general business, economic,
industry and market conditions, financial and otherwise, and other matters
as
they existed on, and could be evaluated as of, the date of the opinion. Houlihan
Lokey’s analyses involved judgments and assumptions with regard to industry
performance, general business, economic, regulatory, market and financial
conditions and other matters, many of which are beyond the control of the
Company, such as the impact of competition on the business of the
Company and
on
the industry generally, industry growth and the absence of any adverse material
change in the financial condition and prospects of the Company or the industry
or in the markets generally. No company, transaction or business used in
Houlihan Lokey’s analyses for comparative purposes is identical to the Company
or the proposed asset sale and
an
evaluation of the results of those analyses is not entirely mathematical.
Houlihan Lokey believes that mathematical derivations (such as determining
average and median) of financial data are not by themselves meaningful and
should be considered together with qualities, judgments and informed
assumptions. While the results of each analysis were taken into account in
reaching its overall conclusion with respect to fairness, Houlihan Lokey
did not
make separate or quantifiable judgments regarding individual analyses. The
estimates contained in the Company’s analyses and the sensitivity reference
range indicated by Houlihan Lokey’s analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by the analyses.
In
addition, any analyses relating to the value of assets, businesses or securities
do not purport to be appraisals or to reflect the prices at which businesses
or
securities actually may be sold, which may depend on a variety of factors,
many
of which are beyond the control of our company. Much of the information used
in,
and accordingly the results of, Houlihan Lokey’s analyses are inherently subject
to substantial uncertainty.
Neither
Houlihan Lokey’s opinion nor its analyses were determinative of the
consideration or of the views of the Board of Directors or management with
respect to the asset sale. The type and amount of consideration payable in
the
asset sale were determined through negotiation between the Company and Amneal,
and the decision to enter into the asset sale was solely that of the Board
of
Directors.
The
following is a summary of the material analyses performed by Houlihan Lokey
in
connection with Houlihan Lokey’s opinion rendered on May 7, 2008. The order of
the analyses does not represent relative importance or weight given to those
analyses by Houlihan Lokey. The analyses summarized below include information
presented in tabular format. The tables alone do not constitute a complete
description of the analyses. Considering the data in the tables below without
considering the full narrative description of the analyses, as well as the
methodologies underlying, and the assumptions, qualifications and limitations
affecting, each analysis, could create a misleading or incomplete view of
Houlihan Lokey’s analyses.
Review
of Solicitation Process and Situational Factors
| |
·
|
Houlihan
Lokey reviewed its understanding as to the solicitation process
undertaken
by the Company in exploring third party interest in a refinancing
transaction, a capital infusion transaction and a strategic acquisition
of
the Company.
|
| |
·
|
Starting
in January 2008, the Company approached 29 lenders regarding a
refinancing
of its Wells Fargo credit facilities, six private equity firms
regarding a
capital infusion and 13 strategic buyers regarding a sale of the
Company.
|
|
|
– |
Five
of 29 lenders contacted expressed initial interest in refinancing
the
Wells Fargo facilities, but all lenders subsequently declined to
pursue a
refinancing.
|
|
|
– |
Two
of the six private equity firms contacted expressed interest regarding
a
capital infusion. Terms discussed with one of the firms were unacceptable
to existing holders of Company preferred stock; other firm subsequently
declined to pursue a capital
infusion.
|
|
|
– |
Four
of 13 strategic buyers contacted expressed initial interest regarding
a
sale of the business and the Company entered negotiations with
the highest
bidder, Amneal.
|
| |
·
|
Without
the emergency working capital from Amneal, the Company would have
been
forced to declare bankruptcy within two
weeks.
|
|
|
– |
If
the Company is unable to consummate the asset sale with the Amneal,
the
Company will likely have no alternative other than to seek protection
under the U.S. bankruptcy laws, which will likely result in a
liquidation of the Company.
|
Review
of Financial Analysis
Hypothetical
Liquidation Analysis-Company Case.
Houlihan
Lokey reviewed a hypothetical liquidation analysis for the Company prepared
by
the Company, which was based in part on the Company’s balance sheet as of March
31, 2008 (except for accounts receivable) and various assumed realization
values. The Company’s assumed recovery values are set forth below:
|
Type of Asset
|
|
Net Book Value
as of 3/31/08
|
|
Estimated
Liquidation Value
(in millions)
|
|
| |
|
|
|
|
|
|
Cash
and Equivalents
|
|
$
|
0.6
|
|
$
|
0.6
|
|
|
Accounts
Receivable (Net of Allowances)
(as
of 4/16/08)
|
|
|
13.8
|
|
|
7.0
|
|
|
Inventory
- Raw Materials
|
|
|
2.4
|
|
|
0.6
|
|
|
Inventory
- Work in Progress
|
|
|
2.4
|
|
|
0.0
|
|
|
Inventory
- Finished Goods
|
|
|
2.9
|
|
|
0.1
|
|
|
Prepaid
Expenses and Other Current Assets
|
|
|
1.0
|
|
|
0.0
|
|
|
Building
- 50 Horseblock Road (including land)
|
|
|
11.9
|
|
|
20.3
|
|
|
Machinery
& Equipment
|
|
|
17.5
|
|
|
2.6
|
|
|
Other
Assets
|
|
|
1.7
|
|
|
1.7
|
|
|
Total
|
|
$
|
54.3
|
|
$
|
33.1
|
|
Hypothetical
Liquidation Analysis-Sensitivity Case.
Houlihan
Lokey also sensitized the Company’s liquidation analysis described above to
account for more aggressive recovery assumptions regarding accounts receivables,
inventory, real estate and certain machinery and equipment. This analysis
indicated that in such events the high end of the recovery range for the
Company’s assets was approximately 25% below the estimated proceeds from the
transaction. The sensitized assumed recovery reference range is set forth
below:
|
|
|
|
|
|
|
Sensitivity
Reference
Range
|
|
|
|
|
Book Value
|
|
Recovery %
|
|
Low
|
|
High
|
|
| |
|
|
|
|
|
(in
millions)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Cash
and Equivalents
|
|
$
|
0.6
|
|
|
100%
- 100%
|
|
$
|
0.6
|
|
$
|
0.6
|
|
|
Accounts
Receivable (Net of Allowances) (as of 4/16/08)
|
|
|
13.8
|
|
|
70%
- 80%
|
|
|
9.7
|
|
|
11.0
|
|
|
Inventory
- Raw Materials
|
|
|
2.4
|
|
|
50%
- 75%
|
|
|
1.2
|
|
|
1.8
|
|
|
Inventory
- Work in Progress
|
|
|
2.4
|
|
|
25%
- 50%
|
|
|
0.6
|
|
|
1.2
|
|
|
Inventory
- Finished Goods
|
|
|
2.9
|
|
|
50%
- 75%
|
|
|
1.5
|
|
|
2.2
|
|
|
Prepaid
Expenses and Other Current Assets
|
|
|
1.0
|
|
|
0%
- 0%
|
|
|
0.0
|
|
|
0.0
|
|
|
Building
- 50 Horseblock Road (including land)
|
|
|
11.9
|
|
|
143%
- 188%
|
|
|
17.0
|
|
|
22.3
|
|
|
Machinery
& Equipment
|
|
|
17.5
|
|
|
35%
- 39%
|
|
|
6.2
|
|
|
6.8
|
|
|
Other
Assets
|
|
|
1.7
|
|
|
100%
- 100%
|
|
|
1.7
|
|
|
1.7
|
|
|
Total
|
|
$
|
54.3
|
|
|
|
|
$
|
38.5
|
|
$
|
47.7
|
|
Selected
Companies Analysis.
Houlihan Lokey did not rely in whole or in part, on a comparable public
companies analysis in reaching the conclusion set forth in its opinion because
of the Company’s lack of ability to obtain financing and the lack of publicly
traded companies in the same industry as the Company facing similar going
concern issues.
Selected
Transactions Analysis.
Houlihan Lokey did not rely, in whole or in part, on a comparable mergers
and
acquisitions transactions analysis is reaching the conclusion set forth in
its
opinion because of the Company’s lack of ability to obtain financing and the
lack of recent change of control transactions involving companies in the
same
industry as the Company facing similar going concern issues.
Discounted
Cash Flow Analysis.
For the
reasons discussed above, Houlihan Lokey did not perform a discounted cash
flow
analysis.
Other
Matters
Houlihan
Lokey was engaged by the Company to provide an opinion to the Board of Directors
regarding the fairness from a financial point of view of the consideration
to be
received by the sellers in the asset sale. We engaged Houlihan Lokey based
on
Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged
to render financial opinions in connection with mergers, acquisitions,
divestitures, leveraged buyouts, recapitalizations, and for other purposes.
Pursuant to the engagement letter, the Company paid Houlihan Lokey a customary
fee for its services, a portion of which became payable upon the execution
of
Houlihan Lokey’s engagement letter and the balance of which became payable upon
the delivery of Houlihan Lokey’s opinion, regardless of the conclusion reached
therein. No portion of Houlihan Lokey’s fee is contingent upon the successful
completion of the asset sale. The Company has also agreed to reimburse Houlihan
Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates
and
certain related parties against certain liabilities and expenses, including
certain liabilities under the federal securities laws arising out of or relating
to Houlihan Lokey’s engagement.
In
the
ordinary course of business, certain of Houlihan Lokey’s affiliates, as well as
investment funds in which they may have financial interests, may acquire,
hold
or sell, long or short positions, or trade or otherwise effect transactions,
in
debt, equity, and other securities and financial instruments (including loans
and other obligations) of, or investments in, any of the sellers, the buyers
or
any other party that may be involved in the asset sale and their respective
affiliates or any currency or commodity that may be involved in the asset
sale.
The Company has agreed to reimburse certain of Houlihan Lokey’s expenses and to
indemnify Houlihan Lokey and certain related parties for certain liabilities
arising out of its engagement.
Houlihan
Lokey and its affiliates may provide investment banking, financial advisory
and
other financial services to any of the sellers, the buyers and other
participants in the asset sale and their respective affiliates in the future,
for which Houlihan Lokey and such affiliates may receive
compensation.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
Name
and
Address
of
Beneficial
Owner
|
|
Title
of
Class
|
|
Amount
and
Nature
of
Beneficial
Ownership
|
|
Percent
of
Class
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Maganlal
K. Sutaria
|
|
Common Stock
|
|
|
1,243,500
|
(2)
|
|
1.84
|
%
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raj
Holdings I, LLC(3)
|
|
Common
Stock |
|
|
15,526,100
|
(3)
|
|
23.26
|
%
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bhupatlal
K. Sutaria
|
|
Common
Stock |
|
|
452,970
|
(4)
|
|
*
|
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rametra
Holdings I, LLC
|
|
Common
Stock |
|
|
8,014,930
|
(5)
|
|
12.01
|
%
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Reback
|
|
Common
Stock |
|
|
61,000
|
(6)
|
|
*
|
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Benjamin
|
|
Common
Stock |
|
|
46,000
|
(7)
|
|
*
|
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ravi
Holdings I, LLC
|
|
Common
Stock |
|
|
10,518,645
|
(8)
|
|
15.76
|
%
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
Perry
Sutaria
|
|
Common Stock
|
|
|
44,093,769
|
(9)
|
|
66.07
|
%
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennith
C. Johnson
|
|
Common
Stock |
|
|
50,000
|
(10)
|
|
*
|
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cameron
Reid
|
|
Common
Stock |
|
|
5,924,298
|
(11)
|
|
8.17
|
%
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P&K
Holdings, LLC
|
|
Common
Stock |
|
|
8,014,928
|
(12)
|
|
12.01
|
%
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
J. Miller
|
|
Common
Stock |
|
|
25,000
|
(13)
|
|
*
|
|
|
75
Adams Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Hauppauge,
NY 11788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joan
P. Neuscheler
|
|
Common
Stock |
|
|
14,586,088
|
(14)
|
|
18.5
|
%
|
|
c/o
Tullis Dickerson Co., Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Two
Greenwich Plaza
|
|
|
|
|
|
|
|
|
|
|
|
Greenwich,
Connecticut 06830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tullis-Dickerson
Capital Focus III, L.P.
|
|
Common
Stock |
|
|
14,561,088
|
(15)
|
|
18.5
|
%
|
|
Two
Greenwich Plaza
|
|
|
|
|
|
|
|
|
|
|
|
Greenwich,
Connecticut 06830
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Aisling
Capital II, L.P.
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Common
Stock |
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14,978,763
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(16)
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18.5
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%
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888
Seventh Avenue, 30th Floor
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New
York, New York 10106
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George
Aronson
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Common
Stock |
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72,451
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*
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75
Adams Avenue
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Hauppauge,
NY 11788
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Peter
Giallorenzo
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Common Stock |
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20,000
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(17)
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*
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75
Adams Avenue
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Hauppauge,
NY 11788
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Kenneth
Cappel
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Common
Stock |
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125,625
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(18)
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*
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75
Adams Avenue
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Hauppauge,
NY 11788
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Jeffrey
Weiss
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Common
Stock |
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235,875
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(19)
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*
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75
Adams Avenue
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Hauppauge,
NY 11788
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All
Directors and
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Common
Stock |
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62,050,060
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(20)
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77.07
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%
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Officers
as a
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Group
(15 persons)
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*
Less
than 1%
(1)
Computed based upon a total of 66,738,426 shares of common stock outstanding
as
of May 6, 2008.
(2)
The
foregoing figure reflects the ownership of 543,500 shares of common stock
and
vested options to acquire 700,000 shares. It does not include 1,874,000 shares
of Series A-1 Preferred Stock held by an annuity Dr.
Sutaria controls.
(3)
Raj
Sutaria is the sole member of Raj Holdings I, LLC, which holds 15,526,100
shares
of common stock. The sole manager of Raj Holdings I, LLC is Perry
Sutaria.
(4)
The
foregoing figure includes 452,970 shares of common stock held directly by
Mr.
Bhupatlal Sutaria, but does not include 199,411 shares held by his
spouse.
(5)
Mona
Rametra is the sole member of Rametra Holdings I, LLC, which holds 8,014,930
shares of common stock. The sole manager of Rametra Holdings I, LLC is Perry
Sutaria.
(6)
The
foregoing figure comprises 61,000 shares of common stock which may be acquired
upon exercise of currently exercisable options.
(7)
The
foregoing figure comprises 46,000 shares of common stock which may be acquired
upon exercise of currently exercisable options.
(8)
Ravi
Sutaria is the sole member of Ravi Holdings I, LLC, which holds 10,518,645
shares of common stock. The sole manager of Ravi Holdings I, LLC is Perry
Sutaria.
(9)
Includes an aggregate of 42,074,603 shares of common stock owned directly
by the
following New York limited liability companies of which Perry Sutaria is
the
sole manager: P&K Holdings, LLC; Raj Holdings I, LLC; Ravi Holdings I, LLC;
and Rametra Holdings I, LLC. Does not include his beneficial interest in
Series
A-1 Preferred Stock held by a trust of which he is a beneficiary. The balance
of
2,019,166 shares are shares held directly by Perry Sutaria.
(10)
The
foregoing figure comprises vested options to acquire 50,000 shares of common
stock.
(11)
The
foregoing figure includes vested options to purchase 3,000,000 shares of
common
stock, warrants to purchase 1,842,103 shares of common stock, an aggregate
of
907,185 shares of common stock currently issuable upon conversion of a
convertible promissory note held by Mr. Reid and 175,000 shares held directly
Mr. Reid.
(12)
Perry Sutaria is the sole member and manager of P&K Holdings, LLC, which
holds 8,014,928 shares of common stock.
(13)
The
foregoing figure comprises vested options to acquire 25,000 shares of common
stock.
(14)
Includes all 14,561,088 shares beneficially owned by Tullis-Dickerson Capital
Focus III, L.P. (“TD III”) as set forth in the table. Ms. Neuscheler is a
principal of TD III and shares voting and dispositive power with respect
to such
shares, but disclaims beneficial ownership of such shares. Also includes
vested
options to acquire 25,000 shares of common stock.
(15)
Beneficial ownership is based on information contained in Amendment No. 4
to a
Statement on Schedule 13D filed by TDIII and certain other persons with the
SEC
on May 6, 2008. Tullis-Dickerson Partners III, L.L.C., Joan P. Neuscheler,
James
L.L. Tullis, Thomas P. Dickerson and Lyle A. Hohnke are also named in such
Amendment No. 4 as beneficially owning all of the shares reported as
beneficially owned by The shares reported as beneficially owned include 568,647
shares of common stock, 2,281,914 shares of common stock issuable upon the
exercise of warrants (which were amended and restated on February 12, 2008
to,
among other things reduce the exercise price) to purchase common stock at
$.95
share, an aggregate of 10,526,316 shares of common stock issuable upon
conversion of Series D-1 Convertible Preferred Stock, 877,194 shares of common
stock issuable upon the conversion of Secured Convertible 12% Notes due 2009
and
307,017 shares of common stock issuable upon the exercise of additional warrants
to purchase common stock at $.95 per share which were issued to TDIII on
February 12, 2008. Ms. Neuscheler, a director of the Company, is a principal
of
TD III. Ms. Neuscheler disclaims beneficial ownership of such shares within
the
meaning of SEC Rule 13d-3.
(16)
Beneficial ownership is based on information contained in Amendment No. 3
to a
Statement on Schedule 13D filed by Aisling Capital II, LP and certain other
persons with the SEC on May 6, 2008. Aisling Capital Partners, Aisling Capital
Partners LLC, Steve Elms, Dennis Purcell and Andrew Schiff are also named
in
such Amendment No. 3 as beneficially owning all of the shares reported as
beneficially owned by Aisling Capital II, LP. The shares reported as
beneficially owned include 548,315 shares of common stock, 2,281,914 shares
of
common stock issuable upon the exercise of warrants (which were amended and
restated on February 12, 2008 to, among other things reduce the exercise
price)
to purchase common stock at $.95 share, 10,960,000 shares of common stock
issuable upon the initial conversion of 10,412 shares of Series D-1
Preferred, 881,517 shares of common stock issuable upon the initial conversion
of $861,826 in principal amount of Secured Convertible 12% Notes due 2009
and
307,017 shares of common stock issuable upon the exercise of additional warrants
to purchase common stock at $.95 per share which were issued to Aisling Capital
II, LP on February 12, 2008.
(17)
The
foregoing figure includes vested options to acquire 20,000 shares of common
stock, but does not include options to acquire 80,000 shares of common stock
which are not exercisable within 60 days.
(18)
The
foregoing figure includes vested options to acquire 125,625 shares of common
stock, but does not include options to acquire an aggregate of 114,375 shares
of
common stock which are not exercisable within 60 days.
(19)
The
foregoing figure comprises vested options to acquire 110,875 shares of common
stock and 125,000 shares acquired through a subscription agreement, but does
not
include options to acquire an aggregate of 149,125 shares of common stock
which
are not exercisable within 60 days.
(20)
The
foregoing figure includes vested options to acquire an aggregate of 4,973,188
shares. The foregoing also includes the shares referred to in footnotes (9)
and
(14).
WHERE
YOU CAN FIND MORE INFORMATION ABOUT THE COMPANY
The
Company files annual, quarterly and special reports, proxy statements and
other
information with the SEC. These materials can be inspected and copied at
the
public reference facilities maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. 20549 The public may obtain information on the operation
of the
public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains
a
web site (HTTP://WWW.SEC.GOV.) that contains the registration statements,
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC such as us.
You
may
also read and copy any reports, statements or other information that we have
filed with the SEC at the address indicated above and you may also access
them
electronically at the web site set forth above. These SEC filings are also
available to the public from commercial document retrieval
services.
The
Company's Common Stock was delisted from the American Stock Exchange on May
1, 2008 and on May 13, 2008 the Company filed a Form 15 with the SEC which
had
the effect of immediately terminating the Company’s periodic reporting
obligations under the Securities Exchange Act of 1934.
ANNEX
A
ASSET
PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (this “Agreement”)
is
made and entered into as of the 24th
day of
April, 2008 (the “Signing
Date”)
by and
among (i) Amneal Pharmaceuticals of New York, LLC, a Delaware limited liability
company (“Buyer”),
(ii)
Interpharm Holdings, Inc., a Delaware corporation, and Interpharm, Inc.,
a New
York corporation (collectively, “Company”),
and
(iii) the shareholders of Company indicated as “Majority
Shareholders” on
the signature
pages hereto (the “Majority
Shareholders”).
Capitalized terms used herein and not otherwise defined shall have the
definition ascribed thereto in Article
I
hereof.
W
I T N E S S E T H:
WHEREAS,
Company and its Subsidiaries (collectively, the “Sellers”)
operate a business of developing, manufacturing and distributing pharmaceutical
products (the “Business”);
and
WHEREAS,
Company desires for it and the other Sellers to sell substantially all of
their
assets to Buyer, and Buyer desires to acquire such assets and to assume certain
specified liabilities of Sellers.
NOW,
THEREFORE, in consideration of the mutual representations, warranties, covenants
and agreements, and upon the terms and conditions hereinafter set forth,
the
parties do hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Defined
Terms.
For
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Article I:
“Action”
means
any suit, action, judicial or administrative action or proceeding.
“ACM”
means
any asbestos or asbestos-containing material.
“Acquisition
Proposal”
means
any inquiry, proposal, offer or expression of interest by any third party
relating to a merger, consolidation or other business combination involving
any
Seller, or any purchase of more than 20% of the consolidated assets of Sellers
or more than 20% of the outstanding shares of capital stock or membership
interests any Seller (other than pursuant to the exercise of stock options
or
conversion rights under securities outstanding as of the Signing Date in
accordance with their terms) or the issuance of any securities (or rights
to
acquire securities) of any Seller, or any similar transaction, or any agreement,
arrangement or understanding requiring any Seller to abandon, terminate or
fail
to consummate any transaction contemplated by this Agreement. Any material
modification of an Acquisition Proposal (including any modification of the
economic terms) shall constitute a new Acquisition Proposal.
“Affiliate”
shall
mean (x) any Person directly or indirectly controlling, controlled by, or
under
common control with another Person, (y) any director, officer, manager,
partner, Employee, shareholder or member of a Person, or (z) any father,
mother,
brother, sister or descendant of a natural person or any spouse thereof;
provided,
however,
that
none of the parties in clause (z) shall be deemed Affiliates for purposes
of
Section
9.3(g)(iii);
and
provided,
further,
that in
the case of a Company shareholder or noteholder which is a private equity
firm,
a portfolio company of such shareholder or noteholder which does not have
any
direct or indirect proprietary, leasehold or financial interest (other than
financial interests consisting of arm’s length transactions) in any of the
Acquired Assets or the Business shall not be deemed an Affiliate of Company
or
any other Seller. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether through
ownership of voting securities, by contract, or otherwise.
“AMEX”
means
the American Stock Exchange.
“ANDA”
means
an Abbreviated New Drug Application filed with the FDA.
“API”
means
active pharmaceutical ingredients.
“Business
Day”
shall
mean any day other than a Saturday, Sunday and all legal public holidays
specified in 5 U.S.C. § 6103(a), as amended from time to time.
“CERCLA”
means
the Comprehensive Environmental Response, Compensation, and Liability Act
of
1980, as amended from time to time (42 U.S.C. §§ 9601 et seq.).
“cGMP”
means
current good manufacturing practices for the methods to be used in, and the
facilities and controls to be used for, the manufacture, storage and handling
of
each Product, all as set forth from time-to-time by the FDA pursuant to the
FD&C Act and the rules and regulations promulgated thereunder (including
specifically, Title 21, parts 210 and 211 of the Code of Federal Regulations
of
the United States).
“Claims”
means
all actions, suits, proceedings, investigations, claims or grievances.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Contracts”
means
all written and oral contracts, leases, sales, purchase orders, commitments
and
other agreements, and any amendments to any of the foregoing.
“Design
Documentation”
means
all documentation, specifications, manuals, user guides, promotional material,
internal notes and memos, technical documentation, drawings, flow charts,
diagrams, source language statements, demo disks, benchmark test results,
and
other written materials related to, associated with or used or produced in
the
development, maintenance or marketing of Sellers Software Programs.
“DGCL”
means
the Delaware General Corporation Law, as amended.
“Employee”
means
any (i) officer or employee of any Seller, and (ii) any independent contractor
or consultant whose engagement by any Seller accounts for the majority of
their
working time.
“Employee
Benefit Plans”
means
all “employee pension benefit plans” (as defined in Section 3(2) of ERISA),
“welfare benefit plans” (as defined in Section 3(l) of ERISA), membership
interest bonus, membership interest option, restricted membership interest,
membership interest appreciation right, membership interest purchase, bonus,
incentive, deferred compensation, severance, vacation plans, and any other
employee benefit plan, program, policy or arrangement maintained or contributed
to by Sellers or any of their ERISA Affiliates, or to which Sellers or any
of
their ERISA Affiliates contribute or are obligated to make payments thereunder
or otherwise may have any liability.
“Environmental
Requirements”
means
all Laws, statutes, rules, regulations, ordinances, guidance documents,
judgments, decrees, orders, agreements and other restrictions and requirements
(whether now or hereafter in effect) of any Governmental Authority relating
to
the regulation of, imposing standards of conduct or liability regarding,
or
protection of, human health and safety (including, without limitation, employee
health and safety), public welfare, natural resources, conservation, the
environment, or the storage, treatment, disposal, transportation, handling,
or
other management of Materials of Environmental Concern.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate”
means
any person (as defined in Section 3(9) of ERISA) that is or has been a member
of
any group of persons described in Section 414(b), (c), (m) or (o) of the
Code that includes Sellers.
“Escrow
Amount”
means
Three Million Five Hundred Thousand Dollars ($3,500,000).
“Escrow
Period”
means
the period commencing on the Closing Date and expiring three hundred sixty
five
(365) days later.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Expenses”
means
any and
all legal, accounting, financial advisory, consulting and other similar fees
and
expenses of third parties that are incurred or paid by a party in connection
with the preparation and negotiation of this Agreement and the other Transaction
Documents and the consummation of transactions contemplated hereby and
thereby.
“Facility”
means
the approximately 38 acres of land located at 50 Horseblock Road, Yaplank,
New
York, together with the approximately 90,000 sq. ft. building and other
Improvements located thereon.
“FDA”
means
the U.S. Food and Drug Administration.
“FD&C
Act”
means
the Federal Food, Drug and Cosmetic Act of 1938, as amended, and the regulations
thereunder, including cGMP regulations, as the same may be amended or
revised.
“Financial
Statements”
means,
collectively, the consolidated balance sheets and the related consolidated
statements of income and cash flows (including the related notes thereto)
of
Sellers included in the SEC Reports.
“GAAP”
means
U.S. generally accepted accounting principles.
“Governmental
Authority”
shall
mean any governmental regulatory or administrative body, department, commission,
board, bureau, agency or instrumentality, any court or judicial authority
or any
public, private or industry regulatory authority, in each case whether federal,
state, local or foreign.
“High
Volume Account”
means
any
retailer, wholesaler or distributor whose annual and/or projected annual
aggregate purchase amounts (on a company-wide level), in units or in dollars,
of
a Product from Sellers was, is, or is projected to be among the top twenty
highest of such purchase amounts by Sellers’ customers on any of the following
dates: (i) the end of the last quarter that immediately preceded the Signing
Date; or (ii) the end of the last quarter that immediately preceded the Closing
Date.
“HSR
Laws”
means
the Hart-Scott-Rodino Antitrust Improvements Act and the regulations promulgated
thereunder, each as amended.
“Improvements”
means
all improvements of any and every nature (including without limitation all
buildings, structures, fixtures and building systems) located in or affixed
to
the Sellers’ Real Property, and all components thereof.
“Indemnified
Party”
shall
mean (i) with respect to Losses described in Section
8.1,
Buyer,
and (ii) with respect to Losses described in Section
8.3,
Company.
“Indemnifying
Party”
shall
mean (i) with respect to Losses described in Section
8.1,
Company, and (ii) with respect to Losses described in Section
8.3,
Buyer.
“Indebtedness”
means,
with respect to Sellers, all indebtedness of any Seller for borrowed money,
whether current or funded, or secured or unsecured, including, without
limitation: (a) all indebtedness of any Seller for the deferred purchase
price
of property or services, whether or not represented by a note, (b) all
indebtedness of any Seller created or arising under any conditional sale
or
other title retention agreement with respect to property acquired by any
Seller
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such
property), (c) all indebtedness of any Seller secured by a purchase money
mortgage or other Lien to secure all or part of the purchase price of property
subject to such mortgage or Lien, (d) all obligations under leases which
shall
have been or must be, in accordance with generally accepted accounting
principles, recorded as capital leases in respect of which any Seller is
liable
as lessee, (e) any liability of any Seller in respect of banker’s acceptances or
letters of credit, (f) all interest, fees and other expenses owed with respect
to the indebtedness referred to above, and (g) all indebtedness referred
to
above which is directly or indirectly guaranteed by any Seller or which any
Seller have agreed (contingently or otherwise) to purchase or otherwise acquire
or in respect of which it has otherwise assured a creditor against loss
(excluding any contingent indemnification obligations or similar contingent
obligations assuring against loss).
“Intellectual
Property”
means
all worldwide intellectual property rights and all rights associated therewith,
including without limitation: (i)
all
issued and existing letters patent U.S. or foreign, including , extensions
(whether arising from patent or regulatory law), supplemental protection
certificates, registrations, confirmations, reissues, reexaminations or renewals
and all foreign equivalents thereof (all of the foregoing described in this
subsection (i), collectively “Issued
Patents”);
(ii) all
published or unpublished non-provisional and provisional patent applications,
U.S and foreign, including any continuation, divisional, continuation in
part or
division thereof, or any substitute application therefore or foreign equivalent
thereof (all of the foregoing described in this subsection (ii), collectively
“Patent
Applications”
and,
with the Issued Patents, the “Patents”); (iii)
all
copyrights and copyrightable works, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation and rights
of ownership of copyrightable works, and all rights to register and obtain
renewals and extensions of registrations, together with all other interests
accruing by reason of international copyright conventions (collectively,
“Copyrights”);
(iv)
trademarks, registered trademarks, applications for registration of trademarks,
service marks, registered service marks, applications for registration of
service marks, trade names, registered trade names and applications for
registrations of trade names (collectively, “Trademarks”);
(v)
Product Technology; (vi) all trade secrets, know-how, techniques, data,
inventions, practices, methods, and other confidential or proprietary technical,
business, marketing, research, development, and other information, and (vii)
all
other intangible assets, properties and rights, including know how (whether
or
not appropriate steps have been taken to protect, under applicable law, such
other intangible assets, properties or rights). Intellectual Property includes
all of the foregoing created or obtained through the efforts of third parties
for or on behalf of Seller.
“Interpharm
Realty”
means
Interpharm Realty, LLC, a New York limited liability company and wholly owned
subsidiary of Company.
“Knowledge”
shall
mean, with respect to Company or Sellers, any fact, circumstance, event or
other
matter that (i) any of the officers or directors of any Seller actually knows
(hereinafter referred to as “Actual
Knowledge”),
or
(ii) any of the foregoing parties should reasonably know in the normal discharge
of his or her assigned duties and responsibilities.
“Laws”
shall
mean any law, statute, ordinance, rule, regulation, order, decree or mandatory
guideline of any Governmental Authority (including, without limitation, the
FD&C Act and FDA regulations), as the same may be amended or revised from
time to time.
“Liens”
means
all liens, mortgages, pledges, security interests, charges, Claims, options,
grant-backs, judgments, court orders or other encumbrances.
“Losses”
means
all damages, losses, obligations, liabilities, Claims, deficiencies, costs,
Taxes, penalties, fines, interest, monetary sanctions and expenses (including,
without limitation, amounts paid in settlement in accordance with Section
8.4)
incurred by an Indemnified Party, including, without limitation, reasonable
attorneys’ fees and costs incurred to comply with injunctions and other court
and agency orders, and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce an Indemnified
Party’s right to indemnification hereunder.
“Material
Adverse Effect”
means
any change or effect which, individually or in the aggregate with all other
such
changes and effects, is materially adverse to the Business or to the condition
(financial or otherwise), assets, operations, financial condition, results
of
operations or prospects of Sellers, taken as a whole (the “Company
Condition”),
or
that would materially and adversely effect the ability of any Seller to perform
its obligations hereunder or that would prevent or delay the consummation
of the
transactions contemplated hereunder; provided,
however,
that
none
of
the following shall be deemed in and of themselves, either alone or in
combination, to constitute, and none of the following shall be taken into
account in determining whether there has been or will be, a Material Adverse
Effect: (i) any loss of or diminution in business from any customer or vendor
primarily attributable to the execution, announcement, pendency or pursuit
of
the consummation of this Agreement and the transactions contemplated by this
Agreement; (ii) any change, event, state of facts or development generally
affecting the general political, economic or business conditions of the United
States; (iii) any change, event, state of facts or development generally
affecting the generic pharmaceutical industry; (iv) any change, event, state
of
facts or development arising from or relating to compliance with the terms
of
this Agreement, or action taken or failure to act, to which Buyer has consented
in writing (excluding any Seller’s actions or omissions in violation of this
Agreement); (v) acts of war (whether or not declared), the commencement,
continuation or escalation of a war, acts of armed hostility, sabotage or
terrorism or other international or national calamity or any material worsening
of such conditions; (vi) changes in Laws or Generally Accepted Accounting
Principles after date hereof or interpretation thereof; (vii) any action
taken
at Buyer’s request by Sellers or any of their respective affiliates, other than
in cure of a Seller’s violation of this Agreement; (viii) any matter set forth
in the Disclosure Memorandum, as in effect on the initial date of delivery
thereof and without giving affect to any amendments or supplements
thereto,
except
for any
material worsening of such matter; (ix) any matter set forth in the Company’s
SEC Reports as of the Signing Date,
except
for any
material worsening of such matter; or (x) any
matter described in Section
3.21(a)
below,
except for any
material worsening of the Business or the Company Condition after the Signing
Date.
“Materials
of Environmental Concern”
means
(i) any “hazardous substance” as defined in § 101(14) of CERCLA or any
regulations promulgated thereunder; (ii) petroleum and petroleum by-products;
(iii) any ACM; (iv) any chemical, material or substance defined as, or
included in the definition of, “hazardous substances,” “hazardous wastes,”
“hazardous materials,” “extremely hazardous wastes,” “restricted hazardous
waste” or “toxic substances” or words of similar import under any applicable
federal, state or local law or under the regulations adopted or publications
promulgated pursuant thereto, including, but not limited to, under any
Environmental Requirements; or (v) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Governmental Authority.
“Most
Recent Audit Date”
means
June 30, 2007.
“Multiemployer
Plan”
means
any multiemployer plan defined as such in Section 3(37) of ERISA to which
contributions are or have been made by any Seller or any of their ERISA
Affiliates or as to which any Seller or any of their ERISA Affiliates may
have
liability and that is covered by Title IV of ERISA.
“NDC”
means
a
national drug code as issued by the FDA.
“NDC
Numbers”
means
the NDC number for each of the Products, respectively.
“Permits”
means
any licenses, certificates, approvals, permits and other authorizations issued
or to be issued by any Governmental Authority.
“Permitted
Liens”
means
(i) Liens set forth on Schedule
2.1(h),
(ii)
Liens for Taxes that are not due and payable or that may thereafter be paid
without penalty, (iii) Liens securing the Assumed Liabilities, (iv) easements,
covenants, rights-of-way and other similar restrictions of record, and (v)
zoning, building and other similar restrictions.
“Person”
means
any corporation, partnership, association, trust, limited liability company,
joint venture, Governmental Authority or natural person.
“Product
Marketing Materials”
means
all marketing materials used specifically in the marketing or sale of any
Product as of the Closing Date, including, without limitation, all advertising
materials, training materials, product data, mailing lists, sales materials
(e.g., detailing reports, vendor lists, sales data), marketing information
(e.g., competitor information, research data, market intelligence reports,
statistical programs (if any) used for marketing and sales research), customer
information (including customer net purchases information to be provided
on the
basis of either dollars and/or units for each month, quarter or year), sales
forecasting models, educational materials, and advertising and display
materials, speaker lists, promotional and marketing materials, website content
and advertising and display materials, artwork for the production of packaging
components, television masters and other similar materials related to the
Product(s).
“Product
Reports”
means
the following: (i) summary of Product complaints from physicians related
to the
Products; (ii) summary of Product complaints from customers related to the
Products; and (iii) Product recall reports filed with the FDA related to
the
Products.
“Product
Scientific and Regulatory Material”
means
all technological, scientific, chemical, biological, pharmacological,
toxicological, regulatory and clinical trial materials and information related
to the Products that are owned or licensed by any Seller.
“Product
Technology”
means
the technology, trade secrets, know-how, and proprietary information (whether
patented, patentable or otherwise) specifically related to the manufacture,
validation, packaging, release testing, stability and shelf life of the
Products, including all product formulations, in existence and in the possession
of any Seller as of the Closing Date, product specifications, processes,
product
designs, plans, trade secrets, ideas, concepts, manufacturing, engineering
and
other manuals and drawings, standard operating procedures, flow diagrams,
chemical, pharmacological, toxicological, pharmaceutical, physical and
analytical, safety, efficacy, bioequivalency, quality assurance, quality
control
and clinical data, research records, compositions, annual product reviews,
process validation reports, analytical method validation reports, specifications
for stability trending and process controls, testing and reference standards
for
impurities in and degradation of products, technical data packages, chemical
and
physical characterizations, dissolution test methods and results, formulations
for administration, clinical trial reports, regulatory communications and
labeling and all other information related to the manufacturing process,
and
supplier lists; in all cases that is used by any Seller in the manufacture
of
the Products, in each case including any of the foregoing created or obtained
through the efforts of third parties for or on behalf of Seller.
“Representatives”
of
a
Person means their directors, officers, managers, partners, shareholders,
members, Employees, consultants, contractors, representatives, agents,
accountants, bankers, attorneys and other advisors.
“SEC”
means
the U.S. Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“SOX”
means
the Sarbanes-Oxley Act of 2002.
“Subsidiary”
or
“Subsidiaries”
of
any
Person means any other Person of which a majority of the outstanding voting
securities or other voting equity interests, or a majority of any other
interests having the power to direct or cause the direction of the management
and policies of such other Person, are owned, directly or indirectly, by
such
first Person.
“Tax”
or
“Taxes”
means
any federal, foreign, state, county, and local income, gross receipts, excise,
import, property, franchise, ad valorem, license, sales or use tax or other
withholding, social security, Medicare, unemployment compensation or other
employment-related tax, or any other tax, together with all deficiencies,
penalties, additions, interest, assessments, and other governmental charges
with
respect thereto.
“Transaction
Documents”
means
this Agreement (including
the Schedules hereto),
the
Disclosure
Memorandum, the Loan
and
Security Agreement,
the Bill
of Sale, the
Facility Purchase Agreement, the Restrictive Covenant Agreements, the
Certificate
of Indebtedness
and all
other documents, instruments and certificates contemplated by Article
VI.
“WARN
Act”
means
the Worker Adjustment and Retraining Notification Act of
1988,
as amended, and the rules and
regulations thereunder.
1.2 Other
Definitions.
The
following capitalized terms defined elsewhere in this Agreement are defined
in
the sections indicated below.
|
Term
|
|
Section
|
| |
|
|
|
Accounting
Firm
|
|
2.6(c)
|
|
Actual
Knowledge
|
|
1.1 (within definition of “Knowledge”)
|
|
Acquired Assets
|
|
2.1
|
|
Agreement
|
|
Introduction
|
|
APR
Interest
|
|
2.1(u)
|
|
Assumed
Contracts
|
|
2.1(h)
|
|
Assumed
Liabilities
|
|
2.3
|
|
Base
Cash Amount
|
|
2.5(a)
|
|
Basket
|
|
8.9
|
|
Bill
of Sale
|
|
6.2(e)
|
|
Break-up
Fee
|
|
7.2(b)
|
|
Business
|
|
Recitals
|
|
Buyer
|
|
Introduction
|
|
Buyer
Advances
|
|
2.5(d)
|
|
Buyer
Designee
|
|
3.6(d)
|
|
Buyer
Disagreement Notice
|
|
2.6(c)
|
|
Buyer
FDC Numbers
|
|
9.3(e)
|
|
Cash
Amount Adjustments
|
|
2.6
|
|
Certificate
of Indebtedness
|
|
6.2(m)
|
|
Ceiling
|
|
8.10(a)
|
|
Claim
Notice
|
|
8.4(a)
|
|
Closing
Cash Amount
|
|
2.5(a)
|
|
Closing
Date
|
|
6.1
|
|
COBRA
|
|
3.15(g)
|
|
Common
Stock
|
|
3.6(b)
|
|
Company
|
|
Introduction
|
|
Company
Disagreement Notice
|
|
2.6(c)
|
|
Company
Shareholders Meeting
|
|
9.4(a)
|
|
DEA
License
|
|
6.1(c)
|
|
Disclosure
Memorandum
|
|
3
|
|
Dispute
Notice
|
|
8.6
|
|
Due
Diligence
|
|
2.8
|
|
Due
Diligence Period
|
|
2.8
|
|
Equipment
|
|
2.1(a)
|
|
Escrow
Agent
|
|
2.10
|
|
Escrow
Fund
|
|
2.10
|
|
Excluded
Assets
|
|
2.2
|
|
Excluded
Receivables
|
|
2.9(a)
|
|
Facility
Purchase Agreement
|
|
6.2(f)
|
|
FDA
Inspection
|
|
5.5(b)
|
|
Inventory
|
|
2.1(b)
|
|
Information
Statement
|
|
5.10
|
|
Inventory
Shortfall
|
|
8.12(a)
|
|
IP
Contractors
|
|
3.14(e)
|
|
Leased
Real Property
|
|
3.8(a)
|
|
Licensed
Intellectual Property
|
|
3.14(c)
|
|
Loan
and Security Agreement
|
|
2.5(d)
|
|
Majority
Shareholders
|
|
Introduction
|
|
Most
Recent Balance Sheet
|
|
3.4(e)
|
|
Non-Paying
Party
|
|
6.1(b)
|
|
Owned
Real Property
|
|
3.8(a)
|
|
Outside
Date
|
|
7.1(d)
|
|
Preliminary
Statement
|
|
2.6(c)
|
|
Products
|
|
2.1(d)
|
|
Purchase
Price
|
|
2.5(a)
|
|
Recommendation
|
|
5.6(b)
|
|
Receivables
|
|
2.1(c)
|
|
Registrations
|
|
9.3(a)
|
|
Required
Shareholders Approval
|
|
3.6(b)
|
|
Restrictive
Covenant Agreements
|
|
6.2(h)
|
|
SEC
Reports
|
|
3.4(a)
|
|
Sellers
|
|
Recitals
|
|
Sellers
Contracts
|
|
3.12
|
|
Sellers
Intellectual Property
|
|
3.14(a)
|
|
Sellers
Real Property
|
|
3.8(a)
|
|
Sellers
Registered Intellectual Property
|
|
3.14(b)
|
|
Sellers
Software Programs
|
|
3.14(f)
|
|
Series
A-1 Preferred Stock
|
|
3.6(b)
|
|
Series
D-1 Preferred Stock
|
|
3.6(b)
|
|
Signing
Date
|
|
Introduction
|
|
Specified
Employee
|
|
9.1(a)
|
|
Statement
|
|
2.6(c)
|
|
Third
Party
|
|
5.7
|
|
Third
Party Intellectual Property
|
|
3.14(d)
|
|
Transaction
Written Consent
|
|
3.6(c)
|
1.3 Construction.
In
interpreting this Agreement, the following rules of construction shall
apply:
(a) Where
the
context requires, the use of the singular form in this Agreement will include
the plural, the use of the plural will include the singular, and the use
of any
gender will include any and all genders.
(b) The
word
“including” (and, with correlative meaning, the word “include”) means that the
generality of any description preceding such word is not limited, and the
words
“shall” and “will” are used interchangeably and have the same
meaning.
(c) References
in this Agreement to “Articles”, “Sections”, or “Exhibits” shall be to Articles,
Sections or Exhibits of or to this Agreement unless otherwise specifically
provided.
(d) References
to any agreement or contract are to such agreement or contract as amended,
modified or supplemented from time to time in accordance with the terms hereof
and thereof.
(e) References
to any statute and related regulation shall include any amendments of the
same
and any successor statutes and regulations.
(f) References
to any Person include the successors and permitted assigns of such
Person.
(g) References
“from” or “through” any date mean, unless otherwise specified, “from and
including” or “through and including,” respectively.
ARTICLE
II
PURCHASE
AND SALE
2.1 Purchase
of Assets.
Subject
to the terms and conditions of this Agreement, at the Closing (as defined
in
Section 6.1),
Sellers shall sell, transfer, convey, assign and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Sellers, all of the assets of each
Seller (other than the Excluded Assets) (collectively, the “Acquired
Assets”),
free
and clear of all Liens (other than Permitted Liens), expressly including,
but
not limited to:
(a) All
vehicles, machinery, equipment (including HVAC equipment), furniture, fixtures
and other tangible personal property which are specifically set forth on
Schedule
2.1(a)
or are
otherwise acquired by any Seller after the Signing Date or owned by any Seller
at the Closing Date (“Equipment”);
(b) All
raw
materials (including API), supplies, work in progress and inventory of finished
products, including without limitation (i) those specifically set forth on
Schedule
2.1(b),
owned
by any Seller and forming part of the Business (collectively, “Inventory”)
and
(ii) those acquired or produced after the Signing Date and not sold in the
ordinary course of business with Schedule 2.1(b) to be supplemented by Company
not later than ten (10) Business Days prior to the Closing Date to reflect
such
additional Inventory and the shelf life for each item listed
thereon;
(c) All
of
the accounts, notes and other receivables of any Seller and all rights relating
thereto existing or accrued as of the Closing Date (“Receivables”),
including without limitation those specifically set forth on Schedule
2.1(c),
other
than the Excluded Receivables (as defined in Section
2.9
below);
(d) All
products approved, pending approval and in development by any Seller, whether
or
not discontinued or previously marketed (the “Products”),
including without limitation (i) those specifically set forth on Schedule
2.1(d)
and (ii)
those produced after the Signing Date and not sold in the ordinary course
of
business;
(e) All
Intellectual Property owned by any Seller or licensed by any Seller under
the
Assumed Contracts, including without limitation (i) the rights of each Seller
in
and to any and all product names and logos, (ii) the Product Scientific and
Regulatory Material, (iii) the Product Intellectual Property, and
(iv)
the Product Marketing Materials.
(f) All
other
owned intangible assets of each Seller, including but not limited to the
customer list and supplier list used in the Business;
(g) All
ANDAs
relating to Products under development by any Seller, including without
limitation (i) those specifically set forth on Schedule
2.1(g),
(ii)
any correspondence with the FDA in any Seller’s files with respect to such
ANDAs, (iii) the right of reference to the Drug Master Files included in
such
ANDAs, and (iv) annual reports relating to the ANDAs which are filed with
the
FDA, and adverse event reports, history and statistics pertaining to the
Products;
(h) All
Contracts of any Seller which are specifically set forth on Schedule
2.1(h)
(the
“Assumed
Contracts”);
(i) The
existing lists of all customers for the Products (both current customers
and all
Persons who were customers within the 24 month period prior to the Signing
Date); a list of the annual net sales to such customers; a list including
the
name, and business contact information, of the Employee(s) for each High
Volume
Account that is or has been responsible for the purchase of the Products
on
behalf of the High Volume Account;
(j) All
outstanding customer purchase orders for the Products;
(k) A
list of
all NDC Numbers;
(l) The
Product Reports;
(m) All
books, records, and facility and equipment qualification documents related
to
the manufacturing, packaging and testing of drug products at the site including,
but not limited to, manufacturing, packaging, and laboratory facility
qualification; HVAC qualification; compressed air qualification; process
equipment qualification; laboratory instrument qualification; and water system
validation;
(n) All
books
and records related to the Products under development including, but not
limited
to laboratory notebooks, technical reports, batch records, product evaluation
reports, call reports and the like in any way relating to the
Business;
(o) All
business and accounting records, data, supplier, dealer, broker, distributor
and
customer lists, manuals, books, files, procedures, systems, business records,
production records, advertising materials and other proprietary information
relating to the Business, and copies of employee files and records;
(p) All
prepaid expenses in the ordinary course;
(q) All
rights in and to any Permits;
(r) All
Claims, deposits, refunds, rebates, causes of action, choses in action, rights
of recovery, and other rights of action against third parties;
(s) All
transferable warranties or similar rights in favor of Sellers;
(t) All
telephone and facsimile numbers and all domain names associated with the
Business;
(u) Sellers’
entire right and interest in and to ten (10) Class A limited liability company
membership interests in APR, LLC, a Delaware limited liability company (the
“APR
Interest”);
(v) The
right
to enforce, for Buyer’s benefit as a third party beneficiary, any and all of
Sellers’ rights which directly or indirectly pertain to non-disclosure,
non-solicitation, non-competition, non-disparagement and assignment of property
covenants made by Sellers’ Employees or directors under any Contract, whether or
not an Assumed Contract, and all rights under said Contract ancillary to
the
foregoing; and
(w) All
other
intangible personal property and the goodwill associated with the
Business.
2.2 Excluded
Assets.
Notwithstanding anything contained in Section
2.1
to the
contrary, no Seller shall sell to Buyer, and Buyer shall not acquire from
any
Seller, any of the following assets (collectively, the “Excluded
Assets”):
(i)
any Seller’s’ corporate minute books, stock ledgers, certificates of
incorporation, bylaws, shareholders agreements, all employee files and records,
and related corporate documents and instruments, (ii) except as set forth
in
Section
2.1(u)
above,
all shares of capital stock, limited liability company interests or other
securities which any Seller holds in any Subsidiary, (iii) all Contracts
of each
Seller other than the Assumed Contracts, (iv) except as set forth in
Section
9.4
below,
the rights of each Seller in and to the names and logos for “Interpharm”,
“Interpharm Holdings”, “Micro Computers Store”, Innovative Business Micros”
“Logix Solutions and “Saturn Chemical,” (v) any Excluded Receivables, and (vi)
the assets listed on Schedule
2.2.
2.3 Assumption
of Liabilities.
As
of and
after the Closing Date, Buyer shall assume only the following liabilities
and
responsibilities (collectively, the “Assumed
Liabilities”),
and
no others:
(a) the
capital leases set forth on Schedule
2.3(a);
(b) the
trade
payables set forth on Schedule
2.3(b);
(c) the
pending litigation against the Acquired Assets or the Business set forth
on
Schedule
2.3(c);
provided,
however,
that
Buyer shall not assume any pending litigation matter (and the parties shall
cause Schedule
2.3(c)
to be
amended to remove any pending litigation matter) if and to the extent that
(i)
Buyer has elected, by written notice to Company given at any time prior to
the
expiration of the Due Diligence Period, to not assume such pending litigation,
or (ii) Buyer and Company are unable to mutually agree upon a dollar value
to
assign to the liability of Company associated with such pending litigation
after
good faith negotiations during the Due Diligence Period in accordance with
Section
2.6(a)(ii)
below;
(d) the
performance obligations of each Seller under all Assumed Contracts, but solely
with respect to performance obligations arising after the Closing Date;
provided,
however,
that
Buyer shall have assumed substantially all of the outstanding Contracts that
are
not subject to either (i) any dispute with or adverse claim by any Seller
or the
other contracting party, or (ii) any pending or threatened litigation, and
provided, further, however that subject to the prior proviso, Buyer shall
not
assume any Contract (and the parties shall cause Schedule
2.1(h)
to be
amended to remove any Contract from the list of Assumed Contracts) if and
to the
extent that Buyer has elected, by written notice to Company given not less
than
five (5) Business Days prior to Closing, to not assume such Contract;
and
(e) all
other
Contracts entered into by any Seller after the date of this Agreement but
prior
to the Closing which were consented to in writing by Buyer prior to their
execution by such Seller.
Schedule
2.1(h)
shall be
amended prior to the Closing to include all Contracts described in clause
(e)
above.
2.4 Excluded
Liabilities.
Except
as expressly provided in Section
2.3
above,
Buyer shall not assume or be liable for any liabilities, obligations or duties
of any Seller, whether known or unknown, absolute, contingent or otherwise.
Without limiting the preceding sentence, except as expressly provided in
Section
2.3
above,
Buyer will not assume or be responsible for any of the following:
(a) any
liability or obligation of any Seller for any Taxes;
(b) any
liability or obligation, to the extent associated with or arising out of
any
Excluded Asset;
(c) any
Indebtedness of any Seller;
(d) any
liability or obligation of any Seller to indemnify any Person;
(e) any
Claims or pending or threatened litigation against the Acquired Assets or
the
Business relating to events occurring prior to the Closing Date regardless
of
when such Claims are asserted or such litigation or proceedings
commenced;
(f) any
liability or obligation of any Seller relating to intercompany obligations
or
other obligations between any Seller and any shareholder or any other Affiliate
of such Seller;
(g) any
liability or obligation of any Seller for Expenses incurred in connection
with
the transactions contemplated by this Agreement and the other Transaction
Documents;
(h) accrued
workers’ compensation and medical insurance liabilities;
(i) any
liability or obligation under any Employee Benefit Plan;
(j) any
liability or obligation owed to Employees or directors, including, but limited
to any severance, success or other fees contingent upon consummation of this
transaction and any liabilities for accrued but unpaid vacation, sick leave
or
other paid time off;
(k) any
liability or obligation associated with or arising out of any Receivables,
except for (i) the obligation to honor any sales returns which are made more
than sixty (60) days after the Closing Date and are dated not less than twelve
(12) months prior to its expiration at the time of its return, (ii) any product
recall for product lots whose manufacturing began prior to the Closing Date
and
were completed after the Closing Date, and (iii) to the extent covered by
reserves as of the Closing Date, for any returns, credits, allowances, rebates,
prebates or chargebacks;
(l) any
liability or obligation of any Seller under any Contract which is not an
Assumed
Contract; or
(m) any
liability or obligation of any Seller under this Agreement.
2.5 Purchase
Price.
(a) Amount
of Purchase Price.
In full
and complete consideration for the acquisition of the Acquired Assets, at
the
Closing Buyer shall (i) pay to Company the sum of Sixty Five Million Dollars
($65,000,000.00) (the “Base
Cash Amount”),
as
adjusted pursuant to Section
2.6
below
(the Base Cash Amount, as so adjusted, the “Closing
Cash Amount”),
(ii)
deliver to the Escrow Agent the Escrow Amount, and (iii) assume the Assumed
Liabilities as set forth in Section
2.3
hereof
(clauses (i)-(iii) collectively, the “Purchase
Price”).
(b) Payment
of Closing Cash Amount.
On the
Closing Date, the Closing Cash Amount shall be payable in such amounts and
to
such bank accounts as may be directed in writing by Company at least three
(3)
Business Days prior to the Closing in immediately available funds.
(c) Cash
To be Paid into Escrow.
On the
Closing Date, Buyer shall deposit with the Escrow Agent a cash amount equal
to
the Escrow Amount, to be held and released by the Escrow Agent in escrow
in
accordance with Section
2.10
below.
(d) Advances
Against Closing Cash Amount.
From
the Signing Date until the earlier to occur of the Closing Date or the
termination of this Agreement in accordance with Section
7.1,
Buyer
or an Affiliate thereof shall advance, as a credit against the Closing Cash
Amount, such amounts (the “Buyer
Advances”)
required by the Loan and Security Agreement in the form attached as Exhibit
A
hereto
(the “Loan
and Security Agreement”)
or
made by Buyer pursuant to Section
5.1(b)(xii)
below.
If this Agreement shall be terminated for any reason in accordance with
Section
7.1
below,
then all Buyer Advances shall be subject to the repayment terms set forth
in the
Loan and Security Agreement.
2.6 Adjustments
to Base Cash Amount.
(a) Adjustments
to Base Cash Amount.
At
Closing, the Base Cash Amount shall be adjusted as follows (the “Cash
Amount Adjustments”):
(i) the
Base
Cash Amount shall be reduced by an amount equal to the aggregate Buyer Advances
existing at Closing;
(ii) the
Base
Cash Amount shall be reduced by an amount equal to the amount of the Assumed
Liabilities assumed under Sections
2.3(a), 2.3(b)
and
2.3(c);
provided,
however,
that
the dollar amount ascribed to the liability of the pending litigation assumed
under Section
2.3(c)
shall be
as mutually agreed by Buyer and Company after good faith negotiations during
the
Due Diligence Period (subject to the provisos to Section
2.3(c))
and, if
the parties cannot so agree on a dollar amount to be ascribed to the liability
for any pending litigation matter, such pending litigation matter shall not
be
assumed by Buyer;
(iii) the
Base
Cash Amount shall be increased by an amount equal to the amount of the face
value of the Receivables (other than the Excluded Receivables) outstanding
as of
the Closing which have not been outstanding more than ninety (90) days for
retail accounts and one hundred twenty (120) days for wholesale accounts
since
invoicing (less reserves for returns, allowances, credits, rebates, prebates
and
chargebacks in amounts satisfactory to Buyer and consistent with Sellers’ past
practices);
(iv) the
Base
Cash Amount shall be reduced by an amount equal to the amount of the purchase
price for the Facility under the Facility Purchase Agreement; and
(v) the
Base
Cash Amount shall be reduced by an amount equal to the amount of any reductions
in the aggregate dollar value ascribed to Inventory (net of reserves) between
the Signing Date and the Closing Date, as determined in accordance with
Section
2.6(b)
below.
(b) Determination
of Inventory.
On or
prior to the fifth (5th)
Business Day prior to the Closing Date, Company shall deliver to Buyer a
written
statement setting forth in reasonable detail a list of Inventory and the
calculation by Company of the dollar values thereof and the computations
used in
connection therewith. The dollar values ascribed to Inventory shall be based
on
Company’s accounting and valuation methods consistent with past practices and
consistently applied, provided that any Inventory with a shelf life of less
than
fourteen (14) months (except for Midrin which shall have a minimum shelf
life of
twelve (12) months) shall be ascribed no value. During the two (2) Business
Day
period following the receipt by Buyer of such statement, Buyer and its
Representatives shall be permitted to: (i) review during normal business
hours
and make copies reasonably required of (x) the working papers of Company
relating to the preparation of such statement and (y) any supporting schedules,
supporting analyses and other supporting documentation relating to the
preparation of such statement; and (ii) perform a reasonable spot check
(physical count) of the Inventory. In the event Buyer disagrees with the
dollar
values ascribed to Inventory reflected on such statement, Buyer and Company
shall seek in good faith to resolve in writing any differences which they
may
have with respect thereto on or prior to Closing Date. At the close of business
on the day before Closing, parties will update (as of such date) the list
of
Inventory and the calculation of the dollar values thereof for the changes
from
the date the above referenced Inventory statement was first delivered to
Buyer.
At Closing, the Base Cash Amount shall be adjusted in accordance with
Section
2.6(a)(v)
above
based on the determinations made pursuant to this Section
2.6(b).
Such
determination and adjustment shall be final and binding on all parties, and
no
further adjustments based on Section
2.6(a)(v)
above
shall be made pursuant to Section
2.6(c)
below.
(c) Adjustment
Process.
(i) Notwithstanding
anything herein to the contrary, for purposes of this Section
2.6(c), the terms “Cash
Amount Adjustments” and “Closing Cash Amount” shall be deemed to exclude the
adjustments under Section
2.6(a)(v),
which
shall instead be determined in accordance with Section
2.6(b)
above
and adjusted at the Closing.
(ii) On
or
prior to the fifth (5th)
Business Day prior to the Closing Date, Company shall deliver to Buyer a
written
statement (the “Preliminary
Statement”)
setting
forth in reasonable detail the calculation by Company of the Closing Cash
Amount, the Cash Amount Adjustments and the computations used in connection
therewith. During the two (2) Business Day period following the receipt by
Buyer
of the Preliminary Statement, Buyer and its representatives shall be permitted
to review during normal business hours and make copies reasonably required
of
(x) the working papers of Company, and, if relevant, its independent auditors
relating to the preparation of the Preliminary Statement and (y) any supporting
schedules, supporting analyses and other supporting documentation relating
to
the preparation of the Preliminary Statement.
(iii) In
the
event Buyer disagrees with the Closing Cash Amount or the Cash Amount
Adjustments reflected on the Preliminary Statement, Buyer shall notify Company
of such disagreement within two (2) Business Days after receipt thereof (the
“Buyer
Disagreement Notice”),
such
Buyer Disagreement Notice to include the amount Buyer believes to be the
correct
Closing Cash Amount and/or Cash Amount Adjustments, as the case may be. If
the
Buyer Disagreement Notice is not received by Company within such
two Business Day period, the Closing Cash Amount and the Cash Amount
Adjustments included in the Preliminary Statement shall be used in order
to
determine the Purchase Price paid at Closing.
(iv) If
a
Buyer Disagreement Notice which disputes the Closing Cash Amount or the Cash
Amount Adjustments included in the Preliminary Statement is received by Company
within such two (2) Business Day period, then:
(x) the
Closing Cash Amount used in order to determine the Purchase Price paid at
Closing shall be the lower of: (A) the Closing Cash Amount included in the
Preliminary Statement; and (B) the Closing Cash Amount included in the Buyer
Disagreement Notice; and
(y) within
thirty (30) days after the Closing, Buyer shall prepare and deliver to Company
a
written statement (the “Statement”)
setting
forth in reasonable detail its calculation of Closing Cash Amount and the
Cash
Amount Adjustments.
(v) During
the ten (10) day period following the receipt by Company of the Statement,
Company and their Representatives shall be permitted to review during normal
business hours and make copies reasonably required of (x) the working
papers of Buyer, Company and, if relevant, its independent auditors relating
to
the preparation of the Statement and (y) any supporting schedules,
supporting analyses and other supporting documentation relating to the
preparation of the Statement. The Statement shall become final and binding
upon
the parties on the tenth (10th)
day
following delivery thereof, except to the extent that Company gives written
notice of disagreement with the Statement (the “Company
Disagreement Notice”)
to
Buyer prior to such date. Any Company Disagreement Notice shall (A) specify
in reasonable detail the nature of any disagreement so asserted (any such
disagreement to be limited to whether such calculation of Closing Cash Amount
and the Cash Amount Adjustments are mathematically correct and/or have been
prepared in accordance with the definition of the Closing Cash Amount and
the
Cash Amount Adjustments, and the definitions included in such definitions)
and
(B) if independent auditors are engaged by Company in connection with the
preparation of the Company Disagreement Notice, be accompanied by a certificate
of the independent auditors of Company that they concur with each of the
positions taken by Company in the Company Disagreement Notice. If a Company
Disagreement Notice complying with the preceding sentence is received by
Buyer
in a timely manner, then the Statement (as revised in accordance with clause
(I)
or (II) below) shall become final and binding upon the parties on the earlier
of
(I) the date Buyer and Company resolve in writing any differences they have
with respect to the matters specified in the Company Disagreement Notice
or
(II) the date any disputed matters are finally resolved in writing by the
Accounting Firm (as defined below).
(vi) During
the fifteen (15) day period following the delivery of a Company Disagreement
Notice that complies with the preceding paragraph, Buyer and Company shall
seek
in good faith to resolve in writing any differences which they may have with
respect to the matters specified in the Company Disagreement Notice. During
such
period, Buyer and its independent auditors shall be permitted to review and
make
copies reasonably required of (i) the working papers of Company and, if
relevant, the designated independent auditors (if any) of Company relating
to
the preparation of the Company Disagreement Notice and (ii) any supporting
schedules, supporting analyses and other supporting documentation relating
to
the preparation of the Company Disagreement Notice.
(vii) If,
at
the end of such fifteen (15) day period, the differences as specified in
the
Company Disagreement Notice are not resolved, Company and Buyer shall within
ten
(10) days following the end of such fifteen (15) day period engage a
nationally recognized independent accounting firm mutually and reasonably
acceptable to Buyer and Company (the “Accounting
Firm”)
and
submit to the Accounting Firm for review and resolution of any and all matters
which remain in dispute and which are properly included in the Company
Disagreement Notice. In acting hereunder, the Accounting Firm shall be acting
as
accounting experts and not as arbitrators. In resolving any disputed item,
the
Accounting Firm shall: (i) be bound by the provisions of this Section
2.6
and the
definitions of Closing Cash Amount and Cash Amount Adjustments and the
definitions included in such definitions; and (ii) limit its review to
matters still in dispute as specifically set forth in the Company Disagreement
Notice (and only to the extent such matters are still in dispute following
such
fifteen (15) day period). The Accounting Firm’s determination of any item that
is a component of Closing Cash Amount or Cash Amount Adjustments and is the
subject of a dispute cannot, however, be in excess of, or less than, the
greatest or lowest value, respectively, claimed for any particular item in
the
Statement or the Company Disagreement Notice (or, if different, the value
claimed by the relevant party at the end of such fifteen (15) day period).
Company and Buyer shall each use their reasonable efforts to cause the
Accounting Firm to render a decision resolving the matters in dispute within
thirty (30) days following the submission of such matters to the Accounting
Firm. Company and Buyer agree that judgment may be entered upon the
determination of the Accounting Firm in any court having jurisdiction over
the
party against which such determination is to be enforced.
(viii) Except
as
specified in the following sentence, the fees and expenses of the Accounting
Firm in connection with the Accounting Firm’s determination of Closing Cash
Amount or Cash Amount Adjustments pursuant to this Section
2.6
shall be
borne, in its entirety, by the party whose calculation of the Closing Cash
Amount as initially submitted to the Accounting Firm is furthest away from
the
Closing Cash Amount as determined by the Accounting Firm. The fees and expenses
of Buyer’s independent auditors (if any) incurred in connection with the
issuance of the Statement and review of the Company Disagreement Notice,
if any,
shall be borne by Buyer, and the fees and expenses of the independent auditors
of Company incurred in connection with their review of the Statement and
their
preparation of the Company Disagreement Notice, if any, shall be borne by
Company.
(ix) If
the
Closing Cash Amount as determined by the Accounting Firm is greater than
the
Closing Cash Amount used in order to determine the Purchase Price paid at
Closing, Buyer shall, within five (5) Business Days after the final
determination of the Closing Cash Amount and Cash Amount Adjustments, make
payment to Company, by wire transfer of immediately available funds, of the
amount of such excess. If the Closing Cash Amount as determined by the
Accounting Firm is less than the Closing Cash Amount used in order to determine
the Purchase Price paid at Closing, Company shall, within five (5) Business
Days
after the final determination of the Closing Cash Amount and Cash Amount
Adjustments, make payment to Buyer, by wire transfer of immediately available
funds, of the amount of such shortfall. Buyer and Company agree that
the
amount
of any payment to be made pursuant to this Section
2.6(c)(viii)
shall
bear interest from (and including) the Closing Date to (but excluding) the
date
of payment at a rate per annum equal to the “prime rate” of interest in effect
at Wells Fargo on the Closing Date. Such interest shall be payable at the
same
time as the payment to which it relates and shall be calculated daily, on
the
basis of a year of 365 days and the actual number of days elapsed, and
compounded annually.
(x) Any
payment required to be made under this Section
2.6
shall be
deemed an adjustment to the Purchase Price.
2.7 Allocation
of Consideration Among Acquired Assets.
Buyer
and Sellers shall file all income tax returns or reports, including without
limitation, IRS Form 8594, for their respective taxable years in which the
Closing occurs to reflect an allocation of the Consideration among
the
Acquired Assets in
a
manner consistent with the allocations set forth on Schedule
2.7
and
Buyer and Sellers shall not take any position inconsistent therewith before
any
Governmental Authority charged with the collection of taxes or in any judicial
proceedings relating to such tax reporting.
2.8 Due
Diligence Contingency.
Buyer
shall have a period, commencing on the Signing Date and ending on the earlier
of
the Closing Date and April 30, 2008 (the “Due
Diligence Period”),
to
conduct (directly and through its Representatives) any and all legal,
regulatory, financial, business, environmental
and
other investigations, evaluations and inspections regarding the assets,
liabilities, prospects, vendors, customers, Employees, operations and affairs
of
the Business, Sellers and their Products and the Sellers Real Property (the
“Due
Diligence”)
as
desired by Buyer (including, but not limited, to a review of the ANDAs and
the
intellectual property matters applicable to each of such Products). If Buyer
is
not satisfied, in its sole discretion, with the results of its Due Diligence,
it
may elect to exercise its termination rights pursuant to Section
7.1(e),
upon
the conditions and subject to the limitations set forth therein.
2.9 Excluded
Receivables.
(a) Buyer
shall have the right to elect, by written notice to Company given at any
time
within the Due Diligence Period, to not assume such Receivables as it may
choose
having an aggregate face amount of not more than Three Hundred Thousand Dollars
($300,000) (any Receivables which Buyer so elects not to assume are hereinafter
referred to as “Excluded
Receivables”).
Buyer
shall, at no cost to Buyer, use commercially reasonable efforts (consistent
with
its own receivables collection practices) to assist Company in the collection
of
and/or collect the Excluded Receivables on Company’s behalf.
(b) From
and
after the Closing, Company shall have the right and authority to collect
for its
own account all Excluded Receivables and to endorse any checks or drafts
received with respect to any Excluded Receivables. Buyer will promptly deliver
to Company any cash or other property received directly or indirectly by
it with
respect to the Excluded Receivables, including any amounts payable as interest.
2.10 Escrow
Fund Arrangement.
(a) On
the
Closing Date, Buyer will deliver to Sovereign Bank or such financial institution
as may be proposed by Buyer and reasonably acceptable to Company (the
“Escrow
Agent”)
by
wire transfer of immediately available funds, a cash amount equal to the
Escrow
Amount, which amount shall be held in accordance with Section
2.5(c)
above
(together with all interest earned thereon, the “Escrow
Fund”)
all
pursuant
to the terms of an agreement among the Escrow Agent, Buyer and Company in
form
and substance as may be mutually agreed by the parties (the “Escrow
Agreement”).
Each
of Company and Buyer covenants to endeavor to negotiate in good faith and
use
its diligent efforts to reach mutual agreement on the terms of the Escrow
Agreement prior to the expiration of the Due Diligence Period. The Escrow
Fund
shall be available for any of Buyer’s indemnity claims as set forth in
Article
VIII
below or
any payment required to be made to Buyer under Section
2.6.
(b) The
Escrow Fund shall be held as a trust fund, shall be the property of Buyer
pending disbursement to Sellers and shall not be subject to any Lien,
attachment, trustee process or any other judicial process of any creditor
of any
party, and shall be held and disbursed solely for the purposes and in accordance
with the respective terms of the Escrow Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF
COMPANY
As
promptly as practicable after the Signing Date but not later than April 24,
2008, Company shall deliver to Buyer a Disclosure Memorandum dated as of
the
date of this Agreement and signed by an officer of Company duly authorized
by
its Board of Directors (the “Disclosure
Memorandum”)
setting forth certain information regarding Sellers and the Business. The
disclosures set forth in the Disclosure Memorandum qualify only those
representations and warranties specifically referenced and referred to in
the
Disclosure Memorandum as relating to such disclosures and a disclosure related
to any particular representation and warranty shall not qualify any other
representation unless so expressly stated. To induce Buyer to enter into
and
perform this Agreement, Company hereby represents and warrants that, except
as
otherwise set forth in the Disclosure Memorandum, each of the representations,
warranties and statements in the following paragraphs of this Article
III is
true
and correct as of the date of this Agreement and as of the Closing
Date:
3.1 Existence
and Good Standing.
(a) Interpharm
Holdings, Inc. is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and Interpharm, Inc. is
a
corporation duly organized, validly existing and in good standing under the
laws
of the State of New York, and each of them has all requisite power and authority
to own, lease and operate its properties and to carry on its business as
now
being conducted and as currently contemplated to be conducted. Each of the
other
Sellers is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation, with all requisite power and authority to own, lease and operate
its
properties and to carry on its business as now being conducted and as currently
contemplated to be conducted.
(b) Each
Seller is qualified or licensed as a foreign corporation or limited liability
company in each jurisdiction in which the character or location of the property
owned, leased or operated by it or the nature of the business conducted by
it
makes such qualification necessary, which jurisdictions are listed on
Part
3.1(b)
of the
Disclosure Memorandum.
(c) Except
as
set forth on Part
3.1(c)
of the
Disclosure Memorandum, no Seller has any Subsidiaries or otherwise owns any
interest in any other Person.
3.2 Capitalization.
The
authorized capital stock and issued and outstanding capital stock or limited
liability company interests, as applicable, of each Seller, together with
the
shareholders or members thereof, are as set forth on Part
3.2
of the
Disclosure Memorandum. All of the outstanding capital stock or limited liability
company interests, as applicable, of Sellers has been duly authorized, validly
issued and is fully paid and nonassessable and none of such capital stock
or
limited liability company interests, as applicable, was issued in violation
of
any preemptive or preferential right. Except as set forth on Part
3.2
of the
Disclosure Memorandum, there are no (i) outstanding conversion or exchange
rights, subscriptions, options, warrants or other arrangements or commitments
obligating any Seller to issue any capital stock, limited liability company
interests or other securities, (ii) outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to any Seller,
or
(iii) agreements, written or oral, relating to the acquisition, disposition,
voting or registration under applicable securities laws of any capital stock,
limited liability company interests or other securities of any Seller. All
of
the Business is carried out and owned by Sellers.
3.3 Authorization.
(a) Company
(and to the extent a party thereto, each of the other Sellers) has full power,
capacity and authority to execute this Agreement and all other agreements
and
documents contemplated hereby to which it is or will be a party, subject
to
receipt of the Required Shareholder Approval in accordance with the DGCL.
The
execution and delivery of this Agreement and such other agreements and documents
by Company (and to the extent a party thereto, each of the other Sellers)
and
the consummation by Company (and to the extent a party thereto, each of the
other Sellers) of the transactions contemplated hereby has been duly authorized
by such Seller and its board of directors, and no other action on the part
of
such Seller is necessary to authorize the transactions contemplated hereby,
subject to receipt of the Required Shareholder Approval in accordance with
the
DGCL and, if applicable to Company, the applicable rules and regulations
of AMEX
(except to the extent that failure to be in compliance with such rules and
regulations would not render this Agreement or the Transaction Written Consent
invalid, void or unenforceable in any material respect). This Agreement has
been
duly executed and delivered by Company and constitutes the valid and binding
obligation of Company, enforceable in accordance with its terms, except that
(i)
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ rights generally, and (ii) the remedies of
specific performance and injunctive relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings
may be
brought.
3.4 SEC
Reports; Financial Statements.
(a) SEC
Reports.
Company
has filed all forms, reports and documents required to be filed by it with
the
SEC since May 30, 2003
(including, without limitation, Sellers’ Annual Report on Form 10-K for the
years ended June 30, 2006 and June 30, 2007,
Sellers’ Quarterly Reports on Form 10-Q for the quarters ended September 30,
2007
and
December 31, 2007, and Company’s
proxy
statement for its 2006 and 2007
Annual
Meetings
of
Shareholders and all certifications and statements required by Rule 13a-14
or
15d-14 under the Exchange Act or 18 U.S.C. §1350 (Section 906 of SOX) with
respect to any Annual Reports), pursuant to the federal securities laws and
the
SEC’s rules and regulations thereunder, and SOX and all rules and regulations
thereunder (collectively, and together with all forms, reports and documents
filed by Company with the SEC after the date of this Agreement, including
any
amendments thereto, the “SEC
Reports”).
The
SEC Reports were or will, as applicable, be prepared in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may
be, and
the rules and regulations thereunder. As of their respective dates, none
of the
SEC Reports, including, without limitation, any financial statements or
schedules included therein, contained any untrue statement of a material
fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under
which
they were made, not misleading. No Seller other than Company is or has been
required to file any form, report, registration statement or other document
with
the SEC.
(b) Disclosure
Controls and Procedures.
Sellers
maintain disclosure controls and procedures required by Rule 13a-15 or 15d-15
under the Exchange Act. Such controls and procedures are effective to ensure
that all material information concerning Sellers is made known on a timely
basis
to the individuals responsible for the preparation of Company’s filings with the
SEC and other public disclosure documents. As
used
in this Section
3.4,
the
term “file” shall be broadly construed to include any manner in which a document
or information is furnished, supplied otherwise made available to the
SEC.
(c) Financial
Statements.
The
Financial Statements included in the SEC Reports, as of their respective
dates,
(i) complied (or, in the case of the SEC Reports filed after the date hereof,
will comply) in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
(ii)
were prepared (or, in the case of the SEC Reports filed after the date hereof,
will be prepared) in accordance with GAAP applied on a basis consistent with
prior periods (except as otherwise noted therein), and (iii) present fairly
(or,
in the case of the SEC Reports filed after the date hereof, will present
fairly)
the consolidated financial position of Sellers as of their respective dates,
and
the consolidated results of their operations and their cash flows for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to notes and normal year-end adjustments that were
not, or
with respect to any such financial statements contained in any of the SEC
Reports to be filed subsequent to the Signing Date are not reasonably expected
to be, material in amount or effect).
(d) SOX
Certifications.
To
the
extent required by Law, Company has complied with all certification requirements
under Sections
302 and
906 of
SOX. Such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn. Neither Company
nor
any of it officers has received notice from any Governmental Authority
questioning or challenging the accuracy, completeness, form or manner of
filing
or submission of such certifications.
(e) Undisclosed
Liabilities.
Except
(i) as reflected in Sellers’ unaudited consolidated balance sheet at December
31, 2007, a copy of which is attached as Part
3.4(e)
of the
Disclosure Memorandum (the “Most Recent
Balance Sheet”)
or
liabilities described in any notes thereto (or liabilities for which neither
accrual nor footnote disclosure is required pursuant to GAAP), (ii) for
liabilities incurred in the ordinary course of business since December 31,
2007
consistent with past practice or in connection with this Agreement or the
transactions contemplated hereby, or (iii) performance obligations under
Contracts required in accordance with their terms, or performance obligations,
to the extent required under applicable Laws, in each case to the extent
arising
after the date hereof, no Seller has any material liabilities or obligations
of
any nature (whether accrued, absolute, contingent or otherwise) required
by GAAP
to be set forth on a financial statement or in the notes thereto. Since the
date
of the Most Recent Balance Sheet, the Business has been conducted only in
the
ordinary course consistent with past practice and there has not been any
change
in the accounting methods, principles or practices of any Seller.
(f) Off-Balance
Sheet Arrangements.
Sellers
have not effected any securitization transactions or “off-balance sheet
arrangements” (as defined in Item 303(c) of Regulation S-K of the SEC) since May
30, 2003. Sellers has delivered or made available to Buyer copies of the
documentation creating or governing all such all securitization transactions
and
off-balance sheet arrangements.
(g) Auditors.
Except
for assistance in the preparation of the Seller’s tax returns, Marcum &
Kliegman LLP has not performed any non-audit services for any Seller since
the
Most Recent Audit Date.
There
has been no change in Sellers’ accountants since the Most Recent Audit Date.
No
Seller
has been in any material disputes with Marcum & Kliegman LLP since the Most
Recent Audit Date,
which,
in any such case, were required to be disclosed in the SEC Reports and were
not
so disclosed.
(h) Books
and Records.
The
books of account of Sellers, including the Financial Statements and the Most
Recent Balance Sheet, are true, complete and correct and fairly reflect,
in
accordance with GAAP, (i) all transactions relating to Sellers and (ii) all
items of income and expense, assets and liabilities and accruals relating
to
Sellers. No Seller has engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts and funds
that have been and are reflected in the normally maintained books and records
of
such Seller.
3.5 No
Violation.
Except
as set forth on Part
3.5
of the
Disclosure Memorandum, the execution, delivery and performance of this Agreement
and the other agreements and documents contemplated hereby by Company (and
to
the extent a party thereto, the other Sellers) and the consummation of the
transactions contemplated hereby will not (i) violate any provision of the
certificates of incorporation, bylaws or other governing documents of any
Seller, (ii) violate any Laws by which any Seller or any of its properties
or
assets are bound, or (iii) result in a violation or breach of, or constitute
a
default under, or result in the creation of any Lien upon, or create any
rights
of termination, cancellation or acceleration in any Person
with
respect to any Contract to which any Seller is a party or by which the Acquired
Assets are bound or any Permit of any Seller.
3.6 Consents;
Shareholder Approvals.
(a) Consents.
Set
forth on Part
3.6
of the
Disclosure Memorandum is a complete and accurate list of all material consents,
approvals or other authorizations of any Governmental Authority, or under
any
material Contract to which any Seller is a party or by which its assets are
bound, which are required as a result of or in connection with the execution
or
delivery of this Agreement and the other agreements, documents and instruments
to be executed by any Seller hereunder or the consummation by any Seller
of the
transactions contemplated hereby and thereby.
(b) Shareholder
Approvals.
The
affirmative vote of a majority of the outstanding shares of Company’s common
stock, par value $.01 per share (the “Common
Stock”),
Company’s Series A-1 Preferred Stock, par value $.01 per share (the
“Series
A-1 Preferred Stock”),
Company’s Series D-1 Preferred Stock, par value $.01 per share (the
“Series
D-1 Preferred Stock”),
voting together as a single class, in favor of the adoption of this Agreement
at
a meeting at which a quorum is present (such votes are hereinafter collectively
referred to as the “Required
Shareholder Approval”)
are
the only votes of the holders of any class or series of any Seller’s securities
necessary to approve this Agreement and the transactions contemplated
hereby.
(c) Obtained
Approvals.
On or
before the Signing Date, Company has delivered to Buyer: (i) a resolution
of the
Board of Directors of Company approving each of the Transaction Documents
and
authorizing its officers to execute, deliver and consummate each of the
transactions under each of the Transaction Documents; (ii) Wells Fargo Bank,
N.A.’s signature to both (A) a binding written approval of the execution,
delivery and consummation of each of the transactions under this Agreement
and
the Facility Purchase Agreement and (B) an intercreditor agreement with Buyer
in
respect of the Buyer Advances; and (iii) a binding written consent approving
the
execution, delivery and consummation of each of the transactions under each
of
the Transaction Documents (the “Transaction
Written Consent”)
signed
by the holders of (A) a majority of the outstanding shares of the Series
A-1
Preferred Stock, (B) all of the outstanding shares of the Series D-1 Preferred
Stock, and (C) a majority of the outstanding shares of the Common Stock.
Set
forth on Part
3.6
of the
Disclosure Memorandum is a complete and accurate list of each of the Company
shareholders who have signed the Transaction Written Consent and the number
of
shares of each class and series of capital stock of the Company owned by
each of
them.
3.7 Tax
Matters.
(a) Returns
and Reports.
All Tax
returns and reports required to be filed prior to the date hereof by or on
behalf of Sellers are true, correct and complete in all respects, have been
duly
and timely filed in accordance with all applicable Laws and such returns
and
reports required to be filed on or before the Closing Date will be, or have
been, duly and timely filed or extensions of time within which to file such
returns will have been obtained, and the income, activities, operations and
transactions of Sellers have been or will be properly included and correctly
reflected thereon.
(b) Payment.
Each
Sellers has paid or, in case of Taxes not yet due, have made adequate provision
on the Most Recent Balance Sheet for the payment of all Taxes for which it
(or
any other Seller) is or may become liable for payment. All Tax deficiencies
assessed against any Seller for which it (or any other Seller) may be directly
or indirectly liable as a result of any examination of Tax returns of it
(or any
other Seller) has been paid. No Seller is, as of the date hereof, the subject
of
any audit or other proceeding in respect of payment of Taxes for which it
(or
any other Seller) may be directly or indirectly liable and no such proceeding
has been threatened.
(c) Extensions.
No
agreements, waivers, or other arrangements exist providing for an extension
of
time or statutory periods of limitations with respect to payment by, or
assessment against, any Seller for any Tax for which it (or any other Seller)
may be directly or indirectly liable and no written request for any such
agreement, waiver or other arrangement has been made and is currently
outstanding.
(d) Proceedings.
No
Actions or Claims have been asserted or are threatened against any Seller
in
respect of any Tax for which it (or any other Seller) may be directly or
indirectly liable.
(e) Tax
Liens.
There
are no Tax Liens as of the date hereof upon any of the assets of any Seller,
except for statutory Liens for Taxes not yet due or delinquent.
(f) Withholding.
The
amounts of Taxes withheld by or on behalf of each Seller with respect to
all
compensation paid to Employees of such Seller for all periods ending on or
before the date hereof and the Closing Date have been (or will be, as the
case
may be) proper and accurate in all respects, and all deposits required with
respect to compensation paid to such Employees have been (or will be) made
in
compliance in all respects with the provisions of all applicable Tax
Laws.
3.8 Real
Property, Personal Property and Assets.
(a) Real
Property.
(i) No
Seller
owns, nor has it previously owned, nor does any Seller hold any options or
contractual obligations to purchase or acquire any interest in, any real
property (an “Owned
Real Property”)
other
than the Facility. Each Seller has good and valid title to all of its respective
Owned Real Property, in each case free and clear of all Liens except Permitted
Liens.
(ii) Set
forth
on Part 3.8(a)(ii)
of the
Disclosure Memorandum is a list of all leases and subleases of any real property
to which any Seller is a party (each, a “Leased
Real Property”).
Each
Seller has good and valid title to the leasehold estates in all of its
respective Leased Real Property, in each case free and clear of all Liens
except
Permitted Liens.
(iii) Each
Owned Real Property and Leased Real Property and each of the Improvements
thereon (collectively, the “Sellers
Real Property”)
is in
good operating condition and repair, ordinary wear and tear excepted, and
is
suited for the operation of the Business as presently conducted and as presently
proposed to be conducted. There is no condition or defect of the Sellers
Real
Property thereon that could materially affect their use or operation in the
Business. Sellers enjoy peaceful and undisturbed possession of all Sellers
Real
Property. Sellers have valid easements and rights of way necessary to conduct
the Business as it is currently conducted and proposed to be conducted, and
following the consummation of the Closing, such easements and rights of way
will
remain valid and in full force and effect. No options have been granted by
any
Seller to others to purchase, lease or otherwise acquire any interest in
any
Sellers Real Property or any part thereof. Sellers have the exclusive right
of
possession of all Sellers Real Property.
(iv) To
the
Knowledge of Company, all aspects of the Sellers Real Property and the present
use, occupancy and operation thereof are in compliance, in all material
respects, with all Laws and private restrictive covenants of record, and
there
has not been any proposed change thereto that would affect any of the Sellers
Real Property or its use, occupancy or operation. No Seller has received
any
written or oral communications alleging any conflict or dispute relating
to any
Sellers Real Property or the activities thereon. To the Knowledge of Company,
no
portion of the Sellers Real Property is subject to any classification,
designation or preliminary determination of any Government Authority or pursuant
to any Law that would restrict its use, development, occupancy or operation
in
connection with the Business. Neither Sellers nor any other Person have caused
any work or Improvements to be performed upon or made to any of Sellers Real
Property for which there remains outstanding any payment obligation that
would
or might serve as the basis for any Lien in favor of the Person who performed
the work.
(v) All
requisite certificates of occupancy and other permits and approvals required
to
be obtained by any Seller with respect to Sellers Real Property and the use,
occupancy and operation thereof have been obtained and paid for and are
currently in effect and allow Sellers to operate the Business as presently
conducted and as presently proposed to be conducted.
(b) Personal
Property.
Each
Seller owns all of its respective Inventory, Equipment and other personal
property (both tangible and intangible) free and clear of any Lien, except
for
Permitted Liens. Such equipment and other personal property are usable in
the
ordinary course of business and conform in all material respects to all
applicable Laws relating to their use and operation as they are currently
used
in the conduct of the Business and constitute all of the assets necessary
to the
operation of the Business as currently conducted. Attached hereto as
Part
3.8(b)
of the
Disclosure Memorandum is a complete and accurate listing of the tangible
personal property owned or leased by Sellers.
(c) Compliance.
Except
for such violations as could not reasonably be expected to have a Material
Adverse Effect, the continued operation, use and occupancy of the Sellers
Real
Property as currently conducted, used and occupied will not violate any zoning,
building, health, flood control, fire or other law, ordinance, order or
regulation or any restrictive covenant. There are no violations of any Law
affecting any portion of the Sellers Real Property or the activities conducted
thereon and no written notice of any such violation has been issued by any
Governmental Authority.
(d) Utilities.
All
utilities (including, without limitation, water, gas, electricity, trash
removal, telephone service, cable service and high speed internet service)
are
available to the Sellers Real Property in sufficient quantities to adequately
serve the same. Company has obtained rights for sewer disposal for the Facility
with local municipalities which, when implemented, will provide adequate
sewer
disposal for the Facility. Currently, the Facility uses a hold-and-haul tank
that provides sufficient capacity for current operations.
(e) Sufficiency
of Assets.
The
Acquired Assets constitute all of the assets, properties, licenses, rights,
Permits and Contracts that are being used in and that are necessary or desirable
for the operation of the Business as presently conducted and as presently
proposed to be conducted.
(f) Ownership
of Assets.
Notwithstanding anything to the contrary herein, no Seller other than the
Company owns or has any interest in any assets or properties
whatsoever.
(g) APR
Interest.
Except
as set forth in Part
3.8(g)
of the
Disclosure Memorandum, since Company’s acquisition of the APR Interest, Company
has not entered into any Contracts relating to the APR Interest or to the
ownership or economic rights arising from or associated with the APR Interest.
3.9 Licenses
and Permits.
Each
Seller possesses all necessary Permits to conduct its business in the manner
in
which and in the jurisdictions and places where such business is now conducted.
Set forth on Part
3.9
of the
Disclosure Memorandum is a complete and accurate list of all material Permits
held by each Seller and all applications pending before any Governmental
Authority for the issuance of any Permits or the renewal thereof. To the
Knowledge of Company, there are no other such Permits which are material
to any
Seller or the Business, which any Seller has not obtained or which in good
industry practice any Seller should hold for the conduct of the Business.
No
Seller is in default, nor has it received any written notice of, nor is there,
to the Knowledge of Company, any Claim or, to the Actual Knowledge of Company,
threatened Claim of default, with respect to any such Permit. Except as
otherwise governed by applicable Laws, each Permit is renewable by its 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
and will not be adversely affected by the closing of the transactions
contemplated by this Agreement. No present or former Representative, shareholder
or Affiliate of any Seller, and no other Person, owns or has any proprietary,
financial or other interest (direct or indirect) in any Permit which any
Seller
owns, possesses, operates under or pursuant to or uses.
3.10 Compliance
with Laws.
Each
Seller and its ownership and operation of the Business is in compliance with
all
applicable Laws in all material respects. No Seller has Knowledge of any
changes
to the Business nor in any regulations, licensing requirements or orders
to
which any Seller or any Seller’s Employees (because of their activities on
behalf of their employer) is subject that would have a Material Adverse
Effect.
3.11 Environmental
Laws and Regulations.
(a) Each
Seller is and has been at all times in compliance with all applicable
Environmental Requirements relating to the Business and the Sellers Real
Property and any use, storage, treatment, disposal, including any arrangement
therefor, or transportation of any Materials of Environmental Concern. To
the
Actual Knowledge of Company, the ownership and operations by any third parties
of the Sellers Real Property, are and have been at all times in compliance
with
all applicable Environmental Requirements.
(b) During
the occupancy and operation of the Sellers Real Property by Sellers, and,
to the
Actual Knowledge of Company, prior to Sellers’ occupancy or operation, no
release, leak, discharge, spill, disposal, or emission of any Materials of
Environmental Concern has occurred in, on or under the Sellers Real Property
in
a quantity or manner that violates or requires further investigation or
remediation under Environmental Requirements. Sellers do not use, treat,
store,
dispose or transport any Materials of Environmental Concern. There is no
pending
or, to the Actual Knowledge of Company, threatened litigation or administrative
proceeding or investigation (whether civil, criminal or administrative)
concerning the Business or the Sellers Real Property involving any Materials
of
Environmental Concern or Environmental Requirements. To the Knowledge of
Company, there is no material quantity of friable ACM within the Sellers
Real
Property, and there are no above-ground or underground storage tank systems
located at the Sellers Real Property.
(c) The
execution and delivery of this Agreement by Company and the consummation
by each
Seller of the transactions contemplated hereby will not affect the validity
or
require the transfer of any permits under Environmental Requirements, and
will
not require notification, registration, reporting, filing, investigation
or
remediation under any Environmental Requirement, including without limitation,
any environmental transfer Law.
(d) Sellers
have provided Buyer with the reports set forth on Part
3.11
of the
Disclosure Memorandum, which set forth all reports in the possession of or
available to Sellers with respect to the compliance status or liability of
Sellers, their operations and the Sellers Real Property under Environmental
Requirements.
3.12 Sellers
Contracts. Part
3.12
of the
Disclosure Memorandum sets forth a complete and accurate list, in each case
whether written or unwritten, of all of each Seller’s:
(a) Contracts
with customers which either (i) are in writing or (ii) involve payments of
$50,000 or more in any twelve (12) month period;
(b) Contracts
for capital expenditures or the acquisition or construction of fixed assets
involving $10,000 or more in any twelve (12) month period per
Contract;
(c) Contracts
for the purchase or lease of goods or services (including without limitation,
raw materials, API, excipients, equipment, materials, software, hardware,
supplies, merchandise, parts or other property, assets or services) involving
$10,000 or more in any twelve (12) month period;
(d) Contracts
under which the amount payable by any Seller is dependent on the revenue,
income
or other similar measure of any Seller or any other Person and which involve
or
may be reasonably be expected to involve $10,000 or more in any twelve (12)
month period;
(e) Contracts
with respect to any Intellectual Property of any Seller, including without
limitation all licenses and service contracts with respect to Intellectual
Property;
(f) Contracts
to which any Seller is a party relating to Indebtedness;
(g) Contracts
between any Seller with any Affiliates of any Seller;
(h) Contracts
which place any material limitation on the method of conducting, or scope
of,
the Business or which limit the freedom of any Seller to engage in any line
of
business or to compete with any other Person;
(i) employment,
collective bargaining, severance, consulting, deferred compensation, benefit
and
similar plans or Contracts;
(j) Contracts
granting a first refusal, first offer or similar preferential right to purchase
or acquire any Seller’s capital stock or assets; and
(k) other
material Contracts, plans or arrangements of any Seller which are not otherwise
described in clauses (a) though (j) above.
All
the
foregoing, including all amendments or modifications thereto, are referred
to as
the “Sellers
Contracts.”
Sellers have furnished to Buyer copies of all Sellers Contracts (or written
descriptions thereof, in the case of oral Sellers Contracts). Each Sellers
Contract (or description) sets forth the entire agreement and understanding
between the applicable Sellers and the other parties thereto. Each Sellers
Contract is valid, binding and in full force and effect, and there is no
event
or condition which has occurred or exists, which constitutes or which, with
or
without notice, the happening of any event and/or the passage of time, could
constitute a default or breach under any Contract by any Seller or any other
party thereto, or could cause the acceleration of any obligation of any party
thereto or give rise to any right of termination or cancellation thereof.
No
Seller has any reason to believe that the parties to any Sellers Contract
will
not fulfill their obligations thereunder in all material respects.
3.13 Litigation
and Related Matters.
Set
forth on Part
3.13
of the
Disclosure Memorandum is a complete and accurate list of (a) all Claims pending
against any Seller or, to the Actual Knowledge of Company, threatened against
any Seller, the Business, the Acquired Assets, or any property or rights
of any
Seller, at law or in equity, before or by any Governmental Authority and
(b) all
worker’s compensation Claims outstanding against any Seller. None of the Claims
listed on Part
3.13
of the
Disclosure Memorandum either (i) could reasonably be expected to have any
Material Adverse Effect or (ii) affects or could reasonably be expected to
affect the right or ability of Buyer to carry on the Business substantially
as
now conducted or the ability of any Seller to enter into this Agreement or
any
other agreement contemplated hereby or to consummate the transactions
contemplated hereby or thereby. Each of the Claims set forth on Part
3.13
of the
Disclosure Memorandum is fully covered by insurance. No Seller is subject
to any
continuing order, writ, injunction or decree of any Governmental Authority
applicable specifically to the Business or its operations, assets or Employees,
nor is any Seller in default with respect to any order, writ, injunction
or
decree of any Governmental Authority with respect to the Business or its
assets,
operations or Employees.
3.14 Intellectual
Property.
(a) Sellers
Intellectual Property.
Each
Seller (i) owns and has independently developed or (ii) has the valid right
or
license to any and all Intellectual Property used by such Seller in the Business
(the “Sellers
Intellectual Property”).
Sellers Intellectual Property is sufficient to use and exploit in furtherance
of
the Business as currently proposed. One or more Sellers own and have good
and
exclusive right or title to each item of Sellers Intellectual Property (that
is
not Licensed Intellectual Property, as defined below), free and clear of
any
Liens or other restrictions of any kind (other than Permitted Liens), and
have
the sole and exclusive right to bring actions for infringement or unauthorized
use thereof. No Seller has granted any third party rights to or under any
Sellers Intellectual Property nor has any Seller granted any third party
the
right to sublicense any Seller Intellectual Property.
(b) Sellers
Registered Intellectual Property.
Set
forth on Part
3.14(b)
of the
Disclosure Memorandum is a complete and accurate list of all of the following
(collectively, the “Sellers
Registered Intellectual Property”):
(i)
Issued Patents and Patent Applications, (ii) registered Trademarks and
applications for Trademark registrations in each Sellers’ names, and (iii)
registered Copyrights and applications for Copyright registration in each
Sellers’ names. Each item of Sellers Registered Intellectual Property is valid,
enforceable, subsisting, and in good standing, with all necessary fees and
filings made.
(c) Licensed
Intellectual Property.
Set
forth on Part
3.14(c)
of the
Disclosure Memorandum is a complete and accurate list of each item of
Intellectual Property licensed by any Seller pursuant to a Contract
(“Licensed
Intellectual Property”)
and
identifies each such item that is incorporated in or an essential component
of
any Product. No Seller is in violation of any Contract to which any Seller
is a
party or otherwise bound and which relates to any Licensed Intellectual
Property.
(d) Infringement
or Misappropriation.
To
Company’s Knowledge, there is no unauthorized use, disclosure, infringement or
misappropriation of any Sellers Intellectual Property by any third party,
including without limitation any Employee or former Employee of any Seller.
No
Seller has brought any Action for infringement or misappropriation of any
Sellers Intellectual Property or breach of any license agreement, services
agreement or other agreement involving any Sellers Intellectual Property
against
any third party. No Seller has been sued (or received any notice or any threat
of being sued) in any Action which involves a Claim of infringement or
misappropriation of any Intellectual Property right of any third party
(“Third
Party Intellectual Property”)
or
which contests the validity, ownership or right of any Seller to exercise
any
Sellers Intellectual Property. To Company’s Knowledge, the Sellers Intellectual
Property does not and will not infringe or misappropriate any Third Party
Intellectual Property and there is no substantial basis for a claim that
the
design, development, use, marketing, licensing, sale, offer for sale, provision,
manufacturing, reproduction, importation and/or distribution of the Products
or
any other Sellers Intellectual Property is infringing or has infringed on
or
misappropriated any Third Party Intellectual Property.
(e) Development
of Sellers Intellectual Property.
Set
forth on Part
3.14(e)
of the
Disclosure Memorandum is a complete and accurate list of all agents,
consultants, contractors and subcontractors involved in the development,
support, customization, maintenance or modification of any Sellers Intellectual
Property (that is not Licensed Intellectual Property) (the “IP
Contractors”)
along
with a list of his, her or its respective engagement agreements with any
Seller.
All Employees and IP Contractors who have contributed to or participated
in the
conception and development of Sellers Intellectual Property (that is not
Licensed Intellectual Property) on behalf of Sellers have executed nondisclosure
agreements and either (i) have been a party to an enforceable arrangement
or
agreement with Sellers in accordance with applicable law that has accorded
Sellers full, effective, exclusive and original ownership of all tangible
property and Intellectual Property thereby arising, or (ii) have executed
appropriate instruments of assignment in favor of Sellers as assignee that
have
conveyed to Sellers effective and exclusive ownership of all tangible property
and Intellectual Property thereby arising. Sellers Intellectual Property
(that
is not Licensed Intellectual Property) was developed exclusively by IP
Contractors and by Employees of Sellers within the scope of such Employee’s
employment. No current or prior officer, Employee or IP Contractor claims
any
ownership interest or similar right in any Sellers Intellectual
Property.
(f) Sellers
Software Programs.
Set
forth on Part
3.14(f)
of the
Disclosure Memorandum is a complete and accurate list of all software programs
that are owned or licensed (other than off the shelf software) by any Seller
(the “Sellers
Software Programs”).
Each
Seller owns full and unencumbered right and good, valid and marketable title
to
or license to use its respective Sellers Software Programs free and clear
of all
Liens (other than Permitted Liens). To the Actual Knowledge of Company, there
are no material defects, malfunctions or nonconformities in any Sellers Software
Programs (including, without limitations, any customization and installation
thereof), and there are no material errors in any Design Documentation. The
Design Documentation is sufficient and adequate to enable a person of reasonable
skill and experience in the relevant art to operate Sellers Intellectual
Property. To the Actual Knowledge of Company, no software contained within
Sellers Software Programs contains any timer, virus, copy protection device,
disabling code, clock, counter, trap door, back door, time bomb or other
limiting design or routine which causes such software (or any portion thereof)
to become erased, inoperable, impaired, or otherwise incapable of being used
in
the full manner for which it was designed.
(g) Royalties.
No
Seller owes any royalties or other payments to third parties in respect of
any
Sellers Intellectual Property.
(h) Protection
of Intellectual Property.
Sellers
have implemented commercially reasonable steps in the physical and electronic
protection of Sellers Intellectual Property from unauthorized disclosure,
use or
modification.
3.15 Employee
Benefit Plans.
(a) Set
forth
on Part
3.15(a)
of the
Disclosure Memorandum is a complete and accurate list of all Employee Benefit
Plans.
(b) Neither
any Seller nor any of its ERISA Affiliates has any liability (including any
contingent liability under Section 4204 of ERISA) with respect to any
Multiemployer Plan covering Employees (or former Employees) employed in the
United States. Neither any Seller nor any of its ERISA Affiliates has incurred
any liability or taken any action that could reasonably be expected to cause
it
to incur any liability (i) on account of a partial or complete withdrawal
(within the meaning of Section 4205 and 4203 of ERISA, respectively) with
respect to any Multiemployer Plan or (ii) on account of unpaid contributions
to
any such Multiemployer Plan.
(c) At
the
Closing, all contributions to, and payments from, the Employee Benefit Plans
which are required to have been made by any Seller, or any of its ERISA
Affiliates, with respect to any period ending on or before the Closing Date
will
have been timely made in accordance with the Employee Benefit
Plans.
(d) Neither
any Seller nor any of its ERISA Affiliates maintain or contribute to, nor
have
they ever maintained or contributed to, any pension plan subject to
Title IV of ERISA or Sections 412 of the Code or 302 of
ERISA.
(e) The
Employee Benefit Plans intended to qualify under Section 401 of the Code
have been determined by the Internal Revenue Service to be so qualified and,
to
the Knowledge of Company, no event has occurred and no condition exists with
respect to the form or operation of such Employee Benefit Plans which would
cause the loss of such qualification or exemption or the imposition of any
material liability, penalty or tax under ERISA or the Code.
(f) There
are
(i) no investigations pending by any governmental entity involving the Employee
Benefit Plans or, to the Knowledge of Company, any Multiemployer Plan, and
(ii)
no pending or, to the Knowledge of Company, threatened Claims, other than
routine Claims for benefits), suits or proceedings against any Employee Benefit
Plan, against the assets of any of the trusts under any Employee Benefit
Plan or
against any fiduciary of any Employee Benefit Plan with respect to the operation
of such plan or asserting any rights or Claims to benefits under any Employee
Benefit Plan or against the assets of any trust under such plan, nor, to
the
Knowledge of Company, are there any facts which would give rise to any
liability.
(g) None
of
the “welfare benefit plans” (as defined in Section 3(l) of ERISA)
maintained by any Seller provides for continuing benefits or coverage for
any
participant or any beneficiary of a participant following termination of
employment, except as may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”),
or
except at the expense of the participant or the participant’s
beneficiary.
3.16 Employees;
Employee Relations.
(a) Set
forth
on Part
3.16(a)
of the
Disclosure Memorandum is a complete and accurate list of the following
information: (i) the name and current annual salary (or rate of pay) and
other
compensation (including, without limitation, normal bonus, profit-sharing
and
other compensation) now payable by any Seller to each Employee or director;
(ii)
any increase to become effective after the date of this Agreement in the
total
compensation or rate of total compensation payable by any Seller to each
Employee or director; and (iii) all presently outstanding loans and advances
(other than routine travel advances to be repaid or formally accounted for
within sixty (60) days) made by any Seller to, or made to any Seller by,
each
Employee or director. Since the Most Recent Audit Date, Seller has not increased
the compensation of any Employee, officer or director other than in the ordinary
course of business consistent with past practice and has not granted any
unusual
or extraordinary bonuses, benefits or other forms of direct or indirect
compensation to any Employee, officer or director.
(b) No
Seller
is a party to, nor bound by, the terms of any collective bargaining agreement,
contract, letter of understanding (formal or informal) with any labor union
or
organization, and no Seller has ever experienced any material labor
difficulties. There are no material labor disputes existing, or to the Knowledge
of Company, threatened involving, by way of example, strikes, work stoppages,
slowdowns, picketing, or any other interference with work or production,
or any
other concerted action by Employees. No grievance or other legal action arising
out of any collective bargaining agreement or relationship exists, or to
the
Knowledge of Company, is threatened. No charges or proceedings before the
National Labor Relations Board, or similar agency, exist, or to the Knowledge
of
Company, are threatened.
(c) No
Actions or Claims exist under any Laws affecting the employment relationship,
and to the Actual Knowledge of Company, no Actions or Claims are threatened
under any such Laws and, to the Knowledge of Company, no facts or circumstances
exist which would give rise to any such Actions or Claims. No Seller is subject
to any settlement or consent decree with any present or former Employee,
employee representative or any Governmental Authority relating to Claims
of
discrimination or other Claims in respect to employment practices and policies.
No Governmental Authority has issued a judgment, order, decree or finding
with
respect to the labor and employment practices (including practices relating
to
discrimination) of any Seller. No Seller has received written notice of the
intent of any Governmental Authority responsible for the enforcement of labor
or
employment Laws to conduct an investigation with respect to or relating to
any
Seller and no such investigation is in progress. Each Seller has complied
with
all applicable Laws relating to the employment or engagement of its Employees,
including but not limited to, those relating to wages, hours, collective
bargaining, unemployment insurance, workers’ compensation, discrimination and
the withholding of payroll taxes.
(d) No
Seller
has incurred any liability or obligation under the WARN Act or similar state
laws.
3.17 Insurance.
Set
forth on Part
3.17
of the
Disclosure Memorandum is a complete and accurate list of the policies and
contracts (including insurer, named insured, type of coverage, limits of
insurance, required deductibles or co-payments, annual premiums and expiration
date) for fire, casualty, liability and other forms of insurance maintained
by,
or for the benefit of, each Seller. All such policies are in full force and
effect and are adequate for the Business. No Seller has received any notice
of
cancellation or non-renewal or of significant premium increases with respect
to
any such policy. No pending Claims made by or on behalf of any Seller under
such
policies have been denied or are being defended against third parties under
a
reservation of rights by an insurer of any Seller. No gaps in coverage have
accrued with respect to the policies listed on Part
3.17
of the
Disclosure Memorandum or any other policies retained by any Seller. All premiums
due prior to the date hereof for periods prior to the date hereof with respect
to such policies have been timely paid, and all premiums due before the Closing
Date for periods between the date hereof and the Closing Date will be timely
paid.
3.18 Accounts
Receivable.
The
accounts receivable set forth in the Most Recent Balance Sheet and those
accounts receivable accruing through the Closing Date represent valid and
bona
fide sales to third parties incurred in the ordinary course of business,
subject
to no known defenses, set-offs or counterclaims and are collectible and will
be
collected in accordance with their terms at their recorded amounts subject
to
any reserves for doubtful accounts, returns, allowances, credits, rebates,
prebates and chargebacks but not in excess of the amount of the reserves
reflected in the Most Recent Balance Sheet. The reserve for doubtful accounts,
returns, allowances, credits, rebates, prebates and chargebacks reflected
in the
Most Recent Balance Sheet is net of fully accrued amounts for future deductions
by customers of the Business relating to sales booked on or before the date
of
the Most Recent Balance Sheet, was established in accordance with GAAP
consistently applied and is adequate and was calculated in accordance with
historical practice. Notwithstanding anything to the contrary herein, Company
makes no representations in this Section
3.18
regarding, and the representations in this Section
3.18
shall
not apply with respect to, any Excluded Receivables.
3.19 Inventory;
Product Warranties.
(a) The
inventories of the Products (i) were acquired and maintained in the ordinary
course of business, (ii) are of good and merchantable quality in all material
respects, (iii) were manufactured in conformance with the ANDAs for such
Product, in conformance with cGMP and in conformance with all applicable
Laws,
(iv) are not adulterated or manufactured, prepared, preserved, packaged or
stored under unsanitary conditions within the meaning of the FD&C Act and
FDA regulations, or in any way contrary to cGMP, (iv) at Closing shall have
a
minimum shelf life of fourteen (14) months (except for Midrin which shall
have a
minimum shelf life of twelve (12) months), and (v) shall not be a product
which
would violate any applicable section of the FD&C Act or any FDA regulation
or any other applicable Law.
(b) Except
as
set forth on Part
3.19(b)
of the
Disclosure Memorandum,
(i)
to
Company’s Knowledge, each Seller’s manufacturing facilities conforms in all
respects to applicable Laws and approvals governing such facilities and have
been adequate to produce the quantities of the Products which each Seller’s
customers have ordered from any Seller since
May
30, 2003, and (ii) Seller
has not received any written notices to the contrary. All laboratory,
scientific, technical and/or data supplied by any Seller to the FDA for
submission or communication with FDA relating to the Products have been true
and
correct in all material respects.
(c) Set
forth
on Part
3.19(c)
of the
Disclosure Memorandum is a complete and accurate list of all outstanding
product
liability, product defect, warranty, breach of contract or other similar
Claims
(including any pending Claims) related to the Products made since May 30,
2003,
in each case to the extent Company has
received
written
notice or otherwise has Knowledge of such Claims.
3.20 Customers
and Suppliers.
(a) Customers.
Set
forth on Part
3.20(a)
of the
Disclosure Memorandum is a complete and accurate list of all material customers
of each Seller. To the Knowledge of Company, no such customer intends or
has
threatened (orally or in writing) to cease to do business with any Seller
following the consummation of the transactions contemplated hereby or intends
to
modify such relationship in a manner which is less favorable to Buyer, and
Company has no Knowledge of facts that would be reasonably likely to result
in
such a termination or modification.
(b) Suppliers.
Set
forth on Part
3.20(b)
of the
Disclosure Memorandum is a complete and accurate list of all materially
significant suppliers of each Seller. To the Knowledge of Company, no such
supplier intends or has threatened (orally or in writing) to cease to do
business with any Seller following the consummation of the transactions
contemplated hereby or intends to modify such relationship in a manner which
is
less favorable to Buyer, and Company has no Knowledge of facts that would
be
reasonably likely to result in such a termination or modification. Except
as set
forth on Part
3.20(b)
of the
Disclosure Memorandum, no Seller has experienced any difficulties in obtaining
any inventory items necessary to the operation of the Business which has
had an
adverse effect on the Business or the operations or financial condition of
any
Seller and, to the Knowledge of Company, no such shortage of supply of inventory
items is threatened or pending. No Seller is required to provide any bonding
or
other financial security arrangements in any material amount in connection
with
any transactions with any of Sellers’ suppliers.
3.21 Absence
of Certain Changes or Events.
(a) Since
October 25, 2007, Wells Fargo Bank has limited the financing available to
Sellers under the terms of its Loan Agreement with Sellers dated February
9,
2006, as amended, as modified by its Forbearance Agreement with Sellers dated
October 25, 2007, as modified by its Forbearance Agreement with Sellers dated
February 5, 2008, and its Amended and Restated Forbearance Agreement with
Sellers dated March 25, 2008. As a result of this limited financing, Sellers
have experienced certain difficulties in obtaining raw materials and inventory
items necessary to the operation of the Business, which has had a materially
adverse effect on the operations, inventory, sales, margins and financial
condition of the Business, and have resulted in Sellers’ operation of the
Business in a manner which is not consistent with past practice, all as more
particularly described on Part
3.21(a)
of the
Disclosure Memorandum.
(b) Except
as
described in Section
3.21(a)
above,
and except as may be permitted under Section
5.1(a),
during
the period from the date of the Most Recent Balance Sheet to the date hereof:
(i) the Business has been operated in the ordinary course, consistent with
past
practice; (ii) there has been no event, change or development which,
individually or in the aggregate, has had a Material Adverse Effect; (iii)
there
has not been any damage, destruction or casualty loss to the physical properties
of any Seller or any of their suppliers; and (iv) no Seller has taken any
action
which, if taken after the execution and delivery of this Agreement, would
constitute a breach or violation of Section
5.1
hereof.
3.22 No
Illegal Payments, Etc.
To the
Actual Knowledge of Company, no Seller nor any of their respective
Representatives at any time after May 30, 2003 has (a) directly or
indirectly given or agreed to give any illegal gift, contribution, payment
or
similar benefit to any supplier, customer, governmental official or employee
or
other person who was, is or may be in a position to help or hinder any Seller
(or to assist in connection with any actual or proposed transaction) or made
or
agreed to make any illegal contribution, or reimbursed any illegal political
gift or contribution made by any other person, to any candidate for federal,
state, local or foreign public office (i) which might subject any Seller to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding or (ii) the non-continuation of which has had or might have,
individually or in the aggregate, a Material Adverse Effect; or
(b) established or maintained any unrecorded fund or asset or made any
false entries on any books or records for any purpose.
3.23 Regulatory
Issues. During
the year immediately prior to the Signing Date, with respect to the Products
only, no Seller has received or been subject to: (i) any FDA Form 483’s
relating to the Products; (ii) any FDA Notices of Adverse Findings relating
to the Products; or (iii) any warning letters or other written
correspondence from the FDA concerning the Products in which the FDA asserted
that the operations of Seller were not in compliance with applicable Laws
or
guidelines of any Governmental Authority with respect to the Products. During
the year immediately prior to the Signing Date, there has not been any
occurrence of any product recall, market withdrawal or replacement, or post-sale
warning conducted by or on behalf of Seller concerning the Products or any
product recall, market withdrawal or replacement conducted by or on behalf
of
any entity as a result of any alleged defect in the Products.
3.24 Interests
in Other Persons.
Except
as set forth in Part
3.24
of the
Disclosure Memorandum, no Employee of any Seller or Person directly or
indirectly controlling, controlled by, or under common control with any Seller
possesses, directly or indirectly, any material financial interest in, or
is an
Employee or Affiliate of, any Person which is a current client, supplier,
franchisee, customer, distributor, broker, lessor, lessee, sublessor, sublessee
or competitor of or otherwise having a contractual relationship with any
Seller.
Ownership of securities of an entity (other than Company) whose securities
are
registered under the Securities Exchange Act of 1934, as amended, not in
excess
of five percent (5%) of any class of such securities shall not be deemed
to be a
financial interest for purposes of this Section 3.24.
3.25 No
Insolvency or Bankruptcy.
No
Seller has filed any petition seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any law relating to bankruptcy or insolvency, nor has any such
petition been filed against any Seller. No general assignment of property
of any
Seller has been made for the benefit of creditors, and no receiver, master,
liquidator or trustee has been applied for or appointed for any Seller or
any of
its properties, including the Acquired Assets.
3.26 Broker
Fees.
No
agent, advisor, broker or other Person acting on behalf of any Seller or
any of
its Affiliates is, or will be, entitled to any commission or broker’s, advisor’s
or finder’s fees from Company or Sellers, or from any of their respective
Affiliates, in connection with any of the transactions contemplated
hereby.
3.27 Availability
of Documents.
Company
has made available for inspection by Buyer and its representatives true,
correct, and complete copies of the certificates of incorporation, bylaws,
certificates of formation, limited liability company operating
agreements and
other
organizational documents of each Seller, all written agreements, arrangements,
commitments, and documents (including, without limitation, all pending and
approved ANDAs and regulatory files with respect thereto) referred to in
the
Disclosure Memorandum and all schedules attached hereto.
3.28 Information
Supplied.
None of
the information supplied or to be supplied by any Seller in writing for
inclusion or incorporation by reference in the
Information
Statement will, at the date the
Information Statement is first mailed to Company’s shareholders
or,
except as set forth in any amendments or supplements to the Information
Statement mailed to Company’s
shareholders prior to Closing, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If required by Law, the
Information Statement will comply as to form in all material respects with
the
applicable requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by Company
with
respect to statements made or incorporated by reference therein based on
information supplied by Buyer for inclusion or incorporation by reference
therein.
3.29 Disclosure.
To the
Knowledge of Company, there is no fact (excluding facts with respect to general
business, economic or political conditions and facts that are publicly known)
which materially and adversely affects the business, assets, properties,
operations, prospects, condition (financial or otherwise), results of operations
or liabilities of Sellers, taken as a whole, that has not been set forth
or
disclosed in this Agreement (including the Schedules), the Disclosure Memorandum
or in any other instrument or certificate delivered by any Seller pursuant
to
Article
VI
hereof.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to Company as follows:
4.1 Organization.
Buyer
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 Authorization.
(a)
Buyer
has full limited liability company power, capacity and authority to execute
and
deliver this Agreement and all other agreements and documents contemplated
hereby. The execution and delivery of this Agreement and such other agreements
and documents by Buyer and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by Buyer and no other action
on
the part of Buyer is necessary to authorize the transactions contemplated
hereby.
(b) This
Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its
terms
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally, and (ii) the remedies of specific performance and injunctive relief
are subject to certain equitable defenses and to the discretion of the court
before which any proceedings may be brought.
4.3 No
Violation.
The
execution and delivery of this Agreement and the other agreements and documents
contemplated hereby by Buyer and the consummation of the transactions
contemplated hereby will not (i) violate any provision of the certificate
of
incorporation or bylaws of Buyer, or (ii) violate any statute, rule, regulation,
order or decree of any public body or authority by which Buyer or its properties
or assets are bound.
4.4 Consents.
No
consent, approval or other authorization of any Governmental Authority or
third
party is required as a result of or in connection with the execution and
delivery of this Agreement and the other agreements and documents to be executed
by Buyer or the consummation by Buyer of the transactions contemplated
hereby.
4.5 Broker
Fees.
No
agent, advisor, broker, person or firm acting on behalf of Buyer is, or will
be,
entitled to any commission or broker’s, advisor’s or finder’s fees from any of
the parties hereto, or from any of their respective Affiliates in connection
with any of the transactions contemplated hereby.
4.6 HSR
Thresholds.
Buyer
represents that its ultimate parent entity (as defined in the HSR Laws) is
Amneal Pharmaceuticals, LLC and, as of the Signing Date, Amneal Pharmaceuticals,
LLC has less than $126.2 million in annual net sales (as defined in the HSR
Laws) and less than $126.2 million in total assets (as defined in the HSR
Laws).
4.7 Sufficient
and Available Funds to Close and Pay Assumed
Liabilities. Buyer
represents that it has the wherewithal to fully fund and pay the Purchase
Price,
including making the Closing Cash Amount payment on the Closing Date and
paying
when due all of the Assumed Liabilities.
4.8 APR,
LLC.
Buyer
represents that, to the Knowledge of Buyer, it has no knowledge of APR, LLC
outside of the information in the public domain or as disclosed to Buyer
by
Company or Cameron Reid.
ARTICLE
V
COVENANTS
OF THE PARTIES
5.1 Conduct
of the Business.
(a) Affirmative
Covenants.
At all
times prior to the Closing, Company shall use all commercially reasonable
and
good faith efforts to preserve its goodwill, rights, property, assets and
business, to keep available to itself and the Buyer its employees, and to
preserve and protect its relationships with its employees, officers,
advertisers, suppliers, customers, creditors and others having business
relationships with it. In addition, from and after the date hereof to the
Closing, Seller shall (except with Buyer’s written consent, which consent shall
not be unreasonably withheld or conditioned, and any request for which shall
be
timely responded to):
(i) maintain
its corporate existence;
(ii) subject
to Section
3.21(a)
above
and except as otherwise expressly provided herein, conduct its business only
in
the ordinary course consistent with the manner conducted as of the Signing
Date;
and
(iii) operate
in such a manner as to assure that the representations and warranties of
Company
set forth in this Agreement will be true and correct as of the Closing Date
with
the same force and effect as if such representations and warranties had been
made on and as of the Closing Date.
(b) Negative
Covenants.
Company
will not, and Company will cause the other Sellers not to, at all times prior
to
the Closing, without Buyer’s prior written consent (which consent shall not be
unreasonably withheld or conditioned, and the request for which shall be
timely
responded to):
(i) change
its method of management or operations in any material respect (including,
without limitation, accelerating receivables, delaying payments or liquidating
assets, except in the ordinary course of business consistent with past
practices);
(ii) dispose
of or acquire any assets or properties or make any commitment to do so, other
than sales of inventory or acquisitions of raw materials, excipients or API,
in
each case in the ordinary course of business consistent with past
practices;
(iii) incur
any
Indebtedness for borrowed money (other than (A) Buyer Advances, (B) after
all of
the Buyer Advances have been advanced, up to $200,000 (on substantially similar
terms and the same interest rate as the Buyer Advances) in additional unsecured
debt, provided that such unsecured debt is necessary for and used only for
Sellers’ business operations and (C) additional Indebtedness to Wells Fargo
under Company’s existing lines of credit as in effect on the Signing Date), make
any loans or advances, assume, guarantee or endorse or otherwise become
responsible for the obligation of any other Person, or subject any of its
properties or assets to any Lien;
(iv) at
any
time after the expiration of the Due Diligence Period, modify, amend, cancel
or
terminate any Contract or, at any time during the Due Diligence Period, fail
to
give Buyer prompt written notice of any proposed modification, amendment,
cancellation or termination of any Contract;
(v) make
any
change in the compensation paid or payable to any Employee or director as
shown
on Part
3.16(a)
of the
Disclosure Memorandum, except in the ordinary course of business and consistent
with past practice;
(vi) pay
or
agree to pay any bonus or similar payment (other than success bonuses payable
contingent upon the Closing);
(vii) promote,
change the job title of, or otherwise alter in any material respect the
responsibilities or duties of, any of its Employees, except in the ordinary
course of business and consistent with past practice;
(viii) enter
into any new Contract involving payments by or to any Sellers in excess of
$5,000 per Contract (and not more than $50,000 in the aggregate for all such
Contracts) in any twelve (12) month period, other than Contracts for the
sale of
inventory or the acquisition of raw materials, excipients and API, in each
case
in the ordinary course of business consistent with past practices;
(ix) make
any
change in its accounting practices or procedures, or make any upward revaluation
of any of its assets, except in the ordinary course of business and as required
under accounting rules and regulations;
(x) change
by
more than ten percent (10%) its customer pricing, rebates, prebates,
chargebacks, returns or discounts (on a per customer, per SKU basis) of any
Product;
(xi) make
any
payment or distribution with respect to its equity securities, whether by
way of
redemption, dividend, distribution or otherwise;
(xii) issue
any
additional equity securities, options, warrants or other arrangements or
commitments obligating any Seller to issue any membership interests or other
securities (other than (A) the issuance of equity securities upon the exercise
of options or warrants outstanding on the date of this Agreement, or (B)
the
issuance of up to $1,000,000 in additional equity securities, but only if
(x)
Company has first offered Buyer in writing a right of first refusal to provide
such funds in the form of additional Buyer Advances and (y) Buyer has not,
within three business days of its receipt of such written offer, agreed to
provide such funds at such times and in such amounts as may be required by
Company to operate the Business prior to the Closing);
(xiii) adopt
any
amendments to its certificate of incorporation or bylaws; adopt a plan of
complete or partial liquidation or dissolution; or alter through merger,
consolidation, reorganization, restructuring or in any other fashion its
structure or ownership;
(xiv) make
an
assignment for the benefit of creditors or admit in writing its inability
to pay
its debts as they mature; or consent to or acquiesce in the appointment of
a
trustee or receiver for any Seller or any property thereof; or permit any
bankruptcy reorganization, debt arrangement, or other proceeding under any
bankruptcy or insolvency law to be instituted by or against any Seller; or
consent to any involuntary petition filed pursuant to or purporting to be
pursuant to any bankruptcy, reorganization or insolvency law of any
jurisdiction; or be adjudicated bankrupt;
(xv) take
any
other action which would be reasonably expected to have a Material Adverse
Effect on its Business or the affairs, assets, condition (financial or
otherwise) or prospects, or could adversely affect or detract from the value
of
its assets or the Business, except as required by Law; or
(xvi) commit
to
do any of the foregoing referred to in clauses (i) – (xv).
5.2 Payment
of Obligations, Distributions to Majority Shareholders.
Company
covenants and agrees that, immediately upon receipt of the Closing Cash Amount
at Closing, it will cause each Seller to pay off in full or otherwise satisfy
all outstanding Indebtedness (other than capital leases) of such Seller and
amounts payable thereon and any other liabilities of such Seller that are
not
expressly assumed by Buyer. Company further covenants and agrees that, in
the
event the Closing shall occur, Company will not make any payment or distribution
with respect to its equity securities, whether by way of redemption, dividend,
distribution or otherwise, to the Majority Shareholders or any other holders
of
Company’s capital stock until more than ninety (90) days after the Closing
Date.
5.3 Required
Approvals; Satisfaction of Closing Conditions.
Between
the date of this Agreement and the Closing Date, Company and Buyer shall
each
use their commercially reasonable efforts to (i) obtain promptly all such
third
party approvals and consents as are necessary or appropriate to the consummation
of the transactions contemplated hereby, (ii) cause all conditions to the
obligations of Buyer under this Agreement over which it is able to exercise
influence or control to be satisfied prior to the Closing Date, and (iii)
obtain
promptly and timely comply with all requisite statutory, regulatory or court
approvals, third party releases and consents, and other requirements necessary
for the valid and legal consummation of the transactions contemplated
hereby.
5.4 Investigations.
(a) Company
shall, and shall cause each other Seller to, provide Buyer and its
representatives and agents such access to the books and records of Sellers
and
furnish to Buyer and its representatives and agents such financial and operating
data and other information with respect to the Business and the properties
of
Sellers as they may reasonably request from time to time. Company shall,
and
shall cause each other Seller to, permit Buyer and its Representatives to
make
such inspections of the Sellers Real Property and the personal properties
of
Sellers and the Business as they may reasonably request from time to time.
Company shall, and shall cause each other Seller to, grant Buyer reasonable
access to manufacturing and packaging equipment for generating data in support
of Buyer’s ANDA supplements and new ANDA registration filings to transfer
Buyer’s existing Products and Products under development to the Sellers Real
Property.
(b) In
the
event that any Seller receives notice that the FDA intends to inspect the
Sellers Real Property (a “FDA
Inspection”),
Company shall immediately notify Buyer and provide Buyer with a copy of such
FDA
notice and, at any time after the expiration of the Due Diligence Period,
will
allow a representative from Buyer to be present during the FDA Inspection
(without participation). Within two (2) Business Days of receipt, Company
will
provide to Buyer a copy of any FDA Form 483 observations pertaining to the
Sellers Real Property or any Seller’s equipment.
(c) After
the
date hereof and until the earlier of the Closing Date or date of termination
of
this Agreement, Company shall, and shall cause each other Seller to, submit
to
Buyer all adverse drug experience information and customer complaints brought
to
the attention of Sellers or its Employees with respect to the Products, as
well
as any material events and matters concerning or affecting the safety or
efficacy of the Products.
5.5 Records
Pertaining to Sellers.
(a) At
the
Closing, Company shall deliver or cause to be delivered to Buyer any and
all
books and records in the possession of any Seller applicable to any Seller,
the
Business or the Acquired Assets (other than any Seller’s corporate and limited
liability company minute books, stock/unit ledgers, certificates of
incorporation, bylaws, shareholders agreements, certificates of formation,
operating agreements and related corporate and limited liability company
documents and instruments).
(b)
Buyer
shall, for a period of five years (except in the case of any sales invoices,
which shall be for three years) after the Closing Date, neither dispose of
nor
destroy any of the business records or files of Sellers or Buyer without
first
offering to turn over possession of copies thereof to Company, at Company’s
expense, by written notice to Company at least thirty (30) days prior to
the
proposed date of such disposition or destruction.
(c) Promptly
after request, Buyer shall allow Company access to all business records and
files acquired hereunder during normal working hours at the principal place
of
business of Buyer, or at any location where such records are stored, in
anticipation of, or preparation for, any existing or future third party actions,
Tax, SEC filings, regulatory matters, contractual obligations or other matters
in which any Seller is involved and which relate to the Business.
5.6 No
Solicitation or Negotiation.
Sellers
and each Majority Shareholder, severally and not jointly, agree as
follows:
(a) Unless
and until such time as this Agreement is otherwise terminated in accordance
with
Section
7.1,
each
Seller and each Majority Shareholder shall, and shall cause its Representatives,
to, immediately cease any activities, discussions or negotiations with any
parties that may be ongoing with respect to an Acquisition Proposal and request
the return or destruction of all confidential information regarding Sellers
provided to any such persons on or prior to the Signing Date pursuant to
the
terms of any confidentiality agreements or otherwise. Each Seller and each
Majority Shareholder shall not, and shall cause its respective Representatives,
not to, directly or indirectly, (i) solicit, participate in, initiate or
encourage (including by way of furnishing information), or take any other
action
designed or reasonably likely to facilitate or encourage, any inquiries or
the
making of any proposal that constitutes, or may reasonably be expected to
lead
to, any Acquisition Proposal or (ii) participate in any discussions or
negotiations (including by way of furnishing information) regarding any
Acquisition Proposal; provided,
however,
that
if, at any time before the date on which the definitive Information Statement
is
filed with the SEC (or, if earlier, mailed to the Company’s shareholders),
Company’s Board of Directors determines in good faith, after consultation with
outside counsel and a financial advisor of nationally recognized reputation,
that such action is, or is reasonably likely to be, necessary in order to
comply
with its fiduciary duties under Law and that such Acquisition Proposal is
reasonably likely to lead to a superior proposal for the common shareholders
of
Company as compared to the transactions contemplated by this Agreement, and
if
done for the sole purpose of increasing sums available for distribution to
Common stockholders of Interpharm Holdings, Inc., then, in such case, Company
may, in response to an Acquisition Proposal not solicited after April 11,
2008
and which is submitted in writing by such Person to the Board of Directors
of
Company after April 11, 2008 and subject to compliance with this Section 5.6
(and
provided that Company
has complied in all respects with its obligations under this Section 5.6)
(x) furnish information with respect to Company and its Subsidiaries
(other than the terms of this Agreement, or that certain letter of intent
dated
April 11, 2008 between Company and Amneal Pharmaceuticals, LLC, or any
discussions or negotiations regarding any of the foregoing) to the Person
making
such Acquisition Proposal (or its designated representatives) pursuant to
a
confidentiality and standstill agreement, provided that any such information
has
been or contemporaneously is provided to representatives of Buyer, and
(y) participate in discussions or negotiations regarding such Acquisition
Proposal.
(b) Except
as
set forth in Section 5.6(c),
the
Board of Directors of Company shall not (i) withdraw or modify, or propose
to withdraw or modify, its approval and recommendation of this Agreement
and the
transactions contemplated hereby (the “Recommendation”),
(ii) approve or recommend or take no position with respect to, or propose
to approve or recommend or take no position with respect to, any Acquisition
Proposal or (iii) cause Company to enter into any agreement related to any
Acquisition Proposal (other than a confidentiality and standstill agreement
with
respect to an Acquisition Proposal as contemplated by Section 5.6(a)).
(c) If,
before the date on which the definitive Information Statement is filed with
the
SEC (or, if earlier, mailed to Company’s shareholders), Company’s Board of
Directors determines in good faith, after consultation with outside counsel
and
a financial advisor of nationally recognized reputation, that such action
is
necessary in order to comply with its fiduciary duties under Law and that
such
Acquisition Proposal is reasonably likely to lead to a superior proposal
for the
common shareholders of Company as compare to the transactions contemplated
by
this Agreement, and if done for the sole purpose of increasing sums available
for distribution to common stockholders of Interpharm Holdings, Inc., and
provided that
Company
has complied in all respects with its obligations under this Section 5.6
and has
negotiated in good faith with Buyer with respect to any amendment or
modification to this Agreement proposed by Buyer, then, in such case Company’s
Board of Directors may (i) withdraw or modify its Recommendation or
(ii) subject to the provisions of Section 7.2(b)(iii)
hereof,
cause Company to terminate this Agreement; but in either case (x) only at
a time
that is after the fifth business day following the receipt by Buyer of written
notice advising Buyer that Company has received a definitive Acquisition
Proposal and containing the information about such Acquisition Proposal
specified by Section 5.6(d)
and (y)
only if simultaneously with taking such action it also executes a definitive
written agreement to implement such Acquisition Proposal.
For
purposes of this Section 5.6(c),
“50%”
shall be substituted for “20%” in the definition of the term “Acquisition
Proposal.”
(d) Company
shall immediately (but in no event later than one Business Day after receipt
thereof) advise Buyer orally and in writing (by facsimile and email) of any
request for information or of any Acquisition Proposal, the material terms
and
conditions of such request or Acquisition Proposal and the identity of the
Person making such request or Acquisition Proposal. Company will immediately
inform Buyer of any material developments in any discussions or negotiations
with respect to, and any material change in the terms (including amendments
or
proposed amendments) of, any such request or Acquisition Proposal, with the
intent and desire of enabling Buyer to make a matching offer so that the
transactions contemplated hereby may be effected, and if such matching offer
is
so made by Buyer, Company shall accept Buyer’s matching offer and reject such
other Acquisition Proposal. Company will promptly provide Buyer with any
agreements entered into by Company with respect to any such request or
Acquisition Proposal.
(e) Nothing
contained in this Section 5.6
shall
prohibit Company from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2 or Rule 14d-9 promulgated under the Exchange Act
or
from making any disclosure to Company’s shareholders if, in the good faith
judgment of its Board of Directors, after consultation with outside counsel,
failure so to disclose would be inconsistent with Law; provided,
however,
that
neither Company nor its Board of Directors shall, except as specifically
permitted by Section 5.6(c),
withdraw or modify, or propose to withdraw or modify, its Recommendation
or
approve or recommend, or propose to approve or recommend, an Acquisition
Proposal.
(f) Remedies.
If any
Seller, any Majority Shareholder or their respective Representatives shall
violate this Section
5.6
and if,
as a result, the conditions to Closing in Section
6.2
will not
be satisfied prior to the Outside Date, Buyer shall have the right to avail
itself of any and all legal and equitable remedies available to Buyer,
including, without limitation, specific performance (without the need to
post a
bond or other security and regardless of the absence or availability of remedies
at law).
5.7 Employee
Bonuses.
Company
hereby covenants and agrees that, except to the extent disclosed in Part
3.16(a)
of the
Disclosure Memorandum, it will not pay or permit to be paid to any Employees
or
directors of any Seller any bonuses otherwise payable upon a change of control
of any Seller or termination of employment or engagement.
5.8 Public
Announcements and Disclosure.
The
Company will notify the Buyer one Business Day in advance prior to making
any
required press release or public announcement with respect to the transactions
contemplated by this Agreement except as may be required by Law or AMEX
regulations. Except as and to the extent required by Law or AMEX regulations,
without the prior written consent of the other party (which consent shall
not be
unreasonably withheld or conditioned, and the request for which shall be
timely
responded to), neither Buyer, any Seller nor any Majority Shareholders will
at
any time make, and each will direct its Representatives not to make, directly
or
indirectly, any public comment, statement, or communication with respect
to, or
otherwise disclose or permit the disclosure of the existence of discussions
regarding, the transactions contemplated by this Agreement or any of the
terms
of this Agreement or any other agreement among the parties (including without
limitation those of the letter of intent). If either Buyer or Company is
required by Law or AMEX regulations to make any such disclosure, it must
first
provide to the other party the content of the proposed disclosure (with a
reasonable opportunity to comment thereon), the reasons that such disclosure
is
required by law and the time and place that the disclosure will be
made.
5.9 Majority
Shareholder Written Consent.
During
the term of this Agreement, each Majority Shareholder covenants and agrees
that
it will not rescind, withdraw or modify its consent as set forth in the
Transaction Written Consent or take or permit to occur any action that would
modify the Required Shareholder Approval or cause the Required Shareholder
Approval not to have been obtained.
5.10 Information
Statement; Public Announcement; SEC Filings.
(a) Not
more
than 14 calendar days after the Signing Date, Company shall file with the
SEC an
Information Statement on Schedule 14C (the “Information
Statement”)
containing the information required by the Exchange Act with respect to the
Transaction Written Consent and the transactions contemplated by this Agreement.
Company shall cooperate and provide Buyer (and its counsel) with a reasonable
opportunity to review and comment on the Information Statement prior to filing
such with the SEC. Company will respond as promptly as practicable to any
comments from the SEC or its staff with respect to the preliminary version
of
the Information Statement. Company will use all reasonable best efforts to
cause
the definitive version of the Information Statement to be mailed to its
shareholders in accordance with Law and the applicable rules and regulations
of
AMEX as soon as it is legally permitted to do so but, in any event, not later
than 21 calendar days before the Outside Date.
(b) Company
will notify Buyer promptly upon the receipt of any comments from the SEC
or its
staff in connection with the filing of, or amendments or supplements to,
the
Information Statement. Whenever any event occurs which is required to be
set
forth in an amendment or supplement to the Information Statement, Company
or
Buyer, as applicable, will promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff, and/or mailing to shareholders
of
Company, such amendment or supplement. Company shall cooperate and provide
Buyer
(and its counsel) with a reasonable opportunity to review and comment on
any
amendment or supplement to the Information Statement or any response to any
comment made by the SEC or its staff prior to filing such with or communicating
such to the SEC or its staff, and will provide Buyer with a copy of all such
filings made with or communications to the SEC or its staff. Except as may
be
required by Law, no amendment or supplement to the Information Statement
will be
made by Company without the approval of Buyer, which will not be unreasonably
withheld or delayed.
5.11 Bankruptcy
Filing.
For a
period of ninety-one (91) days after the Closing Date, Sellers shall not
file or
enter into any bankruptcy proceeding or liquidation whether compulsorily
or
voluntarily, convene a meeting of its creditors, or have a receiver appointed
over all or part of its assets, or take or suffer any similar action in
consequence of its debt.
ARTICLE
VI
CLOSING
6.1 Closing.
(a) Unless
this Agreement is first terminated as provided in Section
7.1
hereof,
and subject to the satisfaction or waiver of all conditions to the consummation
of the transactions contemplated hereby, the closing of the transactions
contemplated hereby (the “Closing”)
shall
take place: (i) at the offices of Budd Larner, P.C., 150 John F. Kennedy
Parkway, Short Hills, New Jersey 07078 on June 16, 2008, as extended pursuant
to
paragraph (b) below; or (ii) at such other place, time and date as Buyer
and
Company may mutually agree in writing (the “Closing
Date”).
(b) During
the Due Diligence Period, Buyer and its Representatives will inspect Company’s
facility at 75 Adams Avenue, Hauppauge, New York 11788 and give Seller a
written
list of the deficiencies which Buyer believes in good faith would be an
impediment to the transfer to Buyer of Company’s Drug Enforcement Agency
controlled substances Permit. Company will use its best efforts to, as promptly
as practicable after Buyer’s delivery of such deficiencies list, remedy all such
deficiencies with the first $120,000 in costs of such remediation borne 100%
by
Company and all additional costs of remediation (whether or the deficiencies
list or otherwise imposed by the Drug Enforcement Agency) shall be split
50% by
Buyer and 50% by Company; provided,
however,
that if
total remediation costs in excess of the first $120,000 exceed $250,000,
then
either party can elect, by written notice given to the other party within
five
(5) Business Days of the end of the Due Diligence Period, not to pay for
such
excess remediation costs (such electing party, a “Non-Paying
Party”).
If
such written election is made, then the other party may elect, by written
notice
given to the Non-Paying Party within five (5) Business Days of receipt of
the
Non-Paying Party’s written election, to assume all of said remediation costs
and, if such notice to assume remediation costs is not given within such
five
(5) Business Day period, this Agreement shall immediately and automatically
terminate at the end of such five (5) Business Day period.
(c) In
the
event that a Drug Enforcement Agency controlled substances license for the
facility at 75 Adams Avenue, Hauppauge, New York 11788 (the “DEA
License”)
has
not been issued to Buyer prior to June 16, 2008, then the Closing Date shall
be
automatically extended to the earlier of (i) July 16, 2008 and (ii) the third
(3rd)
Business Day following the date on which the DEA License has been issued.
In the
event that the DEA License has not been issued to Buyer prior to July 16,
2008
then, unless Buyer and Company mutually agree to extend the Closing Date
or
Buyer waives the condition that it be issued the DEA License prior to Closing
and elects to close, this Agreement shall automatically terminate at midnight
on
July 16, 2008.
(d) In
the
event that Company shall not have fully complied with and satisfied all of
the
Information Statement filing and/or mailing obligations required under
Section
5.10
of this
Agreement prior to June 16, 2008, then the Closing Date shall be automatically
extended to the third (3rd)
Business Day following the date on which the last of such filing and/or mailing
obligations have been fully complied with and satisfied.
(e) In
the
event that Sellers shall not have fully complied with and satisfied all of
the
conditions set forth in Section
6.2
hereof
(other than Section
6.2(j)
and
other than as set forth in paragraphs (b), (c) and (d) above) prior to June
16,
2008, then the Closing Date shall be automatically extended to the third
(3rd)
Business Day following the date on which the last of such conditions has
been
fully complied with and satisfied.
6.2 Conditions
to Buyer’s Obligations.
The
obligation of Buyer to effect the Closing shall be subject to the satisfaction
of each of the following conditions at or prior to the Closing (any of which
may
be waived by Buyer, in whole or in part):
(a) Definitive
Agreement.
This
Agreement (including the Schedules), the Disclosure Memorandum and other
related
documents and agreements consistent with the terms herein shall have been
executed by Company (and, if applicable, the other Sellers) and delivered
to
Buyer.
(b) Representations,
Warranties and Compliance with Covenants.
Each
representation and warranty of Company contained in this Agreement, the
Disclosure Memorandum and in any Schedule shall be true and correct in all
respects (in
the
case of any representations or warranties containing any materiality or Material
Adverse Effect qualifiers) or in all material respects (in the case of any
representations or warranties without any materiality or Material Adverse
Effect
qualifiers)
on and
as of the date of this Agreement and on and as of the Closing Date, with
the
same effect as though such representation and warranty had been made on and
as
of the Closing Date, without giving effect to any supplements
or amendments to the Disclosure Memorandum which,
individually or in the aggregate with all other such changes, would or would
be
reasonably expected to (i) in any material respect be adverse to any of the
Acquired Assets or Assumed Liabilities, taken as a whole or (ii) materially
detrimentally affect the benefit of the bargain struck by Buyer under this
Agreement. Each of the covenants and agreements herein on the part of Company
to
be complied with or performed on or before the Closing Date shall have been
complied with and performed. Buyer shall have received a certificate, dated
the
Closing Date, of Company to the foregoing effect.
(c) Absence
of Litigation.
No
inquiry, action, suit or proceeding shall have been asserted, threatened
or
instituted (i) in which it is sought to restrain or prohibit the carrying
out of
the transactions contemplated by this Agreement or to challenge the validity
of
such transactions or any part thereof, or (ii) which could reasonably be
expected to have, if adversely determined, a Material Adverse
Effect.
(d) Consents
and Approvals.
Company
shall have obtained and delivered to Buyer evidence of approval by the board
of
directors and the shareholders of each Seller of this Agreement and the
transactions contemplated hereby and copies of all consents, approvals or
Permits required to be obtained for the consummation thereof (including,
without
limitation, all consents and approvals listed in Part
3.6
of the
Disclosure Memorandum), and no such consents or consents, approvals or Permits
shall have been withdrawn or suspended.
(e) Bill
of Sale and Assignments.
Each
Seller shall have executed and delivered to Buyer: (i) a bill of sale,
assignment and assumption agreement in substantially the form and substance
of
Exhibit
B attached
hereto (the “Bill
of Sale”),
(ii)
transfer letters for the ANDAs for each of the approved Products and pending
Products and for the rights of reference to the Drug Master Files included
in
such ANDAs to the extent that Seller has such rights of reference and to
the
extent they are assignable, and (iii) such patent assignments, trademark
assignments, copyright assignments, domain
name assignments
and
other instruments of conveyance with respect to the Acquired Assets as Buyer
reasonably requests.
(f) Facility
Purchase Agreement.
Interpharm Realty shall have executed and delivered to Kashiv, LLC a contract
of
sale with respect to the Facility in substantially the form and substance
of
Exhibit
C attached
hereto (the “Facility
Purchase Agreement”),
and
the closing of the transactions contemplated thereby shall have been
consummated.
(g) Restrictive
Covenant Agreements.
Buyer
shall have received a non-disclosure, non-solicitation and non-competition
agreement in substantially the form and substance of Exhibit
D
attached
hereto (each, a “Restrictive
Covenant Agreements”)
executed by each Seller.
(h) Certificates.
Each
Seller shall have delivered to Buyer (i) a certificate of the appropriate
state official, dated as of a date not more than fifteen (15) days prior
to the
Closing Date, attesting to the existence and good standing of such Seller
in its
state of organization and in each jurisdiction where it is qualified or licensed
as a foreign corporation; (ii) a copy, certified by the appropriate state
official of the state of organization as of a date not more than fifteen
(15)
days prior to the Closing Date, of its certificate of incorporation and all
amendments thereto of such Seller; (iii) a copy of the bylaws of Sellers
certified, as of the Closing Date, by the Secretary of such Seller; and (iv)
a
certificate, dated the Closing Date, of the Secretary of such Seller, relating
to the incumbency and board and shareholder proceedings in connection with
the
consummation of the transactions contemplated hereby.
(i) Opinion
of Counsel.
Buyer
shall have received an opinion of Guzov Ofsink, LLC, counsel to Company,
in form
and substance satisfactory to Buyer.
(j) No
Material Adverse Effect.
Since
the date of the Most Recent Balance Sheet , there shall not have been (i)
any
change resulting in a Material Adverse Effect, or
(ii)
any damage, destruction or loss affecting the assets, properties, business,
operations or condition of Company or any other Seller or the Business, whether
or not covered by insurance, which
could reasonably be expected to result in a Material Adverse Effect, or (iii)
any FDA Inspection which discloses items that could reasonably be expected
to
materially and adversely effect Buyer’s ability to manufacture at the Facility
any Products which have been FDA approved or are pending FDA
approval.
(k) Release
of Liens.
Company
shall
have delivered to Buyer evidence of the proper filing of all duly executed
UCC-3
Termination Statements or other releases and/or terminations of security
interests (other than Permitted
Liens) on
all of
the Acquired Assets, in each case satisfactory to Buyer.
(l) Certificate
of Indebtedness; Lien Discharges.
Company
shall have prepared and delivered to Buyer a certificate (the “Certificate
of Indebtedness”),
signed by Company’s Chief Financial Officer, certifying as to the amount of
Indebtedness of each Seller outstanding on the Closing Date and specifying
the
amount owed to each creditor listed thereon. Company shall have caused each
Seller’s creditors set forth in such Certificate of Indebtedness to deliver
payoff letters and lien discharges, each in form reasonably satisfactory
to
Buyer, with respect to any such Indebtedness which does not constitute an
Assumed Liability.
(m) Tax
Clearance Certificates.
At the
Closing and at Company’s sole expense, each of the Sellers shall have delivered
to Buyer Tax Clearance Certificates from the New York Department of Taxation
and
Finance.
(n) Tail
Insurance Policy.
At the
Closing and at Company’s sole expense, Company shall have procured
“tail-coverage” on the claims-made products liability insurance policies
covering each Seller on such terms as may be reasonably satisfactory to Buyer,
and Buyer shall be named as additional insured thereon.
(o) Information
Statement.
Company
shall have complied with all Information Statement filing and/or mailing
obligations required under Section
5.10
of this
Agreement.
(p) Escrow
Agreement.
Each of
Company and Escrow Agent shall have executed and delivered to Buyer the Escrow
Agreement.
(q) EPA
Notice of Violation.
Company
shall have resolved, to Buyer’s reasonable satisfaction, all violations raised
by the U.S. Environmental Protection Agency in its Notice of Violation to
Company dated October 4, 2007.
(r) Disclosure
Memorandum.
After
the expiration of Due Diligence Period, there shall have been no changes
set
forth in any amendments or supplements to the Disclosure Memorandum which,
individually or in the aggregate with all other such changes, would or would
be
reasonably expected to (i) in any material respect be adverse to any of the
Acquired Assets or Assumed Liabilities, taken as a whole or (ii) materially
detrimentally affect the benefit of the bargain struck by Buyer under this
Agreement.
6.3 Conditions
to Obligations of Company.
The
obligation of Company to effect the Closing shall be subject to the satisfaction
of each of the following conditions at or prior to the Closing (any of which
may
be waived by Company, in whole or in part):
(a) Definitive
Agreement.
This
Agreement (including the Schedules) and other related documents and agreements
consistent with the terms herein shall have been executed by Buyer and delivered
to Company.
(b) Accuracy
of Representations and Warranties and Compliance with Covenants.
Each
representation and warranty of Buyer contained in this Agreement and in any
Schedule shall be true and correct in all respects (in
the
case of any representations or warranties containing any materiality or Material
Adverse Effect qualifiers) or in all material respects (in the case of any
representations or warranties without any materiality or Material Adverse
Effect
qualifiers)
on and
as of the date of this Agreement and on and as of the Closing Date, with
the
same effect as though such representation and warranty had been made on and
as
of the Closing Date. Each of the covenants and agreements herein on the part
of
Buyer to be complied with or performed on or before the Closing Date shall
have
been fully complied with and performed. Company shall have received a
certificate, dated the Closing Date, of Buyer to the foregoing
effect.
(c) Absence
of Litigation.
No
inquiry, action, suit or proceeding shall have been asserted, threatened
or
instituted in which it is sought to restrain or prohibit the carrying out
of the
transactions contemplated by this Agreement or to challenge the validity
of such
transactions or any part thereof, other than those asserted, threatened or
instituted by the Sellers or Majority Shareholders.
(d) Consents
and Approvals.
All
material authorizations, consents, approvals, waivers and releases, if any,
necessary for Buyer to consummate the transactions contemplated hereby shall
have been obtained by Buyer, including the resolution of all comments of
the SEC
to the Information Statement and shall have mailed the Information Statement
as
required under Section
5.10.
(e) Assumption
Documents.
Buyer
shall have executed and delivered to Company the Bill of Sale and such other
documents of assumptions of liability relating to the Assumed Liabilities
as
Company reasonably request.
(f) Facility
Purchase Agreement.
Kashiv,
LLC shall have executed and delivered to Interpharm Realty the Facility Purchase
Agreement, and the closing of the transactions contemplated thereby shall
have
been consummated.
(g) Escrow
Agreement.
Each of
Buyer and Escrow Agent shall have executed and delivered to Company the Escrow
Agreement.
6.4 Closing
Payments.
At the
Closing, Buyer shall: (i) deliver the Closing Cash Amount by wire transfer
of
immediately available funds in such amounts and to such bank accounts as
may be
directed in writing by Company at least two (2) Business Days prior to the
Closing; and (ii) deposit with the Escrow Agent by wire transfer of immediately
available funds an aggregate cash sum equal to the Escrow Amount, all in
accordance with Sections
2.5(b) and 2.5(c).
ARTICLE
VII
TERMINATION
PRIOR TO CLOSING
7.1 Right
of Termination.
This
Agreement may be terminated and abandoned at any time prior to the
Closing:
(a) by
the
written mutual consent of Buyer and Company;
(b) by
Buyer,
upon written notice to Company, if any of the conditions set forth in
Section
6.2
shall
not have been fulfilled in all material respects at the time at which the
Closing would otherwise occur or if satisfaction of such a condition is or
becomes impossible, provided
that at
the time of such notice Buyer must have complied in all material respects
with
its obligations under this Agreement; and provided,
further,
that
Company shall have ten (10) days after the notice sent by Buyer pursuant
to this
subsection (b) in which to fulfill such conditions not fulfilled unless
satisfaction of such a condition is or becomes impossible;
(c) by
Company, upon written notice to Buyer, if any of the conditions set forth
in
Section
6.3
shall
not have been fulfilled in all material respects at the time at which the
Closing would otherwise occur or if satisfaction of such a condition is or
becomes impossible, provided
that at
the time of such notice Company must have complied in all material respects
with
their obligations under this Agreement; and provided,
further,
that
Buyer shall have ten (10) days after the notice sent by Company pursuant
to this
subsection (c) in which to fulfill such conditions not fulfilled unless
satisfaction of such a condition is or becomes impossible;
(d) by
either
Buyer or Company, upon written notice to the other, if the Closing shall
not
have occurred on or prior to September 16, 2008 (the “Outside
Date”);
provided,
however,
that at
the time of such notice the party exercising such termination right shall
have
complied in all material respects with its obligations under this
Agreement;
(e) by
Buyer,
if Buyer is not satisfied in its sole discretion with the results of its
Due
Diligence, upon written notice given to Company prior to expiration of the
Due
Diligence Period that Buyer has elected to terminate this Agreement pursuant
to
this Section
7.1(e);
provided,
however,
that
Buyer shall be deemed to have waived its termination right under this
Section
7.1(e)
if Buyer
has not given such written notice to Company prior to expiration of the Due
Diligence Period;
(f) By
Company, in connection with Company’s entering into a definitive agreement to
effect an Acquisition Proposal in accordance, and provided that Company has
complied, with Section 5.6;
provided, however,
that an
election by Company to terminate this Agreement pursuant to this Section 7.1(f)
shall
not be effective until Company shall have paid the Break-up Fee plus all
Buyer
Advances to the Company as provided in Section 7.2(b)(iii);
(g) By
Buyer,
if (i) Company enters into a definitive agreement to effect an Acquisition
Proposal, (ii) Company’s Board of Directors recommends that Company’s
shareholders accept or approve any Acquisition Proposal or (iii) Company’s
Board of Directors withdraws or modifies, in a manner material and adverse
to
Company, the Recommendation, in any case, regardless of whether Company has
complied with Section 5.6;
(h) Automatically,
as set forth in Section
6.1(b)
above;
or
(i) Automatically,
as set forth in
Section 6.1(c)
above;
or
(j) Automatically,
in the event of Buyer’s termination for any reason of the Facility Purchase
Agreement, as permitted thereunder.
7.2 Effect
of Termination.
(a) In
the
event of a termination of this Agreement, all further obligations of the
parties
under this Agreement shall terminate, no party shall have any right under
this
Agreement against any other party, except as set forth in this Section
7.2,
and
each party shall bear its own costs and expenses; provided,
however,
that
(except as set forth in Section
7.2(b)(ii)
below)
termination under Section
7.1
shall
not relieve any party of liability for any failure to perform or comply with
this Agreement prior to the date of termination, or constitute a waiver of
any
claim with respect thereto.
(b) Notwithstanding
anything herein to the contrary:
(i) in
the
event of any termination of this Agreement by Buyer pursuant to Sections
7.1(b), (d) or (e),
or by
mutual written consent pursuant to Section
7.1(a),
or in
the event of any termination of this Agreement pursuant to Section
7.1(h)
due to
Buyer’s election to be a Non-Paying Party or in the event of any termination of
this Agreement pursuant to Section
7.1(i)
or
Section
7.1(j),
Company
shall immediately reimburse Buyer for all Buyer Advances in accordance with
the
terms of the Loan and Security Agreement;
(ii) in
the
event of any termination of this Agreement by Company pursuant to Section
7.1(c),
or in
the event of any termination of this Agreement pursuant to Section
7.1(h)
due to
Seller’s election to be a Non-Paying Party, all Buyer Advances shall be retained
by Company as liquidated damages and Buyer shall have no further obligations
against any of the Sellers or their shareholders of any nature whatsoever
arising out of this Agreement;
(iii) if
this
Agreement is terminated by Company pursuant to Section 7.1(f)
or by
Buyer pursuant to Section
7.1(g),
then
Company shall pay to Buyer, an amount in cash equal to four percent (4%)
of the
Purchase Price plus reimbursement of all of its out-of-pocket costs and expenses
(the “Break-up
Fee”)
plus
all Buyer Advances; and
(iv)
If (A) this Agreement is terminated by Company pursuant to Section 7.1(d)
and
(B) Company consummates an Acquisition Proposal or enters into a definitive
agreement with respect to an Acquisition Proposal, in either case, within
twelve
(12) months of such termination, then Company shall pay Buyer the Break-up
Fee plus all Buyer Advances.
Payment
of the Break-up Fee and Buyer Advances, if applicable, required by this
Section 7.2(b)
shall be
payable by wire transfer of immediately available funds (1) in the case of
termination of this Agreement by Company pursuant to Section 7.1(f)
or by
Buyer pursuant to Section 7.1(g),
concurrently with the effective date of such termination, or (2) in case
of a
situation contemplated by Section 7.2(b)(iv),
concurrently with the consummation of such Acquisition Proposal.
ARTICLE
VIII
INDEMNIFICATION
8.1 Obligation
of Company to Indemnify Buyer.
Company
hereby agrees to indemnify and hold harmless Buyer and its Representatives
from,
against and in respect of any and all Losses suffered, sustained, incurred
or
required to be paid by any of them by reason of:
(i) any
representation or warranty made by Company in or pursuant to this Agreement
or
any of the other Transaction
Documents
being
untrue or incorrect in any respect;
(ii) any
failure by Company to observe or perform its covenants and agreements set
forth
in this Agreement or any other agreement or document executed by them in
connection with the transactions contemplated hereby;
(iii) any
liability of any Seller to the extent it is not an Assumed Liability, including
without limitation any liability of any Seller (other than the Assumed
Liabilities) arising from the operation of the Business prior to the Closing;
(iv) any
Taxes
of any Seller or with respect to the Business for all periods prior to the
Closing Date, and any Tax liability of any Seller or Company’s shareholders
arising in connection with the transactions contemplated hereby;
(v) any
failure of any Seller to have good, verified marketable title to the Acquired
Assets free and clear of all Liens (other than Permitted Liens); or
(vi) any
challenge to the transaction by any shareholder of the Company.
8.2 [Intentionally
Omitted]
8.3 Obligation
of Buyer to Indemnify Company.
Buyer
agrees to indemnify and hold harmless Company and its Representatives from,
against, for and in respect of any all Losses suffered, sustained, incurred
or
required to be paid by any of them by reason of:
(i) any
representation or warranty made by Buyer in or pursuant to this Agreement
being
untrue or incorrect in any respect;
(ii) any
failure by Buyer to observe or perform its covenants and agreements set forth
in
this Agreement or any other agreement or document executed by it in connection
with the transactions contemplated hereby;
(iii)
Buyer’s
failure to discharge or satisfy the Assumed Liabilities; or
(iv) the
operation of Buyer or the conduct of Buyer's business following the Closing,
including, without limitation, any loss, liability, obligation, Lien, damage,
cost or expense arising from products produced or processed by Buyer after
the
Closing, provided that the act that gives rise to said Losses does not arise
from a breach by any Seller of any of the Transaction Documents.
8.4 Claim
Notice.
(a) Except
to
the extent set forth in the next sentence, a party will not have any liability
under the indemnity provisions of this Agreement with respect to a particular
matter unless (i) a written notice (the “Claim
Notice”)
setting forth in reasonable detail the specific nature of the Losses and
the
estimated amount of such Losses (the “Claimed
Amount”)
has
been given to the Indemnifying Party (as defined below) prior to the time
that
the representations, warranties, covenants or agreements which are the basis
for
such indemnification terminate pursuant to Section
8.8(b)
and,
(ii) in addition, if such matter arises out of a third party suit, action,
investigation, proceeding or claim, such Claim Notice is given promptly,
but in
any event within thirty (30) days after the Indemnified Party (as defined
below)
is given notice of the claim or the commencement of the suit, action,
investigation or proceeding. Notwithstanding the preceding sentence, failure
of
the Indemnified Party to give a Claim Notice hereunder shall not release
the
Indemnifying Party from its obligations under this Article
VIII,
except
to the extent the Indemnifying Party is materially prejudiced by such failure
to
give such Claim Notice. The Indemnified Party, if Buyer, shall also concurrently
deliver a copy of the Claim Notice to the Escrow Agent to the extent cash
remains available in the Escrow Fund to satisfy the Claimed Amount.
(b) With
respect to Losses described in Section
8.1,
Company
shall be the “Indemnifying Party” and Buyer and its Representatives shall be the
“Indemnified Parties”. With respect to Losses described in Section
8.3,
Buyer
shall be the “Indemnifying Party” and Company and its Representatives shall be
the “Indemnified Party”.
8.5 Defense
of Third Party Claims.
(a) Upon
receipt of Claim Notice of any third party suit, action, investigation, claim
or
proceeding for which indemnification might be claimed by an Indemnified Party,
the Indemnifying Party shall be entitled to defend, contest or otherwise
protect
against any such suit, action, investigation, claim or proceeding at its
own
cost and expense, and the Indemnified Party must reasonably cooperate in
any
such defense or other action. The Indemnified Party shall have the right,
but
not the obligation, to participate at its own expense in defense thereof
by
counsel of its own choosing, but the Indemnifying Party shall be entitled
to
control the defense unless the Indemnified Party has relieved the Indemnifying
Party from liability with respect to the particular matter or the Indemnifying
Party fails to assume defense of the matter.
(b) In
the
event the Indemnifying Party shall fail to defend, contest or otherwise protect
in a timely manner against any such suit, action, investigation, claim or
proceeding, the Indemnified Party shall have the right, but not the obligation,
thereafter to defend, contest or otherwise protect against the same and make
any
compromise or settlement thereof and recover the entire cost thereof from
the
Indemnifying Party including, without limitation, reasonable attorneys’ fees,
disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or the compromise or settlement thereof;
provided,
however,
that
the Indemnified Party must send a written notice to the Indemnifying Party
of
any such proposed settlement or compromise, which settlement or compromise
the
Indemnifying Party may reject within thirty (30) days of receipt of such
notice.
Failure to reject such notice within such thirty (30) day period shall be
deemed
an acceptance of such settlement or compromise. Consent of the Indemnifying
Party to such proposed settlement or compromise may not be unreasonably
withheld, delayed or conditioned. The Indemnified Party shall have the right
to
effect a settlement or compromise over the objection of the Indemnifying
Party;
provided, that if (i) the Indemnifying Party is contesting such claim in
good
faith or (ii) the Indemnifying Party has assumed the defense from the
Indemnified Party, the Indemnified Party waives any right to indemnity therefor
unless consent of the Indemnifying Party to such proposed settlement or
compromise was unreasonably withheld, delayed or conditioned.
(c) If
the
Indemnifying Party undertakes the defense of such matters then the Indemnified
Party shall not, so long as the Indemnifying Party does not abandon the defense
thereof, be entitled to recover from the Indemnifying Party any legal or
other
expenses subsequently incurred by the Indemnified Party in connection with
the
defense thereof other than the reasonable costs of investigation undertaken
by
the Indemnified Party with the prior written consent of the Indemnifying
Party.
(d)
Buyer,
Company, the Majority Shareholders and each of their successors and assigns
shall cooperate with each other in the defense of any suit, action,
investigation, proceeding or claim by a third party, shall keep each other
informed of all settlement negotiations with third parties and the progress
of
any litigation and, during normal business hours, shall afford each other
access
to their books and records and employees relating to such suit, action,
investigation, proceeding or claim and shall furnish each other all such
further
information that they have the right and power to furnish as may reasonably
be
necessary to defend such suit, action, investigation, proceeding or
claim.
8.6 Claims
Between Company and Buyer.
(a) Company
Claims Against Buyer.
In the
case of a claim for indemnification hereunder which is brought by Seller
as the
Indemnified Party against Buyer as the Indemnifying Party, this Section
8.6(a)
shall
apply. Upon the Claim Notice having been given to the Indemnifying Party,
the
Indemnifying Party shall have thirty (30) days in which to notify the
Indemnified Party in writing (the “Dispute
Notice”)
that
the claim for indemnification is in dispute, setting forth in reasonable
detail
the basis of such dispute. In the event that a Dispute Notice is not given
to
the Indemnified Party within the required thirty (30) days, the Indemnifying
Party shall be obligated to pay the Indemnified Party the Claimed Amount
within
sixty (60) days after the date that the Claim Notice had been given to the
Indemnifying Party. In the event that a Dispute Notice is timely given to
an
Indemnified Party, the parties hereto shall have thirty (30) days to resolve
any
such dispute. In the event that such dispute is not resolved by such parties
within such period, the parties shall have the right to pursue all available
remedies to resolve such dispute.
(b) Buyer
Claims Against Company.
In the
case of a claim for indemnification hereunder which is brought by Buyer as
the
Indemnified Party against Seller as the Indemnifying Party, this Section
8.6(b)
shall
apply. Within thirty (30) days after delivery of a Claim Notice from Indemnified
Party, Indemnifying Party shall deliver to Indemnified Party and the Escrow
Agent a written response (the “Company
Response”)
in
which Indemnifying Party shall either:
(i) agree
that Indemnified Party is entitled to receive all of the Claimed Amount,
in
which case Indemnified Party and Indemnifying Party shall deliver to the
Escrow
Agent, to the extent cash remains available in the Escrow Fund to satisfy
the
Claimed Amount, within two (2) Business Days following the delivery of the
Company Response, a written notice executed by such parties instructing the
Escrow Agent to disburse the Claimed Amount to Indemnified Party;
(ii) agree
that Indemnified Party is entitled to receive part, but not all, of the Claimed
Amount (the “Agreed
Amount”)
in
which case Indemnified Party and Indemnifying Party shall deliver to the
Escrow
Agent, to the extent cash remains available in the Escrow Fund to satisfy
the
Agreed Amount, within two (2) Business Days following the delivery of the
Company Response, a written notice executed by such parties instructing the
Escrow Agent to disburse the Agreed Amount to Indemnified Party; or
(iii) dispute
that Indemnified Party is entitled to receive any of the Claimed Amount,
in
which case, after a final, non-appealable judgment has been rendered or a
settlement has been reached in respect of such dispute, Indemnified Party
shall,
to the extent Indemnified Party is successful in obtaining any cash sum in
such
final resolution or settlement, and to the extent cash remains available
in the
Escrow Fund to satisfy such cash sum, Indemnified Party shall deliver to
the
Escrow Agent a copy of the settlement agreement or court order or decree
setting
forth the cash sum to which Indemnified Party is thereby entitled and the
Escrow
Agent shall act in accordance with the terms of the Escrow Agreement.
8.7 Buyer’s
Knowledge is Not Waiver.
Notwithstanding
any right of Buyer to fully investigate the affairs of Sellers and
notwithstanding any knowledge of facts determined or determinable by Buyer
pursuant to such investigation or right of investigation, Buyer has the right
to
rely fully upon the representations, warranties, covenants and agreements
of
Sellers contained in this Agreement (including
the Schedules), as modified by the Disclosure Memorandum,
or in
any document delivered to Buyer by any Seller or its Representatives in
connection with the transactions contemplated by this Agreement, and
such
knowledge (except to the extent set forth in the Disclosure Memorandum in
a
section corresponding to the representation which it is intended to qualify
or
in a qualification contained in a provision of this Agreement or a Schedule
hereto) shall not constitute a waiver of any Claims for indemnified Losses
which
Buyer may make under this Article
VIII
or estop
Buyer from making any such Claims.
8.8 Survival.
Notwithstanding anything to the contrary in this Agreement, the representations
and warranties of each of the parties set forth in this Agreement shall survive
the Closing, and such representations and warranties shall terminate on the
one
(1) year anniversary of the Closing; provided,
however,
that
any representation or warranty that is the subject of a Claim Notice delivered
in good faith in compliance with the requirements of Section 8.4(a)
prior to
the one (1) year anniversary of the Closing shall survive with respect only
to
the specific matters described in such Claim Notice until the earlier to
occur
of (y) the date on which a final nonappealable resolution of the matter
described in such Claim Notice has been reached or (z) the date on which
the
matter described in such Claim Notice has otherwise reached final resolution.
All covenants and agreements of each of the parties set forth in this Agreement
shall survive the Closing
indefinitely.
8.9 Indemnity
Basket.
Notwithstanding anything to the contrary in this Agreement, no Indemnifying
Party shall have any obligation to indemnify any Indemnified Party under
this
Article
VIII
until
and unless the aggregate amount of Losses (other than those referred to in
the
proviso to this sentence) incurred by all Indemnified Parties exceeds Two
Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate (the “Basket”),
after
which point the Indemnifying Parties will be obligated to indemnify the
Indemnified Parties from and against the full amount of such Losses (including
the Basket), subject to the Ceiling; provided,
however,
that
the Basket shall not apply with respect to any Losses set forth in Section
8.10(b)
below.
8.10 Indemnity
Ceiling.
Notwithstanding
anything to the contrary in this Agreement, the liability of the parties
under
this Article
VIII
shall be
limited as follows:
(a) The
maximum amount of Losses incurred by a party for which any party shall be
liable
pursuant to this Article
VIII
shall
not exceed (i) with respect to all of Company, Three Million Five Hundred
Thousand Dollars ($ 3,500,000.00), and (ii) with respect to Buyer, Three
Million
Five Hundred Thousand Dollars ($ 3,500,000.00) (as applicable, the “Ceiling”).
(b) Notwithstanding
the foregoing, with respect to Losses relating to or resulting from any fraud
or
any intentional misconduct, an Indemnified Party shall be entitled to
indemnification with respect to such Losses as though the Ceiling were equal
to
the Purchase Price.
8.11 Characterization
of Indemnity Payment for Tax Purposes.
All
amounts payable under this Article
VIII
shall be
treated for all tax purposes as adjustments to the Purchase Price, except
as
otherwise required by law.
8.12 Exclusive
Remedy.
Other
than in respect of Claims arising out of fraud, intentional misconduct or
criminal conduct (in which case Buyer shall have all remedies available at
law
or in equity), the sole and exclusive remedy for
any
matter arising out of this Agreement after the Closing is a claim for
indemnification under this Article
VIII
(subject
to the limitations contained in Sections
8.8, 8.9
and
8.10)
and
Buyer’s sole recourse in
order
to satisfy any such claim
(other
than a claim for Losses set forth in Section
8.10(b)
above)
shall be limited to the
Escrowed Funds; provided,
however,
that
this paragraph shall not operate as a bar to any suit for specific performance
(which does not seek monetary damages) contemplated by this
Agreement.
8.13 Duty
to Mitigate; Insurance Benefits.
(a) No
Indemnified Party shall be entitled to indemnification under this Article
VIII
for any Losses with respect to:
| |
(i)
|
any
covenant or condition waived in writing by the other party on or
prior to
the Closing; or
|
| |
(ii)
|
any
Loss with respect to any matter to the extent that such matter
was
incorporated in the calculation of the adjustment of the Purchase
Price
pursuant to Section 2.6
and not otherwise a breach of a representation or
warranty.
|
(b) Each
Indemnified Party shall be obligated to use its commercially reasonable efforts
to mitigate to the fullest extent practicable the amount of any Loss for
which
it is entitled to seek indemnification under this Article VIII.
(c) The
amount of any Losses under Article
VIII
sustained by an Indemnified Party shall be reduced by any amount received
by
such Indemnified Party with respect thereto under any insurance coverage
or from
any other Person alleged to be responsible therefor. The Indemnified Party
shall
use commercially reasonable efforts to collect any amounts available under
such
insurance coverage and/or from such other Person alleged to have responsibility
with respect to the Loss, as applicable. If an Indemnified Party receives
an
amount under insurance coverage and/or from such other Person, as applicable,
with respect to Losses sustained at any time subsequent to any indemnification
payment pursuant to this Article
VIII,
then
such Indemnified Party shall promptly reimburse the applicable Indemnifying
Party for any payment made or expense incurred by such Indemnifying Party
in
connection with providing such indemnification up to such amount realized
or
received by the Indemnified Party.
ARTICLE
IX
OTHER
COVENANTS
9.1 Certain
Employment Arrangements.
(a) Not
less
than fifteen (15) days prior to the Closing, Buyer will provide to Company
a
list identifying the number of the Employees that will be offered employment
(each, a “Specified
Employee”)
as
Buyer determines satisfy Buyer’s needs and hiring criteria (which shall be not
less than seventy percent (70%) of Sellers’ employees). Prior to (but
conditioned upon) the Closing, Buyer shall offer each of the Specified Employees
engagement or employment with Buyer. Other than the Specified Employees,
Buyer
shall have no obligation to engage or hire any Seller Employees.
(b) Sellers
shall be solely responsible for (i) ensuring compliance with the WARN Act
(to
the extent applicable), (ii) payment of accrued vacation or paid time off,
(iii)
payment of any severance payments that may be due to any of its Employees,
and
(iv) all other legal requirements in connection with any reductions in force
or
other terminations of Sellers’ Employees.
9.2 Rights
of Endorsement.
From and
after the Closing, Buyer shall have the right and authority to collect all
receivables and other items transferred and assigned to it by any Seller
hereunder and to endorse with the name of the applicable Seller any checks
received on account of such receivables or other items, and Company agrees
that
it will, and shall cause each of the Sellers to, transfer or deliver promptly
to
Buyer from time to time, any cash or other property that any Seller may receive
with respect to any of the Acquired Assets. Company shall, and shall cause
each
of the Sellers to, cooperate with Buyer in such transfers, including the
execution and delivery of all documents and instruments in order to effectuate
the foregoing.
9.3 Additional
Regulatory Matters; Agency Relationship During Transition
Period.
(a) Registrations.
On or
promptly after the Closing Date, the parties will cooperate in transferring
to
Buyer the new drug applications and ANDAs required to manufacture, market
and
sell finished dosage forms of each Product in the United States, its
territories, commonwealths and possessions filed by or on behalf of any Seller
with the FDA and any amendments or supplements thereto which were filed on
behalf of any Seller on or prior to the Closing Date (the “Registrations”).
Promptly following the Closing Date, the parties will agree upon procedures
to
ensure a smooth transition from each Seller to Buyer of all of the activities
required to be undertaken by the Registration holder, including adverse
experience reporting, quarterly and annual reports to the FDA, handling and
tracking of complaints, sample tracking, and communication with health care
professionals, customers and the FDA. Company shall, and shall cause each
Seller
to, cooperate with Buyer, at no charge, to ensure a smooth transition of
the
activities contemplated hereby.
(b) Interim
Responsibility for Registrations.
Until
the Registrations have been transferred to Buyer, Buyer shall act as the
regulatory agent for all Registrations pending before the FDA and shall be
responsible for maintaining them at its sole cost and expense. Each party
shall
cooperate with the other in making and maintaining all regulatory filings
that
may be necessary in connection with the execution, delivery and performance
of
this Agreement. After each Registration approval is received from the FDA,
Buyer
shall transfer such Registration into Buyer’s name.
(c) Communication
With Agencies.
Until
the Registrations are transferred to Buyer, Buyer, as the Regulatory Agent,
shall have responsibility for all communications with FDA and corresponding
foreign bodies relating to the Products, and Company shall, and shall cause
each
of the Sellers to, promptly provide Buyer with copies of all communications
to
or from the FDA with respect to each Product and/or the manufacture thereof.
After such transfer has been completed, Buyer shall have responsibility for
all
such communication and each party shall promptly provide the other with copies
of any communications or contacts it sends to or receives from any other
governmental agency in the Territory concerning the Products, other than
communications by Buyer concerning promotional materials, with respect to
which
Buyer shall not be required to provide copies to Company.
(d) Sellers’
NDC Numbers.
Until Buyer’s establishment of Buyer NDC Numbers as set forth in Section
9.3(e) below, Company shall, and shall cause each of the Sellers to, not
discontinue the NDC Numbers for the Products existing as of the date hereof;
at
which time, Buyer shall discontinue the use of Sellers’ NDC Numbers for the
Products other than with respect to returns, rebates, allowances and adjustments
for Products sold prior to the Closing Date; provided,
however,
that
Buyer will be permitted to continue to sell the Products with labeling bearing
Sellers’ NDC Numbers if Buyer does not have sufficient Product Inventory bearing
Buyer NDC Number to meet its firm orders; and provided,
further,
that
Sellers shall not seek from any customer any type of cross-referencing of
Buyer
NDC Numbers with any Seller products and provided,
further,
that
Sellers shall provide Buyer with draft notifications to any Seller customers
regarding the use or discontinued use of such numbers by any Seller prior
to
such notifications being disseminated to the customers. Buyer shall have
five
(5) Business Days in which to approve such notifications, such approval shall
not be unreasonably withheld; otherwise, Buyer’s approval shall be deemed
given.
(e) Buyer
NDC Numbers.
Buyer
covenants and agrees that, within five (5) Business Days of the Closing Date,
Buyer will apply for and initiate applicable processes to obtain and establish
new NDC Numbers (the “Buyer
NDC Numbers”)
and
notify Company thereof. Buyer may be permitted to sell the inventory of Product
with labeling bearing the NDC Numbers as of the date hereof until the inventory
of such Product is exhausted. Buyer will not sell any inventory bearing Buyer’s
NDC Numbers prior to selling any products or inventory bearing Sellers’ NDC
Numbers.
(f) Governmental
Inspections.
Each
party shall advise the other party of any governmental visits to, or written
or
oral inquiries about, any facilities (to the extent such visit relates to,
or
the results thereof could affect the manufacture or supply of, a Product)
or
procedures for the manufacture, storage or handling of a Product, or the
marketing, selling, promotion or distribution of any Product, promptly after
any
such visit or inquiry (or in advance, for any scheduled visits). Each party
shall promptly furnish to the other party any report or correspondence issued
by
or provided to the governmental authority in connection with such visit or
inquiry, purged only of confidential information of such party wholly unrelated
to the other party's activities under this Agreement and any information
that is
unrelated to the Products. Each party shall permit the relevant governmental
authorities to inspect its facilities in connection with the activities
contemplated by this Agreement.
9.4 Name
Use License.
For a
period of three (3) years from and after the Closing, Buyer shall have a
royalty
free, fully paid, perpetual, transferable license to use the names “Interpharm”
and “Interpharm Holdings” and the related logos in connection with Buyer’s
seeking to obtain regulatory approval to market and sell the
Products.
9.5 Amendment
to Real Estate Lease Agreement.
Company
shall cause Sutaria Family Realty, LLC, as landlord under the lease agreement
for the Leased Real Property located at 75 Adams Avenue, Hauppauge, New York
11788, to execute and deliver to Buyer, at least two (2) Business Days prior
to
the expiration of the Due Diligence Period, an amendment to said lease agreement
in form and substance reasonably acceptable to Buyer. Failure to meet this
requirement shall give Buyer the right to terminate this Agreement at any
time
prior to the end of the Due Diligence Period.
ARTICLE
X
MISCELLANEOUS
10.1 Notices.
(a) Any
notice, consent, request or other communication required or provided for
by this
Agreement shall be in writing and shall be deemed to have been duly and properly
given or served for any purpose only if (i) delivered personally (with written
confirmation of receipt), (ii) sent by telecopier (with written confirmation
of
receipt), (iii) sent by registered or certified mail, return receipt requested,
or (iv) sent by an internationally recognized courier service, postage and
charges prepaid, in each case to the appropriate addresses and telecopier
numbers set forth below:
|
|
If
to Buyer: |
Amneal
Pharmaceuticals of New York, LLC
|
209
McLean Boulevard
Paterson,
New Jersey 07504
Attn:
Chirag Patel, President
Facsimile:
(973) 357-0230
|
|
With
a copy to: |
Budd
Larner, P.C.
|
150
John
F. Kennedy Parkway
Short
Hills, New Jersey 07078
Attn:
Robert A. Loewenstein, Esq.
Facsimile:
(973) 379-7734
|
|
And
with a copy to: |
Tarsadia
Hotels
|
620
Newport Center Drive, Fourteenth Floor
Newport
Beach, CA 92660
Attn:
Edward Coss, Executive
Vice President
and General Counsel
Facsimile:
(949)
610-8222
If
to any
Seller or
any
Majority
| |
Shareholder: |
c/o
Interpharm Holdings, Inc.
|
75
Adams
Avenue
Hauppauge,
New York 11788
Attn:
Cameron Reid
Facsimile:
(201) 818-1786
|
|
With
a copy to: |
Guzov
Ofsink, LLC
|
600
Madison Avenue, 14th Floor
New
York,
New York 10022
Attn:
Darren L. Ofsink, Esq.
Facsimile:
(212) 688-7273
|
|
And
with a copy to: |
Davidoff
Malito & Hutcher LLP
|
200
Garden City Plaza, Suite 315
Garden
City, New York 11530
Facsimile:
(516) 248-6422
Attention:
Neil Kaufman, Esq.
|
|
And
with a copy to: |
Martin,
Lucas & Chioffi, LLP
|
177
Broad
Street
Stamford,
CT 06901
Facsimile:
Fax: (203) 973-5232
Attention:
Gloria Skigen, Esq.
A
party
may change his or her address for the purpose of this Section
10.1
by
written notice to the other parties in the manner provided for above.
(b) All
such
notices, requests, consents and other communications shall be deemed to have
been given (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of mailing by an internationally recognized express courier
service, if sent by next day delivery providing receipt of delivery, on the
second Business Day following the date of such mailing, (iii) in the case
of
registered or certified mailing, postage and charges prepaid, return receipt
requested, on the third Business Day following the date of such mailing and
(iv)
in the case of telecopy, when received.
10.2 Entire
Agreement.
This
Agreement together with the other Transaction Documents constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, between the parties hereto with respect to the subject matter hereof
including, but not limited to, that certain Letter of Intent dated October
20,
2007, and no party shall be liable or bound to the other in any manner by
any
representations or warranties not set forth herein.
10.3 Successors
and Assigns.
The
terms and conditions of this Agreement shall inure to the benefit of and
be
binding upon the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any rights, interests, or obligations
hereunder may be assigned by any party hereto without the prior written consent
of all other parties hereto; provided,
however,
that
Buyer may assign its rights to any Affiliate or to a successor of the business
of Buyer, in each case without the consent of Company.
10.4 Headings.
The
headings of the articles and sections of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or
to affect the construction hereof.
10.5 Modification
and Waiver.
Any of
the terms or conditions of this Agreement may be waived in writing at any
time
by the party which is entitled to the benefits thereof, and this Agreement
may
be modified or amended by a written instrument executed by all parties hereto.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by all of the parties hereto. No waiver of any
of the
provisions of this 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.
10.6 Schedules,
Etc.
All
Exhibits and Schedules annexed hereto and the Disclosure Memorandum are
expressly made a part of this Agreement as though fully set forth herein,
and
all references to this Agreement herein or in any such Exhibits or Schedules
or
the Disclosure Memorandum shall refer to and include all such Exhibits and
Schedules and the Disclosure Memorandum.
10.7 Governing
Law.
This
Agreement shall be construed, enforced, and governed by the internal laws
of the
State of Delaware, without regard to its conflicts of laws
principles.
10.8 Consent
to Jurisdiction.
Each
party to this Agreement irrevocably consents and agrees that any legal action
or
proceeding with respect to this Agreement and any action for enforcement
of any
judgment in respect thereof will be brought in the federal courts located
in the
State of Delaware, and, by execution and delivery of this Agreement, each
party
to this Agreement hereby submits to and accepts for itself and in respect
of its
property, generally and unconditionally, the non-exclusive jurisdiction of
the
aforesaid courts and appellate courts from any appeal thereof. Each party
to
this Agreement further irrevocably consents to the service of process out
of any
of the aforementioned courts in any such action or proceeding by the mailing
of
copies thereof in the manner set forth in Section
10.1.
Each
party to this Agreement hereby irrevocably waives any objection which it
may now
or hereafter have to the laying of venue of any of the aforesaid actions
or
proceedings arising out of or in connection with this Agreement brought in
the
courts referred to above and hereby further irrevocably waives and agrees
not to
plead or claim in any such court that any such action or proceeding brought
in
any such court has been brought in an inconvenient forum. Nothing in this
Section
10.8
shall be
deemed to constitute a submission to jurisdiction, consent or waiver with
respect to any matter not specifically referred to herein.
10.9 Invalid
Provisions.
If any
provision of this Agreement is held to be illegal, invalid, or unenforceable
under present or future laws, such provision shall be fully severable, this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement, and
the
remaining provisions of this Agreement shall remain in full force and effect
and
shall not be affected by the illegal, invalid, or unenforceable provision
or by
its severance from this Agreement.
10.10 Responsibility
for Taxes.
Each
party shall be responsible for any Taxes that such party may incur pursuant
to
the transactions contemplated hereby and specifically Sellers shall be
responsible for and pay all sales, use and other transfer Taxes resulting
from
the transactions contemplated hereunder.
10.11 Fees
and Expenses.
Each
party shall pay all of its own fees and expenses incurred by it in connection
with the transactions contemplated hereby.
10.12 Confidentiality
Agreement.
Between
the date of this Agreement and the Closing Date or termination date, each
of the
parties hereto shall continue to be bound by the terms and conditions of
that
certain Confidentiality Agreement dated February 15, 2008 between Company
and
Buyer. The terms and conditions of such Confidentiality Agreement shall survive
any termination of this Agreement.
10.13 Third
Party Beneficiaries.
Except
as otherwise specifically provided in Article VIII,
no
Person shall be a third-party beneficiary of the representations, warranties,
covenants and agreements made by any party hereto.
10.14 Further
Assurances.
From
time
to time after the Closing, at the request of any other party but at the expense
of the requesting party, the parties hereto shall execute and deliver any
such
other instruments of conveyance, assignment and transfer, and take such other
action as such requesting party may reasonably request in order to consummate
the transactions contemplated hereby.
10.15 Counterparts;
Facsimile Signatures.
This
Agreement may be executed in one or more counterparts, including by means
of
facsimile, electronic mail or similar means, each of which shall for all
purposes be deemed to be an original and all of which shall constitute the
same
instrument.
10.16 Waiver
of Jury Trial.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE PARTIES
TO
THIS AGREEMENT IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties have executed and delivered this Asset Purchase
Agreement as of the date first above written.
| |
Buyer:
|
|
| |
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AMNEAL
PHARMACEUTICALS OF NEW YORK,
LLC
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|
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By:
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/s/
Chirag Patel
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Name: Chirag
Patel
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Title:
President
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Company:
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INTERPHARM
HOLDINGS, INC.
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| |
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By:
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/s/
Peter Giallorenzo
|
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Name: Peter
Giallorenzo
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Title:
Chief Financial Officer
|
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|
|
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Majority
Shareholders (solely for purposes of
Sections 5.6, 5.8, 5.9 and
8.5(d)):
|
| |
|
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TULLIS-DICKERSON
CAPITAL FOCUS III, L.P.
|
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|
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By:
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Tullis-Dickerson
Partners III, L.L.C., its general partner
|
| |
|
|
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By:
|
/s/
Joan P. Newuscheler
|
| |
|
Name: Joan
P. Neuscheler
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Title:
Principal
|
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|
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AISLING
CAPITAL II, L.P.
|
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|
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By:
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AISLING
CAPITAL PARTNERS, LP, its General Partner
|
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|
|
| |
By:
|
AISLING
CAPITAL PARTNERS, LLC, its General Partner
|
| |
|
|
| |
By:
|
/s/
Dennis Purcell
|
| |
|
Name: Dennis
Purcell
|
| |
|
Title:
Senior Managing
Director
|
[SIGNATURE
PAGE TO ASSET PURCHASE AGREEMENT]
| |
Majority
Shareholders (solely for purposes of
Sections 5.6, 5.8, 5.9 and 8.5(d))
(continued):
|
| |
|
|
| |
RAJ
HOLDINGS I, LLC
|
| |
|
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By:
|
/s/
Manganlal K. Sutaria
|
| |
|
Name: Perry
Sutaria
|
| |
|
Title: Managing
Member
|
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|
By:
Manganlal K. Sutaria, attorney-in-fact
|
| |
|
|
| |
RAVI
HOLDINGS I, LLC
|
| |
|
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By:
|
/s/
Ravi Sutaria
|
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|
Name: Ravi
Sutaria
|
| |
|
Title:
Managing Member
|
| |
|
|
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P&K
HOLDINGS, LLC
|
| |
|
|
| |
By:
|
/s/
Manganlal K. Sutaria
|
| |
|
Name: Perry
Sutaria
|
| |
|
Title: Managing
Member
|
| |
|
By:
Manganlal K. Sutaria, attorney-in-fact
|
| |
|
|
| |
/s/
Manganlal K. Sutaria
|
| |
Maganlal
K. Sutaria
|
| |
|
|
| |
/s/
Manganlal K. Sutaria
|
| |
Perry
Sutaria
|
| |
By:
Manganlal K. Sutaria,
attorney-in-fact
|
[SIGNATURE
PAGE TO ASSET PURCHASE AGREEMENT]
| |
Company:
|
| |
|
|
| |
INTERPHARM,
INC.
|
| |
|
|
| |
By:
|
/s/
Peter Giallorenzo
|
| |
|
Name: Peter
Giallorenzo
|
| |
|
Title:
Chief Financial Officer
|
[SIGNATURE
PAGE TO ASSET PURCHASE AGREEMENT]
SCHEDULES
|
Schedule
2.1(a)
|
–
|
Acquired
Assets – Equipment
|
|
Schedule
2.1(b)
|
–
|
Acquired
Assets – Inventory
|
|
Schedule
2.1(c)
|
–
|
Acquired
Assets – Receivables
|
|
Schedule
2.1(d)
|
–
|
Acquired
Assets – Products
|
|
Schedule
2.1(g)
|
–
|
Acquired
Assets - ANDAs
|
|
Schedule
2.1(h)
|
–
|
Acquired
Assets – Assumed Contracts
|
|
Schedule
2.2
|
–
|
Excluded
Assets
|
|
Schedule
2.3(a)
|
–
|
Assumed
Liabilities – Capital Leases
|
|
Schedule
2.3(b)
|
–
|
Assumed
Liabilities – Trade Payables
|
|
Schedule
2.3(c)
|
–
|
Assumed
Liabilities – Pending Litigation
|
|
Schedule
2.7
|
–
|
Allocation
of Consideration Among
the Acquired Assets
|
EXHIBITS
|
Exhibit
A
|
–
|
Loan
and Security Agreement
|
|
Exhibit
B
|
–
|
Bill
of Sale
|
|
Exhibit
C
|
–
|
Facility
Purchase Agreement
|
|
Exhibit
D
|
–
|
Restrictive
Covenant Agreement
|
FIRST
AMENDMENT
TO
ASSET
PURCHASE AGREEMENT
THIS
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
(this
“Amendment”)
is
made this 2nd day of May, 2008 by and among (i)
Amneal Pharmaceuticals of New York, LLC, a Delaware limited liability company
(“Buyer”),
(ii)
Interpharm Holdings, Inc., a Delaware corporation, and Interpharm, Inc.,
a New
York corporation (collectively, “Company”),
and
(iii) the shareholders of Company indicated as “Majority
Shareholders” on
the signature
pages hereto (the “Majority
Shareholders”).
All
capitalized terms used in this Amendment and not otherwise defined in this
Amendment shall have the respective meanings ascribed to them in that
certain
Asset Purchase Agreement dated as of April 24, 2008 (the “Purchase
Agreement”)
by and
among the parties.
Recitals:
WHEREAS,
as an inducement not to exercise its termination rights pursuant to Section
7.1(e) of the Purchase Agreement, Buyer requires that Company agree to amend
certain terms and conditions of the Purchase Agreement, all on the terms
and
conditions set forth herein.
Agreement:
NOW,
THEREFORE, for
good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the
parties hereby agree as follows:
1. Modifications
of Purchase Agreement.
1.1 Modification
of Purchase Price and Base Cash Amount.
Section
2.5(a)
of the
Purchase Agreement is hereby deleted and replaced with the
following:
“(a) Amount
of Purchase Price.
In full
and complete consideration for the acquisition of the Acquired Assets, at
the
Closing Buyer shall (i) pay to Company the sum of Sixty One Million Six Hundred
Thousand Dollars ($61,600,000.00) (the “Base
Cash Amount”),
as
adjusted pursuant to Section
2.6
below
(the Base Cash Amount, as so adjusted, the “Closing
Cash Amount”),
(ii)
deliver to the Escrow Agent the Escrow Amount, and (iii) assume the Assumed
Liabilities as set forth in Section
2.3
hereof
(clauses (i)-(iii) collectively, the “Purchase
Price”).”
1.2 Modifications
to Company Indemnity Obligations.
Section
8.1
of the
Purchase Agreement is hereby modified to add the following new subsections:
“(vii)all
reasonable attorneys fees and disbursements or other Losses incurred by Buyer
and its Representatives in connection with any pending litigation against
the
Acquired Assets or the Business which is not set forth on Schedule
2.3(c)
(after
giving effect to any amendments to said schedule effected in accordance with
Section
2.3(c));
provided, however, that in the event that there are more than Two Hundred
Thousand Dollars ($200,000) of attorneys’ fee and disbursements, no amount no
amount in excess of Two Hundred Thousand Dollars ($200,000) shall be released
to
Buyer therefor without Company’s written consent, which consent shall not be
unreasonably withheld; and in the event that Company reasonably withholds
such
consent, then Company shall be obligated to provide, at Company’s sold cost and
expense, legal counsel reasonably acceptable to Buyer to represent Buyer
in
connection with any such pending litigation;
(viii) any
failure by any Employee or IP Contractor who has contributed to or participated
in the conception and development of Sellers Intellectual Property (that
is not
Licensed Intellectual Property) on behalf of Sellers to either (A) be and
have
been a party to an enforceable arrangement or agreement with Sellers in
accordance with applicable law that has accorded Sellers full, effective,
exclusive and original ownership of all tangible property and Intellectual
Property thereby arising, or (B) have executed appropriate instruments of
assignment in favor of Sellers as assignee that have conveyed to Sellers
effective and exclusive ownership of all tangible property and Intellectual
Property thereby arising;
(ix) any
brokers fees, commissions or similar payments to Greiner-Maltz Company of
Long
Island, Inc. or any its Affiliates with respect to the sale of the Facility
or
otherwise;
(x) any
failure by Company to pay
costs,
to the extent such payment is required by Section
6.1(b)
of the
Purchase Agreement, to
remedy
deficiencies which Buyer has notified Company (in accordance with Section
6.1(b)
of the
Purchase Agreement) would be an impediment to the transfer to Buyer of Company’s
Drug Enforcement Agency controlled substances Permit; or
(xi) any
costs
of
product
recalls, which recalls occur within one hundred eighty (180) days from the
Closing Date, for product lots which were manufactured prior to the Closing
Date.”
1.3 Additional
Covenants.
The
Purchase Agreement is hereby modified to add the following new Section
5.12:
“5.12. Additional
Covenants.
(a) Company
shall, prior to Closing and at Company’s sole cost, cause each of Buyer and
Amneal Pharmaceuticals, LLC to be added as additional insureds to Company’s tail
insurance coverage.
(b) Company
shall, not later than five (5) Business Days prior to Closing, take such
action
as may be necessary to dismiss with prejudice its first cause of action (titled
‘Rescission
of Contract Due to Fraudulent Misrepresentation/Concealment’)
in its
complaint filed November 2, 2007 in Interpharm,
Inc. v. Watson Laboratories, Inc.
(Index
No: 4600-CV-07, U.S. District Court, Eastern District of New York).
(c) Company
shall, prior to Closing and at Company’s sole cost, remove all Materials of
Environmental Concern (including, at the request of Buyer, hormonal and
controlled substances) from all Sellers Real Property, except that for purposes
of this Section 5.12(c) only, Inventory shall not be deemed Materials of
Economic Concern.”
1.4 Basket
and Ceiling.
Notwithstanding anything to the contrary in the Purchase Agreement or this
Amendment, Company’s indemnification obligations under clauses (vii) through
(xi) of Section
8.1
and, to
the extent arising from a breach of Section
5.12
of the
Purchase Agreement or Section 3 of this Amendment, under clause (ii) of
Section
8.1
shall be
subject to the Basket and the Ceiling.
1.5 EPA
Notice of Violation.
Section
6.2(q)
of the
Purchase Agreement is hereby amended to add the following at the end of the
first sentence:
“In
the
event that any violation raised by the U.S. Environmental Protection Agency
in
such notice also exists as a condition at any other Sellers Real Property,
Company shall have resolved, to Buyer’s reasonable satisfaction, all such
conditions at such other Sellers Real Property.”
1.6
Information
Statement; Public Announcement; SEC Filings.
The
first sentence of Section
5.10
of the
Purchase Agreement shall be deleted and replaced with the
following:
“Not
more
than 17 calendar days after the Signing Date, Company shall file with the
SEC an
Information Statement on Schedule 14C (the “Information Statement”) containing
the information required by the Exchange Act with respect to the Transaction
Written Consent and the transactions contemplated by this Agreement.”
1.7
Certain
Employee Arrangements.
Section
9.1(a)
of the
Purchase Agreement shall be deleted and replaced with the
following:
“Not
less
than fifteen (15) after the Signing Date, Buyer will provide to Company a
list
identifying the number of the Employees that will be offered employment (each,
a
“Specified
Employee”)
as
Buyer determines satisfy Buyer’s needs and hiring criteria (which shall be not
less than fifty percent (50%) of Sellers’ employees). Prior to (but conditioned
upon) the Closing, Buyer shall offer each of the Specified Employees engagement
or employment with Buyer. Other than the Specified Employees, Buyer shall
have
no obligation to engage or hire any Seller Employees.”
1.8
Amendment
to Real Estate Lease Agreement.
Section
9.5
of the
Purchase Agreement shall be deleted in its entirety.
1.9
Conditions
to Buyer’s Obligations – No Material Adverse Effect.
Section
6.2(j)
of the
Purchase Agreement shall be deleted and replaced with the
following:
“(j) No
Material Adverse Effect.
Since
the date of the Most Recent Balance Sheet , there shall not have been (i)
any
change resulting in a Material Adverse Effect, or
(ii)
any damage, destruction or loss affecting the assets, properties, business,
operations or condition of Company or any other Seller or the Business, whether
or not covered by insurance, which
could reasonably be expected to result in a Material Adverse Effect, or (iii)
any FDA Inspection which discloses items that could reasonably be expected
to
materially and adversely affect Buyer’s ability to manufacture at the Facility
or sell one or more Products which, individually or in the aggregate, have
resulted in revenues to the Company of in excess of $5 million in the twelve
months prior to the Closing and which have been FDA approved.”
1.10
Conditions
to Buyer’s Obligations – Tax Clearance Certificates.
Section
6.2(m) of the Purchase Agreement shall be deleted in its entirety.
1.11
Covenant
- Tax Clearance.
The
Purchase Agreement is hereby modified to add the following new Section
5.13:
“5.13
Tax
Clearance Certificates.
At
Company’s sole expense, it shall use its best efforts to deliver to Buyer Tax
Clearance Certificates from the New York Department of Taxation and Finance
by
the Closing, and, if not by such date, as soon as practicable
thereafter.”
2. Modifications
to Schedules.
2.1 Modifications
to Schedule 2.1(c).
Schedule
2.1(c)
to the
Purchase Agreement is hereby amended to add all receivables or other payment
obligations owed to Company by Leiner
Health
Products or its subsidiaries.
2.2 Modifications
to Schedule 2.3(c).
Schedule
2.3(c)
to the
Purchase Agreement is hereby deleted in its entirety and replaced with Schedule
2.3(c) hereto.
2.3 Allocation
of the Purchase Price.
Schedule
2.7
to the
Purchase Agreement is hereby deleted and replaced with the
following:
“Each
of
Company and Buyer covenants to endeavor to negotiate in good faith and use
its
diligent efforts to reach mutual agreement on the terms of this Schedule
2.7
at least
five (5) Business Days prior to the Closing Date.”
3. Additional
Covenants.
3.1
Transaction
Written Consent.
On or
before the date of signing of this Amendment, the Company shall have delivered
to Buyer executed copies of (i) a binding written consent approving this
Amendment and its execution and delivery, and of Company’s consummation of each
of the transactions contemplated hereby, signed by the holders of (A) a majority
of the outstanding shares of the Series A-1 Preferred Stock, (B) all of the
outstanding shares of the Series D-1 Preferred Stock, and (C) a majority
of the
outstanding shares of the Common Stock; and (ii) reasonable evidence as to
the
approval by Company’s Board of Directors of this Amendment and its execution and
delivery, and of Company’s consummation of each of the transactions contemplated
hereby.
3.2
Remediation
Plan.
Company
shall deliver to Buyer, within two (2) Business Days of the date of this
Amendment, a plan for remediation of all conditions that are required to
be
remedied under Section
6.2(q)
of the
Purchase Agreement for each of the Sellers Real Property, as amended by this
Amendment (the “Remediation
Plans”).
Buyer
and Company shall each endeavor to negotiate in good faith, within three
(3))
Business Days after receipt by Buyer of the Remediation Plans, any reasonable
changes requested by Buyer to the Remediation Plans. Upon the parties final
agreement as to the Remediation Plans, it will be annexed hereto as Exhibit
A
and
Sellers’ compliance with the Remediation Plans shall be deemed to satisfy all of
the conditions under Section
6.2(q)
of the
Purchase Agreement, as amended by this Amendment.
3.3
Connection
to Public Sewerage System.
Company
shall, within two (2) days of the date of this Amendment, at its sole expense,
deliver to Buyer all materials (including, without limitation, correspondences,
engineering details, reports, plans, studies, and contact information to
engineers and attorneys retained and/or used by Company) with respect to
or in
connection with the Company’s analysis, efforts and ability to connect with the
local sewage system for the Facility. Buyer shall have until 5:00 p.m. Eastern
time on May 16, 2008 to review said materials, contact the county and
appropriate municipalities and utility providers, retain and consult with
in-house and third party consultants, interview Company’s engineering staff and
its third party consultants and attorneys (and Company shall, within such
two
(2) day period, instruct such engineering staff, consultants and attorneys
to
openly discuss with Buyer and its representatives all of such materials and
their respective efforts and analysis in connection with such sewerage system
connection) to analyze and assess Buyer’s ability to obtain the applicable
permits for such sewage system connection, the timing thereof, capacity issues,
and feasibility. In the event that Buyer determines, in its reasonable
discretion, that it will be unable to obtain any such required permits, or
that
the sewage capacity required by Buyer for maximum utilization of the Facility
will be insufficient, or that the time within which it can obtain such permits
and construct the sewage system connection is unacceptable to Buyer, then
Buyer
may terminate the Purchase Agreement pursuant to Section 7.1(e) thereof (and
solely for purposes hereof, the Due Diligence Period shall be deemed to be
extended to May 16, 2008 at 5:00 p.m. Eastern time).
4. Miscellaneous.
Except
as amended pursuant to this Amendment, the Purchase Agreement (including
the
Schedules and Exhibits thereto) remains in effect in all respects. The
provisions of Article X of the Purchase Agreement, to the extent applicable,
are
hereby incorporated herein by reference.
[SIGNATURES
ON NEXT PAGE]
IN
WITNESS WHEREOF, the parties hereto have caused this First Amendment to Asset
Purchase Agreement to be executed by their respective officers thereunto
duly
authorized, as of the date first written above.
| |
Buyer:
|
| |
|
|
| |
AMNEAL
PHARMACEUTICALS OF NEW YORK, LLC
|
| |
|
|
| |
By:
|
/s/
Chirag Patel
|
| |
|
Name: Chirag
Patel
|
| |
|
Title:
President & Managing Member
|
| |
|
|
| |
Company:
|
| |
|
|
| |
INTERPHARM
HOLDINGS, INC.
|
| |
|
|
| |
By:
|
/s/
Peter Giallorenzo
|
| |
|
Name: Peter
Giallorenzo
|
| |
|
Title:
COO/CFO
|
| |
|
|
| |
INTERPHARM,
INC.
|
| |
|
|
| |
By:
|
/s/
Peter Giallorenzo
|
| |
|
Name: Peter
Giallorenzo
|
| |
|
Title:
COO/CFO
|
| |
|
|
| |
Majority
Shareholders:
|
| |
|
|
| |
TULLIS-DICKERSON
CAPITAL FOCUS III, L.P.
|
| |
|
|
| |
By:
|
Tullis-Dickerson
Partners III, L.L.C., its general partner
|
| |
|
|
| |
By:
|
/s/
Joan P. Neuscheler
|
| |
|
Name: Joan
P. Neuscheler
|
| |
|
Title:
Principal
|
| |
Majority
Shareholders (continued):
|
| |
|
|
| |
AISLING
CAPITAL II, L.P.
|
| |
|
|
| |
By:
|
AISLING
CAPITAL PARTNERS, LP, its General Partner
|
| |
|
|
| |
By:
|
AISLING
CAPITAL PARTNERS, LLC, its General Partner
|
| |
|
|
| |
By:
|
/s/
Dennis Purcell
|
| |
|
Name: Dennis
Purcell
|
| |
|
Title:
Senior Managing Director
|
| |
|
|
| |
RAJS
HOLDINGS I, LLC
|
| |
|
|
| |
By:
|
/s/
Bhupatlal. K. Sutaria
|
| |
|
Name: Bhupatlal.
K. Sutaria
|
| |
|
Title:
Manager
|
| |
|
|
| |
RAVIS
HOLDINGS I, LLC
|
| |
|
|
| |
By:
|
/s/
Bhupatlal. K. Sutaria
|
| |
|
Name: Bhupatlal.
K. Sutaria
|
| |
|
Title:
Manager
|
| |
|
|
| |
P&K
HOLDINGS I, LLC
|
| |
|
|
| |
By:
|
/s/
Perry Sutaria
|
| |
|
Name: Perry
Sutaria
|
| |
|
Title:
Manager
|
| |
|
|
| |
/s/
Maganlal K. Sutaria
|
| |
Maganlal
K. Sutaria
|
| |
|
| |
Perry
Sutaria
|
|
CONTRACT
OF SALE
INTERPHARM,
INC.
and
INTERPHARM
REALTY LLC
SELLER
and
KASHIV,
LLC
PURCHASER
FOR
PROPERTY LOCATED AT 50 HORSEBLOCK ROAD, YAPHANK, NEW YORK
DATED
April 24, 2008
CONTRACT
OF SALE
THIS
AGREEMENT (hereinafter referred to as this "Contract") made this 24th
day of
April, 2008, by and among INTERPHARM, INC., a New York corporation, and
INTERPHARM REALTY LLC, a New York limited liability company, having an office
at
75 Adams Avenue, Hauppauge, New York ("Seller"), and Kashiv, LLC, a Delaware
limited liability company, having an address at 209 McLean Boulevard, Paterson,
New Jersey 07504 ("Purchaser").
WHEREAS,
Seller, Interpharm Holdings, Inc. and certain of its shareholders (collectively
referred to as “Interpharm”) are the sellers under an Asset Purchase Agreement
of even date herewith and Amneal Pharmaceuticals of New York LLC is the
Purchaser, pursuant to which Agreement substantially all of Interpharm’s assets
(including the property referred to herein below) will be sold by Seller
and
certain of its liabilities will be assumed by Purchaser, said Asset Purchase
Agreement hereinafter referred to as the “Asset Agreement”.
NOW
THEREFORE, in consideration of the mutual covenants and agreements herein
contained and intending to be legally bound hereby, the parties agree as
follows:
1. Property.
Upon
and
subject to the following terms, covenants and conditions, Seller agrees to
sell
and convey to Purchaser, and Purchaser agrees to purchase from Seller, fee
simple title in and to all of the property of Seller consisting of approximately
38 acres of land located at 50 Horseblock Road, Yaphank, New York, (the "Land")
(as more particularly described in Exhibit
“A”
annexed
hereto), free and clear of all liens, encumbrances and exceptions to title
except for the Permitted Exceptions (as hereinafter defined):
(a) Fee
simple title in and to any and all streets, alleys, passages, easements,
rights
of way, ways, water, water courses, privileges, licenses, hereditaments,
and any
appurtenances and other rights and benefits belonging or in any way related
to
the Land.
(b) Fee
simple title in and to any buildings, structures, infrastructure, utility
lines,
drainage facilities, and other improvements (collectively, "Improvements"),
now
or hereafter located, placed, erected or constructed upon the Land, including
the building consisting of approximately 110,000 square feet of space, (the
"Building") as located on the Land.
(c) Good
and
marketable title in and to all machinery, apparatus, appliances, equipment,
fittings and fixtures now or hereafter attached or appurtenant to, or forming
a
part of, the Improvements or located upon and used in connection with the
maintenance and operation of the Property including, without limitation all
heating, lighting, plumbing, drainage, ventilating, air conditioning, exhaust,
pneumatic, mechanical, electrical, fire alarm, signage, and other systems
attached to, appurtenant to, forming a part of, or abutting the Property,
all as
more fully described on Schedule A attached hereto ("Equipment").
(d) All
of
Seller's right, title and interest, if any, in and to any land lying in the
bed
of any street, road, avenue, way or boulevard, open or proposed, in front
of or
adjoining the Land, and all right, title and interest of Seller in and to
any
award made or to be made in lieu thereof and in and to any award for damage
to
the Land or the Improvements by reason of any change of grade in any street,
road, avenue, way or boulevard; and Seller covenants to execute and deliver
to
Purchaser at the Closing (as hereinafter defined) or thereafter, on demand,
all
proper instruments for the conveyance of such title and the assignment and
collection of such award.
(e) All
of
Seller's right, title and interest in and to any consents, authorizations,
variances, waivers, licenses, permits and approvals from any Federal, state,
county, municipal or other governmental or quasi-governmental agency,
department, board, commission, bureau or other entity or instrumentality
in
respect of the Property, (as hereinafter defined) building, and zoning
heretofore held by or granted to Seller, including without limitation, the
permanent certificate(s) of occupancy (collectively, "Approvals").
(f) The
property rights described in Sections 1 (a)-(e) hereof are collectively referred
to herein as the “Property”.
2. Purchase
Price.
The
purchase price ("Purchase Price") for the Property to be paid by Purchaser
to
Seller at Closing upon receipt of the Closing Documents (as hereinafter
described) shall be TWENTY MILLION DOLLARS ($20,000,000) to be paid
at
Closing by certified check, bank cashier’s
check or
wire transfer of funds
to
Seller’s order.
3. The
closing ("Closing") shall be held at the offices of Budd Larner, P.C., 150
John
F. Kennedy Parkway, Short Hills, New Jersey at 10 a.m. on June 16, 2008 (such
date or the date to which the Closing may be advanced or adjourned as
hereinafter provided or by agreement of the parties, being herein called
the
"Closing Date"). Notwithstanding anything to the contrary contained herein,
the
sale of the Property shall be closed contemporaneously with the closing of
the
Asset Agreement unless the Closing Date is extended in accordance with the
terms
hereof.
4. Representations,
Warranties and Covenants of Seller.
In
order
to induce Purchaser to enter into this Contract and to perform its obligations
hereunder, Seller represents, warrants and covenants to and agrees with
Purchaser that:
(a) Authorization
of Seller.
Seller
has full power and authority to (i) execute and deliver this Contract and
all
other documents executed and delivered by Seller (both contemporaneously
herewith and at the Closing hereunder) in connection with the sale of the
Property contemplated in this Contract and (ii) perform all of its obligations
arising under or in connection with this Contract. Seller represents that
all
other documents executed and delivered by Seller (both contemporaneously
herewith and at the Closing hereunder) in connection with the sale of the
Property have been (or will be, if executed at Closing) duly executed and
delivered and constitute the legal, valid and binding obligations of Seller,
enforceable in accordance with their respective terms and provisions, except
that such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws then in effect and affecting creditors’ rights
generally. No consent or approval of any person, firm, corporation or
governmental commission, board, bureau or other administrative agency is
required to be obtained by Seller in order for Seller to enter into this
Contract or any such other document or to fully perform all of its obligations
under this Contract or under any such other document, except as expressly
provided herein.
(b) Title
to the Property.
(i) Seller
is
the sole owner of the Property and has not assigned, pledged, transferred
or
otherwise encumbered its interest therein except for the exceptions which
are
listed on Exhibit "B" annexed hereto (the "Permitted Exceptions"). Seller
has,
is able to and will transfer and deliver to Purchaser, fee simple, good,
marketable and Insurable Title (as hereinafter defined) to the Property,
by
bargain and sale deed in recordable form, free of liens, claims, encumbrances,
rights-of-way, easements, restrictions, reservations, covenants, conditions,
claims, liabilities, charges, reversions, options or other agreements and
any
other matter affecting title except the Permitted Exceptions, which title
shall
include such state of facts as an accurate survey will disclose, provided
the
same does not prohibit the use of the Property for currently zoned purposes.
The
words "Insurable Title" and "Insurable" as used in this Contract are hereby
defined to mean title which may be insured at standard rates by any reputable
title insurance company authorized to do business in the State of New York
and
selected by Purchaser (the "Title Company") without exception other than
the
Permitted Exceptions and standard title policy exceptions.
(ii) The
Property is in good operating condition and repair, ordinary wear and tear
excepted, and is suitable for business operations as presently conducted
and as
proposed to be conducted thereon. There is no condition or defect of the
Property thereon that could materially affect its use or operation thereof
as
described herein. Seller enjoys peaceful and undisturbed possession of the
Property. Seller has valid easements and rights of way necessary to conduct
its
operations thereon as then are currently conducted and following the
consummation of the Closing, such easements and rights of way will remain
valid
and in full force and effect. No options have been granted by Seller to others
to purchase, lease or otherwise acquire any interest in the Property or any
part
thereof. Seller has the exclusive right of possession of the Property, and
on
and as of the Closing, will have vacated the Property.
(iii) To
the
Knowledge (as hereinafter defined) of Seller, all aspects of the Property
and
its present use, occupancy and operation thereof are in compliance, in all
material respects, with all laws and restrictive covenants of record, and
there
has not been any proposed change thereto that would affect the Property or
its
use, occupancy or operation. Seller has not received any written or oral
communications alleging any conflict or dispute relating to the Property
or the
activities thereon. To the Knowledge of Seller, no portion of the Property
is
subject to any classification, designation or preliminary determination of
any
government authority or pursuant to any law that restrict its use, development,
occupancy or operation. Neither Seller nor any other person have caused any
work
or Improvements to be performed upon or made to the Property for which there
remains outstanding payment obligation that would or might serve as the basis
for any lien in favor of the person who performed the work.
(iv) All
requisite certificates of occupancy and other permits and approvals required
to
be obtained by Seller with respect to the Property and the use, occupancy
and
operation thereof have been obtained and paid for and are currently in effect
and allow Sellers to operate the Property as presently and proposed to be
conducted.
(v) From
and
after the date hereof and until Closing or the earlier termination of this
Contract, Seller will not sell, assign, lease or create any right, title
or
interest whatever in or to the Property or create or permit to exist any
lien,
encumbrance, charge, or other exception to title thereon (except for the
Permitted Exceptions).
(c) No
Violations, Compliance with Laws.
(i) As
to
Seller, neither the execution, nor the delivery of, nor the performance under
this Contract or any other document executed and delivered by it (both
contemporaneously herewith and at the Closing hereunder) in connection with
the
sale of the Property hereunder is precluded by, will conflict with, result
in a
breach of or violate, any provision of (x) any existing Federal, state, local
or
other governmental or quasi-governmental law, statute, ordinance, restriction,
rule or regulation, (y) any judgment, order, decree, writ or injunction of
any
court or governmental department, commission, board, bureau, agency or
instrumentality applicable to Seller or any other person or entity with respect
to the Property, or (z) Seller’s Certificate of Incorporation or
By-laws.
(ii) Seller
has not received any verbal or written notice of any condition which may
give
rise to any violation of any law, rule, regulation, order or ordinance
applicable to the Property now in effect. Seller has not received notice
or
request from any insurance company or board of fire underwriters, requesting
the
performance of any work or alteration with respect to the Property now in
effect.
(d) Condemnation.
There
has
been no actual nor, to the Knowledge of Seller, any threatened condemnation
or
taking by eminent domain of any of the Property or any real property proximate
to the Land. Seller will give Purchaser prompt notice of any actual or, if
known
to Seller, any threatened condemnation of any of the Property or any land
proximate to the Land.
(e) Possession.
No
other
person, firm, corporation or entity has any right or option to acquire lease,
use or occupy all or any portion of the Property.
(f) Litigation.
Seller
has no Knowledge of any pending or threatened litigation affecting the Property,
or Seller's interest in the Property, and that Seller is not a party to any
litigation affecting the Property except for claims, if any, covered by policies
of liability insurance, for which carriers shall have undertaken the defense
thereof.
(g) Environmental.
(i) Except
as
set forth on Schedule “C” attached hereto, the Property is not presently, and to
the Knowledge of Seller after due inquiry and investigation, has never been
used
for the generation, manufacture, storage, treatment, discharge or disposal
of
Hazardous Materials (as hereinafter defined); and
(ii) During
the occupancy and operation of the Property by Seller, and, to the Actual
Knowledge of Seller, prior to Seller’s occupancy or operation, no release, leak,
discharge, spill, disposal, or emission of any Hazardous Materials has occurred
in, on or under the Property in quantity or manner that violates or requires
further investigation or remediation under Environmental Requirements;
and
(iii) Seller
does not use, treat, store, dispose or transport any Hazardous Materials.
There
is no pending or, to the Actual Knowledge of Seller, threatened litigation
or
administrative proceeding or investigation (whether civil, criminal or
administrative) concerning the use of the Property involving any Hazardous
Materials or Environmental Requirements. To the Knowledge of Seller, there
is no
material quantity of friable ACM within the Property, and there are no
above-ground or underground storage tank systems located at the
Property.
(iv) There
is
no pending, or to the Knowledge of Seller, threatened claim, action, complaint,
notice of violation or proceeding by any governmental authority or third
party
respecting the Property arising out of any violation or alleged violation
of any
Environmental Law; and
(v) To
the
Knowledge of Seller, the Property is in compliance with all Environmental
Laws.
(vi) The
execution and delivery of this Contract by Seller and the consummation by
Seller
of the transactions contemplated hereby will not affect the validity or require
the transfer of any permits under Environmental Requirements and will not
require notification, registration, reporting, filing, investigation or
remediation under any Environmental Requirement, including without limitation,
any environmental transfer law.
(vii) As
used
in this paragraph 4(g), the term “Environmental Law” shall mean and include
CERCLA, 42 U.S.C. 9601, et
seq.,
RCRA 42
U.S.C. 6901, et
seq.,
all
other similar existing and future federal, state and municipal statutes and
ordinances governing the environment, all as amended from time to time and
all
rules and regulations promulgated thereunder. The term “Hazardous Materials”
shall mean and include asbestos, polychlorinated biphenyls, petroleum products
and any other hazardous or toxic material, wastes and substances which are
defined as such in any Environmental Law.
(h) Bankruptcy.
Seller
has not filed any petition in connection with any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any
law relating to bankruptcy or insolvency relating to its business operations,
nor has any such petition been filed against Seller. No general assignment
of
property of Seller has been made for the benefit of creditors, and no receiver,
master, liquidator or trustee has been applied for or appointed for the Seller
or any of its properties, including the Property. Prior to the Closing, Seller
shall not voluntarily file or enter into any bankruptcy proceeding or
liquidation, convey a meeting of its creditors or have a receiver appointed
over
all or part of its assets, or take any similar action in consequence of its
debt.
Notwithstanding
anything to the contrary in the Contract, the representations, warranties
and
covenants of Seller set forth in this Contract shall survive the Closing
and
shall terminate on the one (1) year anniversary of the Closing.
As
used
in this Section 4, “Knowledge” and “Actual Knowledge” shall mean any fact,
circumstance, event or other matter that (i) any of the officers or directors
of
the Seller actually knows (hereinafter referred to as “Actual Knowledge”), or
(ii) any of the foregoing parties should reasonably know in the normal discharge
of his or her assigned duties and responsibilities, and “Environmental
Requirements” means all Environmental laws, documents, judgments, decrees,
orders, agreements and other restrictions and requirements (whether now or
hereafter in effect) of any governmental authority relating to the regulation
of, imposing standards of conduct or liability regarding, or protection of,
human health and safety (including, without limitation, employee health and
safety), public welfare, natural resources, conservation, the environment,
or
the storage, treatment, disposal, transportation, handling, or other management
of Hazardous Materials.
5.
Assignment;
Assignment of Mortgage.
(a) Purchaser
shall have the right to assign this Contract without the prior written consent
of Seller. Purchaser shall notify Seller of any assignment no later than
two (2)
days prior to Closing.
(b) Seller
shall, upon request of Purchaser, use commercially reasonable efforts to
cause
the holder of the existing mortgage(s) encumbering the Property to assign
such
mortgage(s) to Purchaser’s lender at Closing. Purchaser shall pay any and all
costs in connection herewith. The amount paid by or on behalf of Purchaser
to
the holder(s) of such mortgage(s) shall be deemed a payment on account of
the
Purchase Price. The holder(s) of such existing mortgage(s) shall comply with
Section 274-a of the Real Property Law.
(a) As
conditions precedent to Purchaser's obligation to purchase the Property,
(unless
waived in whole or in part by Purchaser in writing), (i) all of the
representations and warranties of Seller set forth in this Contract shall
be
true and correct as of the Closing Date with the same force and effect as
if
made on such date, (ii) that the closing under the Asset Agreement occurs
concurrently with the sale of the Property and (iii) all of the covenants
and
agreements of Seller set forth in this Contract shall have been observed
and
complied with in full on or before the Closing Date (unless such observance
or
compliance is not required by the terms of such covenants prior to the Closing),
including, without limitation, the delivery of all documents required to
be
delivered by Seller pursuant to this Contract.
(b) As
conditions precedent to Seller's obligation to sell the Property, (unless
waived
in whole or in part by Seller in writing), (i) all of the representations
and
warranties of Purchaser set forth in this Contract shall be true and correct
as
of the Closing Date with the same force and effect as if made on such date,
(ii)
that the closing under the Asset Agreement occurs concurrently herewith and
(iii) all of the covenants and agreements of Purchaser set forth in this
Contract shall have been observed and complied with in full on or before
the
Closing Date (unless such observance or compliance is not required by the
terms
of such covenant prior to the Closing), including, without limitation, the
delivery of all documents required to be delivered by Purchaser pursuant
to this
Contract.
7. Contingencies.
This
Contract is expressly subject to the satisfaction of the following conditions
and contingencies:
(a) Title
Examination.
Purchaser shall undertake within thirty (30) days after the execution of
this
Contract to obtain a title commitment and report and shall have instructed
the
title company to forward a copy of the title commitment to Seller’s counsel, in
accordance with paragraph 8 (b) hereof. If Purchaser shall not object to
matters
affecting title within thirty (30) days of the date hereof, the condition
of
title set forth in the report shall be deemed accepted by Purchaser thereby
waiving any title objections, excepting title objections which may arise
after
the thirty (30) day period.
(b) Intentionally
Omitted.
(c) Due
Diligence Investigation.
Purchaser shall have a period until April 30, 2008 (the “Due Diligence Period”),
to conduct (directly and through its Representatives) any and all legal,
regulatory, financial, business, environmental and other investigations,
evaluations and inspections regarding the Property (the “Due Diligence”) as
desired by Purchaser (including, but not limited to, a physical inspection
of
the Land, the Improvements, the Equipment, a “Phase I” environmental inspection,
an inspection of the title and survey, financing, an investigation of all
Approvals and specific zoning and land use ordinances and investigation of
all
other facts and circumstances necessary for Purchaser to determine whether
or
not the Property is suitable for Purchaser’s intended purposes. If Purchaser is
not satisfied, in it sole discretion, with the results of its Due Diligence,
it
may exercise its termination rights upon the conditions and subject to the
limitations set forth herein.
Purchaser
further agrees that, except for pre-existing conditions, it shall indemnify,
defend and save harmless Seller from and against any and all claims or
liabilities incurred in connection with the making of said inspections.
Purchaser shall repair and restore any damage to the Property incurred in
connection with the performance of said investigations.
(d) Termination.
In the
event of the failure of any of the contingencies hereinabove referred to
or any
of the conditions set forth in Section 6.2 of the Asset Agreement, Purchaser
shall either (i) terminate the within Contract or (ii) waive any such condition
and seek specific performance of this Contract, if required.
(e) Delivery
of Documents to Purchaser.
Within
one (1) day of the execution of this Contract, Seller shall deliver to Purchaser
building plans, site plans, environmental and engineering studies/reports,
property operating statements, back title policy and survey and any other
relevant information and documentation pertaining to the Property which are
in
Seller’s possession. If Closing does not take place, Purchaser shall promptly
return all such materials to Seller.
8. Conditions
Precedent to Closing. The
obligation of Purchaser to purchase the Property and to perform its obligations
hereunder is expressly conditioned on the satisfaction at Closing of each
of the
following conditions precedent (any one or more of which may be waived in
whole
or in part by Purchaser, at Purchaser's option):
(a) Performance
of the terms and conditions of paragraph 7.
(b) Delivery
to Purchaser of a preliminary title binder issued by the title insurance
company
selected by Purchaser, at Purchaser's sole expense, together with copies
of all
documents constituting exceptions to title. If the title binder reflects
any
defects or objections, other than Permitted Exceptions, then Seller shall
have
twenty (20) days after receipt of the title binder from Purchaser or the
Title
Company within which to cure or remove any such defects or objections and
have a
new title binder issued and Seller shall take such action during such twenty
(20) day period as shall be necessary to cure or remove any such defects
or
objections and to have a new title binder issued to Purchaser. However, the
period of time to cure shall be extended if it is reasonable to conclude
that
Seller will require more than twenty (20) days to cure the defect and Seller
has
demonstrated a good faith effort to start to remove the defect. Any such
objection which can be cured at the Closing by payment of funds may be so
cured
by Seller at the Closing. If such defects or objections are not cured or
removed
to the satisfaction of Purchaser within said twenty (20) day period, or any
agreed upon extension thereto, then Purchaser may elect to accept such title
as
Seller can convey, without abatement, upon payment of the Purchase Price
less
the amount of any liens or encumbrances of definite or ascertainable amount
which Seller is obligated to pay and discharge.
(c) Closing
of the Asset Agreement simultaneous with the closing of this
Contract.
9. Seller's
and Purchaser's Obligations at Closing.
(a) At
the
Closing, Seller will:
(i) deliver
to Purchaser the customary Bargain and Sale Deed with covenants against
grantor's acts duly executed and acknowledged so as to convey to Purchaser
fee
simple title in and to the Property,
and
such other documents as may be required to comply with the terms and conditions
of this Contract and the reasonable requirements of Purchaser's title insurance
company.
(ii) provide
for payment of all outstanding liens, mortgages or other monetary encumbrances
which are liens against the Property which payment shall be made through
the
Title Company or Purchaser’s attorney out of the proceeds to be paid at
Closing.
(iii) deliver
all additional documents reasonably required by the Title Company or Purchaser's
attorney
(iv) deliver
to Purchaser original Closing Statement setting forth the Purchase Price
and the
prorations between the parties.
(v)
deliver
to Purchaser a certification that Seller is not a “foreign person” within the
meaning of Section 1445 of the Internal Revenue Code, as amended, and
regulations promulgated thereunder.
(b) At
the
Closing, Purchaser will
(i) pay
the
Purchase Price due hereunder in accordance with the provisions of this Contract.
(ii) deliver
all documents reasonably required to effectuate the purposes of this
Contract.
(iii) deliver
to Seller an original Closing Statement setting forth the Purchase Price
and the
prorations between the parties.
10. Fees
and Expenses.
Each
party will pay its own fees and expenses of counsel in connection with the
purchase and sale of the Property.
11. New
York State Real Property Transfer Tax and Recording Fees.
New
York
State Real Property Transfer Tax
with
respect to the sale of the Property pursuant to this Contract shall be paid
by
Seller. Purchaser shall be solely responsible for the recording fees of the
deed. Purchaser shall pay the Peconic Tax, if applicable.
12. Prorations.
At
Closing there shall be adjusted and/or prorated between the parties, the
following:
(a) Taxes,
water and sewer charges, assessments, charges, fees, levies and impositions
constituting a lien. unconfirmed assessments for which work has been completed
prior to the date of execution of this Contract, but not yet assessed, shall
be
the obligation of Seller for which proper assessment shall be taken and held
by
the Title Company if the same shall be effective.
(b) The
parties shall have utility meters read the day of Closing and Seller shall
be
responsible for paying all utility bills which accrue against the Property
prior
to the date of Closing and Purchaser shall be required to pay all utility
bills
accruing against the Property subsequent to the date of Closing. Purchaser
shall, as of the day prior to the date of Closing, post with each utility
company, such deposit as each such utility company shall require, to the
end
that Seller's utility deposits shall be refunded to Seller following the
Closing, after appropriate charge for Seller's utility bills.
13. Indemnification.
(a) Seller
agrees to indemnify and hold Purchaser harmless from, against and in respect
of
any and all losses, damages, liabilities, obligations, fines, penalties,
costs
and expenses, including, but not limited to, reasonable attorneys fees and
environmental expert fees (collectively “Losses”) suffered, sustained, incurred
or required to be paid by Purchaser by reason of:
(i) any
representation or warranty made by Seller in or pursuant to this Contract
being
untrue or incorrect in any material respect; or
(ii) any
failure by Seller to observe or perform its covenants and agreements set
forth
in this Contract.
(b) Except
to
the extent set forth in the next sentence, Seller will not have any liability
under the indemnity provisions of this Contract with respect to a particular
matter unless (i) Purchaser has given Seller a written notice setting forth
in
reasonable detail the specific nature and estimated amount of the Losses
(the
“Claim Notice”) prior to the time that the representations, warranties,
covenants or agreements which are the basis for such indemnification terminate
pursuant to paragraph 4(i) and, (ii) in addition, if such matter arises out
of a
third party suit, action, investigation, proceeding or claim, such Claim
Notice
is given promptly, but in any event within thirty (30) days after Purchaser
is
given notice of the claim or the commencement of the suit, action, investigation
or proceeding. Notwithstanding the preceding sentence, failure of Purchaser
to
give a Claim Notice hereunder shall not release Seller from its obligations
under this paragraph 13, except to the extent Seller is materially prejudiced
by
such failure to give such Claim Notice.
(c) (i) Upon
receipt of Claim Notice of any third party suit, action, investigation, claim
or
proceeding for which indemnification might be claimed by Purchaser, Seller
shall
be entitled to defend, contest or otherwise protect against any such suit,
action, investigation, claim or proceeding at its own cost and expense, and
Purchaser must reasonably cooperate in any such defense or other action.
Purchaser shall have the right, but not the obligation, to participate at
its
own expense in defense thereof by counsel of its own choosing, but Seller
shall
be entitled to control the defense unless Purchaser has relieved Seller from
liability with respect to the particular matter or Seller fails to assume
defense of the matter.
(ii) In
the
event Seller shall fail to defend, contest or otherwise protect in a timely
manner against any such suit, action, investigation, claim or proceeding,
Purchaser shall have the right, but not the obligation, thereafter to defend,
contest or otherwise protect against the same and make any compromise or
settlement thereof and recover the entire cost thereof from Seller including,
without limitation, reasonable attorneys’ fees, disbursements and all amounts
paid as a result of such suit, action, investigation, claim or proceeding
or the
compromise or settlement thereof; provided,
however,
that
Purchaser must send a written notice to Seller of any such proposed settlement
or compromise, which settlement or compromise Seller may reject within thirty
(30) days of receipt of such notice. Failure to reject such notice within
such
thirty (30) day period shall be deemed an acceptance of such settlement or
compromise. Consent of Seller to such proposed settlement or compromise may
not
be unreasonably withheld, delayed or conditioned. Purchaser shall have the
right
to effect a settlement or compromise over the objection of Seller; provided,
that if Seller is contesting such claim in good faith or has assumed the
defense
of such claim from the other party or waives any right to indemnity therefore
unless consent of Seller to such proposed settlement or compromise was
unreasonably withheld, delayed or conditioned.
(iii) If
Seller
undertakes the defense of such matters, then Purchaser shall not, so long
as
Seller does not abandon the defense thereof, be entitled to recover from
Seller
any legal or other expenses subsequently incurred by Purchaser in connection
with the defense thereof other than the reasonable costs of investigation
undertaken by such party with the prior written consent of Seller.
(iv) The
parties shall cooperate with each other in the defense of any suit, action,
investigation, proceeding or claim by a third party, shall keep each other
informed of all settlement negotiations with third parties and the progress
of
any litigation and, during normal business hours, shall afford each other
access
to their books and records and employees relating to such suit, action,
investigation, proceeding or claim and shall furnish each other all such
further
information that they have the right and power to furnish as may reasonably
be
necessary to defend such suit, action, investigation, proceeding or
claim.
(d) In
the
case of a claim for indemnification hereunder that is not a third party claim
covered by paragraph 13(c) hereof, upon the Claim Notice having been given
to
Seller, it shall have thirty (30) days in which to notify Purchaser in writing
(the “Dispute Notice”) that the amount of the claim for indemnification is in
dispute, setting forth in reasonable detail the basis of such dispute. In
the
event that a Dispute Notice is not given to Purchaser within the required
thirty
(30) days, Seller shall be obligated to pay Purchaser the amount set forth
in
the Claim Notice within sixty (60) days after the date that the Claim Notice
had
been given to Seller. In the event that a Dispute Notice is timely given
to
Purchaser, the parties hereto shall have thirty (30) days to resolve any
such
dispute. In the event that such dispute is not resolved by such parties within
such period, the parties shall have the right to pursue all available remedies
to resolve such dispute.
(e) Notwithstanding
the foregoing, Seller shall only be responsible to indemnify Purchaser for
damages to the extent the aggregate of all Claims made by Purchaser hereunder
and pursuant to the Asset Agreement exceed $250,000 (the “Basket”) and are less
than $3,500,000 (the “Ceiling”); provided, however, that any claim hereunder
shall be satisfied only from the Escrow Fund established pursuant to the
Asset
Agreement. The procedure for the parties to determine the amount of damages
to
be paid to Purchaser is set forth in Article 8 of the Asset
Agreement.
14. Broker.
Each
of
Purchaser and Seller represents and warrants to the other that
no real
estate broker has been involved with the negotiation and consummation of
the
sale of the Property. Purchaser and Seller each agrees to indemnify each
other
from any claims or liabilities asserted by any real estate broker alleging
participation in the purchase and sale of the property and claiming authority
from the indemnifying party.
15. Risk
of Loss.
(a) In
the
event of condemnation or casualty to the Property between the date hereof
and
the Closing Date, the same shall affect the rights and obligations of the
parties hereunder as hereinafter provided. If, prior to the Closing Date,
all or
any portion of the Property is condemned, taken by eminent domain, damaged
by
fire or by any other cause of any nature, Seller shall promptly give Purchaser
notice of such taking or damage. In the event of condemnation, Purchaser
shall
have the right at its election to take title subject to the claim of Seller
as
to the condemnation award or in lieu thereof, to terminate the Contract.
Such
decision shall be made within thirty (30) days of Seller's notice. In the
event
of casualty or damage, if the cost of restoration shall be less than TWO
HUNDRED
FIFTY THOUSAND AND 00/100 DOLLARS ($250,000.00), Seller shall undertake to
restore the Property and Improvements to the condition required to be delivered
under the terms and conditions of this Contract and the Closing Date shall
be
extended for such reasonable time as may be required to effectuate restoration.
If the cost of restoration shall exceed TWO HUNDRED FIFTY THOUSAND AND 00/100
DOLLARS ($250,000.00), then either party shall have the right to terminate
this
Contract within forty five (45) days from the date of such fire or casualty,
provided that if Seller elects to terminate this Contract, Purchaser shall
have
the right to keep this Contract in full force and effect by agreeing to proceed
to purchase the Property and to accept an assignment of the insurance proceeds
payable to Seller in connection with such fire or casualty. Seller shall
advise
Purchaser in writing within fifteen (15) days after said fire or casualty
whether or not the cost to restore will exceed TWO HUNDRED FIFTY THOUSAND
AND
00/100 DOLLARS ($250,000.00) as shall be evidenced by the written opinion
of an
AIA architect licensed to practice in the State of New York.
(b) Purchaser
reserves the right, if Seller terminates this Contract as provided in paragraph
15(a) above, to elect to close title without abatement of Purchase Price,
subject to assignment of Seller to Purchaser of Seller's right, title and
interest in and to any claims Seller may have under its insurance policies,
or
to deduct from the Purchase Price any sums received by Seller in settlement
of
the casualty claim; provided, Purchaser gives Seller fifteen (15) days notice
of
such election.
16. Notices.
All
notices, consents, demands, waivers, Approvals and other communications made
hereunder or in connection herewith shall be in writing and shall be given
by
hand delivery or by mailing the same addressed to the party for whom it is
intended by certified or registered mail, return receipt requested, postage
prepaid, or by recognized overnight delivery service (such as Federal Express),
addressed as follows:
|
To
Seller:
|
|
Interpharm,
Inc.
|
| |
|
Interpharm
Realty LLC
|
| |
|
75
Adams Avenue
|
| |
|
Hauppauge,
New York 11788
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| |
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Attn:
Mr. Peter Giallorenzo
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Fax#
(631) 656-1009
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| |
|
|
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with
an additional copy to:
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Guzov
Ofsink LLC
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600
Madison Avenue
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| |
|
New
York, New York 10022
|
| |
|
Attn:
Darren L. Ofsink, Esq.
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Fax#
(212) 688-7273
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| |
|
|
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To
Purchaser:
|
|
Kashiv,
LLC
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| |
|
209
McLean Boulevard
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| |
|
Paterson,
New Jersey 07504
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|
Attn:
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| |
|
Fax
#
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with
an additional copies to:
|
|
Budd
Larner, P.C.
|
| |
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150
John F. Kennedy Parkway
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Short
Hills, New Jersey 07078
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| |
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Attn:
Henry A. Larner, Esq.
|
| |
|
Fax
# (973) 379-7734
|
|
and
|
|
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| |
|
Tarsadia
Hotels
|
| |
|
620
Newport Center Drive Fourteenth Floor
|
| |
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Newport
Beach, CA 92660
|
| |
|
Attn:
Edward Coss, Executive Vice President
|
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|
and
General Counsel
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|
Facsimile#
(949) 610-8222
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Either
party may designate by notice to the other given as hereinabove provided
a new
address to which notices shall thereafter be delivered or mailed. Notices
shall
be effective upon the earlier to occur of receipt or refusal of
delivery.
17. Further
Documents.
Each
party to this Contract agrees to execute, acknowledge and deliver or cause
to be
delivered, such other deeds, assignments, affidavits, certificates and other
instruments and documents as may be reasonably necessary and required by
the
other party from time to time to confirm and carry out the intent and purpose
of
this Contract and the performance of each party's obligations under the terms
of
this Contract, in such form as shall be reasonably satisfactory to counsel
for
both parties.
18. Benefits
and Obligations; No Third Party Beneficiary.
This
Contract shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Notwithstanding anything to
the
contrary contained herein, no party other than the parties hereto or their
respective successors and assigns shall have any right or benefit herein,
including, without limitation, the right to insist upon or enforce against
either Seller or Purchaser the performance of all or any of their respective
obligations hereunder and no such third party shall be deemed to have received
any benefit as a result of any of the provisions of this Contract.
19. Miscellaneous.
(a) This
Contract, including all exhibits and schedules hereto, together with all
other
documents delivered in connection herewith, contains the entire agreement
between the parties hereto with respect to the Transaction and supersedes
all
prior understandings, if any, with respect thereto. If any term or provision
of
this Contract or any application thereof shall be invalid or unenforceable,
the
remainder of this Contract and any other application thereof shall not be
affected thereby. This Contract may not be modified, terminated or amended
nor
any of its provisions waived except by a written instrument signed by the
party
to be charged or by its agent duly authorized in writing. The captions and
headings used in this Contract are for convenience of reference only and
shall
not affect the construction to be given to any of the provisions
hereof.
(b) This
Contract shall be construed in accordance with the laws of the State of
New
York,
and neither it nor any memorandum of it shall be recorded.
(c) This
Contract may be executed in any number of counterparts, each of which shall
be
deemed to be an original, and all of which counterparts shall constitute
one and
the same Contract.
20. Remedies.
(a) In
the
event Purchaser shall default or refuse to close title except for any reason
permitted hereunder or due to a default of Seller, then and in that event,
Seller shall have the right to commence a suit for specific
performance.
(b) In
the
event Seller shall default and refuse to close title except for any reason
permitted hereunder or due to a default of Purchaser, Purchaser shall have
the
right to either (i) commence a suit for specific performance and if successful,
shall also be entitled to all Purchaser’s costs and expenses, including, without
limitation, reasonable attorneys’ and experts’/consultants’ fees; provided,
however, in the event specific performance is unavailable, Purchaser shall
be
entitled to bring suit for all damages, including reasonable attorneys’ fees,
experts’ and consultants’ fees suffered by reason of such failure and all of
Purchaser’s actual costs and expenses in connection with the purchase of the
Property or (ii) terminate this Contract, in which case Seller shall reimburse
Purchaser for all costs associated with its Due Diligence Investigation pursuant
to paragraph 7 hereof and the parties hereunder shall have no further
obligations or liabilities, one to the other with respect to the
Property.
21. Bind
and Inure.
This
Contract shall be binding upon the parties hereto and their successors and
assigns.
22. Tax
Free Exchange.
(a) It
is
mutually understood and agreed by and between Seller and Purchaser that
Purchaser shall have the right to effectuate a like-kind exchange under Section
1031 of the Internal Revenue Code of 1986 (“§1031”), as amended, and the
Regulations promulgated thereunder (“§1031 Exchange”), in connection with the
subject transaction. Seller agrees to fully cooperate and execute and deliver
all documents necessary to accomplish the §1031 Exchange for Purchaser including
but not limited to, delivery of escrow instructions, as appropriate, consenting
to Purchaser’s assignment of certain rights to a “qualified intermediary” (as
defined in §1031) for the limited purpose of complying with §1031, and the
execution thereof.
(b) Without
limiting the foregoing, Purchaser agrees that (a) it shall be responsible
for
all costs associated with its §1031 Exchange, and that Seller shall not be
required to incur any additional cost, expense, or liability of any kind
for the
purpose of effectuating a §1031 Exchange for Purchaser; (b) Purchaser shall
indemnify and hold Seller harmless from and against any loss, cost, damage,
expense or other liability (including reasonable attorney’s fees) that Seller
may incur or suffer in the performance of its obligations under this paragraph
22; (c) no assignment by Purchaser to a “qualified intermediary” for purposes of
complying with §1031 shall operate to limit or modify Purchaser’s obligations or
liabilities to Seller under this Contract.
[SIGNATURES
ON FOLLOWING PAGE]
IN
WITNESS WHEREOF, the parties have caused this Contract to be duly executed
and
delivered as of the date and year first above written.
| |
|
SELLER:
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| |
|
|
|
|
ATTEST:
|
|
INTERPHARM,
INC.
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| |
|
|
|
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/s/
Jeffrey Weiss
|
|
By:
|
/s/
Peter Giallorenzo
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| |
|
|
|
|
WITNESS:
|
|
INTERPHARM
REALTY LLC
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| |
|
|
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/s/
Jeffrey Weiss
|
|
By:
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/s/
Peter Gallorenzo
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|
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|
PURCHASER:
|
| |
|
|
|
|
WITNESS:
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KASHIV,
LLC
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By:
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/s/
Chirag Patel
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|
Managing
Member
|
ANNEX
C
May
7,
2008
Board
of
Directors
Interpharm
Holdings, Inc.
85
Adams
Avenue
Hauppauge,
NY 11788
Dear
Members of the Board of Directors:
We
understand that Amneal Pharmaceuticals of New York, LLC (the “Acquiror”),
Interpharm Holdings, Inc. (the “Company”), Interpharm, Inc., a wholly-owned
subsidiary of the Company (“Interpharm”), and certain shareholders of the
Company listed therein (the “Majority Shareholders”), have entered into an Asset
Purchase Agreement, dated as of April 24, 2008 (the “Original Agreement”),
as amended pursuant to the First Amendment to Asset Purchase Agreement, dated
May 2, 2008 (the “Amendment”, and together with the Original Agreement, the
“Asset Purchase Agreement”), and that Interpharm, Interpharm Realty LLC (“Realty
LLC”) and Kashiv LLC have entered into a Contract of Sale dated April 24,
2008 (the “Contract of Sale”), pursuant to which, among other things, the
Company and its subsidiaries will sell substantially all of their respective
assets, including real property located at 50 Horseblock Road, Yaphank, New
York
(the “Real Estate”), to the Acquiror and its affiliates, and the Acquiror will
assume certain specified liabilities of the Company and its subsidiaries,
for a
cash purchase price of $61.6 million (the “Consideration”), subject to
certain adjustments, together with the Acquiror establishing an escrow fund
of
$3.5 million for the potential payment of additional consideration to the
Company and Interpharm, as provided for in the Asset Purchase Agreement (such
sale of the Real Estate, together with the other asset sales and liability
assumptions contemplated by the Asset Purchase Agreement, collectively, the
“Transaction”). The Company, Interpharm and Realty LLC are referred to herein
collectively as the “Sellers”. We further understand that, in connection with
the Transaction, the Majority Shareholders and certain other holders of Company
common stock have entered into a Proceeds Sharing Agreement, dated as of
May 2,
2008 (the “Proceeds Sharing Agreement”), which sets forth an allocation of the
proceeds due to certain shareholders from the Transaction amongst those
stockholders and allocates some of the proceeds to the holders of the Company’s
common stock, $0.01 par value per share (“Company Common Stock”).
You
have
requested that Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
(“Houlihan Lokey”) provide an opinion (the “Opinion”) as to whether, as of the
date hereof, the aggregate Consideration to be received by the Sellers in
the
Transaction is fair to the Sellers, in the aggregate, from a financial point
of
view.
In
connection with this Opinion, we have made such reviews, analyses and inquiries
as we have deemed necessary and appropriate under the circumstances. Among
other
things, we have:
1. reviewed
the following agreements and documents:
|
Board
of Directors Interpharm Holdings, Inc.,
|
Page
2
|
| May
7, 2008 |
|
a.
the
Original Agreement;
b.
the
Amendment; and
c.
the
Contract of Sale;
2. reviewed
certain publicly available business and financial information relating to
the
Company that we deemed to be relevant;
3. reviewed
certain information relating to the current and future operations, financial
condition and prospects of the Company made available to us by the Company,
including (a) financial projections for the fiscal year ending June 30, 2009,
prepared by the management of the Company, relating to the Company as a going
concern, (b) cash flow projections for the thirteen week period ending June
20,
2008 (together, the “Projections”) and (c) a liquidation analysis prepared by
the management of the Company (the “Liquidation Analysis”);
4. spoken
with certain members of the management of the Company regarding the business,
operations, financial condition and prospects of the Company, the Transaction
and related matters, including such management’s views of the operational and
financial risks and uncertainties attendant with not pursuing the
Transaction;
5. reviewed
the current and historical market prices and trading volume for Company Common
Stock;
6. reviewed
a certificate addressed
to us from senior management of the Company which contains, among other things,
representations regarding the accuracy of the information, data and other
materials (financial or otherwise) provided to us by or on behalf of the
Company; and
7. conducted
such other financial studies, analyses and inquiries and considered such
other
information and factors as we deemed appropriate.
|
Board
of Directors Interpharm Holdings, Inc.,
|
Page
3
|
| May
7, 2008 |
|
We
have
relied upon and assumed, without independent verification, the accuracy and
completeness of all data, material and other information furnished, or otherwise
made available, to us, discussed with or reviewed by us, or publicly available,
and do not assume any responsibility with respect to such data, material
and
other information. In addition, management of the Company has advised us,
and we
have assumed, that the Projections and Liquidation Analysis reviewed by us
have
been reasonably prepared in good faith on bases reflecting the best currently
available estimates and judgments of such management as to the future financial
results and condition of the Company (or the future results of any liquidation
thereof) and we express no opinion with respect to such projections, analysis
or
the assumptions on which they are based. We note that the Projections and
Liquidation Analysis are subject to significant uncertainty, particularly
in
light of the Company’s recent financial performance, current financial
condition, current and prospective access to capital, current and prospective
liquidity and unfavorable future prospects. In this regard, you have advised
us,
and we have relied upon and assumed, that the Company is unable to obtain
financing in an amount or on terms that will allow the Company to continue
as a
going concern and therefore, absent the Transaction, the Company will have
no
alternative other than to seek protection under U.S. bankruptcy laws and
would
likely result in a liquidation of the Company. We have relied upon and assumed,
without independent verification, that there has been no material change
in the
business, assets, liabilities, financial condition, results of operations,
cash
flows or prospects of the Company since the date of the most recent financial
statements provided to us, and that there is no information or any facts
that
would make any of the information reviewed by us incomplete or misleading.
We
have not considered any aspect or implication of any transaction to which
the
Company or any of its security holders may be a party (other than as
specifically described herein with respect to the Transaction).
We
have
relied upon and assumed, without independent verification, that (a) the
representations and warranties of all parties to the agreements identified
in
item 1 above and all other related documents and instruments that are referred
to therein are true and correct, (b) each party to all such agreements and
other
related documents and instruments will fully and timely perform all of the
covenants and agreements required to be performed by such party, (c) all
conditions to the consummation of the Transaction will be satisfied without
waiver thereof, and (d) the Transaction will be consummated in a timely manner
in accordance with the terms described in the agreements and documents provided
to us, without any amendments or modifications thereto. We also have relied
upon
and assumed, without independent verification, that (i) the Transaction will
be
consummated in a manner that complies in all respects with all applicable
federal and state statutes, rules and regulations, and (ii) all governmental,
regulatory, and other consents and approvals necessary for the consummation
of
the Transaction will be obtained and that no delay, limitations, restrictions
or
conditions will be imposed or amendments, modifications or waivers
made that
would result in an adverse effect on the amount or timing of receipt of the
Consideration. The Company has informed us that (i) it has very little or
no unrestricted cash on hand, (ii) financial projections that represent the
best
currently available estimates and judgments of the Company management as
to the
future financial results and operations of the Company exist only through
June 30, 2009, and (iii) as referred to above, the Company is unable
to obtain financing sufficient to continue as a going concern. As a result,
in
reaching our conclusions hereunder, we did not perform a discounted cash
flow
analysis. In addition, we reviewed data regarding publicly traded companies
in
the same industry as the Company and recent change of control transactions
involving companies in the same industry as the Company. However, because
of
(i) the Company’s lack of financing, (ii) the lack of publicly traded
companies in the same industry as the Company facing similar going concern
issues, and (iii) the lack of recent change of control transactions
involving companies in the same industry as the Company facing similar going
concern issues, we did not rely, in whole or in part, on either a comparable
public companies analysis or a comparable mergers and acquisitions transaction
analysis in reaching the conclusion set forth herein.
|
Board
of Directors Interpharm Holdings, Inc.,
|
Page
4
|
| May 7, 2008 |
|
Furthermore,
in connection with this Opinion, we have not been requested to make, and
have
not made, any physical inspection or independent appraisal or evaluation
of any
of the assets, properties or liabilities (fixed, contingent, derivative,
off-balance-sheet or otherwise) of any of the Sellers or any other party,
nor
were we provided with any such appraisal or evaluation, other than (a) the
Liquidation Analysis, and (b) certain appraisals relating to the Real
Estate and the machinery and equipment of the Sellers (collectively, the
“Appraisals”). We have relied upon and assumed, without independent
verification, the accuracy of the conclusions set forth in the Liquidation
Analysis and the Appraisals, and have assumed that the assumptions, estimates
and conclusions contained in the Liquidation Analysis accurately reflect
the
outcome of an orderly liquidation of the Sellers’ assets. We are not real
estate, machinery or equipment appraisers, and do not express any opinion
with
respect to such subject matter. If the conclusions set forth in said Appraisals
and the Liquidation Analysis are not accurate, the conclusion set forth in
this
Opinion could be materially affected. We did not estimate, and express no
opinion regarding, the liquidation value of any entity or asset. We note,
however, that the Liquidation Analysis reflects the belief of management
of the
Company that the liquidation value of the Company’s assets is substantially
lower that the amount of the Consideration. We have undertaken no independent
analysis of any potential or actual litigation, regulatory action, possible
unasserted claims or other contingent liabilities, to which the Company is
or
may be a party or is or may be subject, or of any governmental investigation
of
any possible unasserted claims or other contingent liabilities to which any
of
the Sellers is or may be a party or is or may be subject, and
have
assumed, with your consent, that the Consideration will not be reduced pursuant
to Schedule 2.3(c) of the Asset Purchase Agreement by more than $5 million
as a
result of any liability assumed by the Acquiror related to pending
litigation.
We
have
not been requested to, and did not, (a) initiate or participate in any
discussions or negotiations with, or solicit any indications of interest
from,
third parties with respect to the Transaction, the assets, businesses or
operations of any of the Sellers, or any alternatives to the Transaction,
(b)
negotiate the terms of the Transaction, or (c) advise the Board of Directors
or
any other party with respect to alternatives to the Transaction. In reaching
our
conclusions hereunder, we have considered the status of the Company’s ongoing
negotiations with its lenders with respect to the Company’s defaults on the
covenants of its credit facilities and our discussions with Company management
as to the Company’s financing alternatives and recent efforts to raise
additional capital and seek other strategic alternatives, including a potential
sale of the Company and/or its assets. This Opinion is necessarily based
on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. We have not undertaken,
and are under no obligation, to update, revise, reaffirm or withdraw this
Opinion, or otherwise comment on or consider events occurring after the date
hereof.
This
Opinion is furnished for the use and benefit of the Board of Directors in
connection with the exercise of its fiduciary duties, and may not be relied
on
by any other person or used for any other purpose without our prior written
consent. This Opinion should not be construed as creating any fiduciary duty
on
Houlihan Lokey’s part to any party. This Opinion is not intended to be, and does
not constitute, a recommendation to the Board of Directors, any security
holder
or any other person as to how to act with respect to any matter relating
to the
Transaction.
|
Board
of Directors Interpharm Holdings, Inc.,
|
Page
5
|
| May
7, 2008 |
|
In
the
ordinary course of business, certain of our affiliates, as well as investment
funds in which they may have financial interests, may acquire, hold or sell,
long or short positions, or trade or otherwise effect transactions, in debt,
equity, and other securities and financial instruments (including loans and
other obligations) of, or investments in, any of the Sellers, the Acquiror
or
any other party that may be involved in the Transaction and their respective
affiliates or any currency or commodity that may be involved in the Transaction.
The Company has agreed to reimburse certain of our expenses and to indemnify
us
and certain related parties for certain liabilities arising out of our
engagement.
Houlihan
Lokey and its affiliates may provide investment banking, financial advisory
and
other financial services to any of the Sellers, the Acquiror and other
participants in the Transaction and their respective affiliates in the future,
for which Houlihan Lokey and such affiliates may receive compensation.
In
addition, we will receive a fee for rendering this Opinion, which is not
contingent upon the successful completion of the Transaction.
We
have
not been requested to opine as to, and this Opinion does not express an opinion
as to or otherwise address: (i) the underlying business decision of any of
the
Sellers, their respective security holders or any other party to proceed
with or
effect the Transaction, (ii) the terms of any arrangements, understandings,
agreements or documents related to, or the form or any other portion or aspect
of, the Transaction or otherwise (other than the Consideration to the extent
expressly specified herein), including the terms of the Proceeds Sharing
Agreement, (iii) the fairness of any portion or aspect of the Transaction
to the holders of any class of securities, creditors or other constituencies
of
any of the Sellers, or to any other party, including the terms of the Proceeds
Sharing Agreement, except as set forth in this Opinion, (iv) the relative
merits of the Transaction as compared to any alternative business strategies
that might exist for any of the Sellers or any other party or the effect
of any
other transaction in which any of the Sellers or any other party might engage,
(v) the fairness of any portion or aspect of the Transaction to any one class
or
group of any of the Sellers’ or any other party’s security holders vis-à-vis any
other class or group of any of the Sellers’ or such other party’s security
holders (including without limitation (a) the allocation of any
consideration amongst or within such classes or groups of security holders,
whether pursuant to the Proceeds Sharing Agreement, or otherwise, (b) the
allocation of the Consideration amongst the Sellers, or (c) the allocation
of the Consideration amongst the assets purchased in the Transaction), (vi)
whether or not any of the Sellers, their respective security holders or any
other party is receiving or paying reasonably equivalent value in the
Transaction, (vii) the solvency, creditworthiness or fair value of any of
the
Sellers or any other participant in the Transaction under any applicable
laws
relating to bankruptcy, insolvency, fraudulent conveyance or similar matters,
or
(viii) the fairness, financial or otherwise, of the amount or nature of any
compensation to or consideration payable to or received by any officers,
directors or employees of any party to the Transaction, any class of such
persons or any other party, relative to the Consideration or otherwise.
Furthermore, no opinion, counsel or interpretation is intended in matters
that
require legal, regulatory, accounting, insurance, tax or other similar
professional advice. It is assumed that such opinions, counsel or
interpretations have been or will be obtained from the appropriate professional
sources. Furthermore, we have relied, with your consent, on the assessment
by
the Company and its advisers, as to all legal, regulatory, accounting, insurance
and tax matters with respect to the Sellers and the Transaction. The issuance
of
this Opinion was approved by a committee authorized to approve opinions of
this
nature.
|
Board
of Directors Interpharm Holdings, Inc.,
|
Page
6
|
| May
7, 2008 |
|
If
the
Company is required under the federal securities laws to include the text
of
this Opinion and a description hereof in any proxy statement or other similar
communication required to be filed by the Company with the Securities and
Exchange Commission and delivered to the Company’s stockholders in connection
with the Transaction, the Company may do so, provided that (i) this Opinion
will
be reproduced therein only in its entirety, and (ii) the content and context
of
any such inclusion or description (including, without limitation, any reference
to Houlihan Lokey, the Company’s engagement of Houlihan Lokey, the services
provided by Houlihan Lokey or this Opinion) shall be subject to Houlihan
Lokey’s
prior review and written approval (and, if applicable, formal written
consent).
Based
upon and subject to the foregoing, and in reliance thereon, it is our opinion
that, as of the date hereof, the aggregate Consideration to be received by
the
Sellers in the Transaction is fair to the Sellers, in the aggregate, from
a
financial point of view.
| |
Very truly yours, |
| |
|
| |
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL
ADVISORS, INC. |