PRODUCT PURCHASE AGREEMENT
This Product Purchase Agreement (the "Agreement") is entered into as of the 29th
day of December, 2000, by and between Alpharma USPD Inc., a Maryland corporation
(the "Buyer"), and Ascent Pediatrics, Inc., a Delaware corporation (the
"Seller"). The Buyer and the Seller are referred to together herein as the
"Parties."
RECITALS
WHEREAS, the Seller is the owner of a suppository product lines identified
by the names Feverall (acetaminophen in strengths 80, 120, 325 and 650 mg.) and
Acetaminophen Unisert (in strengths 120, 325 and 650 mg.) (the "Product") and
the New Drug Approval (No. 8-337) issued by the United States Food and Drug
Administration (the "FDA") with respect to the Product together with all
amendments, supplements and updates thereto (the "NDA"); and
WHEREAS, the Seller and the Buyer desire to enter into an agreement
pursuant to which the Buyer will purchase, and the Seller will sell, all of the
Seller's right, title and interest in and to the Product, including without
limitation the NDA for the Product, for the consideration set forth below,
subject to the right and obligation to resell the Product to Seller upon the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
SALE AND DELIVERY OF THE PRODUCT
1.1 Delivery of the Product.
--------------------------
(a) Subject to the terms and conditions of this Agreement, at the Closing
(as hereinafter defined), the Seller shall sell, transfer, convey, assign and
deliver to Buyer, and Buyer shall purchase, acquire and accept from the Seller
all of Seller's right, title and interest in and to the following specifically
identified properties, assets and other claims, contracts, rights and other
interests specifically excluding the Excluded Assets as defined in Section 1.1
(d):
(i) the Product
(ii) the inventories of finished goods, samples, trade packs and similar
items of the Seller which exist on the date hereof (the "Inventory");
(iii) the regulatory approvals, registrations and associated materials
(including the product dossier) relating to the NDA ( the "Registrations");
(iv) the rights of the Seller arising after the Closing under the toll
manufacturing agreement with Upsher-Smith and the other group purchasing
contracts listed on Schedule 1.1 (a) (iv) hereto (the "Contracts"); and
(v) all unfilled orders (if any) relating to the Product as of the Closing
of which Buyer has notice; and
(vi) all United States patents, patent applications, the trademarks
"Feverall" and "Unisert" trade secrets and other proprietary or intellectual
property rights used in, or necessary for the manufacture, marketing or sale of
the Seller's Product, including formula for the Product (the "Related
Intellectual Property").
(b) The Product, the Registrations including the NDA for the Product,
Inventory, Contracts, the Related Intellectual Property and the other properties
and assets described in (a) above are hereinafter referred to collectively
as the "Product Assets."
(c) Seller represents and warrants that the effect of the transfer of
Seller's right, title and interest in and to the Product Assets is to give the
Buyer the exclusive, worldwide rights to manufacture, market, distribute and
sell the Product, subject, however, to the liabilities and obligations of Seller
specifically assumed by Buyer pursuant to Section 1.4 below. The transfer of
the Product Assets shall not effect or be construed as an assumption by Buyer of
any liabilities or obligations related to Seller's manufacture, marketing or
sale of the Product prior to the date hereof.
(d) The Product Assets do not include cash, securities, accounts receivable
(except any accounts receivable associated with unfilled orders), refunds of
taxes related to periods ending on or prior to the Closing Date and other rights
derived from the Product prior to the Closing Date (collectively, the "Excluded
Assets").
1.2 Notification to the FDA. Concurrently herewith Seller will execute and
-------------------------
cause to be filed with the FDA a change of ownership letter, in the form
attached hereto as Exhibit A, naming the Buyer as the sponsor of the NDA for the
Product.
1.3 Assumption of Liabilites. At the Closing the Buyer shall assume
---------------------------
responsibility for performing all of the obligations of Seller under the
Contracts which are due to be performed after the Closing Date; provided that
such assumption shall not include any liability (x) which is in default or was
required under the Contract to have been, but was not, timely performed prior
to the Closing Date or (y) which relates to Products sold by Seller prior to the
Closing Date, including without limitation product liability claims or product
recalls or (z) which becomes due and payable with respect to the delivery of
Products or other third party performance which took place prior to the Closing
Date (including without limitation rebates or similar payments due after the
Closing Date for Products sold prior to the Closing Date).
1.4 Further Assurances. At any time and from time to time after the date
-------------------
hereof, at the Buyer's request and without further consideration, the Seller
promptly shall execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and at Buyer's expense take such other
action, as the Buyer may reasonably request to more effectively transfer, convey
and assign to the Buyer, and to confirm the Buyer's rights to, title in and
ownership of the Product Assets (including, without limitation, all instruments
necessary to transfer of record in the U.S. Trademark Office the "Feverall
trademark being assigned to Buyer pursuant to Section 1.1 (vi) hereof), and to
assist the Buyer in exercising all rights with respect thereto and to carry out
the purpose and intent of this Agreement. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute and agreement to
assign the any agreement or any benefit arising thereunder, if an attempted
assignment thereof without the consent of the other party to an agreement would
constitute a breach thereof. If such consent is necessary but not obtained,
Seller will cooperate with Buyer in any arrangement designed to provide for
Buyer to receive the benefit of such agreement provided that Buyer shall
indemnify and hold Seller harmless for any action which Seller takes in this
regard at the request of Buyer.
1.5 Purchase Price. The purchase price to be paid by the Buyer for the
---------------
Product Assets and for the Retained Intellectual Property License shall be
$12,000,000 (the "Purchase Price"). Concurrently herewith, as full payment of
the Purchase Price, Buyer shall deliver to Seller for cancellation that certain
Promissory Note in the present principal amount of $12,000,000 executed by
Seller in favor of Buyer in connection with the Loan Agreement between the
Parties dated February 16, 1999 (as amended) with such note marked "Paid in
Full".
1.6 Transaction Taxes. Any and all federal, state, county, local or
------------------
foreign sales, use, value added, excise, stamp, transfer and other Taxes (as
defined below) not in the nature of income taxes, fees and duties (including any
interest, additions to tax and penalties with respect thereto) and any and all
transfer, recording or similar fees and charges imposed in connection with the
consummation of the transactions contemplated by this Agreement shall be borne
by the Buyer.
1.7 Allocation of Purchase Price. The amount of the Purchase Price shall be
------------------------------
allocated first to the Inventory at Seller's book value and then to the
remainder of the Product Assets.
1.8 The Closing. The Closing shall take place on the date hereof.
-------------
Such Closing may be held by the parties meeting in a single location to execute
this Agreement and the other instruments required hereby or by the parties
executing duplicate originals of said documents and delivering them by facimile
or other reasonable means. The transfer of the Product Assets by the Seller to
the Buyer and the assumption of liabilities by Buyer as provided hereunder shall
be deemed to have taken place at the close of business on the date of the
Closing (the "Closing Date").
1.9 Inventory. The parties agree that all Inventory being transferred
----------
hereby is presently under the custody and control of Buyer. Within 15 days
after the Closing Date, Seller and Buyer shall jointly determine the quantity of
the Inventory being transferred hereby and Seller's book value thereof as
calculated consistent with Seller's past practice (the "Initial Closing
Inventory Value"). In performing such calculation adequate reserves for excess
and obsolete or unusable Inventory shall be established consistent with Seller's
past practice. The resulting Initial Closing Inventory Value shall be used for
the purposes of the allocation in Section 1.7 and the call option in Section 2.1
but shall not require any adjustment of the Purchase Price paid hereunder.
ARTICLE II
CALL OPTION
2.1 Call Option. The Seller shall have the option to require Buyer to sell
-------------
the Product Assets to Seller for an immediate cash payment in the amount of
$12,000,000 (the "Call Option Purchase Price") pursuant to a Product Purchase
Agreement substantially similar to the terms contained herein except (a) the
representations and warranties shall be adjusted as agreed upon by the parties
to exclude from their terms any fact, event or failure to act prior to the date
hereof (b) the Product Assets shall not include any tangible assets owned by
Buyer as of this date or purchased by Buyer after this date other than Inventory
and (c) in the event the book value of Inventory as of the date of the closing
of the exercise of the call option (as calculated in a manner consistent with
the calculation contemplated by Section 1.9) (the "Option Closing Inventory
Value") varies from that Initial Closing Inventory Value (i) to the extent that
the Option Closing Inventory Value is less than the Initial Closing Inventory
Value, the Call Option Purchase Price shall be adjusted downward on a
dollar-for-dollar basis or (ii) to the extent that the Option Closing Inventory
Value is more than the Initial Closing Inventory Value, at the option of Seller,
either the Call Option Purchase Price shall be adjusted upward on a
dollar-for-dollar basis and all Inventory shall be transferred to Seller or the
Call Option purchase price shall remain at $12,000,000 and Buyer shall retain
(and may sell in the ordinary course of business) Inventory with a book value in
excess of the Initial Closing Inventory Value. In the event that Seller
exercises its option to buy the Product Assets the Buyer shall not be obligated
to transfer such Product Assets to Seller until it receives the aforesaid
$12,000,000 in immediately available funds (as adjusted for Inventory)
2.2 Notification. Seller shall have the right to exercise the option
--- -------------
granted to it in subsection 2.1 by giving the Buyer written notice of its desire
---
to exercise its option at least ten business days prior to the date contemplated
for the consummation of said transaction; provided that Buyer may terminate its
obligation to transfer the Product Assets if Seller is not ready, willing and
able to pay the Call Option Purchase Price, in immediately available funds, on
or before the 30th day after the date of its notice given pursuant to this
subsection.
2.3 Effect of Transfer. Upon the exercise of the option contained in
---------------------
subsection 2.1, Buyer shall remain responsible for any claims related to the
manufacture, marketing or sale of Products between the date hereof and the date
of payment as provided for in Section 2.1 and Seller shall be responsible for
such matters as to any Product manufactured, marketed or sold thereafter.
2.4 Time for Exercise of Options. All of the rights and obligations
--------------------------------
established pursuant to this Article II, including without limitation the option
set forth in subsection 2.1, shall terminate if the sale of the Product Assets
is not consummated on or before December 31, 2001.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
3.1 Authority. The Seller has all requisite power and authority to execute
---------
and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance by the Seller of this Agreement and the
consummation by the Seller of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of the
Seller. This Agreement has been duly and validly executed and delivered by
the Seller and constitutes the valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms.
3.2 Noncontravention. The execution and delivery of this Agreement and the
----------------
consummation by the Seller of the transactions contemplated hereby will not (a)
conflict with or violate any provision of the charter or By-laws of the Seller,
or (c) conflict with, result in a breach of or constitute (with or without due
notice or lapse of time or both) a default under any material contract or
agreement to which the Seller is a party.
3.3 Title and Liens. Seller has good and marketable title to the Product
------------------
Assets, free and clear of all liens, mortgages, security interests, encumbrances
or other charges, ("Liens") except for any Liens which would not interfere in
any material respect with Buyer's manufacture, marketing or sale of the Product
3.4 Regulatory Compliance. The Registrations have been validly issued
-----------------------
and Seller has complied in all material respects with the terms of the
Registrations and all other rules and regulations of the FDA in its
manufacturing, marketing and sale of the Product. Neither Seller, nor to its
knowledge the entity manufacturing the Product under a Contract, has received
any notice that the FDA has commenced or threatened to initiate any action to
withdraw the approval represented by the Registrations or to require a recall of
the Product nor has the FDA issued any inspection reports, observations, warning
letters or similar communications indicating an allegation of lack of compliance
with FDA regulatory requirements as related to the Product except to the extent
satisfied to the FDA's written satisfaction.
3.5 Contracts. The Contracts are valid and binding obligations of the
----------
Seller and, to the knowledge of Seller, the third parties thereto and Seller is
not, and to the knowledge of Seller said third parties are not, in material
default thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
4.1 Authority. The Buyer has all requisite power and authority to execute
---------
and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance by the Buyer of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly and validly executed and delivered by the
Buyer and constitutes the valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms.
4.2 Noncontravention. Neither the execution and delivery of this Agreement
----------------
by the Buyer, nor the consummation by the Buyer of the transactions contemplated
hereby, will (a) conflict with or violate any provision of the charter or
By-laws of the Buyer or (b) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under any
material contract or agreement to which the Buyer is a party.
ARTICLE V
POST-SALE COVENANTS
5.1 Cooperation in Litigation. From and after the date hereof, the Buyer
---------------------------
and the Seller shall each fully cooperate with the other in the defense or
prosecution of any litigation or proceeding already instituted or which may be
instituted hereafter against or by such other party relating to the Product
Assets (other than litigation arising out of the transactions contemplated by
this Agreement). The party requesting such cooperation shall pay the reasonable
out-of-pocket expenses incurred in providing such cooperation (including
legal fees and disbursements) by the party providing such cooperation and by its
officers, directors, employees and agents, but shall not be responsible for such
party or its officers, directors, employees and agents, for their time spent in
such cooperation.
5.2 Sharing of Data. The Seller shall have the right (and shall have the
------------------
right to provide such right to Upsher-Smith) for a period of seven years (or
such longer time as applicable law requires Seller to maintain such records)
following the Closing Date, to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other similar information as are transferred to
Buyer pursuant to this Agreement for the limited purpose of concluding its
involvement in the sale of the Product prior to the Closing and for complying
with its obligations under applicable laws and Buyer agrees to use practices and
procedures identical to that which it applies to its books and records generally
to maintain such books and other documents for such period of time.
5.3 Conduct of Business. Prior to December 31, 2001, the Buyer will not
--------------------
with respect to the Product Assets (y) create or allow to exist liens,
mortgages, pledges or other encumbrances except to the extent such may be
released concurrently with the transfer of the Product Assets pursuant to
Article II hereof or (z) sell, assign or transfer any of the Product Assets
except Inventory in the ordinary course of business or the transfer of the
Product Assets to an affiliate of Buyer who agrees to be bound by the terms of
Articles II and V hereof.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Seller. The Seller hereby agrees to defend,
--------------------------------
indemnify and hold harmless the Buyer, its directors, officers, affiliates,
successors and assigns, from and against any and all claims, losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and court
costs) (collectively, "Damages") resulting from or arising out of (i) any
material misrepresentation, material breach of representation or warranty or
any failure to perform any covenant or agreement of the Seller in this Agreement
or (ii) any claim, suit or cause of action asserting that the Product or
the manufacturing, marketing, sale or use of the Product violates or infringes
any patent, trade secret or other intellectual or proprietary right of any third
party (other than as a result of a modification of the Product or the
manufacturing process for the Product after the Closing Date) or (iii) the
manufacturing, marketing, sale or use of the Product sold by Seller prior to the
date hereof.
6.2 Indemnification by the Buyer. The Buyer hereby agrees to defend,
-------------------------------
indemnify and hold harmless the Seller, its directors, officers, affiliates,
successors and assigns, from and against any and all Damages resulting from,
consisting of or arising out of or in connection with (i) any material
misrepresentation, material breach of representation or warranty or any failure
to perform any covenant or agreement of the Buyer in this Agreement, (ii) the
manufacturing, marketing, sale or use of the Product sold by Buyer after the
date hereof or (iii) any failure of the Buyer to satisfy or fully perform the
Assumed Liabilities.
6.3 Method of Asserting Claims.
-----------------------------
Each Party entitled to indemnification under this Section (the "Indemnified
Party") shall given notice to the Party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld); and,
provided, further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section except to the extent that the Indemnifying Party is
materially adversely affected by such failure. The Indemnified Party may
participate (but not control) in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expense if representation of
such Indemnified Party by the counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential conflicting interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding; provided further that in no event shall the Indemnifying Party be
required to pay the expenses of more than one law firm per jurisdiction as
counsel for the Indemnified Party. The Indemnifying Party also shall be
responsible for the expenses of such defense if the Indemnifying Party does not
elect to assume such defense. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim or litigation, and no Indemnified Party shall consent to entry of any
judgment or settle such claim or litigation without the prior written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld.
6.4 Survival of Representations. The representations and warranties of each
---------------------------
of the parties hereto shall survive until the date that is 12 months after
the Closing Date.
6.5 Limit on Claims. No claim under this Agreement, including but not
------------------
limited to a claim for damages or indemnification, shall exceed the Purchase
Price. A claim for misrepresentation or breach of representation or warranty,
shall not be enforceable unless the party against whom the claim is made
receives written notice of such claim in the manner set forth in Section 6.3 and
7.7 hereof not later than the date set forth in Section 6.4.
ARTICLE VII
MISCELLANEOUS
7.1 Press Releases and Announcements. Until the Closing has occurred, no
-----------------------------------
Party shall issue any press release or announcement relating to the subject
matter of this Agreement without the prior written approval of the other Party;
provided, however, that any Party may make any public disclosure it believes in
-------- -------
good faith is required by law or regulation (in which case the disclosing Party
shall advise the other Party and provide it with a copy of the proposed
disclosure prior to making the disclosure).
7.2 No Third Party Beneficiaries. This Agreement shall not confer any
-------------------------------
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
7.3 Entire Agreement. This Agreement (including the documents referred to
-----------------
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, that may have related in any way to the subject matter hereof.
7.4 Succession and Assignment. This Agreement shall be binding upon and
---------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
7.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
---
together shall constitute one and the same instrument.
7.6 Headings. The section headings contained in this Agreement are inserted
--------
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7 Notices. All notices, requests, demands, claims and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
-----
claim or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
If to the Seller: Copy to:
------------------- --------
Ascent Pediatrics, Inc. Hale and Dorr LLP
187 Ballardvale Street, Suite B125 60 State Street
Wilmington, Massachusetts 01887 Boston, Massachusetts 02109
Attention: President Attn: Stuart Falber, Esq.
If to the Buyer: Copy to:
------------------ --------
Alpharma USPD Inc.
7205 Windsor Boulevard Alpharma Inc.
Baltimore, Maryland 21244 One Executive Drive
Attention: President Fort Lee, New Jersey 07024
Attention: Chief Legal Officer
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered
by giving the other Party or Parties notice in the manner herein set forth.
7.8 Governing Law; Jurisdiction. This Agreement shall be governed by and
-----------------------------
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
7.9 Amendments and Waivers. No amendment of any provision of this Agreement
----------------------
shall be valid unless the same shall be in writing and signed by all of the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
7.10 Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
7.11 Expenses. Except as otherwise expressly provided herein, each of the
--------
Buyer, on the one hand, and the Seller, on the other hand, will pay its own fees
and expenses (including, without limitation, legal and accounting fees and
expenses) incurred by it in connection with the transactions contemplated
hereby.
7.12 Construction. The language used in this Agreement shall be deemed to
------------
be the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
7.13 Confidentiality. Each Party agrees that it will keep confidential and
---------------
will not disclose, divulge or use for any purpose any confidential, proprietary
or secret information which such Party may obtain from the other Party pursuant
to this Agreement or any other agreement between the Parties, unless such
information is known, or until such information becomes known, to the public
(other than as a result of a breach of this Section 7.13 by such Party);
provided, however, that such Party may disclose such information as required by
law, provided that such Party provides prior written notice to the other Party
of such proposed disclosure and takes reasonable steps to avoid and/or minimize
the extent of any such required disclosure.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
BUYER:
Alpharma USPD Inc.
By: /s/ Thomas L. Anderson
-------------------------
Title: President
---------
SELLER:
Ascent Pediatrics, Inc.
By: /s/ Emmett Clemente
---------------------
Title: President
---------
<PAGE>
------
EXHIBIT A
---------
FDA NOTIFICATION LETTER
-----------------------
Attached
