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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT: DECEMBER 17, 1999
(DATE OF EARLIEST EVENT REPORTED)
COMMISSION FILE NUMBER 333-33121
LEINER HEALTH PRODUCTS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3431709
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
901 EAST 233RD STREET, CARSON, CALIFORNIA 90745
(310) 835-8400
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) As of December 17, 1999, the Registrant purchased substantially all of
the assets of Granutec, Inc. ("Granutec") and Stanley Pharmaceuticals Ltd.
("Stanley"), both of which are subsidiaries of Novopharm Limited of Ontario,
Canada, as well as certain related assets of Novopharm Limited. The
Registrant acquired the assets for a purchase price pursuant to the Amended
and Restated Asset Purchase Agreement, attached hereto as Exhibit 2.1,
consisting of $50 million, subject to a net working capital adjustment, the
assumption by the Registrant of all liabilities, obligations and commitments
of Granutec relating to certain outstanding industrial development revenue
bonds, including, without limitation, the obligation to repay the outstanding
principal amount of approximately $7.1 million, and the assumption by the
Registrant and Vita Health Products Inc., a subsidiary of the Registrant, of
trade accounts payable of Granutec and Stanley, respectively, incurred in the
ordinary course of business, but excluding trade accounts payable that have
been outstanding for more than 90 days. The purchase price was funded by a
capital contribution from the Registrant's parent, Leiner Health Products
Group Inc., in the amount of $20 million and the balance was funded by the
Registrant's revolving credit facility with the Bank of Nova Scotia.
Granutec is the fourth largest distributor of private label, over-the-counter
pharmaceutical drugs in the United States, with manufacturing and packaging
facilities located in Wilson, North Carolina and Largo, Florida. Stanley is a
manufacturer and distributor of private label, over-the-counter drugs and
vitamin supplement products in Canada.
(b) The assets acquired by the Registrant as a result of the acquisition
described herein, which assets include property, plant, and equipment, were
used by Granutec and Stanley in the manufacturing and distribution of the
products described in Item 2 (a) above, and the Registrant intends to
continue such use of such assets.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
Amended and Restated Asset Purchase Agreement, dated
as of December 17, 1999, among Leiner Health Products
2.1 Inc., Granutec Acquirco, Inc., Vita Health Products
Inc., and Granutec, Inc., Granutec Holding
Corporation, Stanley Pharmaceuticals Ltd., and
Novopharm Limited.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Leiner Health Products Inc.
By: /s/ Michael S. Yusko
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Michael S. Yusko
Vice President and
Chief Financial Officer
Date: December 30, 1999
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EXHIBIT 2.1
Execution Copy
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AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
AMONG
LEINER HEALTH PRODUCTS INC.,
GRANUTEC ACQUIRCO, INC.
VITA HEALTH PRODUCTS INC.
NOVOPHARM LIMITED,
GRANUTEC HOLDING CORPORATION,
GRANUTEC, INC.,
and
STANLEY PHARMACEUTICALS LTD.
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Dated as of December 17, 1999
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TABLE OF CONTENTS
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ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1. Closing............................................................................................1
1.2. Sale of Assets.....................................................................................2
1.3. Transfer of Assets.................................................................................2
1.4. Excluded Assets....................................................................................2
1.5. Assumption of Liabilities..........................................................................2
1.6. Excluded Liabilities...............................................................................4
1.7. Consent of Third Parties...........................................................................4
ARTICLE II
THE PURCHASE PRICE
2.1. Purchase Price.....................................................................................5
2.2. Computation of Closing Net Working Capital Adjustment..............................................6
2.3. Preparation of Closing Balance Sheets..............................................................8
2.4. Payments by Buyers.................................................................................8
2.5. Allocation of Purchase Price.......................................................................8
2.6. Certain Adjustments................................................................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Sellers.....................................................10
3.1.1. Authorization, etc.....................................................................10
3.1.2. Corporate Status.......................................................................10
3.1.3. No Conflicts, etc......................................................................10
3.1.4. Financial Statements, etc..............................................................11
3.1.5. Absence of Undisclosed Liabilities.....................................................12
3.1.6. Taxes..................................................................................12
3.1.7. Absence of Changes.....................................................................13
3.1.8. Litigation.............................................................................16
3.1.9. Compliance with Laws; Governmental Approvals and Consents..............................16
3.1.10. Operation of the Business.............................................................16
3.1.11. Assets................................................................................17
3.1.12. Contracts.............................................................................17
3.1.13. Territorial Restrictions..............................................................19
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3.1.14. Inventories...........................................................................19
3.1.15. Customers.............................................................................19
3.1.16. Suppliers; Raw Materials..............................................................20
3.1.17. Products..............................................................................20
3.1.18. Absence of Certain Business Practices.................................................21
3.1.19. Intellectual Property.................................................................21
3.1.20. Insurance.............................................................................24
3.1.21. Real Property.........................................................................24
3.1.22. Environmental Matters.................................................................26
3.1.23. Employees, Labor Matters, etc.........................................................27
3.1.24. Employee Benefit Plans and Related Matters............................................28
3.1.25. Confidentiality.......................................................................31
3.1.26. No Guarantees.........................................................................31
3.1.27. Records...............................................................................31
3.1.28. Brokers, Finders, etc.................................................................31
3.1.29. Disclosure............................................................................31
3.1.30. Receivables...........................................................................31
3.1.31. Affiliate Transactions................................................................32
3.1.32. Certain Regulatory Matters............................................................32
3.1.33. Insolvency............................................................................32
3.1.34. Wes-Pak...............................................................................32
3.2. Representations and Warranties of the Buyers......................................................33
3.2.1. Corporate Status; Authorization, etc...................................................33
3.2.2. No Conflicts, etc......................................................................33
3.2.3. Brokers, Finders, etc..................................................................34
3.2.4. Buyers' Financing......................................................................34
3.2.5. Insolvency.............................................................................34
3.2.6. Representations and Warranties.........................................................34
ARTICLE IV
COVENANTS
4.1. Covenants of the Sellers..........................................................................34
4.1.1. Conduct of Business....................................................................34
4.1.2. No Solicitation........................................................................35
4.1.3. Access and Information.................................................................35
4.1.4. Financial Statements...................................................................36
4.1.5. Public Announcements...................................................................36
4.1.6. Further Actions........................................................................36
4.1.7. Further Assurances.....................................................................37
4.1.8. Liability for Transfer Taxes...........................................................37
4.1.9. Canadian Tax Elections.................................................................37
4.1.10. Certificates of Tax Authorities.......................................................38
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4.1.11. Use of Business Name..................................................................38
4.1.12. Product Regulatory Approvals and Applications.........................................38
4.1.13. Contracts.............................................................................39
4.1.14. Minute Books..........................................................................39
4.1.15. Financial Statements..................................................................39
4.1.16. Biotech...............................................................................39
4.1.17. Novopharm ANDAs.......................................................................40
4.2. Covenants of the Buyers...........................................................................40
4.2.1. Public Announcements...................................................................40
4.2.2. Further Actions........................................................................40
4.2.3. Further Assurances.....................................................................41
4.2.4. Novopharm Trade Payables...............................................................41
4.2.5. Waiver.................................................................................41
4.2.6. IRB Assumption.........................................................................41
ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions to Obligations of Each Party...........................................................41
5.1.1. HSR Act Notification, etc..............................................................41
5.1.2. No Injunction, etc.....................................................................41
5.2. Conditions to Obligations of the Buyers...........................................................42
5.2.1. Representations, Performance...........................................................42
5.2.2. Consents...............................................................................42
5.2.3. No Material Adverse Effect.............................................................42
5.2.4. Collateral Agreements..................................................................42
5.2.5. Opinion of Counsel.....................................................................43
5.2.6. Corporate Proceedings..................................................................43
5.2.7. Transfer Documents.....................................................................43
5.2.8. Title Policies.........................................................................44
5.2.9. Surveys................................................................................44
5.2.10. Consents and Estoppels................................................................44
5.2.11. Withholding Certificates..............................................................45
5.2.12. Releases..............................................................................45
5.2.13. Returns...............................................................................45
5.2.14. Transfer of DINs......................................................................45
5.3. Conditions to Obligations of the Sellers..........................................................45
5.3.1. Representations, Performance, etc......................................................45
5.3.2. Assumption Agreements..................................................................46
5.3.3. Opinion of Counsel.....................................................................46
5.3.4. Corporate Proceedings..................................................................46
5.3.5. Consents and Approvals.................................................................46
5.3.6. Collateral Agreements..................................................................46
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ARTICLE VI
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
6.1. Employment of Employees...........................................................................46
6.2. U.S. Savings Plans................................................................................48
6.3. U.S. Welfare and Fringe Benefit Plans.............................................................48
6.4. Workers Compensation..............................................................................48
6.5. Employment Taxes..................................................................................48
6.6. Notices of Termination............................................................................49
ARTICLE VII
TERMINATION
7.1. Termination.......................................................................................49
7.2. Effect of Termination.............................................................................50
ARTICLE VIII
DEFINITIONS, MISCELLANEOUS
8.1. Definition of Certain Terms.......................................................................50
8.2. Indemnification...................................................................................63
8.3. Survival of Representations and Warranties, etc...................................................67
8.4. Expenses..........................................................................................68
8.5. Severability......................................................................................68
8.6. Notices...........................................................................................68
8.7. Miscellaneous.....................................................................................69
8.7.1. Headings...............................................................................69
8.7.2. Entire Agreement.......................................................................69
8.7.3. Counterparts...........................................................................70
8.7.4. Governing Law, etc.....................................................................70
8.7.5. Binding Effect.........................................................................70
8.7.6. Assignment.............................................................................70
8.7.7. No Third Party Beneficiaries...........................................................71
8.7.8. Amendment; Waivers, etc................................................................71
8.7.9. Foreign Currencies.....................................................................71
8.8. Novopharm Undertaking.............................................................................71
8.9. US Buyer Undertaking..............................................................................71
8.10. AMENDING AND RESTATING; RELEASE OF NEWCO..........................................................71
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SCHEDULES
SCHEDULE 1.4 Excluded Assets
SCHEDULE 1.5 Unassumed Contracts
SCHEDULE 3.1.2(a) Incorporation of Sellers
SCHEDULE 3.1.2(b) Qualifications to do Business
SCHEDULE 3.1.3 Conflicts
SCHEDULE 3.1.4(b) Allocation of Sales, Revenue and Income
SCHEDULE 3.1.5 Undisclosed Liabilities
SCHEDULE 3.1.7 Absence of Changes
SCHEDULE 3.1.8 Litigation
SCHEDULE 3.1.9(a) Compliance with Laws
SCHEDULE 3.1.9(b) Governmental Approvals and other Consents
SCHEDULE 3.1.9(c) Governmental Contracts
SCHEDULE 3.1.10 Operation of the Business
SCHEDULE 3.1.11 Asset Exceptions
SCHEDULE 3.1.12(a) Contracts
SCHEDULE 3.1.12(c) Defaults and Consents under Contracts
SCHEDULE 3.1.14 Inventory Exceptions
SCHEDULE 3.1.15 Customers
SCHEDULE 3.1.16 Suppliers
SCHEDULE 3.1.17(a) Product Warranties
SCHEDULE 3.1.17(b) Product Liability
SCHEDULE 3.1.17(c) Rebates
SCHEDULE 3.1.17(d) Product Returns
SCHEDULE 3.1.18 Certain Business Practices
SCHEDULE 3.1.19(a) Owned Intellectual Property
SCHEDULE 3.1.19(d) Intellectual Property Licensing Arrangements
SCHEDULE 3.1.19(e) Intellectual Product Litigation
SCHEDULE 3.1.19(g) Restrictions on Use of Name
SCHEDULE 3.1.20 Insurance
SCHEDULE 3.1.21(a) Owned Real Property
SCHEDULE 3.1.21(b) Leases and Other Leases
SCHEDULE 3.1.22(a) Environmental Permits
SCHEDULE 3.1.22(b) Environmental Violations
SCHEDULE 3.1.22(c) Environmental Actions
SCHEDULE 3.1.22(d) Environmental Disclosure
SCHEDULE 3.1.23 Labor Matters
SCHEDULE 3.1.24(a) Employee Benefit Plans
SCHEDULE 3.1.24(c)(iv) Plan Compliance with Laws
SCHEDULE 3.1.25 Confidentiality Exceptions
SCHEDULE 3.1.26 Guarantees
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SCHEDULE 3.1.30 Receivables
SCHEDULE 3.1.31 Affiliate Transactions
SCHEDULE 3.1.32(a) Regulatory Registrations, etc.
SCHEDULE 3.1.32(b) Regulatory Good Standing
SCHEDULE 3.2.2 Governmental Approvals and other Consents
SCHEDULE 4.1.13 Contracts Not Delivered
SCHEDULE 5.2.10 Pledged Leasehold Interests
SCHEDULE 6.3(b) COBRA
SCHEDULE 8.1 Permitted Liens
EXHIBITS
EXHIBIT A Form of Supply Agreement
EXHIBIT B Form of Non-Competition Agreement
EXHIBIT C-1 Form of General Warranty Deed in North Carolina
EXHIBIT C-2 Form of Deed in British Columbia
EXHIBIT D-1 Form of Assignment of Lease in North Carolina
EXHIBIT D-2 Form of Assignment of Lease in British Columbia
EXHIBIT E Form of Wampole Supply Agreement
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AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT, dated as of December
17, 1999, among Leiner Health Products Inc., a Delaware corporation (the "US
BUYER"), Granutec Acquirco, Inc., a Delaware corporation ("NEWCO"), Vita Health
Products Inc., a Manitoba corporation (the "CANADIAN BUYER" and, together with
the US Buyer, "the BUYERS"), Granutec, Inc., a North Carolina Corporation
("GRANUTEC"), Granutec Holding Corporation, a Delaware corporation ("GHC"),
Stanley Pharmaceuticals Ltd., a British Columbia corporation ("STANLEY" and,
together with Granutec, the "DIVISIONS"), and Novopharm Limited, an Ontario
corporation ("NOVOPHARM" and, together with Granutec, GHC and Stanley, the
"SELLERS").
W I T N E S S E T H :
WHEREAS, the Buyers wish to purchase and acquire from the Sellers,
and the Sellers wish to sell, assign and transfer to the Buyers, all of the
assets and properties (other than the Excluded Assets) relating to, used or held
in connection with, the business and operations of the Divisions (the
"BUSINESS"), and the Buyers have agreed to assume the Assumed Liabilities, all
for the purchase price and upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, Newco, the Buyers and the Sellers, entered into an Asset
Purchase Agreement, dated as of October 7, 1999, (the "ORIGINAL AGREEMENT") and
desire to amend and restate in its entirety the Original Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and of the mutual benefits to be
derived hereby, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE ASSETS
1.1. CLOSING. The closing of the sale and purchase of the Assets
(the "CLOSING") shall take place on the 17th day of December, 1999 at the
offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022 or,
if the conditions set forth in Article V have not been satisfied or waived by
such date, on the fifth Business Day following the satisfaction or waiver of
such conditions. The day on which the Closing actually occurs is herein
sometimes referred to as the "CLOSING DATE".
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1.2. SALE OF ASSETS. At the Closing, in reliance on the
representations and warranties contained herein, and subject to the terms and
conditions set forth in this Agreement,
(a) Granutec and GHC will, and Novopharm will cause Granutec and
GHC to, sell, transfer, convey, assign and deliver to the US Buyer, and
the US Buyer will purchase or acquire from Granutec and GHC, all right,
title and interest of Granutec and GHC in and to the properties, assets
and rights of every nature, kind and description (including, without
limitation, the Specified Assets), tangible and intangible (including
goodwill), whether real, personal or mixed, whether accrued, contingent
or otherwise and whether now existing or hereinafter acquired (other than
the Excluded Assets) relating to or used or held for use in connection
with the Business as the same may exist on the Closing Date (the
"GRANUTEC ASSETS").
(b) Stanley will, and Novopharm will cause Stanley to, sell,
transfer, convey, assign and deliver to the Canadian Buyer, and the
Canadian Buyer will, and the US Buyer will cause the Canadian Buyer to,
purchase or acquire from Stanley, all right, title and interest of
Stanley in and to the properties, assets and rights of every nature, kind
and description (including, without limitation, the Specified Assets),
tangible and intangible (including goodwill), whether real, personal or
mixed, whether accrued, contingent or otherwise and whether now existing
or hereinafter acquired (other than the Excluded Assets) relating to or
used or held for use in connection with the Business, as the same may
exist on the Closing Date (the "STANLEY ASSETS").
(c) Novopharm will sell, transfer, convey, assign and deliver to
the US Buyer, and the US Buyer will purchase or acquire from Novopharm,
all right, title and interest of Novopharm in and to the properties,
assets and rights of every nature, kind and description (including,
without limitation, the Specified Assets), tangible and intangible,
whether real, personal or mixed, whether accrued, contingent or otherwise
and whether now existing or hereinafter acquired (other than the Excluded
Assets) principally used as a part of the Business, as the same may exist
on the Closing Date, including, without limitation, the Novopharm ANDAs
(the "NOVOPHARM ASSETS").
1.3. TRANSFER OF ASSETS. At the Closing, the Assets shall be
transferred or otherwise conveyed to the Buyers free and clear of all Liens
except Liens securing only Assumed Liabilities and Permitted Liens.
1.4. EXCLUDED ASSETS. The Sellers will retain and not transfer, and
none of the Buyers will purchase or acquire, the Albermarle Agreements and the
assets listed on Schedule 1.4 (collectively, the "EXCLUDED ASSETS").
1.5. ASSUMPTION OF LIABILITIES. (a) Subject to the terms and
conditions set forth herein, at the Closing the US Buyer shall assume and agree
to pay, honor and discharge when
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due all of the following liabilities of Granutec and GHC relating to the
Granutec Assets and existing at or arising on or after the Closing
(collectively, the "ASSUMED GRANUTEC LIABILITIES"):
(i) all liabilities, obligations and commitments relating
exclusively to the IRB Loan Agreement;
(ii) trade accounts payable incurred in the ordinary course of
business, including trade accounts payables to Novopharm, but excluding
trade accounts payable that have been outstanding for more than 90 days;
and
(iii) any and all liabilities, obligations and commitments arising
out of the agreements, contracts and commitments and other instruments
and arrangements specified in Schedule 3.1.12(a) (or not required to be
set forth therein and incurred in the ordinary course of business) to
which Granutec or GHC is a party, including, without limitation, any
Leases of real property in North Carolina and Florida listed therein, but
not including (A) any agreements, contracts or commitments or other
instruments or arrangements identified on Schedule 1.5 or (B) any
obligation or liability with respect thereto (other than trade accounts
payable assumed pursuant to clause (ii) above) occurring or arising prior
to or as a result of the Closing, except customer allowances, credits,
discounts, rebates and returns and sales commissions, to the extent of
the amount thereof reflected on the Granutec Closing Balance Sheet, as
adjusted pursuant to Section 2.2 and taken into account as a current
liability in determining the Granutec Closing Net Working Capital.
(b) Subject to the terms and conditions set forth herein, at the
Closing the Canadian Buyer shall assume and agree to pay, honor and discharge
when due all of the following liabilities of Stanley relating to the Stanley
Assets and existing at or arising on or after the Closing (collectively, the
"ASSUMED STANLEY LIABILITIES"):
(i) trade accounts payable incurred in the ordinary course of
business, including trade accounts payables to Novopharm, but excluding
trade accounts payable that have been outstanding for more than 90 days;
and
(ii) any and all liabilities, obligations and commitments arising
out of the agreements, contracts and commitments and other instruments
and arrangements specified in Schedule 3.1.12(a) (or not required to be
set forth therein and incurred in the ordinary course of business) to
which Stanley is a party, including, without limitation, any Leases of
real property in British Columbia and Ontario listed therein, but not
including (A) any agreements, contracts or commitments or other
instruments or arrangements identified on Schedule 1.5 or (B) any
obligation or liability with respect thereto (other than trade accounts
payable assumed pursuant to clause (i) above) occurring or arising prior
to or as a result of the Closing, except customer allowances, credits,
discounts, rebates and
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returns and sales commissions, to the extent of the amount thereof
reflected on the Stanley Closing Balance Sheet, as adjusted pursuant to
Section 2.2, and taken into account as a current liability in determining
the Stanley Closing Net Working Capital.
(c) Subject to the terms and conditions set forth herein, at the
Closing the US Buyer or the Canadian Buyer, as specified in writing by the
Buyers prior to the Closing, shall assume and agree to pay, honor and discharge
when due all of the following liabilities of Novopharm relating to the Novopharm
Assets and existing at or arising on or after the Closing (collectively, the
"Assumed Novopharm Liabilities"): any and all liabilities, obligations and
commitments arising out of the agreements, contracts and commitments and other
instruments and arrangements specified in Schedule 3.1.12(a) (or not required to
be set forth therein and incurred in the ordinary course of business) to which
Novopharm is a party, but not including (A) any agreements, contracts or
commitments or other instruments or arrangements identified on Schedule 1.5 or
(B) any obligation or liability with respect thereto occurring or arising prior
to or as a result of the Closing.
(d) At the Closing, the US Buyer shall assume the Assumed Granutec
Liabilities and the Canadian Buyer shall assume the Assumed Stanley Liabilities,
in each case by executing and delivering to the applicable Seller an assumption
agreement in a form reasonably satisfactory to the Sellers (the "ASSUMPTION
AGREEMENTS").
1.6. EXCLUDED LIABILITIES. Notwithstanding the provisions of
Section 1.5 or any other provision hereof or any schedule or exhibit hereto and
regardless of any disclosure to any Buyer or any Affiliate of any Buyer, other
than the Assumed Liabilities, the Buyers shall not assume any liabilities,
obligations or commitments of any nature, kind or description, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, of any Seller, including, without limitation, (i) relating to or arising
out of the operation of the Business or the ownership of the Assets prior to the
Closing, or (ii) for, relating to or arising out of Taxes or (iii) relating to
or arising out of the Albermarle Agreements (the "EXCLUDED LIABILITIES").
1.7. CONSENT OF THIRD PARTIES. (a) Notwithstanding anything to the
contrary in this Agreement, this Agreement shall not constitute an agreement to
assign or transfer any agreement, contract or commitment or any other instrument
or arrangement to be assumed pursuant to Section 1.5 (including without
limitation any Governmental Approval or Contract) or any claim, right or benefit
arising thereunder or resulting therefrom if an assignment or transfer or an
attempt to make such an assignment or transfer without the Consent of a third
party would constitute a breach or violation thereof or affect adversely the
rights of the Buyers or the Sellers thereunder; and any transfer or assignment
to any Buyer by the Sellers of any interest under any such agreement, contract
or commitment or other instrument or arrangement (including, without limitation,
any Governmental Approval or Contract) that requires the Consent of a third
party shall be made subject to such Consent or approval being obtained.
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Subject to Sections 4.1.12 and 4.1.13, in the event any such Consent is not
obtained and delivered in form and substance reasonably acceptable to the Buyers
on or prior to November 10, 1999, the Sellers shall have no further obligation
to obtain any such Consent, and the Buyers shall have the right by delivery of
written notice to the Sellers to terminate this Agreement.
(b) If the Buyers elect not to terminate this Agreement pursuant to
Section 1.7(a), upon the written request of the Buyers, after the Closing, the
Sellers will cooperate with the Buyers in any lawful and economically feasible
arrangement (an "AGENCY ARRANGEMENT") to provide that the applicable Buyer shall
receive the interest of the applicable Seller in the benefits under any
agreement, contract or commitment or other instrument or arrangement (including,
without limitation, any Governmental Approval or Contract) with respect to which
the necessary Consent to the assignment or transfer to the Buyer has not been
obtained and delivered, including performance by the applicable Seller, as
agent, PROVIDED that the applicable Buyer shall (i) undertake to pay or satisfy
the corresponding liabilities for the enjoyment of such benefit to the extent
such Buyer would have been responsible therefor hereunder if such Consent had
been obtained and (ii) indemnify and hold the Sellers harmless from and against,
any and all Losses resulting from or arising out of such arrangement. The
Sellers shall retain all liabilities, obligations and commitments of any nature,
kind or description with respect to those agreements, contracts or commitments
or other instruments or arrangements (including without limitation, any
Governmental Approval or Contract) for which Consent is not delivered by the
Sellers to the Buyers on or prior to the Closing Date and with respect to which
the Buyers request an Agency Arrangement; PROVIDED that the Buyers shall honor
any purchase order or sale commitment outstanding on the Closing Date under any
such agreement, contract, commitment or instrument or arrangement relating to
customers or suppliers to the extent that the customer or supplier that will not
consent to the assignment or transfer of the underlying Contract agrees to do
business with the Buyers with respect to such purchase order or sales
commitment, PROVIDED FURTHER that if after the Closing Date, the Sellers deliver
a Consent to the assignment or transfer of any agreement, contract, commitment
or other instrument or arrangement with respect to which the Buyers have
requested an Agency Arrangement, the Agency Arrangement shall terminate and the
Buyers shall undertake to pay or satisfy the corresponding liabilities as
contemplated in clause (i) above.
ARTICLE II
THE PURCHASE PRICE
2.1. PURCHASE PRICE. On the terms and subject to the conditions set
forth in this Agreement, in connection with the purchase and sale of the Assets,
the Buyers shall pay or cause to be paid to the Sellers U.S. $50,000,000 (the
"PURCHASE PRICE"), as adjusted pursuant to Sections 2.2 and 2.6, and the US
Buyer and the Canadian Buyer shall assume the Assumed Liabilities pursuant to
Section 1.5. The Purchase Price shall be paid at the Closing to the
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Sellers or as they may direct and shall be payable by wire transfer, of
immediately available funds to such bank account or accounts as specified in
written instructions of the Sellers given to the Buyers prior to the Closing.
Notwithstanding the foregoing, at the Closing, the Buyers at their election may
pay the Sellers the Canadian Equivalent of a portion of the Purchase Price. If
Buyers pay the Sellers the Canadian Equivalent of a portion of the Purchase
Price, the Buyers will pay the Sellers the balance of the Purchase Price in U.S.
dollars.
2.2. COMPUTATION OF CLOSING NET WORKING CAPITAL ADJUSTMENT. (a) As
promptly as practicable, but no later than March 31, 2000, the Buyers shall
prepare in good faith and deliver to the Sellers (i) a balance sheet of the
assets and liabilities (not including any Excluded Assets or Excluded
Liabilities) of Granutec as of the close of business on the Closing Date,
prepared in accordance with Section 2.3 (the "GRANUTEC CLOSING BALANCE SHEET"),
accompanied by a schedule from the Buyer Accountants, (ii) a certificate of the
Buyers, based on the Granutec Closing Balance Sheet, which sets forth with
respect to Granutec, the excess of (A) current assets (not including any
Excluded Assets or items subject to an adjustment pursuant to Section 2.6) over
(B) current liabilities (not including any Excluded Liabilities) (the "GRANUTEC
CLOSING NET WORKING CAPITAL"), together with supporting calculations in
reasonable detail (the "GRANUTEC ADJUSTMENT CERTIFICATE), (iii) a balance sheet
of the assets and liabilities (not including any Excluded Assets or Excluded
Liabilities) of Stanley as of the close of business on the Closing Date,
prepared in accordance with Section 2.3 (the "STANLEY CLOSING BALANCE SHEET"),
accompanied by a schedule from the Buyer Accountants, and (iv) a certificate of
the Buyers, based on the Stanley Closing Balance Sheet, which sets forth with
respect to Stanley, the excess of (A) current assets (not including any Excluded
Assets or items subject to an adjustment pursuant to Section 2.6) over (B)
current liabilities (not including any Excluded Liabilities) (the "STANLEY
CLOSING NET WORKING CAPITAL"), together with supporting calculations in
reasonable detail (the "STANLEY ADJUSTMENT CERTIFICATE).
The Sellers shall have 30 days from the date on which the Closing
Balance Sheets and the Adjustment Certificates are delivered to review such
documents (the "REVIEW PERIOD"). The Sellers and the Seller Accountants shall be
provided with full access to the work papers of the Buyer Accountants in
connection with such review. If the Sellers disagree in any respect with the
calculation of either Closing Net Working Capital, the Sellers may, on or prior
to the last day of the Review Period, deliver a notice to the Buyers setting
forth, in reasonable detail, each disputed item or amount and the basis for the
Sellers disagreement therewith, together with supporting calculations (the
"DISPUTE NOTICE"). The Dispute Notice shall set forth the Sellers' position as
to the proper Closing Net Working Capital for each Division. If no Dispute
Notice is received by the Buyers on or prior to the last day of the Review
Period, the Closing Balance Sheets and the Adjustment Certificates shall be
deemed accepted by the Sellers. If a Dispute Notice relating only to the
Granutec Closing Balance Sheet and the Granutec Adjustment Certificate is
received by the Buyers on or prior to the last day of the Review Period, the
Stanley Closing Balance Sheet and the Stanley Adjustment Certificate shall be
deemed accepted by the Sellers. If a Dispute Notice relating only to the Stanley
Closing
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Balance Sheet and the Stanley Adjustment Certificate is received by the Buyers
on or prior to the last day of the Review Period, the Granutec Closing Balance
Sheet and the Granutec Adjustment Certificate shall be deemed accepted by the
Sellers.
(b) THE ACCOUNTANTS. If the Buyers and the Sellers have been unable
to resolve all issues set forth in the Dispute Notice within 15 days of the
Buyers' receipt of such notice, the Buyers and the Sellers shall jointly contact
the US national office of Deloitte & Touche and shall retain Deloitte & Touche
to resolve all unresolved issues set forth in the Dispute Notice. If for any
reason Deloitte & Touche shall not be available to resolve such issues
consistent with this Section 2.2, the Buyers and Sellers shall promptly contact
the national office of, and shall retain the services of, an international
independent accounting firm with experience in the pharmaceutical industry,
which does not at the time of retention provide and has not in the prior ten
years provided services to the Buyers or the Sellers (or to their Affiliates).
If the Buyers and the Sellers cannot agree on the independent accounting firm to
be retained, the Buyers and the Sellers shall each submit the name of one
accounting firm that satisfies the qualifications set forth in this Section 2.2,
and the independent accounting firm shall be selected by lot from those two
firms. The independent accounting firm retained by the Buyers and the Sellers
(the "ACCOUNTANT") shall conduct such review of the Closing Balance Sheets, any
related work papers of the Buyer Accountants, the Adjustment Certificates, and
the Dispute Notice, and any supporting documentation as the Accountant in its
sole discretion deems necessary, and the Accountant shall conduct such hearings
or hear such presentations by the parties as the Accountant in its sole
discretion deems necessary.
(c) THE ADJUSTMENT REPORT. The Accountant shall, as promptly as
practicable and in no event later than 30 days following the date of its
retention, deliver to the Sellers and the Buyers a report (the "ADJUSTMENT
REPORT"), in which the Accountant shall, after considering all matters set forth
in the Dispute Notice, determine what adjustments, if any, should be made to the
applicable Closing Balance Sheets in order for them to comply with this Section
2.2, and shall determine the appropriate Closing Net Working Capital on that
basis. The Adjustment Report shall set forth, in reasonable detail, the
Accountant's determination with respect to each of the disputed items or amounts
specified in the Dispute Notice, and the revisions, if any, to be made to the
Closing Balance Sheets, the Adjustment Certificates and the Closing Net Working
Capital, together with supporting calculations. The Sellers shall pay one-half,
and the Buyer shall pay one-half, of the fees and expenses of the Accountant
incurred in connection with the matters referred to in this Section 2.2. The
Adjustment Report shall be final and binding upon the Buyers and the Sellers,
and shall be deemed a final arbitration award that is enforceable pursuant to
the terms of the Federal Arbitration Act, 9 U.S.C. Sections 1 ET SEQ.
(d) ADJUSTMENT AND PAYMENT. Effective upon the end of the Review
Period (if a timely Dispute Notice is not delivered), or upon the resolution of
all matters set forth in the Dispute Notice by agreement of the parties or by
the issuance of the Adjustment Report (if a timely Dispute Notice is delivered),
the Purchase Price shall be reduced by (i) the amount, if
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any, by which the Stanley Closing Net Working Capital is less than the Stanley
Projected Net Working Capital and (ii) the amount, if any, by which the Granutec
Closing Net Working Capital is less than the Granutec Projected Net Working
Capital, or increased by (A) the amount, if any, by which the Stanley Closing
Net Working Capital is greater than the Stanley Projected Net Working Capital
and (B) the amount, if any, by which the Granutec Closing Net Working Capital is
greater than the Granutec Projected Net Working Capital. Any payments to be made
to the Buyers or the Sellers pursuant to this Section 2.2(d) shall be made
within five days of the end of the Review Period (if a timely Dispute Notice is
not delivered) or upon the resolution of all matters set forth in the Dispute
Notice by agreement of the parties or by the issuance of the Adjustment Report
(if a timely Dispute Notice is delivered) by wire transfer of immediately
available funds to the account or accounts of the Buyers or the Sellers, as the
case may be, such account or accounts to be designated by a fax at least two
Business Days prior to the date on which such payment is scheduled to be made.
2.3. PREPARATION OF CLOSING BALANCE SHEETS. The Closing Balance
Sheets shall be prepared in accordance with GAAP and in a manner that is
consistent with the Financial Statements; PROVIDED, however, that if the Closing
Balance Sheets cannot be prepared both in accordance with GAAP and in a manner
that is consistent with the Financial Statements, the Closing Balance Sheets
shall be prepared in accordance with GAAP.
2.4. PAYMENTS BY BUYERS. The consideration for the acquisition of
the Granutec Assets by the US Buyer, the acquisition of the Stanley Assets by
the Canadian Buyer and the acquisition of the Novopharm Assets by the applicable
Buyer shall consist of (x) cash in an amount equal to the Purchase Price (as
adjusted pursuant to Section 2.2) allocated to such Assets in accordance with
Section 2.5 and (y) the applicable Assumed Liabilities; PROVIDED that the cash
portion of such consideration may be paid by any Affiliate of either Buyer on
behalf of such Buyer.
2.5. ALLOCATION OF PURCHASE PRICE. Within 60 days after the later
of (i) the Closing Date and (ii) the date on which the Buyers' Accountants
provide their audit reports on the Closing Balance Sheets to the Buyers, the
Buyers shall provide to the Sellers proposed allocations of (x) the aggregate of
the Purchase Price (as adjusted pursuant to Section 2.2) and the Assumed
Liabilities (collectively, the "SELLERS' CONSIDERATION") and (y) the aggregate
of the Sellers' Consideration and all other capitalized costs (collectively, the
"BUYERS' CONSIDERATION") among the Assets acquired from each Seller, on a
Seller-by-Seller basis. The amount allocated to the Non-Competition Agreement
shall be $50,000. In the case of Granutec, such proposed allocations shall be
prepared in accordance with Section 1060 of the Code and the Treasury
regulations issued thereunder. In the case of Stanley, such proposed allocations
shall be prepared in accordance with the applicable provisions of Canadian Tax
law. The parties shall cooperate in determining the final allocations of the
Buyers' Consideration and the Sellers' Consideration among the Assets (the
"FINAL ALLOCATIONS"). Any dispute with respect thereto shall be referred for
resolution to a firm of independent public accountants of international
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standing chosen by agreement of the parties, the fees and expenses of such firm
to be divided evenly between the Buyers and the Sellers. The decision of such
accounting firm with respect to such dispute shall be final and binding;
PROVIDED, that (i) in the event that the Buyers' Consideration exceeds the
aggregate Book Value of the Assets, the Final Allocations shall not result in an
allocation of Buyers' Consideration among the Assets in one jurisdiction in an
amount less than the aggregate Book Value of the Assets in such jurisdiction,
(ii) in the event that the aggregate Book Value of the Assets exceeds the
Buyers' Consideration, the Final Allocations shall result in such excess in each
jurisdiction not being materially different in amount, and (iii) the amount
allocated to the Non-Competition Agreement shall not exceed $50,000. In
connection with the preparation of the foregoing proposed allocations, reports
and the Final Allocations, the parties shall cooperate with each other and
provide such information as any of them shall reasonably request. The parties
shall (i) prepare and file all statements or other information required to be
furnished to any Governmental Authority pursuant to, in the case of Granutec,
section 1060 of the Code and the Treasury Regulations and, in the case of
Stanley, the applicable provisions of Canadian Tax law, in a manner consistent
with the Final Allocations and (ii) prepare all Tax Returns and forms required
to be filed by them (including IRS Form 8594) in a manner consistent with such
allocations, and shall not take any position contrary to such allocations with
any Governmental Authority without the express written consent of the other.
2.6. CERTAIN ADJUSTMENTS. As promptly as practicable, but not later
than March 31, 2000, the Buyers shall prepare in good faith and deliver to the
Sellers a certificate (the "PROPOSED PREPAID ITEM CERTIFICATE") setting forth in
reasonable detail a proposed adjustment to the Purchase Price as of the Closing
Date of items of the nature of those listed in items 1, 2, 3 and 8 of Schedule
1.4 of the Granutec Schedules and items 1,3 and 8 of Schedule 1.4 of the Stanley
Schedules that are not included in the calculation of the Granutec Closing Net
Working Capital and the Stanley Closing Net Working Capital. The Sellers shall
have 30 days from the date on which the Proposed Prepaid Item Certificate is
delivered to review such Certificate. If the Sellers disagree in any respect
with the calculation of any item thereon, the Sellers may, on or prior to the
end of such 30-day period, deliver a notice to the Buyers setting forth, in
reasonable detail, each disputed item or amount and the basis for the Sellers'
disagreement therewith, together with supporting calculations. Such notice shall
set forth the Sellers' position as to the proper adjustment. Any item not
disputed by Sellers in such certificate shall be deemed accepted by the Sellers.
If no such notice is received by the Buyers on or prior to the last day of such
30-day period, the Proposed Prepaid Item Adjustment Certificate shall be deemed
accepted by the Sellers. Any disputes that the Sellers and the Buyers are unable
to resolve within 15 days of receipt of such notice shall be resolved in the
manner set forth in Sections 2.2(b) and (c). Upon resolution of all such
disputes, the appropriate party shall promptly make a single net adjustment
payment.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. As of October
7, 1999 and as of the Closing Date, the Sellers jointly and severally represent
and warrant to the Buyers as follows (except that Granutec and GHC make no
representations and warranties with respect to Stanley, Stanley makes no
representations and warranties with respect to Granutec and Granutec, GHC and
Stanley make no representations and warranties with respect to Novopharm):
3.1.1. AUTHORIZATION, ETC. Each of the Sellers has the corporate
power and authority to execute and deliver this Agreement and each of the
Collateral Agreements to which it will be a party, to perform fully its
obligations thereunder, and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement, and the consummation of
the transactions contemplated hereby, have been, and on the Closing Date each of
the Collateral Agreements will have been, duly authorized by all requisite
corporate action of each of the Sellers. Each of the Sellers has duly executed
and delivered this Agreement and on the Closing Date will have duly executed and
delivered the Collateral Agreements to which it is a party. This Agreement is,
and on the Closing Date each of such Collateral Agreements will be, legal, valid
and binding obligations of each of the Sellers enforceable against it in
accordance with their respective terms.
3.1.2. CORPORATE STATUS. (a) Each of the Sellers is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, as set forth in Schedule 3.1.2(a), with full
corporate power and authority to carry on its business (including its portion of
the Business) and to own or lease and to operate its properties as and in the
places where such business is conducted and such properties are owned, leased or
operated.
(b) Except where the failure to be so qualified or licensed would
not have a Material Adverse Effect on the Business, each of the Divisions is
duly qualified or licensed to do business and is in good standing in each of the
jurisdictions specified opposite its name in Schedule 3.1.2(b).
(c) Each of the Divisions has delivered to the Buyers complete and
correct copies of its certificate of incorporation and by-laws or other
organizational documents, in each case, as amended and in effect on the date
hereof. Neither of the Divisions is in violation of any of the provisions of its
certificate of incorporation or by-laws or other organizational documents.
3.1.3. NO CONFLICTS, ETC. The execution, delivery and performance
by each of the Sellers of this Agreement and each of the Collateral Agreements
to which it is or will be a party, and the consummation of the transactions
contemplated thereby, do not and will not con-
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flict with, contravene, result in a violation or breach of or default under
(with or without the giving of notice or the lapse of time or both), give
rise to a right or claim of termination, amendment, modification, vesting,
acceleration or cancellation of any right or obligation or loss of any
benefit under, or result in the creation of any Lien (or any obligation to
create any Lien) upon any of the Assets under (i) any Applicable Law
applicable to any Seller or any of the properties or assets of either
Division or, to the extent related to the Assets, Novopharm (PROVIDED, with
respect to performance of this Agreement and the Collateral Agreements, that
the Governmental Approvals listed in Schedule 3.1.3 have been obtained prior
to the Closing), (ii) the certificate of incorporation or by-laws or other
organizational documents of each Seller or (iii) except as set forth in
Schedule 3.1.3, any Contract or other contract, agreement or commitment or
other instrument or arrangement to which any Seller is a party or by which
any Seller or any of the Assets may be bound or affected. Except as specified
in Schedule 3.1.3, no Governmental Approval or other Consent is required to
be obtained or made by any Seller in connection with the execution and
delivery of this Agreements and the Collateral Agreements or the consummation
of the transactions contemplated hereby and thereby.
3.1.4. FINANCIAL STATEMENTS, ETC. (a) FINANCIAL STATEMENTS. The
Sellers have delivered to the Buyers (i) audited financial statements of
Granutec and Stanley, in each case, at and for the periods ended December 31,
1996 and December 31, 1997 and on or prior to the Closing Date will deliver to
the Buyer audited financial statements of Granutec and Stanley at and for the
period ended December 31, 1998 (the "AUDITED BALANCE SHEET DATE"), together with
reports thereon by Seller Accountants (the "AUDITED FINANCIAL STATEMENTS"), (ii)
unaudited financial statements of Granutec and Stanley, in each case, as at and
for the eight month periods ended August 31, 1999 (the "UNAUDITED FINANCIAL
STATEMENTS"), including in each of clauses (i) and (ii) a balance sheet,
statements of income and retained earnings and a statement of cash flows, (the
Audited Financial Statements and the Unaudited Financial Statements are referred
to collectively as the "FINANCIAL STATEMENTS"). The Audited Financial Statements
for the periods ended December 31, 1996 and December 31, 1997 are, and upon
delivery the Audited Financial Statements for the period ended December 31, 1998
will be, complete and correct in all material respects and have been or upon
delivery will be prepared in accordance with GAAP consistently applied
throughout the periods indicated. The Unaudited Financial Statements have been
prepared and on a basis consistent with the Audited Financial Statements, except
that the Unaudited Financial Statements do not contain notes and may be subject
to normal audit adjustments and normal annual adjustments. The balance sheets
included in the Financial Statements present fairly or upon delivery will
present fairly the financial condition of the Business as at their respective
dates. The statements of income and retained earnings and statements of cash
flows included in the Financial Statements reflect or upon delivery will reflect
all costs that historically have been incurred by the Business (other than the
Excluded Liabilities) and present fairly or upon delivery will present fairly
the results of operations and cash flows of the Business for the periods
indicated.
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(b) OTHER FINANCIAL INFORMATION. Schedule 3.1.4(b) sets forth the
extent to which each the Division makes sales to or derives revenues or makes
purchases from sources located in foreign countries for the eight months ended
August 31, 1999.
3.1.5. ABSENCE OF UNDISCLOSED LIABILITIES. No Seller has any
liabilities or obligations of any nature, whether known, absolute, accrued,
contingent or otherwise and whether due or to become due, arising out of or
relating to the Business or the Assets, except (a) as set forth in Schedule
3.1.5, (b) as and to the extent disclosed or reserved against on the face of
Audited Balance Sheets and (c) for liabilities and obligations that (i) were
incurred after the date of the Audited Balance Sheets in the ordinary course of
business consistent with prior practice and not prohibited by this Agreement and
(ii) individually and in the aggregate are not material to the Business and have
not had or resulted in, and will not have or result in, a Material Adverse
Effect.
3.1.6. TAXES. (a) (i) All income and other material Tax Returns
required to have been filed in connection with the Business or the Assets have
been filed, (ii) all such Tax Returns are true and correct in all material
respects, (iii) all Taxes shown as due on such Tax Returns have been paid, (iv)
all other material Taxes that are due (or claimed by any Governmental Authority
to be due) in connection with the Business or the Assets, that are chargeable as
a lien upon the Business or the Assets, or that may become due in connection
with the Business or the Assets with respect to any taxable period (or portion
thereof) ending on before the Closing Date, have been paid or have been
adequately reserved for in the books and records of the Sellers, and (iv) the
Divisions and, to the extent related to the Business, Novopharm have duly and
timely withheld all Taxes required to be withheld, including but not limited to
amounts required to be withheld in connection with amounts paid or owing to any
employee, independent contractor, creditor or stockholder, ("WITHHOLDING TAXES")
and such Withholding Taxes have been either duly and timely paid to the proper
Governmental Authority or properly set aside in accounts for such purpose and
will be duly and timely paid to the proper Governmental Authority.
(b) No agreement or other document waiving or extending, or having
the effect of waiving or extending, the statute of limitations or the period of
assessment or collection of any Taxes payable in connection with the Business or
the Assets, and no power of attorney with respect to any such Taxes has been
filed or entered into with any Governmental Authority, which waiver, extension
or power of attorney is currently in effect.
(c) Except as set forth in Schedule 3.1.6(c), no Taxes on or with
respect to the Division or, to the extent related to the Business, Novopharm are
currently under audit, examination or investigation by any Governmental
Authority. No Governmental Authority is now asserting or, to the knowledge of
any Seller, proposing to assert against either Division or, to the extent
related to the Business, Novopharm any material deficiency or claim for any
Taxes or any adjustment to Taxes. There is no litigation or administrative
appeal pending or, to
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the best knowledge of any Seller, threatened against or relating to either
Division or, to the extent related to the Business, Novopharm in connection with
any Taxes.
(d) Neither Division nor, to the extent related to the Business,
Novopharm (i) is a party to or bound by or has an obligation under any Tax
allocation, sharing, indemnity or similar agreement or arrangement, (ii) is or
has been a member of any consolidated, combined or unitary group for purposes of
filing Tax Returns or paying Taxes, (iii) is otherwise liable for the Taxes of
any other Person, as a transferee, successor or otherwise, and (iv) has received
or applied for a Tax ruling or has entered into a closing agreement pursuant to
Section 7121 of the Code, or any predecessor provision or any similar provision
of any Applicable Law.
(e) No Buyer will be required to deduct or withhold any amount in
connection with the transactions contemplated by this Agreement, including
without limitation pursuant to section 1445(a) of the Code.
(f) None of the Assets are subject to Tax liens (other than liens
for Taxes which are not yet due and payable).
(g) The U.S. federal income tax returns of Granutec have been
examined and settled with the IRS (or the statutes of limitation for the
assessment of federal income taxes for such periods have expired) for all years
through 1995, and no material deficiencies were asserted as a result of such
examinations that have not been resolved and fully paid. Stanley has filed as
required all Tax Returns and has not been assessed or reassessed for any Taxes
other than as filed. There are no proposed assessments or reassessments for any
Taxes of Stanley and the "Normal Reassessment Period" (as defined in the Income
Tax Act (Canada)) has expired for Stanley with respect to all taxation years up
to and including 1994.
(h) The Industrial Revenue Development Bonds constitute validly
outstanding tax exempt obligations pursuant to Section 103 of the Code. To the
knowledge of the Sellers the transactions contemplated by this Agreement will
not cause interest with respect to the Industrial Development Revenue Bonds to
fail to qualify as tax exempt interest under Section 103 of the Code or cause
the maturity date of such bonds to be accelerated. To the knowledge of the
Sellers, no conditions exist that would cause the Industrial Development Revenue
Bonds to fail to qualify as tax exempt or would cause the maturity date of such
bonds to be accelerated.
(i) Neither Stanley nor Novopharm are non-residents within the
meaning of the Income Tax Act (Canada), both are registered for the purposes of
the Excise Tax Act (Canada) and their respective business numbers are 122143506
and 885106765.
3.1.7. ABSENCE OF CHANGES. Except as set forth in Schedule 3.1.7,
since the Audited Balance Sheet Date, the Sellers have conducted the Business
only in the ordinary
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course consistent with prior practice and have not, on behalf of, in connection
with or relating to the Business or the Assets:
(a) suffered any Material Adverse Effect;
(b) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection with
the purchase of goods or services in the ordinary course of business
consistent with prior practice, none of which liabilities, in any case or
in the aggregate, could have a Material Adverse Effect;
(c) discharged or satisfied any Lien the discharge or satisfaction
of which did not have a Material Adverse Effect, other than those then
required to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to
become due, other than current liabilities shown on the Audited Balance
Sheet and current liabilities incurred since the date thereof in the
ordinary course of business consistent with prior practice;
(d) assigned, mortgaged, pledged or otherwise subjected to Lien,
any property, business or assets, tangible or intangible, held in
connection with the Business;
(e) sold, transferred, leased to others or otherwise disposed of
any of the Assets, except for inventory sold in the ordinary course of
business, or forgiven, canceled or compromised any debt or claim, or
waived or released any right of substantial value;
(f) received any notice of termination of any contract, lease or
other agreement or suffered any damage, destruction or loss (whether or
not covered by insurance) which, in any case or in the aggregate, has had
a Material Adverse Effect;
(g) transferred or granted any rights or licenses under, or entered
into any settlement regarding the breach or infringement of, any
Intellectual Property, or modified any existing rights with respect
thereto;
(h) other than in the ordinary course of business, made any change
in the rate of compensation, commission, bonus or other direct or
indirect remuneration payable, or paid or agreed or orally promised to
pay, conditionally or otherwise, any bonus, incentive, retention or other
compensation, retirement, welfare, fringe or severance benefit or
vacation pay, to or in respect of any shareholder, director, officer,
employee, salesman, distributor or agent of any Seller relating to the
Business;
(i) encountered any labor union organizing activity, had any actual
or, to the knowledge of the Sellers, threatened employee strikes, work
stoppages, slowdowns or
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lockouts, or had any material change in its relations with its employees,
agents, customers or suppliers;
(j) failed to replenish either Division's inventories and supplies
in a normal and customary manner consistent with its prior practice and
prudent business practices prevailing in the industry, or made any
purchase commitment in excess of the normal, ordinary and usual
requirements of its business or at any price in excess of the then
current market price or upon terms and conditions more onerous than those
usual and customary in the industry, or made any change in its selling,
pricing, advertising or personnel practices inconsistent with its prior
practice and prudent business practices prevailing in the industry;
(k) made any capital expenditures or capital additions or
improvements in excess of an aggregate of $200,000 for each Division;
(l) instituted, settled or agreed to settle any litigation, action
or proceeding before any court or governmental body relating to the
Business or the Assets other than in the ordinary course of business
consistent with past practices but not in any case involving amounts in
excess of $200,000 in the aggregate;
(m) (i) entered into any material transaction, contract, agreement
or commitment or other instrument or arrangement other than in the
ordinary course of business or (ii) breached any material contract,
agreement or commitment or other instrument or arrangement;
(n) made any material changes in policies or practices relating to
selling practices, returns, discounts or other terms of sale or
accounting therefor or in policies of employment;
(o) made any prepayment of any accounts payable, delayed payment of
any trade payables in a manner that had a Material Adverse Effect or
other obligations other than in the ordinary course of business
consistent with past practice, or made any other cash payments other than
in the ordinary course of business;
(p) failed to maintain all of the tangible Assets in good repair,
working order and operating condition subject only to ordinary wear and
tear;
(q) failed to use reasonable best efforts to keep in full force and
effect insurance comparable in amount and scope of coverage to insurance
now carried in connection with the Business; or
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(r) taken any action or omitted to take any action that would
result in the occurrence of any of the foregoing.
3.1.8. LITIGATION. Except as set forth on Schedule 3.1.8, there is
no legal action, claim, demand, suit, proceeding, arbitration, grievance,
citation, summons, subpoena, written inquiry or investigation of any nature,
including, without limitation, any proceedings for the acquisition of collective
bargaining rights, civil, criminal, regulatory, tribunal proceeding or
otherwise, in law or in equity (collectively, "LITIGATION"), filed and served on
or, to the knowledge of the Sellers, threatened against or relating to any
Seller in connection with the Assets or the Business or against or relating to
the transactions contemplated by this Agreement or any Collateral Agreement,
and no Seller knows of any reasonable basis for the same. Except as set forth in
such Schedule 3.1.8, in the three years prior to the date hereof and the Closing
Date no citations, fines or penalties have been asserted against any Seller in
connection with the Assets or the Business that had a Material Adverse Effect
under any Environmental Law or other Applicable Law. Schedule 3.1.8 sets forth
all Litigation against or relating to any Seller in connection with the Assets
or the Business since January 1, 1998 and all Litigation against or relating to
any Seller in connection with the Assets or the Business that had a Material
Adverse Effect during the period from January 1, 1997 to December 31, 1997.
3.1.9. COMPLIANCE WITH LAWS; GOVERNMENTAL APPROVALS AND CONSENTS.
(a) Except as disclosed in Schedule 3.1.9(a) since January 1, 1997, each of the
Sellers has complied in all material respects with all Applicable Laws
applicable to the Business or the Assets, and no Seller has received any notice
alleging any such conflict, violation, breach or default that has not been
cured.
(b) Schedule 3.1.9(b) sets forth all Governmental Approvals and
other Consents necessary for, or otherwise material to, the conduct of the
Business. Except as set forth in Schedule 3.1.9(b), all such Governmental
Approvals and Consents have been duly obtained and are in full force and effect,
and each of the Sellers is in material compliance with each of such Governmental
Approvals and Consents held by it with respect to the Assets and the Business.
(c) Schedule 3.1.9(c) sets forth all Contracts with any
Governmental Authority relating to the Assets or the Business.
3.1.10. OPERATION OF THE BUSINESS. Except for sales of over the
counter drugs, vitamins, minerals, herbals, and supplements under the "Wampole"
brand by Wampole and sales of private label over the counter drugs, vitamins,
minerals, herbals, and supplements by Novopharm Quebec, a division of Novopharm,
and except for the operations of Humanpharma outside the Territory, the
Divisions are the only Affiliates of Novopharm that, and Novopharm itself does
not, develop, manufacture, label, package, market and distribute private label
over the counter drugs, vitamins, minerals, herbals and supplements.
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3.1.11. ASSETS. Except as disclosed in Schedule 3.1.11, each of the
Sellers has good and valid title to all the applicable Assets free and clear of
any and all Liens other than Permitted Liens. Except as disclosed in Schedule
3.1.11, neither Novopharm nor GHC owns any properties, assets, rights, of any
nature, kind and description (including, without limitation, the Specified
Assets), tangible and intangible (including goodwill), whether real, personal or
mixed, whether accrued, contingent or otherwise and whether now existing or
hereinafter acquired (other than the Excluded Assets) relating to or used or
held for use in connection with the Business. Except as disclosed in Schedule
3.1.11, the Assets, together with the services and arrangements described in
Section 5.2.5, comprise all assets and services required for the continued
conduct of the Business by the Buyers as now being conducted. The Assets, taken
as a whole, constitute all the properties and assets relating to or used or held
for use in connection with the Business during the past twelve months (except
Inventory sold, cash disposed of, accounts receivable collected, prepaid
expenses realized, Contracts fully performed, properties or assets replaced by
equivalent or superior properties or assets, in each case in the ordinary course
of business, employees not to be hired by the Buyer, and the Excluded Assets).
The Assets are adequate for the purposes for which such assets are currently
used or are held for use, and are in good repair and operating condition
(subject to normal wear and tear).
3.1.12. CONTRACTS. (a) Schedule 3.1.12(a) contains a complete and
correct list of all material agreements, contracts, commitments and other
instruments and arrangements (whether written or oral), of the types described
below (x) by which any of the Assets are bound or affected or (y) to which any
Seller is a party or by which it is bound in connection with the Business or the
Assets (the "CONTRACTS") and specifies which Seller is a party to such
agreements, contracts, instruments and arrangements:
(i) leases, licenses, permits, franchises, insurance policies,
Governmental Approvals and other contracts concerning or relating to the
Real Property;
(ii) employment, consulting, agency, collective bargaining or other
similar contracts, agreements, and other instruments and arrangements
relating to or for the benefit of current, future or former employees,
officers, directors, sales representatives, distributors, dealers,
agents, independent contractors or consultants;
(iii) loan agreements, indentures, letters of credit, mortgages,
security agreements, pledge agreements, deeds of trust, bonds, notes,
guarantees, and other agreements and instruments relating to the
borrowing of money or obtaining of or extension of credit;
(iv) all agreements and arrangements set forth on Schedule
3.1.19(d), and all other contracts providing in whole or in part for the
use of, or limiting the use of, any Intellectual Property;
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(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar contracts involving a
sharing of profits or expenses (including but not limited to joint
research and development and joint marketing contracts);
(vii) stock purchase agreements, asset purchase agreements and
other acquisition or divestiture agreements, including but not limited to
any agreements relating to the acquisition, sale, lease or disposal of
any Assets (other than sales of inventory in the ordinary course of
business) or involving continuing indemnity or other obligations;
(viii) as of the dates set forth in Schedule 3.1.12(a), orders and
other contracts for the purchase or sale of materials, supplies, products
or services, each of which involves aggregate payments in excess of
$100,000 in the case of purchases or $100,000 in the case of sales;
(ix) to the extent not disclosed in subclauses (i) to (viii) above
and (x) to (xiii) below, contracts with respect to which the aggregate
amount that could reasonably expected to be paid or received thereunder
in the future exceeds $50,000 per annum or $50,000 in the aggregate;
(x) sales agency, manufacturer's representative, marketing or
distributorship agreements;
(xi) contracts, agreements or arrangements with respect to the
representation of the Business in foreign countries;
(xii) master lease agreements providing for the leasing of both (A)
personal property primarily used in, or held for use primarily in
connection with, the Business and (B) other personal property;
(xiii) contracts, agreements or commitments with any employee,
director, officer, stockholder or (except with respect to purchase orders
entered into in the ordinary course of business) Affiliate of any Seller;
and
(xiv) any other contracts, agreements or commitments that are or
will be material to the Business.
(b) Unless otherwise disclosed in Schedule 3.1.12(a) or 4.1.13, the
Sellers have delivered to the Buyer complete and correct copies of all written
Contracts, together with all amendments thereto, and accurate descriptions of
all material terms of all oral Contracts, set forth or required to be set forth
in Schedule 3.1.12(a). All agreements, contracts and
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commitments that have been incurred in the ordinary course of business and are
not required to be disclosed in Schedule 3.1.12(a) are not individually material
to the operation of the Business and will not, in the aggregate, have a Material
Adverse Effect.
(c) Except as set forth in Schedule 3.1.12(a), all Contracts are in
full force and effect and enforceable against each party thereto. There does not
exist under any Contract any default or event or condition that, after notice or
lapse of time or both, would constitute a violation, breach or event of default
thereunder on the part of any Seller or, to the knowledge of the Sellers, any
other party thereto except as set forth in Schedule 3.1.12(c) and except for
such events or conditions that, individually and in the aggregate, (i) have not
had or resulted in, and will not have or result in, a Material Adverse Effect
and (ii) have not and are not reasonably expected to materially impair the
ability of any Seller to perform their respective obligations under this
Agreement and under the Collateral Agreements. Except as set forth in Schedule
3.1.12(c), no consent of any third party is required under any Contract as a
result of or in connection with, and the enforceability of any Contract will not
be affected in any manner by, the execution, delivery and performance of this
Agreement or any of the Collateral Agreements or the consummation of the
transactions contemplated thereby.
(d) Except as set out in Schedule 3.1.12(d), none of the Sellers
has outstanding any power of attorney relating to the Business.
3.1.13. TERRITORIAL RESTRICTIONS. Except as a result of any
agreement set out in Schedule 3.1.13, no Seller is restricted by any written
agreement or understanding with any other Person from carrying on the Business
anywhere in the world. The Buyers, solely as a result of its purchase of the
Business from the Sellers pursuant hereto and the assumption of the Assumed
Liabilities, will not thereby become restricted in carrying on any business
anywhere in the world.
3.1.14. INVENTORIES. All Inventories of the Divisions or, to the
extent related to the Business, Novopharm, are of good, usable and merchantable
quality and, except as set forth on Schedule 3.1.14, do not include obsolete or
discontinued items. Except as set forth on Schedule 3.1.14, (a) all such
Inventories are of such quality as to meet the quality control standards of the
Sellers and any applicable governmental quality control standards, (b) all such
Inventories that are finished goods are saleable as current inventories in the
ordinary course of business, (c) all such Inventories are recorded on the books
of the Business at the lower of cost or market value determined in accordance
with GAAP and (d) no write-down in inventory has been made or should have been
made pursuant to GAAP during the past two years. Schedule 3.1.14 lists the
locations of all such Inventories.
3.1.15. CUSTOMERS. Schedule 3.1.15 sets forth the names of all
customers of either Division or to the extent related to the Business, Novopharm
that ordered Products from such Seller with an aggregate value for each such
customer of $100,000 or more during the twelve-
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month period ended August 31, 1999. Except as set forth on Schedule 3.1.15,
no Seller has received any notice or has any reason to believe that any
significant customer of such Division or to the extent related to the
Business, Novopharm (i) has ceased, or will cease, to use the products, goods
or services of such Seller, (ii) has substantially reduced or will
substantially reduce, the use of products, goods or services of such Seller
or (iii) has sought, or is seeking, to reduce the price it will pay for
products, goods or services of such Seller, including in each case after the
consummation of the transactions contemplated hereby. To the knowledge of the
Sellers, no customer of any Seller described in the first sentence of this
section has otherwise threatened to take any action described in the
preceding sentence as a result of the consummation of the transactions
contemplated by this Agreement and the Collateral Agreements.
3.1.16. SUPPLIERS; RAW MATERIALS. Schedule 3.1.16 sets forth (a)
the names of all suppliers (including without limitation Novopharm and any
Affiliates thereof) from which each Division ordered raw materials, supplies,
merchandise and other goods and services with an aggregate purchase price for
each such supplier of $100,000 or more during the twelve-month period ended
August 31, 1999 and (b) the amount for which each such supplier invoiced each
Seller during such period. Except as disclosed on Schedule 3.1.16, no Seller has
received any notice or has any reason to believe that there has been any change
in the price of such raw materials, supplies, merchandise or other goods or
services that could reasonably be expected to have or result in a Material
Adverse Effect, or that any such supplier will not sell raw materials, supplies,
merchandise and other goods to either Buyer at any time after the Closing Date
on terms and conditions similar to those used in its current sales to the
Divisions or to the extent relating to the Business, Novopharm, subject to
general and customary price increases. To the knowledge of the Sellers, no
supplier of any Seller described in clause (a) of the first sentence of this
section has otherwise threatened to take any action described in the preceding
sentence as a result of the consummation of the transactions contemplated by
this Agreement and the Collateral Agreements.
3.1.17. PRODUCTS. (a) WARRANTIES. Schedule 3.1.17(a) sets forth a
summary of the most frequently used standard terms and conditions of sale for
each of the products or services of each Division and, to the extent related to
the Business, Novopharm (the "PRODUCTS"), containing applicable guaranty,
warranty and indemnity provisions. Schedule 3.1.17(a) contains a complete and
correct list of all Products and a list of the Products that Novopharm supplies
to Granutec and the Products that Novopharm supplies to Stanley. Except as set
forth on Schedule 3.1.17(a), no Product manufactured, sold, or delivered by, or
service rendered by or on behalf of either Division and, to the extent related
to the Business, Novopharm is subject to any guaranty, warranty or other
indemnity, express or implied, beyond such standard terms and conditions.
(b) PRODUCT LIABILITY. Except as set forth on Schedule 3.1.17(b),
no Seller has any liability or obligation of any nature (whether known, accrued,
absolute, contingent or otherwise,
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and whether due or to become due), whether based on strict liability,
negligence, breach of warranty (express or implied), breach of contract or
otherwise, in respect of any product, component or other item manufactured,
sold, designed or produced prior to the Closing by, or service rendered prior to
the Closing by or on behalf of, any Division and, to the extent related to the
Business, Novopharm or any predecessor thereto, that (i) is not fully and
adequately covered by policies of insurance or by indemnity, contribution, cost
sharing or similar agreements or arrangements by or with other Persons, and (ii)
is not otherwise fully and adequately reserved against as reflected in the
Financial Statements and (iii) will not otherwise be fully and adequately
reserved against as reflected in the Closing Balance Sheet.
(c) REBATES. Except as set forth on Schedule 3.1.17(c), no Division
and, to the extent related to the Business, Novopharm has entered into, or
offered to enter into, any agreement, contract commitment or other arrangement
(whether written or oral) pursuant to which such Division or Novopharm is or
will be obligated to make any rebates, discounts, promotional allowances or
similar payments or arrangements to any customer ("REBATE OBLIGATIONS"). All
Rebate Obligations are reflected in the Audited Financial Statements or have
been incurred after the date thereof in the ordinary course of business and will
be reflected in the Subsequent Monthly Financial Statements.
3.1.18. ABSENCE OF CERTAIN BUSINESS PRACTICES. None of the Sellers,
any officer, employee or agent of any Seller, or any other person acting on
their behalf, has, directly or indirectly, within the past five years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the Business (or assist any Seller in connection with any actual or
proposed transaction relating to the Business) (i) which subjected or might have
subjected any Division or to the extent related to the Business, Novopharm, to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) which if not given in the past, might have had a Material
Adverse Effect, (iii) which if not continued in the future, might have a
Material Adverse Effect or subject any Division or to the extent related to the
Business, Novopharm, to suit or penalty in any private or governmental
litigation or proceeding, (iv) for any of the purposes described in Section
162(c) of the Code or any similar provision of any Applicable Law or (v) for the
purpose of establishing or maintaining any concealed fund or concealed bank
account.
3.1.19. INTELLECTUAL PROPERTY. (a) TITLE. Schedule 3.1.19(a)
contains a complete and correct list of all Intellectual Property Assets that
are owned by any Seller (the "OWNED INTELLECTUAL PROPERTY") other than (i)
inventions, trade secrets, processes, formulas, compositions, designs and
confidential business and technical information and (ii) Intellectual Property
that is both (x) not registered or subject to application for registration and
(y) not material to the Business. Except as set forth on Schedule 3.1.19(a), the
Sellers own or have the exclusive right to use pursuant to license, sublicense,
agreement or permission all Intellectual Property Assets, free from any Liens
(other than Permitted Liens) and free from any requirement of any
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past, present or future royalty payments, license fees, charges or other
payments, or conditions or restrictions whatsoever except such payments as may
be necessary in connection with the registration or maintenance of any
Intellectual Property with any Governmental Authority. The Owned Intellectual
Property and the Intellectual Property licensed to or used by the Sellers under
the agreements and arrangements set forth on Schedule 3.1.19(d) as required by
Section 3.1.19(d)(i), comprise all of the Intellectual Property necessary for
the Buyers to conduct and operate the Business as now being conducted by the
Sellers.
(b) TRANSFER. Immediately after the Closing, provided the Buyers
comply with all applicable registration requirements of all Governmental
Authorities to effect such transfer, the Buyers will own all of the Owned
Intellectual Property and will have a right to use all other Intellectual
Property Assets, free from any Liens (other than Permitted Liens) and on the
same terms and conditions as in effect prior to the Closing.
(c) NO INFRINGEMENT. Except as set forth on Schedule 3.1.19(c), the
conduct of the Business as currently conducted does not infringe or otherwise
conflict with any rights of any Person in respect of any Intellectual Property.
To the knowledge of the Sellers, none of the Intellectual Property Assets is
being used or has been made available for use by any other Person without the
permission of the relevant Seller or is being infringed by any other Person.
(d) LICENSING ARRANGEMENTS. Schedule 3.1.19(d) sets forth a
complete and correct list of all material written and oral agreements or
arrangements pursuant to which (i) any Seller has any Intellectual Property
Asset(s) licensed to it or has otherwise been permitted to use any Intellectual
Property Asset(s) (through non-assertion, settlement or similar agreements or
otherwise), and (ii) any Seller has licensed any Intellectual Property Asset(s)
to any Person (including, but not limited to, another Seller) or has otherwise
permitted the use by any Person of any Intellectual Property Asset(s) (through
non-assertion, settlement or similar agreements or otherwise). Each Seller has
delivered to the Buyers true and complete copies of all agreements and
arrangements (including amendments) set forth on Schedule 3.1.19(d), and
provided to the Buyers accurate written descriptions of all material terms of
all such agreements and arrangements that are oral. All royalties, license fees,
charges and other amounts payable by, on behalf of, to, or for the account of,
the Sellers or the Business in respect of any Intellectual Property are
disclosed in the Audited Financial Statements.
(e) NO INTELLECTUAL PROPERTY LITIGATION. Except as set forth on
Schedule 3.1.19(e), no written claim or demand of any Person has been made nor
is there any proceeding that is pending or, to the knowledge of the Sellers,
threatened, nor is there a reasonable basis therefor, which (i) challenges the
rights of any Seller in respect of any Intellectual Property Asset(s), (ii)
asserts that any Seller is infringing or otherwise in conflict with, or is,
except as set forth in Schedule 3.1.19(d), required to pay any royalty, license
fee, charge or other amount with regard to, any Intellectual Property, or (iii)
claims that any default exists under any agreement or arrangement listed on
Schedule 3.1.19(d). Except as set forth on Schedule 3.1.19(e), none
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of the Intellectual Property Assets is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court, arbitrator, or
administrative agency, or has been the subject of any litigation within the last
five years, whether or not resolved in favor of the Sellers.
(f) DUE REGISTRATION, ETC. The Owned Intellectual Property
described on Schedule 3.1.19(a) has been duly registered with, filed in or
issued by, as the case may be, the United States Patent and Trademark Office,
United States Copyright Office or such other filing offices, domestic or
non-United States, and the Sellers have taken all other actions, as necessary or
desirable to ensure full protection under any and all Applicable Laws and
regulations, and such registrations, filings, issuances and other actions remain
in full force and effect, in each case to the extent material to the Business.
(g) USE OF NAME AND MARK. Except as set forth in Schedule
3.1.19(g), there are, and as of the Closing will be, no contractual restriction
or limitations pursuant to any orders, decisions, injunctions, judgments, awards
or decrees of any Governmental Authority on any Buyer's right to use the names
ands marks in Schedules 3.1.19(a) and (d) and the names and marks "Granutec",
"CPL", "Granupap", "Stanley", "Stanley Pharmaceuticals", "Wes-Pak", or "KSL
Pharmaceuticals" in the conduct of the Business as presently carried on by the
Sellers or Wes-Pak Products Ltd. ("WES-PAK").
(h) YEAR 2000. (i) The Sellers have conducted an inventory of all
technology, equipment, devices, systems, hardware and Software used in, or by,
the Business (collectively, the "COMPUTER SYSTEMS") in order to determine which
parts of the Computer Systems are not Year 2000 Compliant.
(ii) The Sellers have developed, adequately funded and commenced a
plan (the "YEAR 2000 PLAN") to modify or replace any and all Computer Systems
that are not Year 2000 Compliant and have adequate personnel, resources and
consultants under contract to timely do so.
(iii) All Computer Systems are Year 2000 Compliant or are
reasonably expected to be Year 2000 Compliant by the Closing Date.
(iv) The Sellers have conducted a reasonable inquiry into the Year
2000 Compliant status of the operations of any third party with which the
Business has a material relationship including, but not limited to, business
partners, suppliers, service providers, customers, vendors, utilities and
transporters. The Sellers have not received notice that such third parties will
not be, before January 1, 2000, Year 2000 Compliant and will not be able to
continue to conduct business with the Business without material disruption.
(v) The Sellers have provided the Buyers with the Year 2000 Plan, a
current status report on Year 2000 Compliance of the Computer Systems, and other
documents related to the
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Year 2000 Compliant status of the Business including, without limitation,
certifications, correspondence and other documents received from third parties
(including but not limited to the third parties referenced in Section
3.1.19(h)(iv) above) relating to such third parties' Year 2000 Compliant status.
3.1.20. INSURANCE. Schedule 3.1.20 contains a complete and correct
list and sum mary description of all insurance policies maintained by any Seller
for the benefit of or in connection with the Assets or the Business. The
Sellers have delivered to the Buyers complete and correct copies of all such
policies together with all riders and amendments thereto. Such policies are in
full force and effect, and all premiums due thereon have been paid. The Sellers
have complied with the terms and provisions of such policies. Schedule 3.1.20
sets out all claims made by the Sellers under any policy of insurance during the
past two years with respect to the Business.
3.1.21. REAL PROPERTY. (a) OWNED REAL PROPERTY. Schedule 3.1.21(a)
contains a complete and correct list of all Owned Real Property setting forth
the address and owner of each parcel of Owned Real Property including, without
limitation, the properties reflected as being so owned on the Audited Financial
Statements. Each of the Divisions has, or on the Closing Date will have, good,
valid and marketable fee simple title to the Owned Real Property indicated on
Schedule 3.1.21(a) as being owned by it, free and clear of all Liens except
Permitted Liens. Except as set forth on Schedule 3.1.21(a) there are no
outstanding options or rights of first refusal to purchase the Owned Real
Property, or any portion thereof or interest therein.
(b) LEASES. Schedule 3.1.21(b) contains a complete and correct list
of (i) all Leased Real Property setting forth the address, landlord and tenant
for each Lease and (ii) all Other Leases, setting forth the address, landlord
and tenant for each Other Lease. The Sellers have delivered to the Buyers
correct and complete copies of the Leases and the Other Leases. Each Lease and
Other Lease is legal, valid, binding, enforceable, and in full force and effect,
except as may be limited by bankruptcy, insolvency, reorganization and similar
Applicable Laws affecting creditors generally and by the availability of
equitable remedies. No Division nor to the knowledge of the Sellers any other
party to the Leases is in default, violation or breach in any respect under any
Lease or Other Lease, and no event has occurred and is continuing that
constitutes or, with notice or the passage of time or both, would constitute a
default, violation or breach in any respect under any Lease or Other Lease. Each
Lease grants the tenant under the Lease the exclusive right to use and occupy
the demised premises thereunder. Except as set forth on Schedule 3.1.21(b), the
Divisions have good and valid title to the Leasehold Interest in each Lease free
and clear of all Liens other than Permitted Liens against such Leasehold
Interest. Each of the Divisions enjoys peaceful and undisturbed possession under
its respective Leases for the Leased Real Property.
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(c) FEE AND LEASEHOLD INTERESTS, ETC. Except as set forth on
Schedule 3.1.21(c), the Real Property constitutes all the fee and leasehold
interests in real property used in or held for use in connection with, necessary
for the conduct of, or otherwise material to, the Business. Except as set forth
in Schedule 3.1.21(c), there is no fee or leasehold interest used in or held for
use in connection with the Business other than the Owned Real Property that will
be owned by the Buyers after the Closing and the Leased Real Property that will
be leased to the Buyers after the Closing.
(d) NO PROCEEDINGS. There are no eminent domain, expropriation,
rezoning, condemnation or other similar proceedings pending or, to the
knowledge of the Sellers, threatened affecting any portion of the Owned Real
Property or, to the knowledge of the Sellers, the Leased Property. There is no
writ, injunction, decree, caveat, lis pendens, order or judgment outstanding,
nor any action, claim, suit or proceeding, pending or, to the knowledge of the
Sellers, threatened, relating to the ownership, lease, use, occupance or
operation by any Person of any Real Property.
(e) CURRENT USE. The use and operation of the Real Property in the
conduct of the Business does not violate any instrument of record or agreement
affecting the Owned Real Property, or, to the knowledge of the Sellers, the
Leased Property. There is no violation of any covenant, condition, restriction,
easement or order of any Governmental Authority having jurisdiction over such
property or of any other Person entitled to enforce the same affecting the Real
Property or the use or occupancy thereof. No damage or destruction has occurred
with respect to any of the Real Property that would, individually or in the
aggregate, have a Material Adverse Effect.
(f) COMPLIANCE WITH REAL PROPERTY LAWS. The Owned Real Property or,
to the knowledge of the Sellers, the Leased Property, is in full compliance with
all applicable building, zoning, subdivision and other land use and similar
Applicable Laws affecting the Real Property (collectively, "REAL PROPERTY
LAWS"), and no Seller has received any notice of violation or claimed violation
or, the knowledge of the Sellers, no violation is threatened in respect of any
Real Property Law. No current use by any of the Divisions of the Real Property
is dependent on a nonconforming use or other Governmental Approval the absence
of which would materially limit the use of such properties or assets held for
use in connection with, necessary for the conduct of, or otherwise material to,
the Business.
(g) REAL PROPERTY TAXES. Each parcel included in the Owned Real
Property is assessed for real property tax purposes as a wholly independent tax
lot, separate from adjoining land or improvements not constituting a part of
that parcel. All real property taxes, sales levies and assessments with respect
to the Owned Real Property or, to the knowledge of the Sellers, the Leased
Property, have been paid in full and there are no proceedings with respect
thereto.
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(h) LEASES AND LICENSES OF OCCUPATION. The Owned Real Property is
not subject to any agreements to lease, leases, tenancy agreements, licenses of
occupation whether written or oral, relating to any use or occupancy thereof.
3.1.22. ENVIRONMENTAL MATTERS. (a) PERMITS. All Environmental
Permits are identified in Schedule 3.1.22(a), and the Sellers currently hold,
and at all times have held, all such Environmental Permits necessary to the
Business, or required in connection with the Real Property, and all such
Environmental Permits shall be validly transferred to the Buyers on the Closing
Date. No Seller has been notified by any relevant Governmental Authority that
any Environmental Permit will be modified, suspended, canceled or revoked, or
cannot be renewed on the same terms and conditions in the ordinary course of
business.
(b) NO VIOLATIONS. Except as disclosed in Schedule 3.1.22(b), each
of the Sellers and their respective Affiliates have complied in all material
respects and is in material compliance with all material Environmental Permits
and all material Environmental Laws pertaining to the Real Property (and the
use, ownership or transferability thereof) and the Business. No Person has
threatened or alleged any material violation by any Seller or their respective
Affiliates of any Environmental Permits or any Environmental Law relating to the
conduct of the Business or in any way relating to the use, ownership or
transferability of the Real Property.
(c) NO ACTIONS. Except as set forth in Schedule 3.1.22(c), none of
the Sellers or any of their respective Affiliates has caused or taken any action
that has resulted or may result in, or has been or is subject to, any liability
or obligation relating to (i) the environmental conditions on, under, or about
any Real Property, the Assets or other properties or assets currently owned,
leased or used by the Sellers held for use in connection with, necessary for the
conduct of, or otherwise material to, the Business, or (ii) the past or present
use, management, placement, handling, transport, treatment, generation, storage,
disposition or Release of any Hazardous Substances on, under or about any Real
Property or in connection with the Business.
(d) OTHER. Except as set forth in Schedule 3.1.22(d):
(i) There has been no Release of Hazardous Substances at the Leased
Real Property of either Division and the Owned Real Property of Granutec
and, during Stanley's ownership of its Owned Real Property, there has
been no Release of Hazardous Substances. None of current or past
operations, or any by-product thereof, and none of the currently owned,
leased or operated property or assets of any Seller used in the Business,
including without limitation the Assets and the Real Property, is related
to or subject to any investigation or evaluation existing or, to the
knowledge of the Sellers, threatened by any Governmental Authority, as to
whether any Remedial Action is needed to respond to a Release or
threatened Release of any Hazardous Substances.
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(ii) No Seller is subject to any outstanding order, judgment,
injunction, claim, investigation, notice, direction, judicial or
administrative proceeding, letter, demand decree or writ from, or
contractual or other obligation to or with, any Governmental Authority or
other Person in respect of which the Buyer may be required to incur any
Environmental Liabilities and Costs arising from or in any way connected
with the Release or threatened Release of a Hazardous Substance, the
conduct of the Business or the ownership or use of the Real Property.
(iii) None of the Real Property is, and no Seller nor any of their
respective Affiliates has transported or arranged for transportation
(directly or indirectly) of any Hazardous Substances relating to the
Assets or the Real Property to any location that is, listed or proposed
for listing under CERCLA, or on any similar state list, or the subject of
federal, state, provincial, regional district or local enforcement
actions or investigations or Remedial Action.
(iv) No work, repair, construction or capital expenditure is
required or planned in respect of the Assets or the Real Property
pursuant to any Environmental Law, nor to comply with any Environmental
Law, nor have any of the Sellers and their respective Affiliates received
or, to the knowledge of the Sellers, been threatened with any notice of
any such requirement, except for such work, repair, construction or
capital expenditure is not material to the Business and is in the
ordinary course of business.
(e) FULL DISCLOSURE. The Sellers have disclosed and made available
to the Buyers all material information, including without limitation all
investigations, assessments, audits, studies, analyses and test results, in the
possession, custody or control of any Seller and their respective Affiliates or
their agents relating to (i) the environmental conditions on, under or about the
Real Property, and (ii) Hazardous Substances used, managed, handled,
transported, treated, generated, stored disposed or Released by any Seller or
any other Person at any time on any Real Property.
3.1.23. EMPLOYEES, LABOR MATTERS, ETC. Schedule 3.1.23 contains a
complete and correct list of all current employees of the Divisions. No
Novopharm employees other than David Howard perform any material work related to
the operation of the Business other than research and development. Schedule
3.1.23 contains a complete and correct list of all Novopharm employees that
perform such research and development. Except as set forth in Schedule 3.1.23,
no Seller is a party to or bound by any collective bargaining agreement and
there are no labor unions or other organizations representing, purporting to
represent or attempting to represent any employees employed in the operation of
the Business. Since January 1, 1998 there has not occurred or, to the knowledge
of the Sellers, been threatened any material strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime or other similar labor activity
with respect to any employees employed in the operation of the Business. Except
as set forth in Schedule 3.1.23, there are no labor disputes currently subject
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to any grievance procedure, arbitration or litigation and there is no
representation petition or, to the knowledge of the Sellers, no representation
application pending or, to the knowledge of the Sellers, threatened with respect
to any employee employed in the operation of the Business. Each Seller has
complied with all provisions of Law pertaining to the employment of employees,
including, without limitation, all such Applicable Laws relating to labor
relations, equal employment, fair employment practices, entitlements, prohibited
discrimination or other similar employment practices or acts, except for any
failure so to comply that, individually or together with all such other
failures, has not and will not result in a material liability or obligation on
the part of either Buyer or the Business, and has not had or resulted in, and
will not have or result in, a Material Adverse Effect.
3.1.24. EMPLOYEE BENEFIT PLANS AND RELATED MATTERS. (a) EMPLOYEE
BENEFIT PLANS. Schedule 3.1.24(a) sets forth a true and complete list of each
"employee benefit plan", as such term is defined in section 3(3) of the ERISA,
whether or not subject to ERISA, and each bonus, incentive or deferred
compensation, pension, supplementary pension, retirement, profit sharing,
savings, medical, dental, life insurance, disability, severance, termination,
retention, change of control, stock option, stock appreciation, stock purchase,
phantom stock or other equity-based, performance or other employee or retiree
benefit or compensation plan, program, arrangement, agreement, policy or
understanding, whether written or unwritten, that provides or may provide
benefits or compensation in respect of any employee or former employee employed
or formerly employed in the operation of the Business or the beneficiaries or
dependents of any such employee or former employee (such employees, former
employees, beneficiaries and dependents collectively, the "EMPLOYEES") or under
which any Employee is or may become eligible to participate or derive a benefit
and that is or has been maintained or established by any Seller or any other
trade or business, whether or not incorporated, which, together with any Seller
is or would have been at any date of determination occurring within the
preceding six years treated as a single employer under section 414 of the Code
or other Applicable Law (such other trades and businesses collectively, the
"RELATED PERSONS"), or to which any Seller or any Related Person contributes or
is or has been obligated or required to contribute or with respect to which any
Seller or the Business may have any liability or obligation (collectively, the
"PLANS"). With respect to each such Plan, the Sellers have provided the Buyers
complete and correct copies of: all written Plans; descriptions of all unwritten
Plans; all trust agreements, insurance contracts or other funding arrangements;
the two most recent actuarial and trust reports or where applicable cost
certificates; the two most recent Forms 5500 and all schedules thereto; the most
recent IRS determination letter; proof of registered status with Revenue Canada
(Taxation) and any other applicable Canadian Governmental Authority, current
summary plan descriptions or other written employee communications setting forth
Plan benefits; all material communications received from or sent to the IRS, the
Pension Benefit Guaranty Corporation, the Department of Labor, Revenue Canada
(Taxation) or any other applicable Governmental Authority (including a written
description of any oral communication); an actuarial study of any
post-employment life or medical benefits provided under any such Plan, if any;
statements or other communications
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regarding withdrawal or other multiemployer plan liabilities, if any; management
agreements, policy statements; and all amendments and modifications to any such
document. The Sellers have not communicated to any Employee any intention or
commitment to modify any Plan or to establish or implement any other employee or
retiree benefit or compensation arrangement.
(b) QUALIFICATION. Except as set forth on Schedule 3.1.24(b), each
Plan intended to be registered with Revenue Canada (Taxation), or qualified
under section 401(a) of the Code, and the trust (if any) forming a part thereof,
is duly registered and in good standing and (in the case of Granutec Plans)
where applicable, has received a favorable determination letter from the IRS as
to its qualification under the Code and to the effect that each such trust is
exempt from taxation under section 501(a) of the Code, and nothing has occurred
since the date of registration of the Plan or the date of the aforementioned
determination letter that could adversely affect such registration,
qualification or tax-exempt status.
(c) COMPLIANCE; LIABILITY. Except as set forth on Schedule
3.1.24(c):
(i) No Plan is a defined benefit plan as such term is defined in
section 3(35) of ERISA, or is subject to the benefit accrual requirements
as set forth in section 204 of ERISA.
(ii) No Plan is (A) an excess benefit plan as such term is defined
in section 3(36) of ERISA, or (B) a supplemental pension plan that
provides benefits in excess of the maximum benefits or contribution limit
under the Income Tax Act (Canada).
(iii) No liability has been or is expected to be incurred by any
Seller, any Related Person or the Business (either directly or
indirectly, including as a result of an indemnification obligation) under
or pursuant to the Income Tax Act (Canada) or Title I or IV of ERISA or
the penalty, excise tax or joint and several liability provisions of the
Code relating to any Plan that could, following the Closing, become or
remain a liability of the Business or become a liability of either Buyer
or of any Plan established or contributed to by either Buyer and, to the
knowledge of the Sellers after due inquiry, no event, transaction or
condition has occurred or exists that could result in any such liability
to the Business or, following the Closing, either Buyer. None of the
Plans require or permit a retroactive increase in premiums or payments
and the level of insurance reserves required to be funded by the Sellers
are reasonable and sufficient to provide for all incurred but unreported
claims up to Closing. Sufficient reserves have been established by
Stanley to meet its liabilities extending beyond the Closing resulting
from long term disability claims incurred under any Plan prior to the
Closing. Granutec has adequately provided, through its insurer,
sufficient coverages to meet its liabilities extending beyond the Closing
resulting from long term disability claims incurred under any Plan prior
to the Closing.
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(iv) Each of the Plans and predecessor Plans has been operated and
administered in all respects in compliance with their terms and all
Applicable Law, except for any failure so to comply that, individually or
together with all other such failures, has not and will not result in a
material liability or obligation on the part of the Business, or,
following the Closing, either Buyer, and has not had or resulted in, and
will not have or result in, a Material Adverse Effect. There are no
material pending or, to the knowledge of the Sellers, threatened claims
by or on behalf of any of the Plans, by any Employee or otherwise
involving any such Plan or the assets of any Plan (other than routine
claims for benefits).
(v) No Plan is a "multi-employer plan" within the meaning of
section 4001(a)(3) of ERISA or is a "multiple employer plan" within the
meaning of section 4063 or 4064 of ERISA or is a "multi-employer plan" as
defined in the Income Tax Act (Canada) or the Pension Benefits Standards
Act (British Columbia).
(vi) All contributions or premiums required to have been made by
any Seller and each Related Person to any Plan under the terms of any
such Plan (including, any funding agreements, policies, or contracts) or
pursuant to any applicable collective bargaining agreement or Applicable
Law have been made within the earliest time prescribed by any such Plan,
agreement or Applicable Law. Each Plan required to be funded in
accordance with Applicable Laws and the terms of such Plans has been so
funded and, for greater certainty, there are no funding deficiencies,
either on a going concern or solvency basis in such Plans. No withdrawal
of assets, including cash, has been made from the assets from time to
time held in trust for any Plan, except for the purpose of paying or
arranging for the payment of funds or proper expenses of any such Plan in
accordance with its terms and Applicable Laws.
(vii) There are no agreements, written or otherwise, that will
provide Transferred Employees, as a result of the execution and
performance of this Agreement, with payments of compensation or benefits,
or the acceleration of the vesting or timing of payment of any
compensation or benefits.
(viii) There are no agreements, written or otherwise, that entitle
Transferred Employees to receive severance pay or benefits.
(ix) There are no agreements, written or otherwise, that provide
Transferred Employees with post-retirement benefits of any kind by reason
of employment in the Business, including, without limitation, death or
medical benefits (whether or not insured), other than (A) group health
plan continuation coverage mandated by section 4980B of the Code or (B)
pension benefits payable under any Plan qualified under section 401(a) of
the Code or registered with Revenue Canada (Taxation) and applicable
Governmental Authority.
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(x) Each investment held in respect of any Plan (including without
limitation, investment in trusts and other pooled trusts) is a permitted,
qualified or eligible investment under Applicable Law, the terms of the
Plan and any supporting documents of the Plan and the Sellers have acted
in accordance with Applicable Law in their selection of the funding
agents and investment managers of the assets of the Plan.
3.1.25. CONFIDENTIALITY. Except as set forth on Schedule 3.1.25,
the Sellers have taken all reasonable steps necessary to preserve the
confidential nature of all Confidential Information (including, without
limitation, any proprietary information) with respect to the Business, including
but not limited to the manufacturing or marketing of any of the products or
services of the Business.
3.1.26. NO GUARANTEES. Except as set forth on Schedule 3.1.26, none
of the obligations or liabilities of the Business or of the Sellers incurred in
connection with the operation of the Business is guaranteed by or subject to a
similar contingent obligation of any other Person. No Division has guaranteed or
become subject to a similar contingent obligation in respect of the obligations
or liabilities of any other Person. Except as set forth on Schedule 3.1.26,
there are no outstanding letters of credit, surety bonds or similar instruments
of any Seller or any of its Affiliates in connection with the Business or the
Assets.
3.1.27. RECORDS. The Minutes of the Divisions insofar as they
relate to or affect the Business and the Assets are complete and correct.
3.1.28. BROKERS, FINDERS, ETC. All negotiations relating to this
Agreement, the Collateral Agreements, and the transactions contemplated thereby,
have been carried on without the participation of any Person acting on behalf
of any Seller or their respective Affiliates in such manner as to give rise to
any valid claim against the Buyers or any of their subsidiaries for any
brokerage or finder's commission, fee or similar compensation, or for any bonus
for which the Buyers shall have any obligation or liability to any officer,
director, employee, agent or sales representative of or consultant to any Seller
or their respective Affiliates upon consummation of the transactions
contemplated hereby or thereby.
3.1.29. DISCLOSURE. No representation or warranty by any Seller
contained in this Agreement nor any statement or certificate furnished or to be
furnished by or on behalf of any Seller to the Buyers or their representatives
in connection herewith or pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make the statements contained herein or therein not misleading.
3.1.30. RECEIVABLES. All of the Divisions' receivables (including
accounts receivable, loans receivable and advances) which have arisen in
connection with the Business and which are reflected in the Audited Financial
Statements, and all such receivables which will have arisen since the Audited
Balance Sheet Date, shall have arisen only from BONA FIDE trans-
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actions in the ordinary course of business. No Seller has knowledge of any
facts or circumstances generally (other than general economic conditions)
which would result in any material increase in the uncollectability of such
receivables as a class in excess of the reserves therefor set forth on the
Audited Financial Statements. The Sellers have delivered to the Buyers an
accurate list as of August 31, 1999 of all receivables arising out of or
relating to each Division showing the amount owing and the aging of such
receivable. All such receivables are unsecured.
3.1.31. AFFILIATE TRANSACTIONS. Schedule 3.1.31 contains a complete
and correct list of all material written or oral agreements, contracts,
arrangements, understandings, transfers of assets or liabilities or other
commitments or transactions, whether or not entered into in the ordinary course
of business, to or by which a Division on the one hand, and Novopharm or any
Affiliate (other than the Divisions), on the other hand, are or have been a
party or otherwise bound or affected. Except as disclosed on Schedule 3.1.31,
each agreement, contract, arrangement, understanding, transfer of assets or
liabilities or other commitment or transaction set forth or required to be set
forth on Schedule 3.1.31 (i) was on terms and conditions as favorable to the
applicable Division as would have been obtainable by it at the time in a
comparable arm's-length transaction with a Person other than Novopharm or any
Affiliate (other than the Divisions) and (ii) will be terminated prior to the
Closing.
3.1.32. CERTAIN REGULATORY MATTERS. (a) Schedule 3.1.32(a) sets
forth a complete list of all applicable product registrations, approvals,
notifications, and pending applications of the Sellers relating to the Business
or the Assets pursuant to any applicable food, drug, cosmetic and medical device
regulatory legislation. On the Closing Date, the Sellers shall have delivered to
the Buyers complete and correct copies of the Novopharm ANDAs.
(b) Except as disclosed in Schedule 3.1.32(b), each of the
registrations, approvals, and pending applications set out in Schedule 3.1.32(a)
is valid, complete, current and in good standing, as the case may be, and has
been issued or received, as the case may be, based upon complete, accurate, and
truthful underlying information.
3.1.33. INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition, or arrangement with creditors, voluntary or involuntary, affecting
any Seller is pending or, to the knowledge of the Sellers, threatened; nor has
any Seller made any assignment for the benefit of creditors, or taken any action
in contemplation thereof, or taken any action which would constitute the basis
for the institution of any such insolvency proceedings.
3.1.34. WES-PAK. All of Wes-Pak's right, title and interest in and
to the properties, assets and rights of every nature, kind and description
(including, without limitation, assets of the nature contemplated in Specified
Assets hereunder), tangible and intangible, whether real, personal or mixed,
whether accrued, contingent or otherwise and whether now existing or
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hereinafter acquired (other than the Excluded Assets) principally used as part
of the Business by Wes-Pak shall be sold, transferred, conveyed, assigned and
delivered to the Canadian Buyer on the Closing Date so as to comprise a portion
of the Stanley Assets.
3.2. REPRESENTATIONS AND WARRANTIES OF THE BUYERS. As of October 7,
1999 and as of the Closing Date, the Buyers jointly and severally represent and
warrant to the Sellers as follows:
3.2.1. CORPORATE STATUS; AUTHORIZATION, ETC. Each Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation with full corporate power and
authority to execute and deliver this Agreement and the Collateral Agreements to
which it is a party, to perform its obligations thereunder and to consummate
the transactions contemplated thereby. The execution and delivery by each Buyer
of this Agreement, and the consummation of the transactions contemplated hereby,
have been, and on the Closing Date the execution and delivery by each Buyer of
the Collateral Agreements to which it is a party will have been, duly authorized
by all requisite corporate action of such Buyer. Each Buyer has duly executed
and delivered this Agreement and on the Closing Date and each Buyer will have
duly executed and delivered the Collateral Agreements to which it is a party.
This Agreement is, and on the Closing Date each of the Collateral Agreements to
which each Buyer is a party will be, valid and legally binding obligations of
such Buyer, enforceable against each Buyer in accordance with their respective
terms. On the Closing Date, each of the Collateral Agreements to which each of
the Buyers is a party will be legal, valid and binding obligations of such
Buyer, enforceable against it in accordance with their respective terms. The
Canadian Buyer is not, and any assignee of the Canadian Buyer permitted
hereunder will not be, a non-resident within the meaning of the Income Tax Act
(Canada).
3.2.2. NO CONFLICTS, ETC. The execution, delivery and performance
by each Buyer of this Agreement and each of the Collateral Agreements to which
it is a party, and the con summation of the transactions contemplated thereby,
do not and will not conflict with or result in a violation of or under (with or
without the giving of notice or the lapse of time, or both) (i) the certificate
of incorporation or by-laws or other organizational documents of such Buyer,
(ii) any Applicable Law applicable to such Buyer or any of its properties or
assets (PROVIDED, with respect to performance of this Agreement and the
Collateral Agreements, that the Governmental Approvals listed in Schedule 3.2.2
have been obtained prior to the Closing) or (iii) any contract, agreement or
other instrument applicable to such Buyer or any of its or their properties or
assets, except, in the case of clause (iii), for violations and defaults that,
individually and in the aggregate, have not and will not impair the ability of
such Buyer to perform its obligations under this Agreement or under any of the
Collateral Agreements to which it is a party. Except as specified in Schedule
3.2.2, no Governmental Approval or other Consent is required to be obtained or
made by any Buyer in connection with the execution and
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delivery of this Agreement or the Collateral Agreements or the consummation of
the transactions contemplated thereby.
3.2.3. BROKERS, FINDERS, ETC. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of the Buyers in such manner as
to give rise to any valid claim against any Seller for any brokerage or finder's
commission, fee or similar compensation.
3.2.4. BUYERS' FINANCING. The Buyers will have available as of the
Closing immediately available funds sufficient to consummate the transactions
contemplated by this Agreement.
3.2.5. INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition, or arrangement with creditors, voluntary or involuntary, affecting
any Buyer is pending or, to the knowledge of the Buyers, threatened; nor has any
Buyer made any assignment for the benefit of creditors, or taken any action in
contemplation thereof, or taken any action which would constitute the basis for
the institution of any such insolvency proceedings.
3.2.6. REPRESENTATIONS AND WARRANTIES. To the knowledge of the
Buyers, except with respect to the last sentence of Section 3.1.32(a), the
representations and warranties of the Sellers in this Agreement are true and
correct in all material respects.
ARTICLE IV
COVENANTS
4.1. COVENANTS OF THE SELLERS.
4.1.1. CONDUCT OF BUSINESS. (a) From the date hereof to the Closing
Date, except as expressly permitted or required by this Agreement or as
otherwise consented to by the Buyers in writing, the Sellers will:
(i) carry on the Business in, and only in, the ordinary course, in
substantially the same manner as heretofore conducted, and use all
reasonable efforts to preserve intact its present business organization,
maintain its properties in good operating condition and repair, keep
available the services of its present officers and significant employees,
and preserve its relationships with customers, suppliers and others
having business dealings with it, to the end that its goodwill and going
business shall be unimpaired following the Closing;
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(ii) pay accounts payable and other obligations of the Business
when they become due and payable in the ordinary course of business
consistent with prior practice;
(iii) perform all of its obligations under all Contracts and other
agreements and instruments relating to or affecting the Business or the
Assets, and comply with all Applicable Laws applicable to it, the Assets
or the Business;
(iv) not enter into or assume any material agreement, contract or
commitment or other instrument or arrangement relating to the Business,
or enter into or permit any material amendment, supplement, waiver or
other modification in respect thereof;
(v) not grant (or commit to grant) any increase in the compensation
(including incentive or bonus compensation) of any employee employed in
the operation of the Business or institute, adopt or amend (or commit to
institute, adopt or amend) any compensation or benefit plan, policy,
program or arrangement or collective bargaining agreement applicable to
any such employee, PROVIDED that the Buyers hereby consent to the payment
by the Seller of commercially reasonable bonuses to such employees with
respect to the performance of due diligence in connection with the
transactions contemplated by this Agreement; and
(vi) not take any action or omit to take any action, which action
or omission would result in a breach of any of the representations and
warranties set forth in Section 3.1.7.
(b) Without prejudice to the Buyers' rights under Section 8.2(a),
any material agreement, contract commitment or other instrument or arrangement
relating to the Business, or material amendment, supplement, waiver or other
modification in respect thereof that Sellers enter into from the date hereof to
the Closing Date without the prior written consent of the Buyers shall, at the
option of the Buyers exercisable at or prior to the Closing, constitute an
Excluded Asset and an Excluded Liability hereunder.
4.1.2. NO SOLICITATION. During the term of this Agreement, none of
the Sellers, any of their Affiliates or any Person acting on their behalf shall
(i) solicit or encourage any inquiries or proposals for, or enter into any
discussions with respect to, the acquisition of the Assets or the Business or
(ii) furnish or cause to be furnished any non-public information concerning the
Business to any Person (other than the Buyers and their agents and
representatives), other than in the ordinary course of business or pursuant to
Applicable Law and after prior written notice to the Buyers. No Seller shall
sell, transfer or otherwise dispose of, grant any option or proxy to any Person
with respect to, create any Lien upon, or transfer any interest in, any Asset,
other than in the ordinary course of business and consistent with this
Agreement.
4.1.3. ACCESS AND INFORMATION. (a) So long as this Agreement
remains in effect, each Seller will (and will cause each of their Affiliates and
their and their Affiliates' respective
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accountants, counsel, consultants, employees and agents to) give the Buyers, the
Buyers' prospective lenders and investors, and their respective accountants,
counsel, consultants, employees and agents, full access during normal business
hours upon prior notice to, and furnish them (subject to existing obligations
under Contracts relating to confidentiality) with all documents, records, work
papers and information with respect to, all of such Person's properties, assets,
books, contracts, commitments, reports and records relating to the Divisions or
the Business, as the Buyers shall from time to time reasonably request. In
addition, the Sellers will permit the Buyers, the Buyers' prospective lenders
and investors, and their respective accountants, counsel, consultants, employees
and agents, reasonable access to such personnel of the Sellers during normal
business hours as may be necessary or useful to the Buyers in its review of the
properties, assets and business affairs of the Divisions and the Business and
the above-mentioned documents, records and information. The Sellers will keep
the Buyers generally informed as to the affairs of the Business.
(b) Novopharm will, and will cause each other Seller to, retain all
books and records relating to each Division in accordance with such Seller's
record retention policies as presently in effect. During the seven-year period
beginning on the Closing Date, the Sellers shall not dispose of or permit the
disposal of any such books and records not required to be retained under such
policies without first giving 60 days' prior written notice to the Buyers
offering to surrender the same to the Buyers at the Buyers' expense.
4.1.4. FINANCIAL STATEMENTS. Until the Closing, on or before the
21st day of each month, the Sellers shall deliver to the Buyers separate
unaudited internally prepared financial statements of Stanley and Granutec as at
and for the monthly period ending the last day of the preceding month (the
"SUBSEQUENT MONTHLY FINANCIAL STATEMENTS"), which shall include a balance sheet
and a statement of income.
4.1.5. PUBLIC ANNOUNCEMENTS. Except as required by Applicable Law,
the Sellers shall not, and they shall not permit any Affiliate to, make any
public announcement in respect of this Agreement or the transactions
contemplated hereby without the prior written consent of the Buyers.
4.1.6. FURTHER ACTIONS. (a) The Sellers shall agree to use good
faith efforts to take all actions and to do all things necessary, proper or
advisable to consummate the transactions contemplated hereby by the Closing
Date.
(b) The Sellers will, as promptly as practicable, file or supply,
or cause to be filed or supplied, all applications, notifications and
information required to be filed or supplied by any of them pursuant to
Applicable Law in connection with this Agreement, the Collateral Agreements, the
sale and transfer of the Assets pursuant to this Agreement and the consummation
of the other transactions contemplated thereby, including but not limited to
filings pursuant to the HSR Act and comparable Canadian legislation.
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(c) The Sellers as promptly as practicable, will use all reasonable
efforts to obtain, or cause to be obtained, all Consents (including, without
limitation, all Governmental Approvals and any Consents required under any
contract, agreement or commitment or instrument or other arrangement) necessary
to be obtained by any of them in order to consummate the sale and transfer of
the Assets pursuant to this Agreement and the consummation of the other
transactions contemplated thereby.
(d) The Sellers will, and will cause each of their Affiliates to,
cooperate with the Buyers in exchanging such information and supplying such
assistance as may be reasonably requested by the Buyers in connection with (i)
the filings and other actions contemplated by Section 4.2.2 and (ii) efforts by
the Buyers after the Closing to cause the Business fully to comply with all
Applicable Law.
(e) At all times prior to the Closing, the Sellers shall promptly
notify the Buyers in writing of any fact, condition, event or occurrence that
will or may result in the failure of any of the conditions contained in Sections
5.1 and 5.2 to be satisfied, promptly upon either of them becoming aware of the
same.
4.1.7. FURTHER ASSURANCES. Following the Closing, the Sellers
shall, and shall cause each of their Affiliates to, from time to time, execute
and deliver such additional instruments, documents, conveyances or assurances
and take such other actions as shall be necessary, or otherwise reasonably
requested by the Buyers, to confirm and assure the rights and obligations
provided for in this Agreement and in the Collateral Agreements and render
effective the consummation of the transactions contemplated thereby.
4.1.8. LIABILITY FOR TRANSFER TAXES. The Sellers and the Buyers
each pay one-half of all sales (excluding bulk sales), use, value added,
documentary, stamp, gross receipts, registration, transfer, conveyance, excise,
recording, license and other similar Taxes and fees ("TRANSFER TAXES"), arising
out of or in connection with or attributable to the transactions effected
pursuant to this Agreement and the Collateral Agreements. To the extent
practicable, the Buyers and the Sellers shall pay identified Transfer Taxes at
Closing. The Sellers shall prepare and timely file all Tax Returns required to
be filed in respect of Transfer Taxes, PROVIDED that the Buyers shall be
permitted to prepare any such Tax Returns that are the primary responsibility
of the Buyers under Applicable Law. The Buyers' preparation of any such Tax
Returns shall be subject to the Sellers' approval, which approval shall not be
unreasonably withheld.
4.1.9. CANADIAN TAX ELECTIONS. At the Closing Date, the Canadian
Buyer, Stanley and Novopharm shall enter into joint elections pursuant to
Section 22 of the Income Tax Act (Canada) and Part IX of the Excise Tax Act
(Canada). The Canadian Buyer, Stanley and Novopharm, as applicable, shall file
such elections with the applicable Tax Returns required to be filed for the
reporting period in which the Closing occurs.
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4.1.10. CERTIFICATES OF TAX AUTHORITIES. The Sellers shall provide
to the Buyers all consents, authorizations and other reasonably requested
assistance in connection with efforts by the Buyers to obtain certificates from
the appropriate taxing authority stating that as of a date on or close to the
Closing Date no Taxes are due to any state, provincial or other taxing authority
for which the Buyers could have liability to withhold or pay Taxes with respect
to the transfer of the Assets or the Business.
4.1.11. USE OF BUSINESS NAME. After the Closing, no Seller shall,
directly or indirectly, use or do business under, or allow any Affiliate to use
or do business under, or assist any third party in using or doing business under
, any of the names or marks "Granutec," "Stanley", "Stanley Pharmaceuticals" or
"KSL Pharmaceuticals" (or any other name confusingly similar to such name or
mark). Within 5 days of the Closing, Granutec and GHC will change their name in
accordance with the laws of the State of North Carolina and Stanley and Wes-Pak
will change their names in accordance with the laws of the Province of British
Columbia. Each such entity's changed corporate name shall not contain the words
"Granutec", "CPL", "Granupap", "Stanley", "KSL Pharmaceutical" or "Wes-Pak"
(whether used alone or in combination with any other words, symbols or phrases),
nor will it contain any other name confusingly similar to "Granutec", "Stanley",
"Stanley Pharmaceuticals", "Wes-Pak" or "KSL Pharmaceuticals".
4.1.12. PRODUCT REGULATORY APPROVALS AND APPLICATIONS. (a) Prior to
the Closing, the Sellers, as promptly as practicable and in cooperation with the
Buyers, shall take all actions necessary and appropriate to cause each Product
registration, identification number and approval, including, without limitation,
each ANDA included in the Assets, relating to the Business or the Assets to be
valid, complete, current and in good standing, as the case may be. The foregoing
shall not require either Seller to expedite any drug submission application or
similar application in progress which would not in the ordinary course of their
respective businesses be expedited.
(b) Prior to the Closing, the Sellers, as promptly as practicable
and in cooperation with the Buyers, shall take all actions necessary and
appropriate for the transfer to the Buyers at the Closing of all Product
registrations, identification numbers, and approvals, and standing as applicant
in all pending Product registrations or approvals relating to the Business or
the Assets, including wherever appropriate all consents of all Affiliates or
third parties required to provide access, on the part of appropriate regulatory
authorities and on the part of the Buyers, to the documents or information
however maintained of such Affiliates or third parties as may be required to
enable the transfer of Product registrations, identification numbers, or
approvals to the Buyers, and to enable the full prosecution of pending
applications by the Buyers, PROVIDED that absent negligence or wilful misconduct
of the Sellers, the Sellers shall not be responsible for the failure of the
applicable Canadian Governmental Authority to transfer the DINs or any
alterations to any of the DINs as a result of such transfer. The Sellers and the
Buyers shall cooperate to transfer good title to the DINs owned by Stanley and
Wes-Pak to
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"Stanley Pharmaceuticals", a division of the Canadian Buyer and "Wes-Pak
Products", a division of the Canadian Buyer. The Buyer shall pay all fees due to
Governmental Authorities in Canada in connection with the transfer of the DINs
to the Canadian Buyer and shall, with the cooperation of the Sellers, prepare
all filings and related documents necessary to effect such transfer.
(c) Prior to the Closing, the Sellers shall take all actions
necessary and appropriate to amend or otherwise correct each of the ANDAs #
074635 and # 074931 (regarding Naproxen Sodium and Ibuprofen, respectively) and
related materials to cause (i) the Granutec Facility to be listed as an
alternate manufacturing facility, and the Canadian Facility to continue to be
listed as a manufacturing facility, under such ANDAs and (ii) both the Granutec
Facility and the Canadian Facility to be authorized facilities for
manufacturing, release testing and stability testing under such ANDAs.
(d) The Sellers shall take all actions necessary and appropriate to
cause the Novopharm NC Facility, so long as it remains in operation, to continue
to be available to the Buyers, on commercially reasonable terms, as an outside
testing laboratory to conduct the microbiological testing of raw materials for
Products manufactured at the Granutec Facility.
4.1.13. CONTRACTS. The Sellers shall use best efforts to deliver
each written Contract and a reasonably detailed description of the terms of each
oral Contract listed in Schedule 4.1.13 to the Buyers before the close of
business on the twentieth day after the date hereof. By the close of business on
the twenty-fifth day after the date hereof (the "ASSUMPTION NOTICE DATE"), the
Buyers, in their sole and absolute discretion, shall determine whether such
Contracts are satisfactory, whether or not such Contracts have been delivered.
If such Contracts, taken as a whole, are not satisfactory, the Buyers, by
delivery of written notice to the Sellers, shall have the right to terminate
this Agreement on the Assumption Notice Date. If the Buyers do not terminate
this Agreement on the Assumption Notice Date, the Buyers shall assume each such
Contract at the Closing pursuant to Section 1.5.
4.1.14. MINUTE BOOKS. On or prior to the Closing, the Sellers shall
deliver to the Buyers complete and correct copies of the Minutes of each
Division.
4.1.15. FINANCIAL STATEMENTS. Prior to the Closing Date, the
Sellers shall deliver to the Buyers the Audited Financial Statements of Granutec
and Stanley for the period ended December 31, 1998 in form and substance
substantially similar to the drafts of such Audited Financial Statement
previously delivered to the Buyers, PROVIDED that the balance sheet and
statement of income contained in such Audited Financial Statements shall contain
no changes from the previously delivered draft of such balance sheet and
statement of income.
4.1.16. BIOTECH. The Sellers shall use commercially reasonable
efforts to cause Novopharm Biotech Inc. to execute and deliver the
Non-Competition Agreement.
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4.1.17. NOVOPHARM ANDAS. (a) After the Closing Date, Sellers shall
not make any filings with any Governmental Authority or take any other actions
related to any Novopharm ANDA without the prior written consent of the Buyers.
(b) Novopharm shall promptly take all action necessary to eliminate
any linkage between the Cimetidine Rx ANDA and the Novopharm ANDA related to
Cimetidine. Subject to the following two sentences, upon the reasonable request
of Novopharm, the Buyers shall cooperate with Novopharm regarding any action
Novopharm proposes to eliminate any such linkage. Prior to the elimination of
any such linkage, Novopharm shall not sell, dispose, transfer, amend, supplement
or otherwise modify or cause to be sold, disposed, transferred, amended,
supplemented or otherwise modified, the Cimetidine Rx ANDA (in connection with
eliminating such linkage or otherwise) without the prior written consent of the
Buyers. In addition, Novopharm shall maintain the Cimetidine Rx ANDA in
accordance with the US Act and take all other action necessary to ensure that
the Cimetidine Rx ANDA remains valid, in good standing and in full force and
effect, PROVIDED that Novopharm shall not perform any such maintenance or take
any such other action without the prior written consent of the Buyers.
4.2. COVENANTS OF THE BUYERS.
4.2.1. PUBLIC ANNOUNCEMENTS. Prior to the Closing, except as
required by Applicable Law, the Buyers shall not, and shall not permit their
Affiliates to, make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the
Sellers.
4.2.2. FURTHER ACTIONS. (a) The Buyers agree to use all good faith
efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated hereby by the Closing Date.
(b) The Buyers will, as promptly as practicable, file or supply, or
cause to be filed or supplied, all applications, notifications and information
required to be filed or supplied by the Buyers pursuant to Applicable Law in
connection with this Agreement, the Collateral Agreements, the Buyers'
acquisition of the Assets pursuant to this Agreement, and the consummation of
the other transactions contemplated thereby, including but not limited to
filings pursuant to the HSR Act and comparable Canadian legislation.
(c) The Buyers will coordinate and cooperate with the Sellers in
exchanging such information and supplying such reasonable assistance as may be
reasonably requested by the Sellers in connection with the filings and other
actions contemplated by Section 4.1.6.
(d) At all times prior to the Closing, the Buyers shall promptly
notify the Sellers in writing of any fact, condition, event or occurrence that
will or may result in the failure of any of
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the conditions contained in Sections 5.1 and 5.3 to be satisfied, promptly upon
becoming aware of the same.
4.2.3. FURTHER ASSURANCES. Following the Closing, the Buyers shall,
and shall cause their Affiliates to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and take such other
actions as shall be necessary, or otherwise reasonably requested by the Sellers
to confirm and assure the rights and obligations provided for in this Agreement,
and in the Collateral Agreements and render effective the consummation of the
transactions contemplated thereby.
4.2.4. NOVOPHARM TRADE PAYABLES. Within 30 days of the Closing
Date, the US Buyer and the Canadian Buyer shall pay all trade accounts payable
to Novopharm assumed at the Closing pursuant to Section 1.5.
4.2.5. WAIVER. The Buyers shall use good faith efforts to obtain
the Waiver.
4.2.6. IRB ASSUMPTION. The Buyers shall (i) obtain and deliver to
the Norwest Bank Minnesota, N.A. a reasonably satisfactory replacement letter of
credit consistent with the terms of the IRB Loan Agreement in connection with
the US Buyers' assumption of the obligations of Granutec thereunder or (ii) take
all action necessary to permit Granutec to prepay in full or otherwise defease,
with funds provided by the Buyers, all outstanding obligations under the IRB
Loan Agreement.
ARTICLE V
CONDITIONS PRECEDENT
5.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of
the parties to consummate the transactions contemplated hereby shall be subject
to the fulfillment on or prior to the Closing Date of the following conditions:
5.1.1. HSR ACT NOTIFICATION, ETC. In respect of the notifications
of the Buyers and the Sellers pursuant to the HSR Act and comparable Canadian
legislation, the applicable waiting periods and any extensions thereof shall
have expired or been terminated without any action or proceeding thereunder
having been commenced and the parties shall have received advice in writing, in
a form reasonably satisfactory to the Buyers, from the applicable Canadian
Governmental Authority that no such action or proceeding thereunder shall be
commenced at such time.
5.1.2. NO INJUNCTION, ETC. The consummation of the transactions
contemplated hereby shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction, decree or
judgment of any court or other Governmental
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Authority. No court or other Governmental Authority shall have determined any
Applicable Law to make illegal the consummation of the transactions contemplated
hereby or the Collateral Agreements, and no proceeding with respect to the
application of any such Applicable Law to such effect shall be pending.
5.2. CONDITIONS TO OBLIGATIONS OF THE BUYERS. The obligations of
the Buyers to consummate the transactions contemplated hereby shall be subject
to the fulfillment (or waiver by the Buyers) on or prior to the Closing Date of
the following additional conditions, which the Sellers agree to use good faith
efforts to cause to be fulfilled:
5.2.1. REPRESENTATIONS, PERFORMANCE. The representations and
warranties of the Sellers contained in this Agreement and in the Collateral
Agreements (i) shall be true and correct in all material respects at and as of
October 7, 1999, and (ii) shall be repeated and shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date. Each of the Sellers shall have duly
performed and complied in all material respects with all agreements and
conditions required by this Agreement and each of the Collateral Agreements to
be performed or complied with by it prior to or on the Closing Date. Each of the
Sellers and Novopharm shall have delivered to the Buyers a certificate, dated
the Closing Date and signed by its duly authorized officers, to the foregoing
effect.
5.2.2. CONSENTS. The Sellers shall have obtained and shall have
delivered to the Buyers copies of all Governmental Approvals required to be
obtained by the Sellers in connection with the execution and delivery of this
Agreement and the Collateral Agreements and the consummation of the transactions
contemplated hereby or thereby and all Consents necessary to be obtained in
order to consummate the assumption of obligations related to the Industrial
Revenue Development Bonds, unless the failure to obtain such Consent would not,
individually or in the aggregate, have a Material Adverse Effect.
5.2.3. NO MATERIAL ADVERSE EFFECT. Except as set forth in Schedule
3.1.7, no event, occurrence, fact, condition, change, development or effect
shall have occurred, exist or come to exist since December 31, 1998 that,
individually or in the aggregate, has constituted or resulted in, or could
reasonably be expected to constitute or result in, a Material Adverse Effect.
5.2.4. COLLATERAL AGREEMENTS. Novopharm and/or one of its
Affiliates, as the case may be, shall have entered into each of the following
agreements with the Buyers:
(a) a supply agreement, in substantially the form attached hereto
as Exhibit A;
(b) a Non-Competition Agreement, in substantially the form attached
hereto as Exhibit B; and
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(c) a supply agreement, in substantially the form attached hereto
as Exhibit E.
5.2.5. OPINION OF COUNSEL. The Buyers shall have received an
opinion, addressed to the Buyers and dated the Closing Date, from each of
Wallace, Creech & Sarda L.L.P., special North Carolina counsel to the Sellers,
Fogler Rubinoff, special Ontario counsel to the Sellers, and Bull, Housser &
Tupper, special British Columbia counsel to the Sellers, in each case, in
substance and form reasonably satisfactory to the Buyers.
5.2.6. CORPORATE PROCEEDINGS. All corporate and other proceedings
of the Sellers in connection with this Agreement and the Collateral Agreements
and the transactions contemplated thereby, and all documents and instruments
incident thereto, shall be reasonably satisfactory in substance and form to the
Buyers and their counsel, and the Buyers and their counsel shall have received
all such documents and instruments, or copies thereof, certified if requested,
as may be reasonably requested.
5.2.7. TRANSFER DOCUMENTS. The Sellers shall have delivered to the
Buyers at the Closing all documents, certificates and agreements necessary to
transfer to the Buyers good and marketable title to the Assets, free and clear
of any and all Liens thereon, other than Permitted Liens and Liens securing only
Assumed Liabilities, including without limitation:
(a) a bills of sale, assignment and general conveyance, in form and
substance reasonably satisfactory to the Buyers, dated the Closing Date,
with respect to the Assets, (other than any Asset to be transferred
pursuant to any of the instruments referred to in any other clause of
this Section 5.2.7);
(b) assignments of all Contracts, Intellectual Property and any
other agreements and instruments constituting Assets, dated the Closing
Date, assigning to the Buyers all of the Sellers's right, title and
interest therein and thereto, together with any required Consent;
(c) a general warranty deed and Form A transfer documents, as
applicable, dated as of the Closing Date, with respect to each parcel of
Owned Real Property in the form attached as Exhibit C-1 or C-2, as
applicable, together with any necessary transfer declarations or other
filings;
(d) an assignment of lease, dated as of the Closing Date, with
respect to each Lease in the form attached as Exhibit D-1 or D-2, as
applicable, and with respect to each Other Lease in a form reasonably
satisfactory to the Buyers, together with any necessary transfer
declarations or other filings; and
(e) certificates of title to all motor vehicles included in the
Assets to be transferred to the Buyers hereunder, duly endorsed for
transfer to the Buyers as of the Closing Date.
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5.2.8. TITLE POLICIES. The Buyers shall have received, at their
expense, from a nationally recognized title insurance company (the "TITLE
COMPANY") satisfactory to the Buyers (A) a fee owner's title insurance policy
issued to the Buyers, and a mortgagee's policy issued to one or more lenders
designated by the Buyers, with respect to Owned Real Property other than Owned
Real Property located in British Columbia, and (B) a leasehold title insurance
policy issued to the Buyers, and a mortgagee's policy issued to one or more
lenders designated by the Buyers, with respect to each Leased Real Property, in
each case in form and substance satisfactory to the Buyers and the Buyers'
lenders, together with endorsements reasonably requested by the Buyers,
including, without limitation, access, zoning, comprehensive, non-imputation
and contiguity endorsements, in an amount determined by the Buyers, insuring the
Buyers and the Buyers' lenders and issued as of the Closing Date by the Title
Company, showing the relevant Buyer to have a fee simple title to each Owned
Real Property, and a valid leasehold estate in each Leased Real Property, in
each case subject only to Permitted Liens. The Sellers shall have delivered to
the Title Company any affidavits or indemnities required by the Title Company in
connection with the delivery of the owner's title policies, leasehold title
policies and any mortgagee title policies issued to the Buyers' lenders.
5.2.9. SURVEYS. The Buyers shall have received, at their expense, a
survey of each Real Property located in the United States, dated within 30 days
of the Closing Date, prepared by a certified or registered surveyor reasonably
acceptable to the Buyers and the Title Company and certified to the Buyers, the
Title Company and the Buyers' lenders, in form and substance satisfactory to the
Buyers, the Title Company and the Buyers' lenders, complying with the current
Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys and (A)
setting forth an accurate description of each parcel of such Owned Real
Property, (B) locating all improvements, Liens (setting forth the recording
information of any recorded instruments), setback lines, alleys, streets and
roads, (C) showing any encroachments upon or by any improvements on such Real
Property, and (D) showing all dedicated public streets providing access to such
Real Property and the municipal address of any improvements located on the Owned
Real Property.
5.2.10. CONSENTS AND ESTOPPELS. The Buyers shall have received
consents from the lessor of each Lease listed on Schedule 3.1.21(b) to the
assignment of such Lease to the relevant Buyer and consents from the lessor of
each Lease listed on Schedule 5.2.10 to the mortgaging of the tenant's interest
under such Lease to the Buyers' lenders. The Buyers shall also have received
estoppel certificates addressed to the Buyers and the Buyers' lenders from the
lessor of each Lease, dated within 30 days of the Closing Date, identifying the
Lease documents and any amendments thereto, stating that the Lease is in full
force and effect and, to the best knowledge of the lessor, that the tenant is
not in default under the Lease and no event has occurred that, with notice or
lapse of time or both, would constitute a default by the tenant under the Lease
and containing any other information reasonably requested by the Buyers or the
Buyer's lenders. The Buyers shall also have received non-disturbance agreements
from any
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mortgagees of the owners of any Leased Real Property, agreeing to recognize the
applicable Buyer as lessee in the event of any foreclosure.
5.2.11. WITHHOLDING CERTIFICATES. The Buyers shall have received
(a) certificate of Granutec and GHC, dated the Closing Date and sworn to under
penalty of perjury, setting forth the name, address and federal tax
identification number of and stating that Granutec is not a "foreign person"
within the meaning of Section 1445 of the Code, such certificate to be in the
form set forth in the Treasury Regulations thereunder and (b) an IRS Form W-8
from each of Stanley and Novopharm (or such other forms as are necessary to
establish that any interest payment to such persons are not subject to any U.S.
withholding tax).
5.2.12. RELEASES. The Buyers shall have received evidence, in
substance and form reasonably satisfactory to the Buyers, that all Liens (other
than Permitted Liens) to which the Assets are subject have been released.
5.2.13. RETURNS. The products of the Business sold after September
1, 1999 and returned by any purchaser of such products to any Seller prior to
the Closing shall have not exceeded in the aggregate, based on the sale price of
such products, four percent of the aggregate gross sales of the Business (the
calculation of the amount of returned products shall include (i) for Stanley,
sales and marketing expenses internally classified by Stanley as variable
expenses below gross margin and (ii) products not yet returned but for which
either Division has received notice of return, chargeback or nonpayment for such
period).
5.2.14. TRANSFER OF DINS. The Buyers shall have received reasonable
evidence, in form and substance satisfactory to the Buyers, that the DINs owned
by Stanley and Wes-Pak will be transferred to the Canadian Buyer by
administrative notification or other similar procedure.
5.3. CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligation of
the Sellers to consummate the transactions contemplated hereby shall be subject
to the fulfillment (or waiver by the Sellers), on or prior to the Closing Date,
of the following additional conditions, which the Buyers agree to use good faith
efforts to cause to be fulfilled.
5.3.1. REPRESENTATIONS, PERFORMANCE, ETC. The representations and
warranties of the Buyers contained in this Agreement and the Collateral
Agreements (i) shall be true and correct in all material respects at and as
October 7, 1999 and (ii) shall be repeated and shall be true and correct in all
material respects on and as of the Closing Date with the same effect as though
made at and as of such time. Each Buyer shall have duly performed and complied
in all material respects with all agreements and conditions required by this
Agreement and the Collateral Agreements to be performed or complied with by it
prior to or on the Closing Date. Each Buyer shall have delivered to the Sellers
a certificate, dated the Closing Date and signed by its duly authorized officer,
to the foregoing effect.
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5.3.2. ASSUMPTION AGREEMENTS. The Sellers shall have received from
the Buyers the Assumption Agreements and, unless the Buyers have taken all
action necessary to permit Granutec to prepay in full or otherwise defease with
funds provided by the Buyers all outstanding obligations under the IRB Loan
Agreement, all documents necessary to assume all outstanding obligations under
the IRB Loan and release Granutec from liability thereunder.
5.3.3. OPINION OF COUNSEL. The Sellers shall have received an
opinion, addressed to them and dated the Closing Date, of each of Debevoise &
Plimpton, special U.S. counsel for the Buyers, Fraser Milner, special Canadian
counsel to the Buyers, and Aikins, MacAulay & Thorvaldson, special Manitoba
counsel to the Buyers, in each case, in form and substance reasonably
satisfactory to the Sellers.
5.3.4. CORPORATE PROCEEDINGS. All corporate proceedings of each
Buyer in connection with the Acquisition Agreements and the Collateral
Agreements and the transactions contemplated thereby, and all documents and
instruments incident thereto, shall be reasonably satisfactory in substance and
form to the Sellers, and their counsel, and the Sellers and their counsel shall
have received all such documents and instruments, or copies thereof, certified
if requested, as may be reasonably requested.
5.3.5. CONSENTS AND APPROVALS. The Sellers shall have obtained all
Governmental Approvals (other than those addressed in Section 5.1.1) and
Consents necessary to consummate the transactions contemplated hereby.
5.3.6. COLLATERAL AGREEMENTS. Each Buyer shall have entered into
each of the Collateral Agreements to which it is a party.
ARTICLE VI
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
6.1. EMPLOYMENT OF EMPLOYEES. (a) Each Seller will, and will cause
each other Seller and each of its and their respective subsidiaries to, use all
reasonable efforts to cause the employees of the Divisions (except David Howard)
("CURRENT EMPLOYEES") to make available their employment services to the Buyers.
For a period of two years from the Closing Date, each Seller will not, and will
not permit any of their Affiliates to, solicit, offer to employ or retain the
services of or otherwise interfere with the relationship of any Buyer with any
Person employed by or otherwise engaged to perform services for any Buyer in
connection with the operation of the Business, PROVIDED, HOWEVER, that no Seller
shall be prohibited from hiring any such Person if such Person responds to a
general search by a Seller for employees, whether through media advertisements,
employment firms or otherwise, that is not focused on Persons employed by any
Buyer or any of their respective Affiliates.
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(b) Effective as of the Closing Date, the US Buyer and the Canadian
Buyer shall offer employment to all Current Employees who are employed by any
Seller principally in the operation of the Business at wage or salary levels, as
applicable, and, except as otherwise contemplated herein, with employee benefits
that are competitive with those of similarly situated employees of Affiliates of
the Buyers; PROVIDED, HOWEVER, that the Sellers shall prepay to all Transferred
Employees formerly employed by Granutec the balance of their wage or salary
level (the "WAGES") for the period commencing on the Closing Date and ending on
December 29, 1999 (the "FINAL PAY PERIOD"). At Closing, the US Buyer shall
tender to the Sellers payment in US dollars an amount equal to $231,850, which
represents 50% of the Final Pay Period Wages, plus Granutec's portion of the
Taxes imposed under the United States Federal Insurance Contributions Act
("FICA") and all of Granutec's Taxes under the United States Federal
Unemployment Tax Act ("FUTA") and Granutec's obligation for any other applicable
employment-related withholding tax owed on the Final Pay Period Wages. The
Buyers shall be responsible for payment of any and all retention, change in
control or other similar compensation or benefits which are or may become
payable in connection with the consummation of the transactions contemplated by
this Agreement with respect to Current Employees. Those Current Employees who
accept such offers of employment effective as of the Closing Date shall be
referred to herein as the "TRANSFERRED EMPLOYEES".
(c) Except as provided in Section 6.1(d), neither the Buyers nor
any of their Affiliates shall have any Benefit Loss with respect to any Plan.
From and after the Closing, the Sellers shall, jointly and severally, remain
solely responsible for any and all Benefit Losses relating to or arising in
connection with any claims, whether such claims are asserted before, on or after
the Closing Date relating to (i) the participation in or accrual of benefits or
compensation under, or the failure to participate in or to accrue compensation
or benefits under, any Plan or other employee or retiree benefit or compensation
plan, program, practice, policy, agreement or arrangement of any Seller; (ii)
except where covered under the terms of the applicable Assumed Canadian Plans so
as to require no out-of-pocket payment by the Canadian Buyer (other than
premiums payable under the Assumed Canadian Plans in the normal course) life
insurance, disability, accidental death or dismemberment, supplemental
unemployment compensation, medical, dental, hospitalization, other health or
other welfare or fringe benefits or expense reimbursements which claims relate
to or are based upon an occurrence on or before the Closing Date (including
claims for continuing treatment in respect of any illness, accident, disability,
condition or confinement which occurs or commences on or before the Closing
Date); or (iii) accrued as of the Closing Date but unpaid salaries, wages,
bonuses, incentive compensation, vacation or sick pay or other compensation or
payroll items (including, without limitation, deferred compensation).
(d) Effective as of the Closing, the Canadian Buyer shall assume
the Assumed Canadian Plans and the Canadian Buyer shall be solely responsible
for any claims for Benefit Losses in connection with such Plans which relate to,
arise from or are based upon an occurrence after the Closing Date.
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(e) On or before the Closing, the Sellers, as promptly as
practicable and in cooperation with the Buyers, shall take all actions
reasonably necessary and appropriate to permit the Assumed Canadian Plans to be
assumed by the Canadian Buyer on Closing.
6.2. U.S. SAVINGS PLANS. Effective as of January 12, 2000, the U.S.
Buyer shall establish or maintain a defined contribution plan which shall be
qualified under section 401(a) of the Code upon and after the Closing (the "U.S.
BUYER PLAN"). The U.S. Buyer shall cause the U.S. Buyer Plan to accept direct
rollovers of "eligible rollover distributions" as defined in Section 402 of the
Code, consisting of only cash, with respect to Transferred Employees from the
Granutec, Inc./Novopharm Inc. 401(k) Plan (the "SELLERS' PLAN").
6.3. U.S. WELFARE AND FRINGE BENEFIT PLANS. (a) The US Buyer shall
provide the Transferred Employees of Granutec and their dependents and
beneficiaries coverage under any welfare and fringe benefit plans, programs,
policies or arrangements established by the US Buyer for such Persons.
(b) From and after the Closing Date, the Sellers shall, jointly and
severally, remain solely responsible for any and all Benefit Losses relating to
or arising in connection with the requirements of section 4980B of the Code to
provide continuation of health care coverage under any Plan (other than for
Transferred Employees and their covered dependents); PROVIDED, HOWEVER, that
Granutec shall offer medical and dental coverage (the "COBRA COVERAGE") to the
Transferred Employees formerly employed by Granutec for the period commencing on
the Closing Date and ending on or before February 29, 2000 time being of the
essence with respect to such date (the "TRANSITION PERIOD"). Granutec shall
offer COBRA Coverage to such Transferred Employees for the Transition Period
under the terms and conditions as set forth in Schedule 6.3(b).
6.4. WORKERS COMPENSATION. From and after the Closing Date, the
Sellers shall, jointly and severally, remain solely responsible for any and all
Benefit Losses relating to or arising in connection with any and all claims for
workers' compensation benefits arising in connection with any occupational
injury or disease occurring or existing on or prior to the Closing Date.
6.5. EMPLOYMENT TAXES. (a) The Sellers will remain liable for any
and all applicable Taxes imposed under FUTA or FICA relating to the prepayment
of Wages to the Transferred Employees for the Final Pay Period contemplated in
Section 6.1(b), and Sellers shall be responsible for all Tax reporting
obligations, including the filing of the IRS Form W-2, with respect to each such
Transferred Employee for the Final Pay Period.
(b) At the request of the Buyers with respect to any particular
applicable Tax law relating to employment, unemployment insurance, social
security, disability, workers' compensation, payroll, health care or other
similar Tax other than Taxes imposed under FICA and
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FUTA, the Sellers will, and the Buyers will, (i) treat the applicable Buyers as
a successor employer and the applicable Seller as a predecessor employer, within
the meaning of the relevant provisions of such Tax law, with respect to
Transferred Employees who are employed by the Buyer (or, if applicable, the
other Buyers) and (ii) cooperate with each other to avoid, to the extent
possible, the filing of more than one individual information reporting form
pursuant to each such Tax law with respect to each such Transferred Employee for
the calendar year within which the Closing Date occurs.
6.6. NOTICES OF TERMINATION. No communications shall be issued by
the Sellers to Current Employees between the date hereof and the Closing which
may reasonably be construed to be notice of termination of employment without
the prior approval of the Buyers, acting reasonably.
ARTICLE VII
TERMINATION
7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the written agreement of the Buyers and the Sellers;
(b) by either the Sellers or the Buyers by written notice to the
other party if the transactions contemplated hereby shall not have been
consummated pursuant hereto by 5:00 p.m. New York City time on January
31, 2000, unless such date shall be extended by the mutual written
consent of the Sellers and the Buyers;
(c) by the Sellers by delivery of written notice to the Buyers if
the Sellers have not received written notice, or other evidence by the
close of business on October 14, 1999 reasonably satisfactory to the
Sellers, from BNS by confirming that BNS has approved, and will vote in
favor of, the Waiver;
(d) by the Sellers by delivery of written notice to the Buyers if
the Sellers have not received written notice or other evidence reasonably
satisfactory to the Sellers, from BNS by the close of business on
November 10, 1999 confirming that the Waiver has been duly executed and
delivered by all parties thereto;
(e) by the Sellers pursuant to Section 4.1.12; or
(f) by the Buyers pursuant to Section 1.7 or Section 4.1.14.
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7.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to the provisions of Section 7.1, this Agreement shall
become void and have no effect, without any liability to any Person in respect
hereof or of the transactions contemplated hereby on the part of any party
hereto, or any of its directors, officers, employees, agents, consultants,
representatives, advisers, stockholders or Affiliates, except as specified in
Section 8.4 and except for any liability resulting from such party's breach of
this Agreement.
ARTICLE VIII
DEFINITIONS, MISCELLANEOUS
8.1. DEFINITION OF CERTAIN TERMS. The terms defined in this Section
8.1, whenever used in this Agreement (including in the Schedules), shall have
the respective meanings indicated below for all purposes of this Agreement. All
references herein to a Section, Article or Schedule are to a Section, Article or
Schedule of or to this Agreement, unless otherwise indicated.
ACCOUNTANT: as defined in Section 2.2.
ADJUSTMENT CERTIFICATES: the Granutec Adjustment Certificate and
the Stanley Adjustment Certificate.
ADJUSTMENT REPORT: as defined in Section 2.2.
AFFILIATE: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first Person. "Control" (including the
terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise.
AGENCY ARRANGEMENT: as defined in Section 1.7(b).
AGREEMENT: this Amended and Restated Asset Purchase Agreement,
including the Schedules hereto.
ALBERMARLE AGREEMENTS: the Sales Agreement, dated September 8,
1999, between Granutec and Albermarle Corporation, regarding the sale of
Ibuprofen from October 1, 1999 to September 30, 2002 and (ii) the Sales
Agreement, dated September 8, 1999, between Granutec and Albermarle
Corporation, regarding the sale of Naproxen Sodium from July 1, 2000 to
June 30, 2003.
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ANDA: an "Abbreviated New Drug Application" as defined in the US
Act.
APPLICABLE LAW: all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, by-laws, codes or orders of any Governmental Authority, (ii)
Governmental Approvals and (iii) orders, decisions, directives,
injunctions, judgments, awards, decrees of, requirements of or agreements
with any Governmental Authority.
ASSETS: the Granutec Assets, the Stanley Assets and the Novopharm
Assets.
ASSUMED CANADIAN PLANS: the Plans set out in items 1, 2(a), 2(b),
2(c) and 3 of Schedule 3.1.24 of the Stanley Schedules.
ASSUMED GRANUTEC LIABILITIES: as defined in Section 1.5(a).
ASSUMED LIABILITIES: the Assumed Granutec Liabilities, the Assumed
Stanley Liabilities and the Assumed Novopharm Liabilities.
ASSUMED NOVOPHARM LIABILITIES: as defined in Section 1.5(c).
ASSUMED STANLEY LIABILITIES: as defined in Section 1.5(b).
ASSUMPTION AGREEMENTS: as defined in Section 1.5(d).
AUDITED BALANCE SHEETS: the balance sheet for the period ended
December 31, 1998 contained in the Audited Financial Statements.
AUDITED FINANCIAL STATEMENTS: as defined in Section 3.1.4.
BENEFIT LOSSES: any and all claims, liabilities, obligations,
losses, fines, costs, royalties, proceedings, deficiencies or damages
(whether absolute, accrued, conditional or otherwise) in respect of the
Employees, including, without limitation, the Transferred Employees and
their beneficiaries and dependents.
BOOK VALUE: the aggregate value of the Assets reflected on the
Closing Balance Sheets.
BNS: The Bank of Nova Scotia.
BUSINESS: as defined in the first Whereas clause of this
Agreement.
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BUSINESS DAY: shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required to close.
BUYERS: as defined in the first paragraph of this Agreement.
BUYER INDEMNITIES: as defined in Section 8.2(a).
BUYER ACCOUNTANTS: Ernst & Young LLP.
CANADIAN BUYER: as defined in the first paragraph of this
Agreement.
CANADIAN EQUIVALENT: on any day, the number of Canadian dollars
that may be acquired for a given amount of U.S. dollars based on New York
foreign exchange mid-range rates (not the forward rates) for the
preceding day as published in the WALL STREET JOURNAL (Western Edition).
CANADIAN FACILITY: Novopharm's facility at 30 Novopharm Court,
Scarborough, Ontario M1B 2K9.
CERCLA: the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Sections 9601 ET SEQ.
CIMETIDINE RX ANDA: ANDA No. 74-151.
CLOSING: as defined in Section 1.1.
CLOSING BALANCE SHEETS: the Granutec Closing Balance Sheet and the
Stanley Closing Balance Sheet.
CLOSING DATE: as defined in Section 1.1.
CLOSING NET WORKING CAPITAL: the Granutec Closing Net Working
Capital or the Stanley Closing Net Working Capital.
CLOSING NET WORKING CAPITAL SCHEDULES: the Granutec Closing Net
Working Capital Schedule and the Stanley Closing Net Working Capital
Schedule.
CODE: the Internal Revenue Code of 1986, as amended.
COLLATERAL AGREEMENTS: the agreements and other documents and
instruments described in Sections 5.2.4 and 5.2.7.
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CONFIDENTIAL INFORMATION: (A) all proprietary and technical
information relating to the Business, including all Intellectual
Property, inventions, trade secrets, processing formulas, compositions
and designs that Sellers as a policy matter or otherwise seek to maintain
as confidential, (B) information concerning pricing policies, customers,
suppliers and research and development of Sellers and (C) financial
information concerning Sellers, excluding, however: (i) all information
made known to the public generally from sources outside the Seller and
(ii) all information required to be disclosed by court order, if any.
CONSENT: any consent, approval, authorization, waiver, release,
permit, grant, franchise, concession, agreement, license, exemption or
order of, registration, certificate, declaration or filing with, or
report or notice to, any Person, including but not limited to any
Governmental Authority.
CONTRACT: as defined in Section 3.1.12(a).
CURRENT EMPLOYEES: as defined in Section 6.1.
DIN: a "Drug Identification Number" issued pursuant to the Food and
Drugs Act (Canada).
DISPUTE NOTICE: as defined in Section 2.2.
DIVISION: as defined in the preamble of this Agreement.
$ or DOLLARS: lawful money of the United States of America.
EMPLOYEES: as defined in Section 3.1.24(a).
ENVIRONMENTAL LAWS: all Applicable Laws relating to the protection
of the environment, to human health and safety, to natural resources, or
to any emission, discharge, generation, processing, storage, holding,
abatement, existence, Release, threatened Release or transportation of
any Hazardous Substances, or imposing liability or establishing
standards of conduct for the protection of human health and safety or the
environment including, without limitation, (i) CERCLA, the Resource
Conservation and Recovery Act, and the Occupational Safety and Health
Act, (ii) all other requirements pertaining to reporting, licensing,
permitting, investigation or remediation of emissions, discharges,
Releases or threatened Releases of Hazardous Materials into the air,
surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, sale, treatment, receipt, storage,
disposal, transport or handling of Hazardous Substances, and (iii) all
other requirements pertaining to the protection of the health and safety
of employees or the public.
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ENVIRONMENTAL LIABILITIES AND COSTS: all Losses, whether direct or
indirect, known or unknown, current or potential, past, present or
future, imposed by, under or pursuant to Environmental Laws, including,
without limitation, all Losses related to Remedial Actions and all
reasonable fees, disbursements and expenses of counsel, experts,
personnel and consultants based on, arising out of or otherwise in
respect of: (i) the ownership or operation of the Business, Real Property
or Other Leases; (ii) the environmental conditions existing on the
Closing Date on, under, above, or about any Real Property or property
subject to Other Leases, or on properties or businesses adjoining any
Real Property or property subject to the Other Leases; and (iii)
expenditures necessary to cause any Real Property, property subject to
Other Leases, or any aspect of the Business to be in compliance with any
and all requirements of Environmental Laws as of the Closing Date,
including, without limitation, all Environmental Permits issued under or
pursuant to such Environmental Laws.
ENVIRONMENTAL PERMITS: any federal, foreign, provincial, state,
regional district, municipal and local permit, license, registration,
consent, order, administrative consent order, certificate, approval or
other authorization with respect to any Seller necessary for the conduct
of the Business as currently conducted or previously conducted under any
Environmental Law or with respect to the Business or the Real Property or
property subject to Other Leases.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
EXCLUDED ASSETS: as defined in Section 1.4.
EXCLUDED LIABILITIES: as defined in Section 1.6.
FINANCIAL STATEMENTS: each of the financial statements required to
be provided by Section 3.1.4.
FINANCING AUTHORITY: the Wilson County Industrial Facilities and
Pollution Control Financing Authority.
GAAP: with respect to Granutec, generally accepted accounting
principles as in effect in the United States and with respect to
Novopharm and Stanley, generally accepted accounting principles as in
effect in Canada.
GRANUTEC: as defined in the first paragraph of this Agreement.
GRANUTEC ADJUSTMENT CERTIFICATE: as defined in Section 2.2.
GRANUTEC ASSETS: as defined in Section 1.2(a).
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GRANUTEC CLOSING BALANCE SHEET: as defined in Section 2.2.
GRANUTEC CLOSING NET WORKING CAPITAL: as defined in Section 2.2.
GRANUTEC FACILITY: Granutec's manufacturing facility at 4409 NW
Airport Drive, Wilson, North Carolina.
GRANUTEC CLOSING NET WORKING CAPITAL SCHEDULE: as defined in
Section 2.2.
GRANUTEC PROJECTED NET WORKING CAPITAL: US$23,280,000.
GOVERNMENTAL APPROVAL: any Consent of, with or to any Governmental
Authority.
GOVERNMENTAL AUTHORITY: any nation or government, any state ,
province or territory or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation,
any government authority, municipality, regional district, agency,
department, ministry, board, commission or instrumentality of the United
States or Canada, any State of the United States or Province or Territory
of Canada or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory
organization.
HAZARDOUS SUBSTANCES: any substance, element, compound, chemical or
other material that: (i) is or contains asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum or petroleum-derived
substances or wastes, radon gas or related materials (ii) requires
investigation, removal or remediation under any Environmental Law, or is
defined, listed or identified as a "hazardous waste", "hazardous
substance", "hazardous materials", "contaminants", "pollutants", "solid
wastes", "extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "toxic pollutants", "special wastes", "deleterious
substances" or words of similar import thereunder, or (iii) is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous and is regulated by any Governmental
Authority or Environmental Law.
HSR ACT: the Hart-Scott-Rodino Anti-trust Improvements Act of
1976, as amended.
INDEMNIFIED PARTY: as defined in Section 8.2(d).
INDEMNIFYING PARTY: as defined in Section 8.2(d).
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INDUSTRIAL REVENUE DEVELOPMENT BONDS: the Wilson County Industrial
Facilities and Pollution Control Financing Authority $8,100,000
Industrial Development Revenue Bonds (Granutec, Inc. Project, Series
1994).
INTELLECTUAL PROPERTY: all (1) United States and foreign: (a)
patents (including design patents, industrial designs and utility models)
and patent applications (including docketed patent disclosures awaiting
filing, reissues, divisions, continuations-in-part and extensions),
patent disclosures awaiting filing determination, inventions and
improvements thereto; (b) trademarks, service marks, trade names, trade
dress, logos, business and product names, slogans, and registrations and
applications for registration thereof; and (c) copyrights and
registrations thereof (2) inventions, processes, designs, formulae, trade
secrets, know-how, industrial models, confidential and technical
information, manufacturing, engineering and technical drawings, product
specifications and confidential business information; (3) Software, data
and documentation; (4) mask work and other semiconductor chip rights and
registrations thereof; (5) intellectual property rights similar to any of
the foregoing; (6) rights to sue for and remedies against past, present
and future infringements of any or all of the foregoing and rights of
priority and protection of interests therein under the laws of any
jurisdiction; (7) licenses of any of the foregoing; and (8) copies and
tangible embodiments thereof (in whatever form or medium, including
electronic media).
INTELLECTUAL PROPERTY ASSETS: as defined in the definition of
"Specified Assets".
INTERIM PERIOD: as defined in Section 4.3.
INVENTORIES: as defined in the definition of "Specified Assets".
IRB LOAN AGREEMENT: the Loan Agreement, dated as of May 1, 1994,
by and between the Financing Authority and Granutec.
IRS: the Internal Revenue Service.
LEASED REAL PROPERTY: all interests leased pursuant to the Leases.
LEASEHOLD INTEREST: with respect to any Lease, the tenant's right,
title and interest in, to and under such Lease.
LEASES: the real property leases, subleases, licenses and occupancy
agreements used or held for use in connection with the Business and that
pursuant to which any Division is the lessee, sublessee, licensee, or
occupant or otherwise has the right of possession or occupancy.
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LICENSED INTELLECTUAL PROPERTY: all Intellectual Property that is
not owned by the Sellers and that is used, held for use in connection
with, necessary for the conduct of, or otherwise material to the
Business.
LIEN: any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, charge, notation, equitable charge,
lease, sublease, license, occupancy agreement, Adverse claim or interest,
easement, right of way, building scheme, covenant, encroachment, burden,
title defect, title retention agreement, voting trust agreement,
interest, equity, option, lien, caveat, lis pendens, right of first
refusal, charge or other restrictions or limitations of any nature
whatsoever, including but not limited to such as may arise under any
licenses, Contracts or other agreements or commitments.
LOSSES: as defined in Section 8.2(a).
MATERIAL ADVERSE EFFECT: any event, occurrence, fact, condition,
change or effect that is materially adverse to the business, operations,
prospects, results of operations, prospects, condition (financial or
otherwise), properties (including intangible properties), assets
(including intangible assets) or liabilities of the Divisions, the
Business or the Assets.
MINUTES: with respect to any Person, records of (i) the proceedings
at any and all meetings of the shareholders or board of directors of such
Person, material to the operation of the Business, and (ii) all
resolutions and other actions of such shareholders and board of directors
material to the operation of the Business, adopted at a meeting or by
consent resolution.
MULTIEMPLOYER PLAN: as defined in Section 3.1.24(c)(iv).
NEWCO: as defined in the first paragraph of this Agreement.
NON-COMPETITION AGREEMENT: as defined in Section 5.2.4.
NOVOPHARM: as defined in the first paragraph of this Agreement.
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NOVOPHARM ANDAS: the ANDAs for each of the following Products
identified by the following ANDA number, if any, respectively:
<TABLE>
<CAPTION>
Product ANDA Number
------- -----------
<S> <C>
Loperamide 73-254
Naproxen Sodium 74-635
Ibuprofen 74-931
Cimetidine 74-961
Ranitidine 75-094
</TABLE>
NOVOPHARM ASSETS: as defined in Section 1.2.
NOVOPHARM NC FACILITY: the facility at 4700 Novopharm Blvd.,
Wilson, North Carolina, owned by Novopharm N.C., Inc.
ORIGINAL AGREEMENT: as defined in the second Whereas clause
of this Agreement.
OTHER LEASES: the leases, subleases, licenses and occupancy
agreements pursuant to which any Division is a lessor, sublessor,
licensor or otherwise has the right of possession or occupancy of
any part of the Real Property.
OWNED INTELLECTUAL PROPERTY: as defined in Section 3.1.19(a).
OWNED REAL PROPERTY: the real property owned by the Divisions
together with all other structures, facilities, improvements, fixtures,
systems, services, equipment and items of property presently or hereafter
located thereon attached or appurtenant thereto or owned by the Divisions
and located on Leased Real Property and all easements, covenants,
charges, equitable charges, licenses, rights, interests, options and
appurtenances relating to the foregoing other than owned real property
included in Excluded Assets.
PERMITTED LIENS: Liens listed on Schedule 8.1.
PERSON: any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Authority
or other entity.
PLAN: as defined in Section 3.1.24(a).
PRE-CLOSING PROPERTY TAXES: Any real or personal property Taxes
(and amounts required to be withholding in respect of such Taxes) imposed
with respect to the operation or ownership of the Business or the Assets
for any taxable period (or portion thereof) ending on before the Closing
Date. In the case of any such Taxes imposed for a
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taxable period that begins on or before and ends after the Closing Date,
such Taxes shall be apportioned on a per diem basis.
PRODUCTS: as defined in Section 3.1.17(a).
PROPOSED PREPAID ITEM CERTIFICATE: as defined in Section 2.6.
PURCHASE PRICE: as defined in Section 2.1.
REAL PROPERTY: the Owned Real Property and the Leased Real
Property.
REAL PROPERTY LAWS: as defined in Section 3.1.21(f).
RELATED PERSONS: as defined in Section 3.1.24(a).
RELEASE: any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping,
emptying, seeping, dispersal, migration, trans porting, placing and the
like, including without limitation, the moving of any materials through,
into or upon, any land, soil, surface water, groundwater or air, or
otherwise entering into the environment.
REMEDIAL ACTION: all actions required to (i) clean up, remove,
treat, dispose or in any other way remediate any Hazardous Substances;
(ii) prevent the release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or
the environment; or (iii) perform studies, investigations and care
related to any such Hazardous Substances.
REPORT: as defined in Section 4.1.12.
REVIEW PERIOD: as defined in Section 2.2.
SELLERS: as defined in the first paragraph of this Agreement.
SELLER ACCOUNTANTS: PricewaterhouseCoopers LLP.
SELLERS' PLAN: as defined in Section 6.2.
SITE: as defined in Section 4.1.12.
SOFTWARE: computer programs in any and all forms and media,
whether recorded on paper, magnetic media or other electronic or
non-electronic media.
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SPECIFIED ASSETS: (a) all tangible assets and properties, including
machinery, equipment, furniture, furnishings, automobiles, trucks,
vehicles, tools, dies, molds and parts and similar property (including,
but not limited to, any of the foregoing purchased subject to any
conditional sales or title retention agreement in favor of any other
Person);
(b) all inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts, and office
and other supplies (collectively, the "INVENTORIES"), including
Inventories held at any location controlled by any Seller and Inventories
previously purchased and in transit to such locations;
(c) all rights in and to products sold or leased (including, but
not limited to, products hereafter returned or repossessed and unpaid
sellers' rights of rescission, replevin, reclamation and rights to
stoppage in transit);
(d) all rights (including but not limited to any and all
Intellectual Property rights) in and to the products sold or leased and
in and to any products or other Intellectual Property rights under
research or development prior to or on the Closing Date;
(e) all of the rights under all contracts, arrangements, licenses,
leases and other agreements, including, without limitation, any right to
receive payment for products sold or services rendered, and to receive
goods and services, pursuant to such agreements and to assert claims and
take other rightful actions in respect of breaches, defaults and other
violations of such contracts, arrangements, licenses, leases and other
agreements and otherwise;
(f) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and prepaid items;
(g) all notes and accounts receivable and all notes, bonds and
other evidences of indebtedness of and rights to receive payments from
any Person;
(h) all Intellectual Property and all rights thereunder or in
respect thereof relating to or used or held for use in connection with
the Business, including, but not limited to, the "Granutec", "Stanley",
"Stanley Pharmaceuticals", "Wes-Pak", and "KSL Pharmaceuticals", names
and marks (together with all Intellectual Property rights included in the
other clauses of this definition of "SPECIFIED ASSETS", the "INTELLECTUAL
PROPERTY ASSETS");
(i) all books, records, manuals and other materials (in any form or
medium), including, without limitation, all records and materials
maintained at the offices of the Sellers, advertising matter, catalogues,
price lists, correspondence, mailing lists, lists of customers,
distribution lists, photographs, production data, sales and promotional
mate-
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rials and records, purchasing materials and records, personnel
records, manufacturing and quality control records and procedures,
blueprints, research and development files, records, data and laboratory
books, Intellectual Property disclosures, media materials and plates,
accounting records, sales order files and litigation files;
(j) to the extent their transfer is permitted by law, all
Governmental Approvals, including all applications therefor;
(k) all Real Property and all licenses, permits, approvals and
qualifications relating to any Real Property issued to any Seller or
Subsidiary by any Governmental Authority;
(l) all rights to causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by the Sellers with
respect to the Business or the ownership, use, function or value of any
Asset, whether arising by way of counterclaim or otherwise;
(m) all guarantees, warranties, indemnities and similar rights with
respect to any Asset;
(n) cash and cash equivalents; and
(o) all Governmental Approvals, related Products, the Assets or the
Business, and pending applications and registrations related thereto.
STANLEY: as defined in the first paragraph of this Agreement.
STANLEY ADJUSTMENT CERTIFICATE: as defined in Section 2.2.
STANLEY ASSETS: as defined in Section 1.2.
STANLEY CLOSING BALANCE SHEET: as defined in Section 2.2.
STANLEY CLOSING NET WORKING CAPITAL: as defined in Section 2.2.
STANLEY NET WORKING CAPITAL SCHEDULE: as defined in Section 2.2.
STANLEY PROJECTED CLOSING NET WORKING CAPITAL: C$12,396,000.
SUBSEQUENT MONTHLY FINANCIAL STATEMENTS: as defined in Section
4.1.4.
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SUBSIDIARIES: each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing at least 50% of the outstanding voting stock or
other equity interests.
TAX: any federal (US or Canadian), state, provincial, local,
foreign or other income, alternative, minimum, inheritance, accumulated
earnings, personal holding company, corporation, franchise, capital
stock, net worth, capital, profits, windfall profits, capital gain, gross
receipts, value added, sales, use, goods and services, excise, customs
duties, transfer, conveyance, mortgage, registration, stamp, documentary,
recording, premium, severance, environmental (including taxes under
Section 59A of the Code), real property, personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers'
compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or
deficiencies thereof (including all interest and penalties thereon and
additions thereto whether disputed or not).
TAX RETURN: any return, report, declaration, form, claim for
refund or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
TERRITORY: The United States, Canada and Mexico.
TITLE COMPANY: as defined in Section 5.2.11.
TO THE KNOWLEDGE OF THE SELLERS: the actual knowledge, after due
inquiry, of each executive officer, compliance officer and senior manager
of each Seller.
TRANSACTION EXPENSES: as defined in Section 8.4.
TRANSFERRED EMPLOYEES: as defined in Section 6.1(b).
TRANSFER TAXES: as defined in Section 4.1.8.
TREASURY REGULATIONS: the regulations prescribed pursuant to the
Code.
US ACT: the United States Food, Drug and Cosmetic Act, as amended
from time to time, and the regulations promulgated thereunder.
US BUYER: as defined in the first paragraph of this Agreement.
U.S. BUYER PLAN: as defined in Section 6.2.
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WES-PAK: as defined in Section 3.1.19(g).
WAIVER: the waiver by or other agreement, with the requisite
percentage of the Lenders party to the Amended and Restated Credit
Agreement (the "Credit Agreement"), dated as of May 15, 1998, as amended,
among US Buyer, the Canadian Buyer, BNS and the lenders party thereto,
necessary to permit US Buyer to borrow under such Credit Agreement to
finance in part, the Purchase Price.
WITHHOLDING TAXES: as defined in Section 3.6(a).
YEAR 2000 COMPLIANT (and grammatical variations thereof): with
respect to any Computer System, that such Computer System is and will be
able to (i) record, store, process and provide true and accurate dates
and calculations for dates and spans of dates, (ii) operate or are
expected to operate on a basis comparable to their current operation
before, on and after January 1, 2000, including, but not limited to, leap
years, and (iii) shall not end abnormally or provide invalid or incorrect
results as a result of date data which represents or references (or fails
to represent or reference) different centuries or more than one century.
YEAR 2000 PLAN: as defined in Section 3.1.19(h)(ii).
8.2. INDEMNIFICATION. (a) BY THE SELLERS. The Sellers, jointly and
severally, covenant and agree to defend, indemnify and hold harmless the Buyers
and their Affiliates, and their respective officers, directors, employees,
agents, advisers, representatives (collectively, the "BUYER INDEMNITEES") from
and against, and pay or reimburse the Buyer Indemnitees for any and all claims,
liabilities, obligations, losses, fines, costs, royalties, proceedings,
deficiencies or damages (whether absolute, accrued, conditional or otherwise and
whether or not resulting from third party claims), including out-of-pocket
expenses and reasonable attorneys' and accountants' fees incurred in the
investigation or defense of any of the same or in asserting any of the rights
hereunder (collectively, "LOSSES") resulting from or arising out of:
(i) any inaccuracy of any representation or warranty when made or
deemed made by any Seller herein or in any Collateral Agreement or in
connection herewith or therewith (except to the extent such inaccuracies
were disclosed on the Closing certificate provided by the Sellers
pursuant to Section 5.2.1);
(ii) any failure of any Seller to perform any covenant or agreement
hereunder or under any Collateral Agreement or fulfill any other
obligation in respect hereof or of any Collateral Agreement (except to
the extent such failures were disclosed on the Closing certificate
provided by the Sellers pursuant to Section 5.2.1);
(iii) any Excluded Liabilities or Excluded Assets;
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(iv) any and all liabilities for Taxes imposed on any Seller or its
Affiliates and any liability for Pre-Closing Property Taxes;
(v) any and all liabilities in respect of Employees and any and all
liabilities in respect of the termination by the Sellers of any Plan,
whether or not such termination occurs on or after Closing Date, except
with respect to Losses that are subject to an indemnity pursuant to
Section 8.2(b)(v), (vi) and (vii) of this Agreement;
(vi) all Environmental Liabilities and Costs arising out of or in
any way connected with the breach of any representation or warranty
provided to the Buyers in this Agreement;
(vii) any product liability claim, product recall, or regulatory
action with respect to products manufactured or sold or events occurring
prior to the Closing; and
(viii) any failure of the Sellers to comply with applicable bulk
sales law.
Any Buyer Indemnitee's right to indemnity hereunder (or other
remedy, except in connection with fraud) for any Losses shall be subject to the
following limitations:
(1) No indemnification shall be required to be made by the Sellers
solely under Section 8.2(a)(i) until the aggregate amount of Losses
exceeds $100,000; PROVIDED that, if the aggregate amount of Losses
exceeds such amount, indemnification shall be made with respect to all
Losses.
(2) To the extent that any Buyer Indemnitee is seeking
indemnification solely under Section 8.2(a)(i), such Buyer Indemnitee
shall be entitled to indemnity only for those Losses to which such Buyer
Indemnitee has given written notice thereof to the Sellers within the
time period related to the applicable survival period pursuant to Section
8.2(d). Such Buyer Indemnitee may at its option give notice under this
Section 8.2(a) as soon as it has become aware of a potential third party
claim in respect of any breach of any representation or warranty of the
Sellers contained in this Agreement, regardless of whether any Losses
have been suffered, so long as such Buyer Indemnitee shall in good faith
determine that such potential claim is not frivolous or that such Buyer
Indemnitee may be liable or otherwise incur Losses as a result of such
claim and shall give written notice of such determination to the Sellers.
Any written notice delivered by such Buyer Indemnitee pursuant to this
subparagraph (2) shall set forth with specificity the basis of the claim
for Losses and an estimate of the amount thereof.
(3) In no event shall the Buyer Indemnitees be entitled to
indemnity under Section 8.2(a) for Losses in excess of an aggregate
amount equal to $57,100,000.
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(4) The amount of Losses and recovery hereunder in connection with
any Claim shall be reduced by the net amount any Buyer Indemnitee
recovers (after deducting all attorneys' fees and expenses and other
costs related to obtaining such recovery) from any insurer in respect of
such Losses.
(5) In no event shall the Buyer Indemnitees be entitled to recover
any Losses constituting consequential, punitive or other special damages.
(b) BY THE BUYERS. The Buyers jointly and severally covenant and
agree to defend, indemnify and hold harmless the Sellers and their Affiliates,
and their respective officers, directors, employees, agents, advisers,
representatives (collectively, the "SELLER INDEMNITEES") from and against any
and all Losses resulting from or arising out of:
(i) any inaccuracy in any representation or warranty by any Buyer
when made or deemed made or contained in this Agreement or any Collateral
Agreement or in connection therewith; or
(ii) any failure of any Buyer to perform any covenant or agreement
made or contained in this Agreement or any Collateral Agreement or
fulfill any other obligation in respect thereof;
(iii) the Assumed Liabilities;
(iv) the operation of the Business by the Buyers or the Buyers'
ownership, operation or use of the Assets following the Closing Date;
(v) notwithstanding the provisions of Article 6 or any other
provisions of this Agreement, any and all liabilities in respect of
Current Employees of Stanley arising from, related to or in connection
with the employment of such Current Employees with the Canadian Buyer on
or after the Closing Date, including without limitation any obligation on
the Canadian Buyer to recognize the service of such Current Employees
with Stanley, and any and all liabilities to Current Employees of Stanley
arising from, relating to or in connection with the termination of
employment of such Current Employees on or after the Closing Date,
including without limitation any Losses of such Current Employees in
respect of the Plans arising from the failure of Stanley to provide
notice of termination to such Current Employees as required by Applicable
Law in Canada, whether or not such liabilities are deemed under
Applicable Law in Canada or whether or not any such termination of such
Current Employees is proper or wrongful;
(vi) any and all liabilities in respect of Benefit Losses
contemplated in Section 6.1(d); and
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(vii) any and all liabilities in respect of Current Employees of
Granutec arising from, related to or in connection with the employment of
such Current Employees with the U.S. Buyer on or after the Closing Date,
including without limitation any obligation on the U.S. Buyer to
recognize the service of such Current Employees with Granutec, and any
and all liabilities to Current Employees of Granutec arising from,
relating to or in connection with the termination of employment of such
Current Employees with Granutec on or after the Closing Date, whether or
not such liabilities are deemed under Applicable Law in North Carolina or
whether or not any such termination of such Current Employees is proper
or wrongful.
Any Seller Indemnitee's right to indemnity hereunder (or other
remedy, except in connection with fraud) for any Losses shall be subject to the
following limitations:
(1) No indemnification shall be required to be made by the Buyers
solely under Section 8.2(b)(i) until the aggregate amount of Losses
exceeds $100,000; PROVIDED that, if the aggregate amount of Losses
exceeds such amount, indemnification shall be made with respect to all
Losses.
(2) To the extent that any Seller Indemnitee is seeking
indemnification solely under Section 8.2(i), such Seller Indemnitee shall
be entitled to indemnity only for those Losses to which such Seller
Indemnitee has given written notice thereof to the Buyers within the time
period related to the applicable survival period pursuant to Section
8.2(d). Such Seller Indemnitee may at its option give notice under this
Section 8.2(b) as soon as it has become aware of a potential third party
claim in respect of any breach of any representation or warranty of the
Buyers contained in this Agreement, regardless of whether any Losses have
been suffered, so long as such Seller Indemnitee shall in good faith
determine that such potential claim is not frivolous or that such Seller
Indemnitee may be liable or otherwise incur Losses as a result of such
claim and shall give written notice of such determination to the Buyers.
Any written notice delivered by such Seller Indemnitee pursuant to this
subparagraph (2) shall set forth with specificity the basis of the claim
for Losses and an estimate of the amount thereof.
(3) In no event shall the Seller Indemnitees be entitled to
indemnity under Section 8.2(b) for Losses in excess of an aggregate
amount equal to $57,100,000.
(4) The amount of Losses and recovery hereunder in connection with
any Claim shall be reduced by the net amount any Seller Indemnitee
recovers (after deducting all attorneys' fees and expenses and other
costs related to obtaining such recovery) from any insurer in respect of
such Losses.
(5) In no event shall the Seller Indemnitees be entitled to recover
any Losses constituting consequential, punitive or other special damages.
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(c) INDEMNIFICATION PROCEDURES. In the case of any claim asserted
by a third party against a party entitled to indemnification under this
Agreement (the "INDEMNIFIED PARTY"), notice shall be given by the Indemnified
Party 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 the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of any claim or any litigation resulting therefrom, PROVIDED that (i)
the counsel for the Indemnifying Party who shall conduct the defense of such
claim or litigation shall be reasonably satisfactory to the Indemnified Party,
(ii) the Indemnified Party may participate in such defense at such Indemnified
Party's expense, and (iii) the omission by any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Indemnifying Party and
such Indemnifying Party is materially damaged as a result of such failure to
give notice. Except with the prior written consent of the Indemnified Party, no
Indemnifying Party, in the defense of any such claim or litigation, shall
consent to entry of any judgment or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the Indemnified Party or that
does not include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with respect
to such claim or litigation. In the event that the Indemnified Party shall in
good faith determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of any Buyer to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be available to the
Indemnifying Party in respect of such claim or any litigation relating thereto,
the Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to
any such claim at the sole cost of the Indemnifying Party, PROVIDED that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. In the event
that the Indemnifying Party does not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against any
such claim or demand and shall be entitled to settle or agree to pay in full
such claim or demand. In any event, the Indemnifying Party and the Indemnified
Party shall cooperate in the defense of any claim or litigation subject to this
Section 8.2 and the records of each shall be available to the other with respect
to such defense.
(d) TIME LIMITATION. All claims for indemnification under clause
(i) of the first sentence of Section 8.2(a) or clause (i) of the first sentence
of Section 8.2(b) must be asserted within 30 days of the termination of the
respective survival periods set forth in Section 8.3.
8.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. The
representations and warranties contained in this Agreement shall survive the
execution and delivery of this
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Agreement, any examination by or on behalf of the parties hereto and the
completion of the transactions contemplated herein, but only to the extent
specified below:
(a) except as set forth in clauses (b) and (c) below, the
representations and warranties contained in Section 3.1 and Section 3.2
shall survive for a period of two years following the Closing Date.
(b) the representations and warranties contained in Sections 3.1.1,
3.1.2, 3.1.3, 3.3.11, 3.1.22, 3.1.24 and 3.2.1 shall survive without
limitation; and
(c) the representations and warranties contained in Section 3.1.6
shall survive as to any Tax covered by such representations and
warranties for so long as any statute of limitations for such Tax remains
open, in whole or in part, including without limitation by reason of
waiver of such statute of limitations, and for 30 days thereafter.
8.4. EXPENSES. Except as provided in Section 4.1.8, the Sellers on
the one hand, and the Buyers, on the other hand, shall bear their respective
expenses, costs and fees (including attorneys', auditors' and financing
commitment fees) in connection with the transactions contemplated hereby,
including the preparation, execution and delivery of this Agreement and
compliance herewith (the "TRANSACTION EXPENSES"), whether or not the
transactions contemplated hereby shall be consummated.
8.5. SEVERABILITY. If any provision of this Agreement, including
any phrase, sentence, clause, Section or subsection is inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
8.6. NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (A) delivered
personally, (B) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or (C) sent by next-day or overnight mail or
delivery or (D) sent by telecopy.
(i) if to Newco and/or the Buyers to,
c/o Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Attention: President
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with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Franci Blassberg
(ii) if to the Sellers,
c/o Novopharm Limited
30 Novopharm Court
Scarborough, Ontario M1B 2K9
Canada
Attention: President
with a copy to:
Fogler, Rubinoff
Suite 4400
Royal Trust Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1G8
Canada
Attention: Melvyn Rubinoff, Q.C.
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (W) if by personal delivery
on the day after such delivery, (X) if by certified or registered mail, on the
seventh business day after the mailing thereof, (Y) if by next-day or overnight
mail or delivery, on the day delivered, (Z) if by telecopy, on the next business
day following the day on which such telecopy was sent, provided that a copy is
also sent by certified or registered mail.
8.7. MISCELLANEOUS.
8.7.1. HEADINGS. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
8.7.2. ENTIRE AGREEMENT. This Agreement (including the Schedules
hereto) and the Collateral Agreements (when executed and delivered) and the
Confidentiality Agreement,
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dated July 1, 1999 between CIBC World Markets Corp., on behalf of Novopharm, and
the US Buyer, as amended, constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
8.7.3. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
8.7.4. GOVERNING LAW, ETC. This Agreement shall be governed in all
respects, including as to validity, interpretation and effect, by the internal
laws of the State of New York, without giving effect to the conflict of laws
rules thereof to the extent that the application of the law of another
jurisdiction would be required thereby. The Buyers and the Sellers hereby
irrevocably submit to the jurisdiction of the courts of the State of New York
and the Federal courts of the United States of America located in the State of
New York, New York City, Manhattan, solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any of such
document may not be enforced in or by said courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a New York State or Federal court. The
Buyers and the Sellers hereby consent to and grant any such court jurisdiction
over the person of such parties and over the subject matter of any such dispute
and agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 8.6, or in such other
manner as may be permitted by applicable law, shall be valid and sufficient
service thereof.
8.7.5. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
8.7.6. ASSIGNMENT. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent of
the other party hereto, PROVIDED that the Buyers may assign this Agreement to
any Affiliate of the Buyers or to any lender to the Buyers or any Subsidiary or
Affiliate thereof as security for obligations to such lender in respect of the
financing arrangements entered into in connection with the transactions
contemplated hereby and any refinancings, extensions, refundings or renewals
thereof, PROVIDED, FURTHER, that no assignment to any such lender shall in any
way affect the Buyers' obligations or liabilities under this Agreement.
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8.7.7. NO THIRD PARTY BENEFICIARIES. Except as provided in Section
8.2 with respect to indemnification of Indemnified Parties hereunder, nothing in
this Agreement shall confer any rights upon any person or entity other than the
parties hereto and their respective heirs, successors and permitted assigns.
8.7.8. AMENDMENT; WAIVERS, ETC. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies that any
party may otherwise have at law or in equity. The rights and remedies of any
party based upon, arising out of or otherwise in respect of any inaccuracy or
breach of any representation, warranty, covenant or agreement or failure to
fulfill any condition shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any such
inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement as to which there is no
inaccuracy or breach. The representations and warranties of the Sellers shall
not be affected or deemed waived by reason of any investigation made by or on
behalf of the Buyers (including but not limited to by any of its advisors,
consultants or representatives) or by reason of the fact that the Buyers or any
of such advisors, consultants or representatives knew or should have known that
any such representation or warranty is or might be inaccurate.
8.7.9. FOREIGN CURRENCIES. Unless otherwise stated, all dollars
specified in this Agreement and the Collateral Agreements shall be in U.S.
dollars. All foreign currency shall be converted to U.S. dollar equivalents
determined on the basis of the exchange rates published in The Wall Street
Journal on the date three days prior to the Closing (or, if The Wall Street
Journal is not published on such date, the next preceding date on which it is
published).
8.8. NOVOPHARM UNDERTAKING. Novopharm shall cause GHC and the
Divisions to comply with and perform fully their obligations, covenants and
agreements hereunder.
8.9. US BUYER UNDERTAKING. The US Buyer shall cause the Canadian
Buyer to comply with and perform its obligations, covenants and agreements
hereunder.
8.10. AMENDING AND RESTATING; RELEASE OF NEWCO. The parties to
this Agreement hereby amend and restate the Original Agreement in its
entirety. All parties to this Agreement
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agree that Newco is hereby released from all liabilities and obligations arising
under and with respect to the Original Agreement and this Agreement and the
transactions contemplated thereby and hereby.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first above written.
LEINER HEALTH PRODUCTS INC.
By: /s/ Gale K. Bensussen
-------------------------
Name: Gale K. Bensussen
Title: President
GRANUTEC ACQUIRCO, INC.
By: /s/ Gale K. Bensussen
-------------------------
Name: Gale K. Bensussen
Title: President
VITA HEALTH PRODUCTS INC.
By: /s/ Eric Smith
-------------------------
Name: Eric Smith
Title: President
NOVOPHARM LIMITED
By: /s/ Leslie L. Dan
-------------------------
Name: Leslie L. Dan
Title: Director and
Chairman
GRANUTEC, INC.
By: /s/ Leslie L. Dan
-------------------------
Name: Leslie L. Dan
Title: Vice President
<PAGE>
GRANUTEC HOLDING CORPORATION
By: /s/ Leslie L. Dan
-------------------------
Name: Leslie L. Dan
Title: President
STANLEY PHARMACEUTICALS LTD.
By: /s/ Leslie L. Dan
-------------------------
Name: /s/ Leslie L. Dan
Title:
<PAGE>
GRANUTEC, INC.
SCHEDULE 1.4
EXCLUDED ASSETS
1. All credits, prepaid expenses, deferred charges, advance payments,
security deposits for real estate, and other prepaid items by Granutec,
Inc. to the extent any of the foregoing are not included in the
Granutec Closing Net Working Capital or included in the calculation of
an adjustment to the Purchase Price pursuant to Section 2.6.
2. The prorated amount of the security deposits with respect to each
personal property lease to the extent that the unexpired term bears to
the entire term of such lease (to the extent not included in the
calculation of an adjustment to the Purchase Price pursuant to Section
2.6).
3. All Tax refunds or rebates (to the extent not included in the
calculation of an adjustment to the Purchase Price pursuant to Section
2.6).
4. All rights and interests arising out of or related to the following:
a. Granutec, Inc. v. LNK International, Inc.
(See Schedule 3.1.8.)
b. Novopharm Limited and Novopharm USA, Inc. v. TorPharm, Inc.
(See Schedule 3.1.8.)
5. All insurance policies/contracts held by Granutec, Inc. or under which
Granutec, Inc. is a named or additional insured and all insurance
claims existing prior to Closing and claims made after Closing related
to coverages and events occurring before Closing.
6. Real property described in Deed Book 1731, Page 962, Wilson County
Registry [Joe Callaway, Trustee in Bankruptcy for Howard Phykitt
(Grantor) to Novopharm Investments, LLC (Grantee)].
7. Recoveries, claims, rights and interests arising out of indemnity
claims against third parties including but not limited to subrogation
claims by Granutec for events or transactions occurring before Closing.
8. Accounts receivable to the extent not included in the Granutec Closing
Net Working Capital or included in the calculation of an adjustment to
the Purchase Price pursuant to Section 2.6.
9. Preferred Supplier Agreement dated April 1, 1996 between R. P. Scherer
North America and the Novopharm Group: Granutec, Inc., Stanley
Pharmaceuticals Ltd., Novopharm Limited Toronto and Novopharm Quebec.
10. Cash or cash equivalent on hand or deposit as of Closing to the extent
not included in the Granutec Closing Net Working Capital.
11. The services of David Howard.
12. Minute books, corporate seal and all corporate documents including Tax
records and financial statements of Granutec, Inc. (Copies of minutes
for formal meetings of the Board of Directors and copies of adopted
resolutions as customarily maintained in the minute book shall be
provided to Buyer.)
13. All licenses and permits which are not assignable.
<PAGE>
GRANUTEC, INC.
14. All documents and information in whatever form regarding Novopharm
Limited and its other Affiliates owned by Novopharm Limited or its
Affiliates and located at Granutec's facilities except to the extent
such documents are material to the Business.
(Continuation of Schedule 1.4)
15. All research and development, quality assurance and quality control,
assistance and testing provided by Novopharm and/or its Affiliates.
16. The New Drug Application for Formatidine.
2
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STANLEY PHARMACEUTICALS LTD.
DISCLOSURE SCHEDULE(1)
SCHEDULE 1.4
EXCLUDED ASSETS
1. All credits, prepaid expenses, deferred items, advance payments, and
other items prepaid by Stanley (to the extent any of the foregoing are
not included in the calculation of the Stanley Closing Net Working
Capital). Security deposits on real property leases. The prorated
amount of the security deposits with respect to each personal property
lease to the extent that the unexpired term bears to the entire term of
such lease.
2. All rights and interests arising out of or related to the claim by
Stanley against Takeda Canada Vitamins & Foods Inc., BASF Canada Inc.
and Hoffman-La Roche Canada and their Affiliates and any other parties
for damages suffered by Stanley as a result of a conspiracy to fix
prices for the supply of certain vitamins.
3. All Tax refunds or rebates.
4. All insurance policies/contracts held by Stanley or under which Stanley
is a named or additional insured and all insurance claims existing
prior to Closing and claims made after Closing related to coverages and
events occurring before Closing.
5. Recoveries, claims, rights and interests arising out of indemnity
claims against third parties including but not limited to subrogation
claims by Stanley for events or transactions occurring before Closing.
6. The services of David Howard.
7. All rights of Stanley to occupy the warehouse located at 21 Farzee
Avenue, Dartmouth, Nova Scotia. Novopharm permits Stanley to occupy
part of the Dartmouth warehouse under tenancy-at-will at no cost to
Stanley.
8. Accounts Receivable to the extent not included in the calculation of
the Stanley Closing Net Working Capital.
9. Cash or cash equivalent on hand or deposit as of Closing to the extent
not included in the calculation of the Stanley Closing Net Working
Capital.
- --------
(1) NOTE: All dollar amounts in the Disclosure Schedule are in Canadian
dollars unless otherwise indicated.
<PAGE>
10. The minute book, corporate seal and all corporate documents (including
Tax records and financial statements) of Stanley.
11. All business licences held by Stanley. NOTE: BUSINESS LICENCES ARE NOT
TRANSFERABLE.
12. The permits held by Stanley for denatured and real alcohol. NOTE:
EXCISE LICENSES ARE NOT TRANSFERABLE.
13. Preferred Supplier Agreement dated April 1, 1996 between R.P. Scherer,
North America and the Novopharm Group: Granutec Inc., Stanley,
Novopharm Ltd. Toronto, and Novopharm Quebec.
14. All documents and confidential information in whatever form regarding
Novopharm and its other Affiliates owned by Novopharm or its Affiliates
and located at Stanley's facilities except to the extent such documents
and information are material to the Business.
15. All research and development, quality assurance and quality control
assistance and testing provided by Novopharm and/or its Affiliates.
16. New Drug Application/Submission for Famotidine.
17. Negotiation Agreement dated October 8, 1997 between Stanley and McNeill
Consumer Products. Copy of this contact has not been provided to the
Buyers.
18. Royalty Agreement between Stanley and Johnson & Johnson regarding
Famotidine.
2
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GRANUTEC, INC.
SCHEDULE 1.5
UNASSUMED CONTRACTS
1. Term Note dated September 2, 1993 due by Granutec Holding Corporation
to Branch Banking and Trust Company in the amount of $7,000,000.00.
(The debt will be paid, and the Note cancelled in connection with
Closing.)
2. Guaranty Agreement dated September 2, 1993 executed by Novopharm
Limited, Novo Holdings, Inc. and Granutec, Inc. and Branch Banking and
Trust Company ($7,000,000.00 loan) (The debt will be paid, and the
Agreement will be cancelled in connection with Closing.)
3. Loan Agreement dated September 2, 1993 between Granutec Holding
Corporation and Branch Banking and Trust Company ($7,000,000.00 loan).
(The debt will be paid, and the Agreement will be cancelled in
connection with Closing.)
4. Line of Credit Note dated September 2, 1993 due by Granutec, Inc. to
Branch Banking and Trust Company in the amount of $8,000,000.00. (The
debt will be paid, and the Note cancelled in connection with Closing.)
5. Guaranty Agreement dated September 2, 1993 executed by Novopharm
Limited, Novo Holdings, Inc. and Granutec Holding Corporation and
Branch Banking and Trust Company ($8,000,000.00 loan). (The debt will
be paid, and the Agreement will be cancelled in connection with
Closing.)
6. Loan Agreement dated September 2, 1993 between Granutec, Inc. and
Branch Banking and Trust Company ($8,000,000.00 loan). (The debt will
be paid, and the Agreement will be cancelled in connection with
Closing.)
7. Security Agreement dated September 2, 1993 between Granutec, Inc. and
Branch Banking and Trust Company for $7,000,000.00 and $8,000,000.00
loans. (The debts will be paid, and the Agreement will be cancelled in
connection with Closing.)
8. Deed of Trust executed by Granutec, Inc. to Jerone C. Herring, Trustee
for Branch Banking and Trust Company dated September 2, 1993, securing
the principal sum of $15,000,000.00 recorded on September 2, 1993 at
4:50 p.m. in Book 1494, Page 712, Wilson County Registry. (The debt
secured by this Deed of Trust will be paid at Closing, and Deed of
Trust will be cancelled.)
9. Collateral Assignment of Lease executed by Granutec, Inc. to Branch
Banking and Trust Company dated September 2, 1993 assigning 8601
Somerset Drive, Largo, Florida lease as additional security. (The debt
secured by this Collateral Assignment will be paid at Closing and the
Collateral Assignment will be cancelled.)
10. 1997 First Consolidated Amendment Agreement to September 2, 1993 Loan
Agreement, Parent Guaranty Agreement and Security Agreement (the
"Amendment Agreement") dated March 31, 1997 executed by and among
Granutec, Inc., Novopharm Holdings, Inc., Granutec Holding Corporation
and Branch Banking and Trust Company. (The Agreement will be cancelled
in connection with Closing.)
<PAGE>
GRANUTEC, INC.
(Continuation of Schedule 1.5)
11. 1997 First Consolidated Amendment to Letter of Credit and Reimbursement
Agreement and Guaranty Agreement dated March 31, 1997 executed by and
among Granutec, Inc., Granutec Holding Corporation, Novopharm Holdings,
Inc., Novopharm Limited and Branch Banking and Trust Company. (The
Agreement will be cancelled in connection with Closing.)
12. Note Modification Agreement dated March 31, 1997 increasing the Line of
Credit Note dated September 2, 1993 from $8,000,000.00 to
$11,000,000.00 due by Granutec, Inc. to Branch Banking and Trust
Company. (The Agreement will be cancelled in connection with Closing.)
13. Amendment to Deed of Trust and Security Agreement dated March 31, 1997
granted by Granutec, Inc. to Jerone C. Herring, Trustee for the benefit
of Branch Banking and Trust Company recorded in Book 1624, Page 438,
Wilson County Registry. Said Amendment modifies Deed of Trust recorded
in Book 1494, Page 712, Wilson County Registry. (This instrument will
be cancelled upon payment of the underlying debt at Closing.)
14. Subordination Agreement dated March 31, 1997 by Novopharm Limited, as
owner of Granutec, Inc., in favor of Branch Banking and Trust Company.
(The Agreement will be cancelled in connection with Closing.)
15. Note Modification Agreement dated January 15, 1999 due by Granutec,
Inc. to Branch Banking and Trust Company regarding the $7,000,000.00
loan. (This Agreement will be cancelled upon payment of the debt in
connection with Closing.)
16. Note Modification Agreement dated January 15, 1999 due by Granutec,
Inc. to Branch Banking and Trust Company regarding the $11,000,000.00
loan (formerly the $8,000,000.00 loan). (This Agreement will be
cancelled upon payment of the debt in connection with Closing.)
17. Note Modification Agreement dated April 12, 1999 due by Granutec, Inc.
to Branch Banking and Trust Company regarding the $11,000,000.00 loan.
(This Agreement will be cancelled upon payment of the debt in
connection with Closing.)
18. Deed of Trust executed by Granutec, Inc. to Charles N. Anderson, Jr.,
Trustee for the benefit of Mutual Life Assurance Company of Canada
dated July 19, 1999, recorded on July 21, 1999 at 12:10 p.m. in Book
1728, Page 260, Wilson County Registry. (This Deed of Trust will be
released in connection with Closing.)
19. Deed of Trust executed by Granutec, Inc. to Jerry L. Beauclair, Trustee
for the benefit of Canadian Imperial Bank of Commerce dated July 19,
1999, recorded on July 21, 1999 at 12:10 p.m. in Book 1728, Page 278,
Wilson County Registry. (This Deed of Trust will be released in
connection with Closing.)
20. Security Agreement between BB&T, Novopharm Limited, Novopharm Holdings,
Inc., Novopharm USA, Inc., Novopharm N.C., Inc., Novopharm Investments,
LLC, PharmNovo, LLC, Granutec Holding Corporation, Granutec, Inc.,
Stanley Pharmaceuticals, Ltd. and Wampole Canada, Inc. dated February
5, 1999. (The Assets of Granutec, Inc. will be released from this
Agreement upon payment of the underlying debt at Closing.)
2
<PAGE>
GRANUTEC, INC.
(Continuation of Schedule 1.5)
21. Security Agreement between The Mutual Life Assurance Company of Canada,
Novopharm Limited, Novopharm Holdings, Inc., Novopharm USA, Inc.,
Novopharm N.C., Inc., Novopharm Investments, LLC, PharmNovo, LLC,
Granutec Holding Corporation, Granutec, Inc., Stanley Pharmaceuticals,
Ltd. and Wampole Canada, Inc. dated February 5, 1999. (The Assets of
Granutec, Inc. will be released from this Agreement upon payment of the
underlying debt at Closing.)
22. Security Agreement between Canadian Imperial Bank of Commerce,
Novopharm Limited, Novopharm Holdings, Inc., Novopharm USA, Inc.,
Novopharm N.C., Inc., Novopharm Investments, LLC, PharmNovo, LLC,
Granutec Holding Corporation, Granutec, Inc., Stanley Pharmaceuticals,
Ltd. and Wampole Canada, Inc. dated February 5, 1999. (The Assets of
Granutec, Inc. will be released from this Agreement upon payment of the
underlying debt at Closing.)
23. Security Agreements for UCC financing statements which have been filed
of public record as shown on Schedule 3.1.11.
24. Tax Sharing Agreement dated 1996 between Novopharm Holdings, Inc.,
Novopharm USA, Inc., Granutec, Inc., Granutec Holding Corporation and
Novopharm Investments, LLC. This is an Excluded Liability.
25. There are no other written intercompany agreements. Novopharm Limited
and/or its other controlled affiliates does provide or has in the past
provided certain raw materials and use of ANDAs for use by Granutec
with respect to Ranitidine, Cimetidine, Loperamide, Naproxen and
Ibuprofen. Purchases are reflected on invoices or purchase orders and
have been reflected on the financial statements of Granutec, Inc.
Novopharm Limited also provides for the services of David Howard to
Granutec and Novopharm N.C. has in the past offered research and
development support as well as quality assurance control on an as
needed basis. For summary of verbal arrangements regarding Affiliate
Transactions see Schedule 3.1.31.
26. In-House Contracts--Sales Representatives. Granutec has verbal
agreements regarding bonuses with its employees, Terry Temp and Bob
Haywood, both of whom are sales representatives. Bonuses are paid on a
quarterly basis on their achieving minimum threshold sales
requirements. For 1999 Granutec has agreed to pay $5,000.00 per quarter
for a total of $20,000.00 to each employee. In addition, each employee
is provided with a base salary, a car allowance, and an administrative
allowance.
27. Letter Agreement with Daymon Associates, Inc. dated June 14, 1999
regarding commission rate.
28. Letter Agreement with Terrell & Associates dated August 28, 1998
regarding commission rate. (Terrell Clampitt and Peter Keck)
29. Letter Agreement with Shubert Brokerage dated August 28, 1998 regarding
commission rate.
30. Letter Agreement with Ohio Sales & Brokerage dated August 28, 1998
regarding commission rate.
3
<PAGE>
GRANUTEC, INC.
(Continuation of Schedule 1.5)
31. Letter Agreement with T. P. O'Brien Company dated August 28, 1998
regarding commission rate.
32. Letter Agreement with Hynes Sales Company dated August 28, 1998
regarding commission rate.
33. Letter Agreement with Manufacturer's Sales Agency dated August 28, 1998
regarding commission rate. (Jim Ellis and Scott Ellis)
34. Letter Agreement with W. J. Hopkins Associates dated August 28, 1998
regarding commission rate.
35. Letter Agreement with Consumer Products Management dated August 28,
1998 regarding commission rate. (David Horwitz, Mark Sterger, and Ron
Eastman)
36. Letter Agreement with Kershner Associates dated August 28, 1998
regarding commission rate. (Terry Kershner, Ed DeMatteis, and Marc
Davis)
37. Letter Agreement with CMN dated August 28, 1998 regarding commission
rate.
38. Letter Agreement with Pezrow dated August 28, 1998 regarding commission
rate.
39. Granutec, Inc. Employee Incentive Stock Option Plan dated June 17,
1994. Only Terry Temp currently has option rights. If exercised, it
will be subject to the Shareholders Agreement disclosed in Schedule
3.1.12.
40. All Plans described in Schedule 3.1.24(a) subject to the obligation of
Buyer to indemnify the Seller pursuant to Section 8.2(b)(v).
41. Employment Agreements, both written and oral between Granutec, Inc. and
its employees subject to the obligation of Buyers to indemnify the
Sellers pursuant to Section 8.2(b)(v).
42. All insurance policies and coverages set forth on Schedule 3.1.20.
43. Sales Agreement with Albemarle Corporation for the supply of Ibuprofen
from October 1, 1999 to September 30, 2002.
44. Sales Agreement with Albemarle Corporation for the supply of Naproxen
Sodium from July 1, 2000 to June 30, 2003.
45. Shareholders Agreement between Granutec, Inc. and Granutec Holding
Corporation dated June, 1994.
46. Deed of Trust executed by Granutec, Inc. to Jerone C. Herring, Trustee
for Branch Banking and Trust Company, dated May 1, 1994, in the amount
of $8,100,000.00, recorded on May 5, 1994 at 9:30 a.m., in Book 1520,
Page 234, Wilson County Registry.
47. Collateral Assignment of Lease dated May 1, 1994 between Granutec, Inc.
and Branch Banking and Trust Company relating to The Wilson County
Industrial Facilities and Pollution Control Financing Authority
$8,100,000.00 Industrial Development Revenue Bond
4
<PAGE>
SCHEDULE 1.5
UNASSUMED CONTRACTS
1. The following Security Agreements:
(a) Security Agreement dated February 5, 1999 between
Stanley and Mutual Life Assurance Company of Canada.
THIS SECURITY WILL BE DISCHARGED ON CLOSING.
(b) Security Agreement dated February 5, 1999 between
Stanley and Branch Banking and Trust Company. THIS
SECURITY WILL BE DISCHARGED ON CLOSING.
(c). Security Agreement dated February 5, 1999 between the
Canadian Imperial Bank of Commerce and Stanley. THIS
SECURITY WILL BE DISCHARGED ON CLOSING.
2. The following Mortgages:
(a) Mortgage BN85821 granted in favour of Branch Banking
and Trust Company in respect of 1353 Main Street,
North Vancouver, B.C. V7J 1C5. THIS MORTGAGE WILL BE
DISCHARGED ON CLOSING.
(b) Mortgage BN 85820 granted in favour of the Mutual
Life Assurance Company of Canada in respect of 1353
Main Street, North Vancouver, B.C. V7J lC5. THIS
MORTGAGE WILL BE DISCHARGED ON CLOSING.
(c) Mortgage BN85819 granted in favour of Canadian
Imperial Bank of Commerce in respect of 1353 Main
Street, North Vancouver, B.C. V7J 1C5. THIS MORTGAGE
WILL BE DISCHARGED ON CLOSING.
3. All obligations associated with any inter-company agreements, including
guarantees between Stanley and its Affiliates except the assumption by
the Buyer of the Assumed Liabilities including trade accounts payable
to Novopharm and its Affiliates.
5. Employment agreements both written and oral between Stanley and its
employees.
6. Settlement letter dated March 8, 1999 from Bull, Housser & Tupper to
Davis and Company in respect of Robert McMillan and corresponding
Release and Indemnity given by Robert McMillan.
7. All liabilities associated with any of the insurance policies referred
in items 171 to 175 of Schedule 3.1.12(a).
<PAGE>
8. Any liabilities or obligations associated with the Excise Canada permit
in respect of denatures alcohol and real alcohol.
9. All liabilities associated with the Preferred Supplier Agreement dated
April 1, 1996 between R.P. Scherer, North America and the Novopharm
Group: Granutec Inc., Stanley, Novopharm Ltd. Toronto, and Novopharm
Quebec.
10. All plans, agreements, and certificates described in 106, 123, 125,
126, 129, 137-142 of Schedule 3.1.12(a).
2
<PAGE>
GRANUTEC, INC.
SCHEDULE 2.6
PREPAID EXPENSES AND OTHER ITEMS
<TABLE>
<CAPTION>
- -------------------------- --------------------------------------------- -------------------------------------------
ACCOUNT # ACCOUNT DESCRIPTON BALANCE AS OF 11/30/99
- -------------------------- --------------------------------------------- -------------------------------------------
<S> <C> <C>
XX-000-001000 PETTY CASH
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-002300 CASH-BB&T OPERATING ACCOUNT
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-002400 CASH-BB&T PAYROLL
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-002500 CASH-BB&T-INSURANCE
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-003000 CASH-REPUBLIC BANK PAYROLL
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-004000 HELD CHECKS
- -------------------------- --------------------------------------------- -------------------------------------------
- -------------------------- --------------------------------------------- -------------------------------------------
TOTAL CASH & EQUIVALENTS
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-011500 DUE FROM AFFILIATE -NOVO. WILSON
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-011700 DUE FROM AFFILIATE--NOVO. CANADA
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-018000 PREPAID EXPENSES
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-019000 PREPAID INSURANCE
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-019300 SECURITY DEPOSITS--RENT
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-019400 SECURITY DEPOSITS--OTHER
- -------------------------- --------------------------------------------- -------------------------------------------
XX-000-019500 DEFERRED TAXES
- -------------------------- --------------------------------------------- -------------------------------------------
- -------------------------- --------------------------------------------- -------------------------------------------
TOTAL OTHER CURRENT ASSETS
- -------------------------- --------------------------------------------- -------------------------------------------
</TABLE>
<PAGE>
GRANUTEC, INC.
SCHEDULE 6.3(b)
On or before March 1, 2000, the US Buyer shall offer to all
Transferred Employees who were Current Employees of Granutec as of the Closing
Date and their eligible dependents (together or separately, for purposes of this
schedule "TRANSFERRED EMPLOYEES") coverage under its sponsored group health
plans (the "US BUYER'S HEALTH PLAN"); PROVIDED, HOWEVER, Granutec shall offer
those Transferred Employees, who were covered under the Granutec's sponsored
group health plans (the "GRANUTEC HEALTH PLAN") immediately prior to the Closing
Date, with group health plan continuation coverage (as defined under Code
Section 4980B(f)(1)(A)) under the Granutec Health Plan for the Transition
Period.
For the Transition Period, the US Buyer and Granutec agree to offer
the Granutec Health Plan continuation coverage for those eligible Transferred
Employees in accordance with the following terms and conditions:
1. Granutec shall continue to sponsor the Granutec Health Plan
for the Transition Period as it exists immediately prior to
the Closing Date.
2. US Buyer shall pay the following expenses and claims, and
shall provide the services of its employees (at no cost to
Granutec) to perform required plan administrative procedures,
related to the US Buyer's operation of the Granutec Health
Plan for the Transition Period (collectively, the
"SELF-INSURED COSTS"):
(A) The re-insurance premium for the Granutec Health Plan
for the Transferred Employees;
(B) All claims processed and approved by the Granutec
Health Plan's third-party administrator ("Core
Source"), to the extent claims are not covered by the
Granutec Health Plan re-insurance coverage, as
submitted by Transferred Employees for services or
treatment rendered on or after the Closing Date; and
(C) Core Source's scheduled fees and an expenses, or any
other plan administration fee or expense
<PAGE>
incurred on behalf of the Granutec Health Plan to a
third-party for the administration of the Transferred
Employees' claims incurred on or after the Closing
Date.
3. The US Buyer shall administer the Granutec Health Plan for the
Transition Period and beyond to the extent necessary to process all
timely submitted claims; PROVIDED, HOWEVER, Granutec shall pay, to
the extent not funded by Granutec as of the Closing Date, for the
claims and administration expenses of: (A) Any claims, for services
or treatment rendered prior to the Closing Date, by any former
Granutec employee or dependent thereof, including Transferred
Employees; and (B) any former Granutec employee or dependent
thereof who was on COBRA under the Granutec Plan as of the
Closing Date and continues such coverage into the Transition
Period.
4. The US Buyer shall prepare, in a timely manner for Granutec's
signing and filing, the Form 5500 for the Granutec Health Plan for
the plan year commencing on January 1, 2000, and shall perform all
other contracted and legally imposed obligations for the
administration of the Granutec Health Plan; PROVIDED, HOWEVER, that
Granutec shall be responsible for the termination of the Granutec
Health Plan.
5. The US Buyer shall maintain accurate records of all claims and
expenses processed and incurred by Granutec Health Plan for the
Transition Period and after and the US Buyer shall furnish to
Granutec documentation as to such claims and expenses for which
Granutec is liable. To the extent reasonably requested by
Granutec (or its authorized representative) Granutec shall have
the right to review the Granutec Health Plan books and records
maintained by the US Buyer for the Transition Period and
thereafter.
6. The US Buyer shall indemnify, defend and hold harmless Granutec
and its Affiliates and their respective officers, directors,
employees, successors and assigns against and from any and all
claims or actions for benefits or damages (including plan
administrative expenses) which any person or entity may make or
file against Granutec or its Affiliates or their respective
officers, directors, or employees; PROVIDED, HOWEVER, that this
indemnity is limited only to such claims or actions for benefits
or damages (including plan administrative
2
<PAGE>
expenses) that have arisen out of Transferred Employees' benefit
claims for services or treatment rendered on or after the Closing
Date.
3
<PAGE>
SUPPLY AGREEMENT
THIS AGREEMENT dated as of this 17th day of December, 1999, is entered into
by and between Leiner Health Products Inc., a Delaware corporation (the "US
BUYER"), Vita Health Products Inc., a Manitoba corporation (the "CANADIAN
BUYER" and, together the US Buyer, the "BUYERS") and Novopharm Limited, an
Ontario corporation ("NOVOPHARM").
WITNESSETH:
WHEREAS, Novopharm has expertise, and is engaged, in the development,
manufacture and supply of over-the-counter pharmaceutical products ("OTC
PRODUCTS");
WHEREAS, Novopharm owns or has rights to certain patents and/or know-how
applicable to OTC Products;
WHEREAS, Novopharm owns the Approved ANDAs related to the Granutec Products
and the DINs related to the Stanley Products and has therefore obtained all
necessary regulatory approval for the manufacture, supply and sale of the
Products in the United States and Canada;
WHEREAS, pursuant to that certain Amended and Restated Asset Purchase
Agreement (the "ASSET PURCHASE AGREEMENT"), dated as of December 17, 1999,
among the Buyers Granutec Acquirco, Inc., a Delaware corporation, Novopharm,
Granutec, Inc., ("GRANUTEC") Granutec Holding Corporation ("GHC"), and
Stanley Pharmaceuticals Ltd., ("STANLEY") the US Buyer desires to acquire the
Approved ANDAs and the Canadian Buyer desires to acquire the DINs related to
the Products, and Novopharm has agreed to sell or cause the sale of such
Approved ANDAs and DINs to the US Buyer and the Canadian Buyer;
WHEREAS, the Buyers desire to obtain certain transitional services and other
assistance relating to the process of obtaining the requisite Governmental
Approvals to manufacture the Products governed by the Approved ANDA's;
WHEREAS, the Buyers desire to purchase commercial quantities of the Products
from Novopharm from time to time for a limited time and Novopharm is willing
to supply the Buyer's requirements for the Products, on the terms and subject
to the conditions set forth below;
WHEREAS, the Buyers desire to acquire the right of first refusal to acquire
the Approved ANDAs and the DINs that Novopharm or any of its Affiliates may
develop and obtain
<PAGE>
regarding OTC Products other than the Products, on the terms and subject to
the conditions set forth below; and
WHEREAS, it is a condition precedent to the consummation of the transactions
contemplated by the Asset Purchase Agreement that Novopharm execute and
deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth below, the parties agree as follows:
ARTICLE 1: DEFINITIONS
For purposes of this Agreement, the terms defined in this Article 1 shall
have the respective meanings set forth below (the singular shall include the
plural and vice versa):
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person. A Person shall be regarded as in control of another Person
if it owns, or directly or indirectly controls, fifty percent (50%) or more
of the voting stock or other ownership interest of the other Person, or if it
directly or indirectly possesses the power to direct or cause the direction
of the management and policies of the other Person by any means whatsoever.
"ANDA" means an "Abbreviated New Drug Application" as defined in the US Act.
"APPROVED ANDA" means an ANDA approved by the FDA.
"ASSET PURCHASE AGREEMENT" is defined in the recitals to this Agreement.
"BUSINESS DAY" means any Monday, Tuesday, Wednesday, Thursday or Friday that
is not a day on which banking institutions in New York City are authorized or
obligated by law or executive order to close.
"CANADIAN ACT" means the Canadian Food and Drugs Act, as amended from time to
time, and the regulations promulgated thereunder.
"CANADIAN BUYER" is defined in the first paragraph of this Agreement.
"CANADIAN PRIME RATE" means the prime interest rate of The Bank of Nova
Scotia in effect from time to time for Canadian dollar loans made in Canada.
2
<PAGE>
"CBE" means a "Changes Being Effected" supplement as defined in the US Act.
"CGMP" shall mean current Good Manufacturing Practices promulgated by each of
the FDA and TPP governing the manufacture, handling, storage and control of
the Products in the United States and Canada, respectively.
"CLOSING" means the Closing as defined in the Asset Purchase Agreement.
"CONFIDENTIAL INFORMATION" means Technical Information and information
pertaining to Novopharm's and the Buyers' respective businesses, products,
marketing plans, marketing activities, market projections and related
matters, provided by one party to the other pursuant to or in furtherance of
this Agreement.
"DEVELOPMENT COSTS" is defined in Section 3.1.
"DINS" means Canadian Drug Identification Numbers.
"DSA" means a Drug Submission Application submitted to the TPP requesting
authorization to sell each of the Stanley Products, and the "DSAs" means all
approved DSAs for the Stanley Products, and includes DIN Applications, New
Drug Submissions, Supplemental New Drug Submissions and Investigational New
Drug Submissions.
"EFFECTIVE DATE" means the Closing Date as defined in the Asset Purchase
Agreement.
"FDA" means the United States Food and Drug Administration and all agencies
under its direct control or any successor organization.
"FORCE MAJEURE EVENT" means any fire, flood, embargo, war, act of war
(whether war be declared or not), insurrection, riot, civil unrest,
unforeseeable plant breakdowns or lack or failure of source of supply.
"GRANUTEC" is defined in the recitals to this Agreement.
"GRANUTEC PRODUCTS" means those products set forth in Schedule A hereto.
"NON-COMPETITION AGREEMENT" means the Non-Competition Agreement, dated as of
the date hereof, among the Buyers, Granutec, GHC, Stanley and Novopharm.
"OFFER" is defined in Section 2.1(b).
"OFFER NOTICE" is defined in Section 2.1(b).
3
<PAGE>
"ORDER" as defined in Section 5.2(a).
"OTC PRODUCTS" is defined in the recitals to this Agreement.
"PRODUCTS" means the Granutec Products and the Stanley Products.
"SPECIFICATIONS" means with respect to any of the Products, the
specifications as set forth in such product's Drug Master File or Regulatory
Approval, as appropriate, in accordance with, in the case of a Granutec
Product, the US Act and such Product's Approved ANDA and, in the case of a
Stanley Product, the Canadian Act.
"SPECIFIED FUTURE PRODUCTS" means those products set forth in Schedule C
hereto.
"STANLEY" is defined in the recitals to this Agreement.
"STANLEY PRODUCTS" means those products set forth in Schedule B hereto.
"SUPAC PROCESS" means the process by which a CBE is filed to effect a
manufacturing site change in accordance with the Scale Up and Post Approval
Changes (Immediate Release) guidance issued by the FDA.
"TECHNICAL INFORMATION" means all know-how, trade secrets, inventions, data
(including regulatory data), technology, processes and information, including
improvements and modifications to any thereof, the disclosure or use of which
is provided for or permitted under this Agreement and which a party hereto
has the lawful and contractual right to disclose to the other party. It shall
also include, without limitation, (a) medical, chemical, bioequivalent and
other scientific data; (b) processes and analytical methodology used in the
development, testing, analysis and validation of such Products; and (c)
packaging and manufacturing data and processes. Notwithstanding the
foregoing, Technical Information shall not include trademarks or patents.
"TERRITORY" means the United States, Canada and Mexico.
"THIRD PARTY" means any entity or person which is not party to this Agreement
or an Affiliate and/or subsidiary of a party to this Agreement.
"TPP" means the Therapeutic Products Program, Department of Health and
Welfare (Canada).
"UNSPECIFIED FUTURE PRODUCTS" means any OTC Products other than the Products
and the Specified Future Products.
4
<PAGE>
"US ACT" means the United States Food, Drug and Cosmetic Act, as amended from
time to time, and the regulations promulgated thereunder.
"US BUYER" is defined in the first paragraph of this Agreement.
ARTICLE 2: MANUFACTURE AND SALE OF PRODUCTS
2.1 MANUFACTURE AND SALE. (a) From and after the Effective Date and until
the first anniversary of the Effective Date, on the terms and subject to the
conditions of this Agreement, Novopharm shall manufacture, sell and deliver,
for sale in the Territory, (A) to the US Buyer all of the US Buyer's
requirements of Granutec Products for the Territory and (B) to the Canadian
Buyer all of the Canadian Buyer requirements of Stanley Products for the
Territory.
(b) From and after the Effective Date until the second anniversary
of the Effective Date, the US Buyer shall not purchase any of the Granutec
Products and the Canadian Buyer shall not purchase any of the Stanley
Products from a Third Party, unless such Buyer shall first deliver to
Novopharm a notice (an "OFFER NOTICE") stating:
(i) that such Buyer has received a bona fide offer to supply all or a
portion of its requirements for such Product(s) (an "OFFER");
(ii) with respect to each Product included in the Offer, the price,
volume and other material terms contained in the Offer (other than the
identity of the Third Party supplier of such Products); and
(iii) such Buyer's offer, irrevocable by its terms for five (5)
Business Days to purchase from Novopharm all (but not less than all) of
the Products included in the Offer, on terms and conditions not less
favorable to Novopharm than those contained in the Offer.
(c) If Novopharm fails to accept the offer within such five (5)
Business Days, then the relevant Buyer shall have the right to purchase the
Products set forth in such Offer Notice from the offeror identified in the
Offer Notice or any other Third Party, on terms and conditions no less
favorable to such Buyer than those terms and conditions set forth in the
Offer Notice.
2.2 STARTING MATERIAL. Novopharm shall acquire all of the material required
for the manufacture of the Products.
5
<PAGE>
2.3 STORAGE. Novopharm shall store all material and Products, including
work-in-process, in accordance with the appropriate cGMP and the guidelines
set out, in the case of Granutec Products, in the US Act and its regulations
and all corresponding Approved ANDAs and, in the case of Stanley Products, in
the Canadian Act and its regulations.
2.4 OTC SPECIFICATIONS. Novopharm shall manufacture under this Agreement
the Novopharm Products and Granutec Products in conformity with their
Specifications and the corresponding Approved ANDAs and the Stanley Products
in conformity with their Specifications and the corresponding DINs. Any
modifications or process changes with respect to the Products shall be
implemented in accordance with, in the case of Novopharm Products and
Granutec Products, the US Act and its regulations and, in the case of Stanley
Products, the Canadian Act and its regulations. Novopharm shall ensure that
such changes, if any, do not render the Products non-compliant with respect
to any applicable requirement under, with respect to each Novopharm Product
and Granutec Product, the US Act and such Product's respective Approved ANDA
and/or Specifications, and, with respect to each Stanley Product, the
Canadian Act and such Product's respective DIN and/or Specifications. In no
event shall Novopharm make any such modification or process change without
the prior written consent of the US Buyer and its duly authorized agents or
the Canadian Buyer and its duly authorized agents as appropriate.
2.5 RIGHT TO INSPECTION. Each Buyer and its duly authorized agents shall at
all times during the period commencing on the Effective Date and ending on
the second anniversary thereof be entitled to inspect during normal business
hours upon reasonable advance notice, any premises where the Products are
stored, manufactured, packaged or handled, or any premises where materials to
be used in the manufacture of the Products are stored, and each Buyer and its
duly authorized agents shall have free access to all parts of such premises
and may inspect and test such Products or materials and may interview
employees involved in such storage, manufacture, packaging or handling.
ARTICLE 3: TRANSITION PERIOD/FUTURE OTC PRODUCTS
3.1 SUPAC. (a) From and after the Effective Date, upon the request of the
US Buyer Novopharm shall assist the US Buyer in the SUPAC Process for each
Product whereby the US Buyer will acquire the right to manufacture each
Product in the plant acquired by the US Buyer pursuant to the Asset Purchase
Agreement from Granutec located in Wilson, North Carolina. Such assistance
shall include, without limitation, providing supporting data as electronic
and hard copies of Master Batch Records, Standard Operating Procedures, Raw
Material Specifications, Technology Transfer documentation, and comparison of
equipment lists. Novopharm will provide the Canadian Buyer (i)
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<PAGE>
access to its Product approvals for the purpose of assisting the Canadian
Buyer in obtaining a cross-referenced DIN and (ii) all support necessary to
obtain an approved change in the registered manufacturing site or
Establishment License, as appropriate, under the Canadian Act. Novopharm
shall not be entitled to compensation for such assistance, PROVIDED, however,
that the US Purchaser shall reimburse Novopharm for cost of test batches and
related materials.
3.2 FUTURE OTC PRODUCTS. (a) Except as set forth in Section 3.2(b), on each
occasion, if any, that Novopharm or any of its Affiliates develops and
obtains or otherwise acquires an Approved ANDA and/or a DIN for any of the
Specified Future Products (by action of the FDA, the TPP or otherwise),
Novopharm shall promptly and in any event within 5 Business Days of obtaining
such Approved ANDA or DIN deliver to the Buyers a written offer, irrevocable
on its terms for thirty (30) Business Days, to sell such Approved ANDA and/or
DIN to any Buyer at a price equal to the sum of (i) the cost of developing
and obtaining or otherwise acquiring such Approved ANDAs and/or DINs, as
determined to the reasonable satisfaction of the Buyers, based on Novopharm's
accrued development costs, including without limitation, cost of materials
and reasonable overhead ("DEVELOPMENT COSTS") and (ii) 10% of the amount
determined pursuant to clause (i) of this Section 3.2(a).
(b) The US Buyer or the Canadian Buyer may from time to time
request that Novopharm develop and obtain Approved ANDAs and/or DINs for any
of the Specified Future Products. Upon receipt of any such request, Novopharm
shall use commercially reasonable best efforts to develop and obtain as
promptly as practicable such Approved ANDAs and/or DINs as requested by the
requesting Buyer. Promptly upon obtaining any Approved ANDAs and/or DINs,
Novopharm shall sell, and the requesting Buyer shall purchase, such Approved
ANDAs and/or DINs at a price equal to the sum of (i) the Development Costs of
such Approved ANDA or DIN and (ii) 10% of the amount determined pursuant to
clause (i) of this Section 3.2(b); PROVIDED that if such ANDA or DIN is not
approved the Buyer will forthwith, on written notice from Novopharm that such
ANDA or DIN has not been approved, pay to Novopharm the Development Costs of
such ANDA or DIN.
(c) On each occasion, if any, that Novopharm or any of its
Affiliates develops and obtains or otherwise acquires an Approved ANDA and/or
DIN with respect to an Unspecified Future Product, Novopharm shall promptly
deliver to the Buyers a written offer, irrevocable on its terms for thirty
(30) Business Days, to sell such Approved ANDAs and/or DINs to the Buyers on
terms and conditions set forth in such written offer. The Buyers shall have
thirty (30) Business Days in which to determine whether to accept such offer.
If the Buyers fail to accept such offer within such thirty (30) Business
Days, Novopharm shall have the right to sell the offered Approved ANDAs
and/or DINs to
7
<PAGE>
Third Parties on terms and conditions no less favorable to Novopharm than
those terms and conditions offered to the Buyers or, subject to the
Non-Competition Agreement, to use such Approved ANDAs and/or DINs for its own
account.
(d) On each occasion, if any, that the Buyers request that
Novopharm develop and obtain an Approved ANDA and/or DIN for any Unspecified
Future Product, Novopharm and the Buyers shall negotiate in good faith the
terms and conditions pursuant to which such work shall be performed.
3.3 Novopharm shall be entitled to sell the Products outside of the
Territory. During the term of this Agreement, at the request of Novopharm the
US Buyer shall use its commercially reasonable best efforts to assist
Novopharm, at Novopharm's sole cost and expense, in obtaining regulatory
clearances for the Products in such markets outside of the Territory, such
assistance to include, without limitation, confirming that Novopharm
originally developed and obtained the Approved ANDA.
ARTICLE 4: FORECASTS, ORDERS, PACKAGING, AND DELIVERY
4.1 FORECASTS. Promptly after the Effective Date, and promptly after the
beginning of each month during the term of this Agreement, the Buyers shall
provide Novopharm with a non-binding, rolling twelve month forecast of the
quantities of Products required. The Buyers shall notify Novopharm as
promptly as practicable of any changes to the forecast.
4.2 ORDERS (a) The Buyers may place orders (each an "ORDER") for Products
from time to time in accordance with this Article. With respect to each
Product ordered, each Order shall specify: (i) the volume and type of the
Product required; (ii) the required delivery date; and (iii) the place of
delivery.
(b) Orders may be placed by telephone, facsimile or mail.
(c) The Buyers will use good faith efforts to ensure that Orders
are materially consistent with the forecast delivered in accordance with
Section 4.1, as the same may be reasonably amended by the Buyers from time to
time.
(d) Each Order must be placed at least 90 Business Days prior to
the delivery date specified in the Order.
(e) Novopharm must confirm an Order to the applicable Buyer within
five Business Days after receipt of the Order from such Buyer and confirm the
date of delivery.
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<PAGE>
If the delivery date is unacceptable, such Buyer must notify Novopharm within
5 days that the order is cancelled.
4.3 PACKAGING AND LABELLING. The Products shall be sold in bulk or strip
form. Novopharm shall ensure that packaging and labeling of the bulk and
strip products conforms to all applicable regulations.
4.4 DELIVERY. All Products supplied under this Agreement shall be shipped
FOB Novopharm Toronto. The applicable Buyer shall pay all freight, insurance
charges, taxes, import and export duties, inspection fees and other charges
applicable to the sale and transport of the Products purchased by the
applicable Buyer hereunder. Novopharm must use all commercially reasonable
efforts to deliver the Product to the applicable Buyer by the time specified
in the relevant Order. Novopharm shall package the Products and use a mode of
transportation that assures that the products meet all applicable
Specifications when delivered for shipment.
4.5 PURCHASE ORDER TERMS. The terms and conditions of this Agreement shall
be controlling over any terms and conditions included in the documents used
by the Buyers in placing Orders or by Novopharm in accepting or confirming
orders.
4.6 TITLE TO PRODUCTS. Title to the Products manufactured by Novopharm
shall pass to the applicable Buyer on the earlier of payment by the
applicable Buyer or delivery to the applicable Buyer in accordance with the
Order pursuant to which such delivery is made.
ARTICLE 5: RETURNS AND RECALLS
If at any time any Buyer believes that its finished goods should be recalled
and/or be the subject of a notification to a governmental authority because
any of the relevant Products shall have failed to meet its Specifications or
was otherwise noncompliant, such Buyer shall promptly notify Novopharm in
writing of such belief and provide to Novopharm all information it has
received in connection therewith. If at any time Novopharm believes that any
finished goods should be recalled and/or be the subject of a notification to
a governmental authority because the relevant Products shall have failed to
meet Specifications or were otherwise noncompliant, Novopharm shall promptly
notify the appropriate Buyer in writing of such belief and provide to such
Buyer all information it has received in connection therewith. The
appropriate Buyer shall, at Novopharm's sole cost and expense, be responsible
for conducting any recall that is initiated and for complying with any and
all regulatory requirements applicable to any such recall. Novopharm shall
assist such Buyer by providing information reasonably needed by such Buyer to
conduct such recall and to comply with regulatory requirements.
9
<PAGE>
ARTICLE 6: PRICE AND PAYMENT TERMS
6.1 PURCHASE PRICE. The price for the Products sold by Novopharm to the
Buyers pursuant to Section 2.1(a) hereunder shall be as set forth, with
respect to the Granutec Products, in Schedule A hereto, and with respect to
the Stanley Products, in Schedule B hereto. The prices set forth in Schedule
A shall be applicable for a period of one (1) year and in Schedule B shall be
applicable for a period of 120 days, each from the Effective Date of this
Agreement and thereafter the price for each Product shall be as agreed upon
by the parties to this Agreement from time to time.
6.2 SALES AND USE TAXES. Novopharm shall be solely responsible for the
payment of all federal, state or local sales, use or value-added tax, excise
or similar charge, or other tax assessment assessed or charged on the sale of
Products sold pursuant to this Agreement.
6.3 PAYMENT. Each month Novopharm shall deliver to each Buyer an invoice
for all Products delivered during the prior calendar month. Payment is due
and payable within 30 days of the end of the month in which the invoice is
sent by Novopharm to the applicable Buyer in respect of the Products
manufactured and delivered by Novopharm and will be made by check made
payable to Novopharm. Any amount invoiced by Novopharm pursuant to this
Section 6.3 shall, beginning 30 days after the end of the month in which such
amount is invoiced, bear interest at the Canadian Prime Rate plus 3% per
annum.
ARTICLE 7: DEVELOPMENT COSTS
7.1 ACCESS TO INFORMATION. Novopharm must, during the term of this
Agreement, retain, and allow the Buyers access, on reasonable notice, to
information relating to the Development Costs, for the purpose only of
verifying those costs and changes in them.
7.2 MINIMIZATION OF DEVELOPMENT COSTS. Novopharm shall take commercially
reasonable steps to minimize the Development Costs which may be incurred by
Novopharm in performing their obligations under this Agreement.
ARTICLE 8: FORCE MAJEURE
Neither party shall be held liable or responsible to the other party nor be
deemed to have defaulted under or breached this Agreement for failure or
delay in fulfilling or performing any term of this Agreement to the extent,
and for so long as, such failure or delay is caused by or results from a
Force Majeure Event. Upon the occurrence of a Force
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<PAGE>
Majeure Event, the party failing or delaying performance, shall promptly
notify the other party, in writing, setting forth in reasonable detail the
nature of the occurrence, its expected duration and how such party's
performance is affected. In the event of the applicability of this Section
8.1, the party failing or delaying performance shall use its commercially
reasonable efforts to eliminate, cure and overcome any such causes and resume
performance of its obligations as quickly as possible. In the event a delay
in or failure of performance by Novopharm in the delivery of Products to any
Buyer ordered pursuant to Section 2.1(b) or 4.2 extends for more than 10
days, the affected Buyer may cancel the applicable order and obtain the
Product from a Third Party.
ARTICLE 9: REPRESENTATIONS WARRANTIES
9.1 NOVOPHARM REPRESENTATIONS WARRANTIES. Novopharm represents and warrants
to the Buyer as follows:
(a) The Products supplied pursuant to this Agreement will conform
with the applicable Specifications and will be manufactured in
accordance with the applicable cGMP.
(b) The Products supplied by Novopharm under this Agreement and the
methods, facilities and controls used for the receipt, manufacturing
and packaging of the Products will comply with all representations,
warranties and requirements of or implied by any applicable laws,
regulations, rules and orders of any governmental authority,
including, without limitation, the US Act and the Canadian Act.
(c) Without limiting the foregoing, all shipments or other deliveries
of the Products by Novopharm to the Buyers is hereby guaranteed by
Novopharm, as of the date of such shipment or delivery, to be, on
such date, (i) in the case of the Granutec Products shipped to the US
Buyers, not adulterated or misbranded within the meaning of the US
Act, and not an article which may not, under the provisions of such
act, be introduced into interstate commerce, and (ii) in the case of
Stanley Products shipped to the Canadian Buyers, not in violation of
the Canadian Act or any applicable governmental approval or law.
(d) The Products supplied pursuant to this Agreement will not
infringe the rights of any person or entity.
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<PAGE>
(e) Novopharm is registered with the FDA as follows:
<TABLE>
<S> <C>
USA
Registered Drug Establishment Number 1062246
Labeler Code Assignment Number 0625213
The Manufacturing Facility Location 4700 Novopharm Blvd.
Wilson, NC 267893
Contact Vincent Rocco
VP-Quality & Compliance
Phone 252-234-2222
CANADA
Registered Drug Establishment Number FCCA094
Labeler Code Assignment Number 43806
The Manufacturing Facility Location 30 Novopharm Court
Toronto, ON M1B 2K9
Contact Kenneth Micholko
Sr. Dir.-Reg. Affairs
Phone 416-291-8888 Ext. 7020
</TABLE>
(f) Novopharm hereby certifies that it did not and will not use in
any capacity the services of any person debarred under section 306 of
the US Act.
9.2 DELIVERY OF PRODUCT. Novopharm represents, warrants and undertakes to
the Buyers that each of the statements in Section 9.1 will be true and
correct on each date Novopharm delivers Products pursuant to this Agreement
as if made on and as at that date.
9.3 PRODUCT CONFORMITY. If any Product sold and delivered hereunder shall,
in any material respect, fail to conform to the provisions of this Agreement,
or to meet the Specifications for such Product, Novopharm shall provide the
applicable Buyer, at such Buyer's option, with either a full refund of the
purchase price for such nonconforming Product (including all freight,
insurance charges, taxes, import and export duties, inspection fees and other
charges) or an equal quantity of Product as replacement therefor. In
addition, the Buyers shall have the right, by written notice to Novopharm, to
terminate Section 2.1 of this Agreement. This Section 9.3 shall in no way
limit or affect the indemnification obligations of Novopharm as provided in
Section 12.2.
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<PAGE>
ARTICLE 10: INSURANCE
Each party shall maintain comprehensive general liability insurance,
including contractual liability insurance and product liability insurance, of
at least ten million dollars ($10,000,000) for the term of this Agreement and
thereafter, for so long as it customarily maintains insurance for itself for
similar products and activities.
ARTICLE 11: CONFIDENTIALITY AND PUBLICATION
11.1 CONFIDENTIAL INFORMATION. The terms of this Agreement and all Offers
delivered hereunder and all technical and processing data, information and
knowledge related to the Products, including, without limitation, any
manufacturing processes or methods, analytical methods, quality control and
safety data, the Approved ANDAs for each of the Granutec Products and the
DINs for the Stanley Products, whether in oral, written or graphic form, and
identified in writing by the disclosing party as confidential shall be deemed
and included in the definition of "Confidential Information". Neither party
shall use, disclose or grant the use of the Confidential Information except
on a need-to-know basis to those directors, officers, employees, consultants,
contractors, (sub)licensees or permitted assignees, to the extent that such
disclosure is reasonably necessary in connection with such party's activities
as expressly authorized by this Agreement. To the extent that disclosure is
authorized by this Agreement, prior to disclosure, each party hereto shall
obtain agreement of any such person to hold in confidence and not make use of
the Confidential Information for any purpose other than those permitted by
this Agreement. Both parties shall take the same precautions as it normally
takes with its own Confidential Information to prevent disclosure to third
parties. The Confidential Information shall not be disclosed during the term
of this Agreement, and for a period of five (5) years following the
expiration or termination of the Agreement.
11.2 PERMITTED DISCLOSURES. The confidentiality obligations contained
herein shall not apply to the extent that (A) any party is required to
disclose Confidential Information pursuant to applicable law, regulation or
order of a governmental agency or court of competent jurisdiction, but only
to the extent required to be disclosed; PROVIDED that the disclosing party
notifies the other party in writing and gives the other party reasonable time
to comment on or contest the same prior to disclosure; or (B) the disclosing
party can demonstrate that (I) the disclosed information was public knowledge
prior to, at the time of or after disclosure other than through unauthorized
acts or omissions of the disclosing party; (II) the information was
previously disclosed to the recipient on an unrestricted basis from a third
party source unrelated to any party to this Agreement and not under a duty of
confidentiality to the non-disclosing party; or (III) the disclosed
information was
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<PAGE>
independently developed by the recipient without use of Confidential
Information as evidenced by written records.
11.3 PUBLICATION. Neither party shall disclose to Third Parties nor
originate any publicity, news release or public announcement, written or
oral, whether to the public, the press, stockholders or otherwise, referring
to the existence of or relating to the terms of this Agreement, without prior
written consent of the other party.
ARTICLE 12: TERMINATION, TERM
12.1 TERMINATION.
12.1.1 BREACH. In the event Novopharm commits a breach or defaults in
the performance or observance of any of the provisions of this Agreement, and
such breach is not cured within twenty (20) days after the receipt of written
notice thereof from the other party specifying such breach or default or a
petition in bankruptcy is filed by or against Novopharm, a receiver is
appointed on account of Novopharm's insolvency, or Novopharm makes a general
assignment for the benefit of its creditors, the Buyers shall be entitled to
terminate all or any provision of this Agreement upon an additional thirty
(30) days written notice to the breaching or defaulting party, PROVIDED,
HOWEVER, that either party shall be entitled to seek specific performance of
this agreement without prejudice to such party's right to also seek damages
or such other legal remedies to which such party may otherwise be entitled.
12.1.2 OBLIGATION TO PAY. The termination or expiration of this Agreement
shall not release the Buyers from the obligation to pay any sum owed to
Novopharm for Products delivered prior to any such termination or expiration.
12.1.3 Notwithstanding any termination or expiration of this Agreement,
the provisions of Articles 3.2, 11, and 13 shall remain in effect.
12.1.4 Notwithstanding anything to the contrary in this Agreement, subject
to Section 12.1.3, this Agreement shall terminate (4) four years from the
Effective Date.
ARTICLE 13: LIABILITY AND INDEMNIFICATION
13.1 The Buyers shall indemnify, defend and hold Novopharm, its affiliates,
officers, directors and shareholders, and its successors and assigns and their
respective officers, directors, employees, agents, advisers, representatives
(collectively, "NOVOPHARM
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<PAGE>
INDEMNIFIED PARTIES") from and against, and pay or reimburse the Novopharm
Indemnified Parties for any and all claims, liabilities, obligations, losses,
fines, costs, royalties, proceedings, deficiencies or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims), including product returns or recalls, out-of-pocket
expenses and reasonable attorneys' and accountants' fees incurred in the
investigation or defense of any of the same or in asserting any of the rights
hereunder (collectively, "LOSSES") to the extent such Losses result from or
arise out of any failure of any Buyer to perform any covenant or agreement made
or contained in this Agreement or fulfill any other obligation in respect
thereof.
13.2 Novopharm shall indemnify, defend and hold the Buyers, their affiliates,
officers, directors and shareholders, and their successors and assigns and their
respective officers, directors, employees, agents, advisers, representatives
(collectively, the "BUYER INDEMNIFIED PARTIES") from and against, and pay or
reimburse the Buyers Indemnified Parties for any and all claims, liabilities,
obligations, losses, fines, costs, royalties, proceedings, deficiencies or
damages (whether absolute, accrued, conditional or otherwise and whether or not
resulting from third party claims), including product returns or recalls
(subject to Article 5) out-of-pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same or
in asserting any of the rights hereunder (collectively, "LOSSES") to the extent
such Losses result from or arise out of (A) Novopharm's negligent or wilful
misconduct in its performance under this Agreement, (B) any inaccuracy in any
representation or warranty by Novopharm when made or deemed made or contained in
this Agreement or in connection therewith; or (C) any failure of Novopharm to
perform any covenant or agreement made or contained in this Agreement or fulfill
any other obligation in respect thereof.
13.3 The party seeking indemnification (the "INDEMNIFIED PARTY") hereunder shall
notify promptly in writing the party from whom indemnity is sought (the
"INDEMNIFYING PARTY") of any matter for which indemnity is sought and shall give
the Indemnifying Party full information and assistance for the defense of any
such claim. The Indemnifying Party shall pay all damages and costs awarded
against the Indemnified Party but shall not be responsible for any settlement
made by the Indemnified Party without the Indemnifying Party's written consent
(which shall not be unreasonably withheld).
ARTICLE 14: MISCELLANEOUS
14.1 ENTIRE AGREEMENT. This Agreement and the attached Schedules set forth the
entire understanding between the parties with respect to the subject matter
hereof. All express or implied agreements and understandings, either oral or
written, heretofore made are
15
<PAGE>
expressly superseded by this Agreement. This Agreement may not be modified or
amended except in writing signed by both parties.
14.2 WAIVER. The waiver by either party of any right hereunder or the failure to
perform or of a breach by the other party shall not be deemed a waiver of any
other right hereunder or of any other breach or failure by said other party
whether of a similar nature or otherwise.
14.3 SEVERABILITY. If and to the extent that any particular provision of this
Agreement is found to be void, voidable or unenforceable for any reason
whatsoever, then such provision or provisions shall be deemed severed from the
remainder of this Agreement and all other provisions hereof shall remain in full
force and effect. Such severed provisions shall be replaced with a revised
written provision agreed to by the parties which accomplishes, to the extent
possible, the business purpose of the original provision in a valid and
enforceable manner.
14.4 RELATIONSHIP. It is expressly agreed that Novopharm and the Buyers shall be
independent contractors and nothing in this Agreement shall create among the
parties a partnership, joint venture or agency. Neither party shall have the
authority to make any statements, representations or commitments of any kind, or
to take any action, which shall be binding on the other party, without the prior
express written consent of the other party to do so.
14.5 NO CONFLICT. Each party represents that neither this Agreement nor any of
its obligations hereunder shall conflict or result in a breach of any
arrangement or agreement between such party and any Third Party.
14.6 OFFICIAL LANGUAGE. The official language of this Agreement, and of all
consents, notices and reports required or permitted to be given or made under
this Agreement, shall be English.
14.7 HEADINGS. The headings of each article in this Agreement are for reference
and convenience and shall not affect the meanings of the provisions of the
Agreement.
14.8 NOTICES. Any consent, notice or report required or permitted to be given or
made under this Agreement by one of the parties to the other shall be in
writing, delivered by registered or certified mail, postage prepaid, or by
facsimile and confirmed by mail and addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addresser:
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If to Novopharm: Novopharm Limited
30 Novopharm Court
Toronto, Ontario, Canada M1B 2K9
Attention: President and Chief Executive
Officer
Copy to: General Counsel
If to Buyers: Leiner Health Products Inc.
901 East 233rd Street
Carson, California 90745
Attention: President and Chief Executive Officer
All notices shall be deemed to be effective five days after the date of
mailing or upon receipt if sent by telex or facsimile (but only if followed by
certified or registered confirmation).
14.9 BENEFIT. This Agreement shall be binding upon and inure to the benefit of
the parties hereto, their respective successors and permitted assigns.
14.10 DOLLAR CURRENCY. All dollar amounts referred to in this Agreement and in
Schedule A attached hereto are in lawful money of the United States. Dollar
amounts referred to in Schedule B are in Canadian dollars.
14.11 GOVERNING LAW. This Agreement shall be governed in all respects, including
as to validity, interpretation and effect, by the internal laws of the State of
New York, without giving effect to the conflict of laws rules thereof to the
extent that the application of the law of another jurisdiction would be required
thereby.
14.12 NO THIRD PARTY BENEFICIARIES. Except as provided in Section 13 with
respect to indemnification of Indemnified Parties hereunder, nothing in this
Agreement shall confer any rights upon any person or entity other than the
parties hereto and their respective heirs, successors and permitted assigns.
14.13 ASSIGNMENT. This Agreement shall not be assignable or otherwise
transferable by any party hereto without the prior written consent of, in the
case of assignment or transfer by Novopharm, the Buyers and, in the case of
assignment or transfer by any Buyer, Novopharm, PROVIDED that any Buyer may
assign this Agreement to any Affiliate of such Buyer, and PROVIDED, further,
that each Buyer remains obligated for performance under the terms of this
Agreement notwithstanding any assignment to any Affiliate.
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<PAGE>
14.14 REMEDIES. The rights and remedies provided in this Agreement are
cumulative and are not exclusive of any rights and remedies either party may
have otherwise have at law or in equity.
14.15 COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed an original and all of which shall together constitute
one and the same instrument.
14.16 PRIORITY. Novopharm undertakes to treat the Buyers as its preferred
customers and to give priority to the Buyers over all other of Novopharm's
customers in respect of inventories and production and development resources
during the term of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
LEINER HEALTH PRODUCTS INC. NOVOPHARM LIMITED
By: By:
---------------------------- -------------------------
Title: Title:
------------------------- ----------------------
VITA HEALTH PRODUCTS INC.
By:
----------------------------
Title:
-------------------------
19
<PAGE>
SCHEDULE A
GRANUTEC PRODUCTS
<TABLE>
<CAPTION>
Form, Shape,
Product Size & Color Price (in U.S.$)
------- -------------- -----------------
<S> <C> <C>
Loperamide 2 mg Strips of 6 $190.00 per thousand
strips
Naproxen Sodium 220 mg Bulk Tablets or Caplets $23.93 per thousand
Ranitidine 75 mg Strips of 10 $224.47* per thousand
strips
Cimetidine 200 mg. Strips of 6 $196.00 per thousand
strips
Strips of 10 $270.00 per thousand
strips
</TABLE>
- --------
* Price effective no later than July 1, 2000; prior to July 1, 2000, price
is $249.47 per thousand strips.
<PAGE>
SCHEDULE B
SCHEDULE B
STANLEY PRODUCTS *
<TABLE>
<CAPTION>
FORM, SHAPE,
PRODUCT SIZE AND COLOR PRICE (in CS)
<S> <C> <C>
Packaged Stan S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged PH-P Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged PPLS S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged MEDC S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged LOBL S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged LOBL S/R Cold Decongestant* 30 Count Blistered Capsules $2.22
Packaged LOND S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged CERT S/R Cold Decongestant* 10 Count 895680 Capsules $0.85
Packaged WALM S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged WALM S/R Cold Decongestant* 30 Count Blistered Capsules $2.22
Packaged WALM Ibuprofen 200 MG 24 Count Bottles Caplets Brown $0.83
Packaged WALM Ibuprofen 200 MG 50 Count Bottles Caplets Brown $1.16
Packaged WALM Ibuprofen 200 MG 100 Count Bottles Caplets Brown $1.85
Packaged PHSV S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged PHSV Ibuprofen 200 MG 24 Count Bottles Caplets Brown $0.83
Packaged PHSV Ibuprofen 200 MG 50 Count Bottles Caplets $1.16
Packaged PHSV Ibuprofen 200 MG 100 Count Bottles Caplets $1.85
Packaged PHSV Ibuprofen 200 MG 100 Count Bottles Tablets Brown $1.85
Packaged PR-W S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged REXL S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged P-CH Acid Control Tablets 18 Count Tablets $0.91
Packaged P-CH S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged P-CH Ibuprofen 200 MG 24 Count Bottles Caplets $0.83
Packaged P-CH Ibuprofen 200 MG 50 Count Bottles Caplets $1.16
Packaged P-CH Ibuprofen 200 MG 100 Count Bottles Caplets $1.85
Packaged ESSM Ibuprofen 200 MG 50 Count Bottles Caplets $1.16
Packaged ESSM Ibuprofen 200 MG 50 Count Bottles Tablets Brown $1.16
Packaged FMPX Cold Decongestant 10 Count Blistered Capsules $0.85
Packaged FMPX Ibuprofen 200 MG 30 Count Bottles Caplets Brown $0.93
Packaged FEDR S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
<PAGE>
SCHEDULE B
Packaged FEDR Ibuprofen 200 MG 24 Count Bottles Caplets Brown $0.83
Packaged FEDR Ibuprofen 200 MG 50 Count Bottles Caplets Brown $1.16
Packaged FEDR Ibuprofen 200 MG 100 Count Bottles Caplets Brown $1.85
Packaged BEST S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
PRSC Anti-Diarrheal 12 Count Blister Caplets $1.20
Packaged ARP S/R Cold Decongestant* 10 Count Blistered Capsules $0.85
Packaged ACID Control 6 Count Blister Tablets $0.18
Packaged Anti-Diarrheal 6 Count Blister Tablets $0.31
Bulk Ibuprohen 200 MG Brown Caplets $12.51
Bulk Miconazole 3 Day Ovule Blister Caplets $1.24
Bulk Milk of Magnesia 385 MG Tablets USP $8.02
Packaged STAN Antibiotic Ointment 15 GM $1.10
Packaged LIFE Antibiotic Ointment 15 GM $1.10
Packaged LIFE Antibiotic Ointment 30 GM $1.86
Packaged PH-P Antibiotic Ointment 15 GM $1.10
Packaged PH-P Antibiotic Ointment 30 GM $1.86
Packaged HY&Z Antibiotic Ointment 15 GM $1.10
Packaged WALM Antibiotic Ointment 15 GM $1.10
Packaged WALM Antibiotic Ointment 30 GM $1.86
Packaged PHSV Antibiotic Ointment 15 GM $1.10
Packaged PR-W Antibiotic Ointment 15 GM $1.10
Packaged REXL Antibiotic Ointment 15 GM $1.10
Packaged P-CH Antibiotic Ointment 15 GM $1.10
Packaged FEDR Antibiotic Ointment 15 MG $1.10
Packaged BEST Antibiotic Ointment 15 MG $1.10
Packaged PRSC Antibiotic Ointment 15 MG $1.10
Packaged ARP Antibiotic Ointment 15 MG $1.10
</TABLE>
* The Buyer acknowledges that the cold decongestant Product referred to
in this Schedule B is manufactured by a third party. Accordingly,
except to the extent that such representations and warranties relate to
the packaging or handling of the cold decongestant Product by, or
actions of, Novopharm, and without limiting the Buyer's recourse to the
actual manufacturer of such Products:
(a) the representations and warranties set out in Section 9.1 (and the
indemnities related thereto in Section 13.2) shall not apply to the
sale of such cold decongestant Product to the Buyer; and
2
<PAGE>
SCHEDULE B
(b) notwithstanding Section 5, Novopharm shall not be responsible for the
costs of recall and returns for such cold decongestant Products.
3
<PAGE>
SCHEDULE C
SPECIFIED FUTURE PRODUCTS
<TABLE>
<CAPTION>
MOLECULE BRAND FORM BASIC PATENT EXPIRY
<S> <C> <C> <C>
ANTACIDS/GASTRO-INTESTINAL
Omeprazole Prilosec Tablet 04/05/2003
ANTI-INFECTIVES
COUGH & COLD/ALLERGY
Loratidine Claritin Tablet 2003 at the earliest
Loratidine/Pseu Claritin D 12 CR Tablet 2003 at the earliest
Loratidine/Pseu Claritin D 24 CR Tablet 2003 at the earliest
Fexofenadine Allegra Tablet 06/19/2002
Fexofenadine/Pseu Allegra D CR Tablet 06/19/2002
Ceterizine Zyrtec Tablet 06/26/2002
ANALGESIC (NSAIDS)
Etodolac Lodine Tablet
Etodolac XL Lodine XL CR Tablet
Diclofenac Voltaren Tablet
Diclofenac XL Voltaren NA Tablet
</TABLE>
<PAGE>
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT, dated as of December 17, 1999, among
Leiner Health Products Inc., a Delaware corporation ("US BUYER"), Vita Health
Products Inc., a Manitoba corporation (the "CANADIAN BUYER" and, together
with the US Buyer, the "BUYERS"), Granutec, Inc., a North Carolina
corporation ("GRANUTEC"), Granutec Holding Corporation, a Delaware
corporation ("GHC"), Stanley Pharmaceuticals Ltd., a British Columbia
corporation ("STANLEY"), and Novopharm Limited, an Ontario corporation
("NOVOPHARM" and, together with Granutec, GHC and Stanley, the "SELLERS").
All capitalized terms not defined herein have the meanings set forth in the
Asset Purchase Agreement defined below.
WHEREAS, pursuant to the Amended and Restated Asset Purchase
Agreement, dated as of December 17, 1999 (the "ASSET PURCHASE AGREEMENT"),
among the Buyers, Granutec Acquirco, Inc., a Delaware corporation, Granutec,
GHC, Stanley and Novopharm, Granutec has agreed to sell, transfer, convey,
assign and deliver to the US Buyer all of Granutec's right, title and
interest in and to the Granutec Assets, Stanley has agreed to sell, transfer,
convey, assign and deliver to Canadian Buyer all of Stanley's right, title
and interest in and to the Stanley Assets, and Novopharm has agreed to sell,
transfer, convey, assign and deliver to the US Buyer or the Canadian Buyer,
as specified by the Buyers, all of Novopharm's right, title, and interest to
the Novopharm Assets, on the terms and subject to the conditions set forth
therein; and
WHEREAS, as an inducement for the purchase by Buyers of the
Business, and as required by the Asset Purchase Agreement, Novopharm,
Granutec, GHC and Stanley are entering into this Agreement for the benefit of
the Buyers.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and of the mutual benefits to be
derived hereby, the parties hereto agrees as follows:
Section 1. DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, a Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first Person. "Control"
(including the terms "controlled by" and "under common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through
<PAGE>
the ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise.
"Business" shall mean developing, manufacturing, labeling,
packaging, marketing, distributing, selling and reselling private label
over-the-counter drugs, vitamins, minerals, herbals, and supplements.
"Novopharm Quebec" shall mean Novopharm Quebec, a division of
Novopharm.
"Person" shall mean any natural person, firm, partnership,
association, corporation, company, trust, business trust, Governmental
Authority or other entity.
"Products" shall have the meaning set forth in the Asset Purchase
Agreement.
"Subsidiary" shall mean each corporation or other Person in which
any one of the Sellers owns or controls, directly or indirectly, capital
stock or other equity interests representing at least 50% of the outstanding
voting stock or other equity interests.
"Territory" shall mean the United States, Canada and Mexico.
"Wampole" shall mean Wampole Canada Inc. an Ontario corporation.
Section 2. PAYMENT FOR NON-COMPETE. Simultaneously with the
execution of this Agreement, Buyers shall pay to the Sellers an aggregate of
$50,000 as consideration for the non-competition undertakings of the Sellers
in this Agreement and the Sellers hereby acknowledge receipt of such payment.
The Sellers and the Buyers agree that such consideration shall be allocated
25% to the first year, 25% to the second year, 25% to the third year and 25%
to the fourth year of this Agreement.
Section 3. NON-COMPETE. During the period commencing on the
Closing Date and continuing until the fourth anniversary of the Closing Date
(the "Period"), without the prior written consent of the Buyers, each Seller
shall not, and shall cause its Affiliates and Subsidiaries (other than, with
respect to contract manufacturing, Novopharm Quebec and, with respect to the
Wampole brand, Wampole) and any officers or directors of such Seller or any
of its Affiliates and Subsidiaries, whether as principal or as agent,
representative, consultant, shareholder, investor, partner, employee or
otherwise, alone or in association with any Person, not to, conduct,
participate or engage in any aspect of the Business in the Territory,
including without limitation by developing, manufacturing, labeling,
packaging, marketing, distributing, selling or reselling any Products, it
being understood that any such conduct, participation or engagement in the
Business, including without limitation by
2
<PAGE>
developing, manufacturing, labeling, packaging, marketing, distributing,
selling or reselling would be in competition with the Buyers.
Section 4. SURVIVAL OF NON-COMPETE. The parties acknowledge that
the research and development, marketing and service capabilities and
international reputation of each Seller would impair the ability of the
Buyers to sustain the Business and compete successfully if any Seller were to
re-enter the markets related to the Business, including without limitation
the market for the Products, during the Period. The provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws
and policies of each jurisdiction in which enforcement may be sought.
Section 5. TERM. The term of this Agreement shall commence on the
Closing Date and shall expire on the fourth anniversary of the Closing Date.
Section 6. EFFECT OF TERMINATION. Notwithstanding the expiration
or termination of this Agreement, the provisions of Sections 7 through 17
shall survive such expiration or termination. Nothing in Sections 5 or 6
shall be deemed to release any party from any liability for any breach by
such party of the terms and provisions of this Agreement.
Section 7. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the
sole benefit of the Buyers and their Affiliates and permitted assigns and
nothing herein expressed or implied shall give or be construed to give to any
Person, other than the Buyers and such Affiliates and assigns, any legal or
equitable rights hereunder.
Section 8. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof.
Section 9. AMENDMENT; WAIVERS, ETC. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or
binding unless set forth in writing and duly executed by the party against
whom enforcement of the amendment, modification, discharge or waiver is
sought. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the
rights of the party granting such waiver in any other respect or at any other
time. Neither the waiver by any of the parties hereto of a breach of or a
default under any of the provisions of this Agreement, nor the failure by any
of the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder, shall be
construed as a waiver of any other breach or default of a similar nature, or
as a waiver of any of such provisions, rights or privileges hereunder. The
rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
3
<PAGE>
Section 10. NOTICES. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a)
delivered personally, (b) mailed by first-class, registered or certified
mail, return receipt requested, postage prepaid, or (c) sent by next-day or
overnight mail or delivery or (d) sent by telecopy.
a. if to the Buyers to,
c/o Leiner Health Products Inc.
901 East 233rd Street
Carson, CA 90745
Attention: President
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Franci Blassberg
b. if to the Sellers,
c/o Novopharm Limited
30 Novopharm Court
Scarborough, Ontario M1B 2K9
Canada
Attention: President
4
<PAGE>
with a copy to:
Fogler, Rubinoff
Suite 4400
Royal Trust Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1G8
Canada
Attention: Melvyn Rubinoff, Q.C.
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal
delivery on the day after such delivery, (x) if by certified or registered
mail, on the seventh business day after the mailing thereof, (y) if by
next-day or overnight mail or delivery, on the day delivered, (z) if by
telecopy, on the next day following the day on which such telecopy was sent,
provided that a copy is also sent by certified or registered mail.
Section 11. HEADINGS. The headings contained in this Agreement are
for purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
Section 12. SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 13. GOVERNING LAW, ETC. This Agreement shall be governed
in all respects, including as to validity, interpretation and effect, by the
internal laws of the State of New York, without giving effect to the conflict
of laws rules thereof to the extent that the application of the law of
another jurisdiction would be required thereby. The Buyers and the Sellers
hereby irrevocably submit to the jurisdiction of the courts of the State of
New York and the Federal courts of the United States of America located in
the State of New York, New York City, Manhattan, solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this
5
<PAGE>
Agreement, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof or of
any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or
that the venue thereof may not be appropriate or that this Agreement or any
of such document may not be enforced in or by said courts, and the parties
hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a New York State or Federal
court. The Buyers and the Sellers hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of
any such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in
Section 10, or in such other manner as may be permitted by applicable law,
shall be valid and sufficient service thereof.
Section 14. REMEDIES. Each of the Sellers and the Buyers each
acknowledge that, in view of the uniqueness of its business and the
transactions contemplated by this Agreement, the Buyers would not have an
adequate remedy at law for money damages in the event that the covenants to
be performed after the Closing Date have not been performed in accordance
with their terms, and therefore agree that each of the Buyers shall be
entitled to specific enforcement of the terms hereof in addition to any other
legal or equitable remedy to which such parties may be entitled.
Section 15. ASSIGNMENT. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written consent
of the other party hereto, PROVIDED that the Buyers may assign this Agreement
to any Affiliate of the Buyers or to any lender to the Buyers or any
Subsidiary or Affiliate thereof as security for obligations to such lender in
respect of the financing arrangements entered into in connection with the
transactions contemplated hereby and any refinancings, extensions, refundings
or renewals thereof, PROVIDED, FURTHER, that no assignment to any such lender
shall in any way affect the Buyers' obligations or liabilities under this
Agreement.
Section 16. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of
which shall together constitute one and the same instrument.
Section 17. WAIVER OF JURY TRIAL. Each party hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial
by jury in respect of any litigation directly or indirectly arising out of,
under or in connection with this Agreement. Each party (i) certifies that no
representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (ii) acknowledges that
it and the other
6
<PAGE>
parties have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 17.
7
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first above written.
VITA HEALTH PRODUCTS INC.
By:
-------------------------------------
Name:
Title:
LEINER HEALTH PRODUCTS INC.
By:
-------------------------------------
Name:
Title:
NOVOPHARM LIMITED
By:
-------------------------------------
Name:
Title:
GRANUTEC, INC.
By:
-------------------------------------
Name:
Title:
GRANUTEC HOLDING CORPORATION
By:
-------------------------------------
Name:
Title:
8
<PAGE>
STANLEY PHARMACEUTICALS LTD.
By:
-------------------------------------
Name:
Title:
9
<PAGE>
SUPPLY AGREEMENT
THIS AGREEMENT dated as of this ___ day of December, 1999, is entered into by
and between Vita Health Products Inc., a Manitoba corporation ("Vita Health"),
Novopharm Limited, an Ontario corporation ("Novopharm"), Wampole Canada Inc., an
Ontario corporation ("Wampole") and Human Serum & Pharmaceutical Manufacturing
Co. Ltd., a Hungarian corporation ("Human") (Novopharm, Wampole and Human are
collectively described as the "Buyers")
WITNESSETH:
WHEREAS, Vita Health and Novopharm are parties to that certain Amended and
Restated Asset Purchase Agreement (the "Asset Purchase Agreement") dated as of
December ___, 1999 among Leiner Health Products Inc., Vita US Acquisition Co.,
Novopharm, Granutec, Inc., Granutec Holdings Corporation and Stanley
Pharmaceuticals Ltd. ("Stanley"), whereby Vita Health will acquire the assets
and operations of Stanley;
WHEREAS, Novopharm and its Affiliates have previously purchased from Stanley,
and the Buyers now desire to purchase from Vita Health on a non-exclusive basis
following the Closing, commercial quantities of the Products from time to time
for a limited time;
WHEREAS, Vita Health is willing to supply the requirements of the Buyers for the
Products on a non-exclusive basis, on the terms and subject to the conditions
set forth below;
WHEREAS, it is a condition precedent to the consummation of the transactions
contemplated by the Asset Purchase Agreement that the parties hereto execute and
deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth below, the parties agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement, the terms defined in this Article 1 will have
the respective meanings set forth below (the singular will include the plural
and vice versa):
"AFFILIATE" means, with respect to any Person, any other Person which directly
or indirectly controls, is controlled by, or is under common control with, such
Person. A Person will be regarded as in control of another Person if it owns, or
directly or indirectly controls, fifty percent (50%) or more of the voting stock
or other ownership interest of the other Person, or if it directly or indirectly
possesses the power to direct or cause the direction of the management and
policies of the other Person by any means whatsoever.
"ASSET PURCHASE AGREEMENT" is defined in the recitals to this Agreement.
<PAGE>
"BUSINESS DAY" means any Monday, Tuesday, Wednesday, Thursday or Friday that is
not a day on which banking institutions in Toronto, Ontario are authorized or
obligated by law or executive order to close.
"BUYERS" is defined in the recitals to this Agreement.
"CANADIAN ACT" means the Canadian FOOD AND DRUGS ACT, as amended from time to
time, and the regulations promulgated thereunder.
"CANADIAN PRIME RATE" means the prime interest rate of The Bank of Nova Scotia
in effect from time to time for Canadian dollar loans made in Canada.
"CLOSING" means the Closing as defined in the Asset Purchase Agreement.
"CONFIDENTIAL INFORMATION" means Technical Information and information
pertaining to Novopharm's and the Buyers' respective businesses, products,
marketing plans, marketing activities, market projections and related matters,
provided by one party to the other pursuant to or in furtherance of this
Agreement.
"DIN" means the Drug Identification Number assigned to the Product by Health
Canada.
"CGMP" will mean current Good Manufacturing Practices promulgated by the
Therapeutic Products Program, Department of Health and Welfare (Canada)
governing the manufacture, handling, storage and control of the Products in
Canada.
"EFFECTIVE DATE" means the Closing Date as defined in the Asset Purchase
Agreement.
"FORCE MAJEURE EVENT" means any fire, flood, embargo, war, act of war (whether
war be declared or not), insurrection, riot, civil unrest, unforeseeable plant
breakdowns or lack or failure of source of supply.
"HUMAN" is defined in the recitals to this Agreement.
"NOVOPHARM" is defined in the recitals to this Agreement.
"ORDER" as defined in Section 3.2(a) of this Agreement.
"PRODUCTS" means those products set forth in Schedule A hereto.
"SPECIFICATIONS" means with respect to any of the Products, the specifications
as set forth in such product's regulatory approval, in accordance with the
Canadian Act.
"STANLEY" is defined in the recitals to this Agreement.
"TECHNICAL INFORMATION" means all know-how, trade secrets, inventions, data
(including regula-
2
<PAGE>
tory data), technology, processes and information, including improvements and
modifications to any thereof, the disclosure or use of which is provided for
or permitted under this Agreement and which a party hereto has the lawful and
contractual right to disclose to the other party. It shall also include,
without limitation, (a) medical, chemical, bioequivalent and other scientific
data; (b) processes and analytical methodology used in the development,
testing, analysis and validation of such Products; and (c) packaging and
manufacturing data and processes. Notwithstanding the foregoing, Technical
Information shall not include trademarks or patents.
"THIRD PARTY" means any entity or person which is not party to this Agreement or
an Affiliate and/or subsidiary of a party to this Agreement.
"VITA HEALTH" is defined in the recitals to this Agreement.
"WAMPOLE" is defined in the recitals to this Agreement.
ARTICLE 2. SUPPLY OF PRODUCTS TO THE BUYERS
2.1 SUPPLY AND PURCHASE OF PRODUCTS. From and after the Effective Date and
until the fourth anniversary of the Effective Date (the "Term") and subject to
the terms and conditions of this Agreement, Vita Health will sell the Products
to the Buyers on a non-exclusive basis as follows:
(a) Vita Health will sell to Novopharm the Products identified
with the prefix "20", "42", "61", "82" and "83" on Schedule A;
(b) Vita Health will sell to Wampole the Products identified with
the prefix "39" on Schedule A; and
(c) Vita Health will sell to Human the Products identified with
the prefix "84" on Schedule A.
Nothing in this Section 2.1 will require the Buyers to purchase any or all of
their requirements for the Products from Vita Health nor will Vita Health be
restricted from selling the Products to any Third Party.
2.2 STORAGE. Vita Health will store all material and Products, including
work-in-process, in accordance with the appropriate cGMP and the guidelines set
out in the Canadian Act.
2.3 OTC SPECIFICATIONS. Vita Health will manufacture under this Agreement
the Products in conformity with their Specifications and the corresponding DINs.
Any modifications or process changes with respect to the Products will be
implemented in accordance with the Canadian Act and its regulations. Vita Health
will ensure that such changes, if any, do not render the Products non-compliant
with respect to any applicable requirement under the Canadian Act and such
Product's respective DIN and/or Specifications.
2.4 RIGHT TO INSPECTION. Each of the Buyers and its duly authorized agents
will at all times
3
<PAGE>
during the Term be entitled to inspect during normal business hours upon
reasonable advance notice, any premises where the Products are stored,
manufactured, packaged or handled, or any premises where materials to be used
in the manufacture of the Products are stored, and each of the Buyers and its
duly authorized agents will have free access to all parts of such premises
and may inspect and test such Products or materials and may interview
employees involved in such storage, manufacture, packaging or handling.
ARTICLE 3. FORECASTS, ORDERS, PACKAGING, AND DELIVERY
3.1 FORECASTS. Promptly after the Effective Date, and promptly after the
beginning of each month during the Term, the Buyers will provide Vita Health
with a non-binding, rolling 12 month forecast of the quantities of Products
required by it and its Affiliates. The Buyers will notify Vita Health as
promptly as practicable of any changes to the forecast.
3.2 ORDERS:
(a) The Buyers may place orders (each an "ORDER") for Products
from time to time in accordance with this Article 3. With
respect to each of the Products ordered, each Order will
specify: (I) the volume and type of each of the Products
required; (II) the required delivery date; and (iii) the place
of delivery.
(b) Orders may be placed by telephone, facsimile or mail.
(c) The Buyers will use good faith efforts to ensure that Orders
are materially consistent with the forecast delivered in
accordance with Section 3.1, as the same may be reasonably
amended by the Buyers from time to time.
(d) Each Order must be placed at least 90 Business Days prior to
the delivery date specified in the Order.
(e) Vita Health must confirm an Order to the applicable Buyer
within five Business Days after receipt of the Order from such
Buyer and confirm the date of delivery. If the delivery date
is unacceptable, such Buyer must notify Vita Health within
five days that the Order is cancelled.
3.3 PACKAGING AND LABELLING. The Products will be sold as specified in the
form specified in Schedule A hereto. Vita Health will ensure that packaging and
labeling of the Products as specified in the attached form conforms to all
applicable regulations.
3.4 DELIVERY. All Products supplied under this Agreement will be shipped
FOB the applicable Buyer's facility. The applicable Buyer will pay all freight,
insurance charges, taxes, import and export duties, inspection fees and other
charges applicable to the sale and transport of the Products purchased by the
applicable Buyer hereunder. Vita Health will use all commercially reasonable
efforts to deliver the Products to the applicable Buyer by the time specified in
the relevant Order. Vita Health will package the Products and use a mode of
4
<PAGE>
transportation that assures that the Products meet all applicable Specifications
when delivered for shipment.
3.5 PURCHASE ORDER TERMS. The terms and conditions of this Agreement will
be controlling over any terms and conditions included in the documents used by
the applicable Buyer in placing Orders or by Vita Health in accepting or
confirming Orders.
3.6 TITLE TO PRODUCTS. Title to the Products manufactured by Vita Health
will pass to the applicable Buyer on the earlier of payment by the applicable
Buyer or delivery to the applicable Buyer in accordance with the Order pursuant
to which such delivery is made.
ARTICLE 4. RETURNS AND RECALLS
4.1 If at any time Vita Health believes that its finished goods should be
recalled and/or be the subject of a notification to a governmental authority
because any of the relevant Products will have failed to meet its Specifications
or was otherwise noncompliant, Vita Health will promptly notify the applicable
Buyer in writing of such belief and provide to the applicable Buyer all
information it has received in connection therewith. If at any time a Buyer
believes that any finished goods should be recalled and/or be the subject of a
notification to a governmental authority because the relevant Products will have
failed to meet Specifications or were otherwise noncompliant, the Buyer will
promptly notify Vita Health in writing of such belief and provide to Vita Health
all information it has received in connection therewith. The applicable Buyer
will, at Vita Health's sole cost and expense, be responsible for conducting any
recall that is initiated and for complying with any and all regulatory
requirements applicable to any such recall. Vita Health will assist such Buyer
by providing information reasonably needed by such Buyer to conduct such recall
and to comply with regulatory requirements.
ARTICLE 5. PRICE AND PAYMENT TERMS
5.1 PURCHASE PRICE OF PRODUCTS. The price for the Products sold by Vita
Health to the Buyers pursuant to Section 2.1 hereunder will be as set forth in
Schedule A hereto. The prices set forth in Schedule A will be applicable for a
period of 120 days from the Effective Date of this Agreement and thereafter the
price for each Product will be as agreed upon by the parties to this Agreement
from time to time.
5.2 SALES AND USE TAXES. Vita Health will be solely responsible for the
payment of all federal, state or local sales, use or value-added tax, excise or
similar charge, or other tax assessment assessed or charged on the sale of
Products sold pursuant to this Agreement.
5.3 PAYMENT. Each month Vita Health will deliver to each Buyer an invoice
for all Products delivered during the prior calendar month. Payment is due and
payable within 30 days of the end of the month in which the invoice is sent by
Vita Health to the applicable Buyer in respect of the Products manufactured and
delivered by Vita Health and will be made by cheque made payable to Vita Health.
Any amount invoiced by Vita Health pursuant to this Section 5.3 will, beginning
30 days after the end of the month in which such amount is invoiced, bear
interest at the
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Canadian Prime Rate plus 3% per annum.
ARTICLE 6. FORCE MAJEURE
No party will be held liable or responsible to the other parties nor be
deemed to have defaulted under or breached this Agreement for failure or
delay in fulfilling or performing any term of this Agreement to the extent,
and for so long as, such failure or delay is caused by or results from a
Force Majeure Event. Upon the occurrence of a Force Majeure Event, the party
failing or delaying performance, will promptly notify the other party, in
writing, setting forth in reasonable detail the nature of the occurrence, its
expected duration and how such party's performance is affected. In the event
of the applicability of this Section 6, the party failing or delaying
performance will use its commercially reasonable efforts to eliminate, cure
and overcome any such causes and resume performance of its obligations as
quickly as possible. In the event that a delay in or failure of performance
by Vita Health in the delivery to any Buyer of Products ordered pursuant to
Section 2.1 or 3.2 extends for more than 10 days, the affected Buyer may
cancel the applicable Order and obtain the Products from a Third Party.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES
7.1 VITA HEALTH REPRESENTATIONS AND WARRANTIES. Vita Health represents and
warrants to each of the Buyers as follows:
(a) The Products supplied pursuant to this Agreement will be
manufactured in conformity with the applicable Specifications
and the corresponding DINs and will be manufactured in
accordance with the applicable cGMP.
(b) The Products supplied by Vita Health under this Agreement and
the methods, facilities and controls used for the receipt,
manufacturing and packaging of the Products will comply with
all representations, warranties and requirements of or implied
by any applicable laws, regulations, rules and orders of any
governmental authority, including, without limitation, the
Canadian Act.
(c) Without limiting the foregoing, all shipments or other
deliveries of the Products by Vita Health to the Buyers is
hereby guaranteed by Vita Health, as of the date of such
shipment or delivery, to be, on such date, not in violation of
the Canadian Act or any applicable governmental approval or
law.
(d) The Products supplied by Vita Health pursuant to this
Agreement will not infringe the rights of any person or
entity.
7.2 DELIVERY OF PRODUCTS. Vita Health represents, warrants and undertakes
to the Buyers that each of the statements in Section 7.1 will be true and
correct on each date Vita Health delivers Products pursuant to this Agreement as
if made on and as at that date.
7.3 PRODUCTS CONFORMITY. If any Products sold and delivered hereunder will,
in any material
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respect, fail to conform to the provisions of this Agreement, or to meet the
Specifications for such Products, Vita Health will provide the applicable
Buyer, at such Buyer's option, with either a full refund of the purchase
price for such nonconforming Products (including all freight, insurance
charges, taxes, import and export duties, inspection fees and other charges)
or an equal quantity of Products as replacement therefor. In addition, the
Buyers will have the right, by written notice to Vita Health, to terminate
Section 2.1 of this Agreement. This Section 7.3 will in no way limit or
affect the indemnification obligations of Vita Health as provided in Section
11.2.
ARTICLE 8. INSURANCE
Each party will maintain comprehensive general liability insurance, including
contractual liability insurance and product liability insurance, of at least ten
million dollars for the term of this Agreement and thereafter, for so long as it
customarily maintains insurance for itself for similar products and activities.
ARTICLE 9. CONFIDENTIALITY AND PUBLICATION
9.1 CONFIDENTIAL INFORMATION. The terms of this Agreement and all technical
and processing data, information and knowledge related to the Products,
including, without limitation, any manufacturing processes or methods,
analytical methods, quality control and safety data and the DINs for the
Products, whether in oral, written or graphic form, and identified in writing by
the disclosing party as confidential will be deemed and included in the
definition of "Confidential Information". Neither party will use, disclose or
grant the use of the Confidential Information except on a need-to-know basis to
those directors, officers, employees, consultants, contractors, (sub)licensees
or permitted assignees, to the extent that such disclosure is reasonably
necessary in connection with such party's activities as expressly authorized by
this Agreement. To the extent that disclosure is authorized by this Agreement,
prior to disclosure, each party hereto will obtain agreement of any such person
to hold in confidence and not make use of the Confidential Information for any
purpose other than those permitted by this Agreement. Both parties will take the
same precautions as it normally takes with its own Confidential Information to
prevent disclosure to third parties. The Confidential Information will not be
disclosed during the term of this Agreement, and for a period of five (5) years
following the expiration or termination of the Agreement.
9.2 PERMITTED DISCLOSURES. The confidentiality obligations contained herein
will not apply to the extent that (A) any party is required to disclose
Confidential Information pursuant to applicable law, regulation or order of a
governmental agency or court of competent jurisdiction, but only to the extent
required to be disclosed; PROVIDED that the disclosing party notifies the other
party in writing and gives the other party reasonable time to comment on or
contest the same prior to disclosure; or (B) the disclosing party can
demonstrate that (I) the disclosed information was public knowledge prior to, at
the time of or after disclosure other than through unauthorized acts or
omissions of the disclosing party; (II) the information was previously disclosed
to the recipient on an unrestricted basis from a Third Party source unrelated to
any party to this Agreement and not under a duty of confidentiality to the
non-disclosing party; or
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(III) the disclosed information was independently developed by the recipient
without use of Confidential Information as evidenced by written records.
9.3 PUBLICATION. Neither party will disclose to Third Parties nor originate
any publicity, news release or public announcement, written or oral, whether to
the public, the press, stockholders or otherwise, referring to the existence of
or relating to the terms of this Agreement, without prior written consent of the
other party.
ARTICLE 10. TERMINATION, TERM
10.1 TERMINATION.
(a) BREACH BY VITA HEALTH. In the event Vita Health commits a
breach or defaults in the performance or observance of any of
the provisions of this Agreement, and such breach is not cured
within 20 days after the receipt of written notice thereof
from the other party specifying such breach or default or a
petition in bankruptcy is filed by or against Vita Health, a
receiver is appointed on account of Vita Health's insolvency,
or Vita Health makes a general assignment for the benefit of
its creditors, the Buyers will be entitled to terminate all or
any provision of this Agreement upon an additional 30 days
written notice to the breaching or defaulting party, provided,
however, that either party will be entitled to seek specific
performance of this agreement without prejudice to such
party's right to also seek damages or such other legal
remedies to which such party may otherwise be entitled.
(b) OBLIGATION TO PAY. The termination or expiration of this
Agreement will not release the Buyers from the obligation to
pay any sum owed to Vita Health for Products delivered prior
to any such termination or expiration.
(c) Notwithstanding any termination or expiration of this
Agreement, the provisions of Article 11 will remain in effect.
(d) Notwithstanding anything to the contrary in this Agreement,
subject to Section 10.1 (c) this Agreement will terminate at
the end of the Term.
ARTICLE 11. LIABILITY AND INDEMNIFICATION
11.1 The Buyers will indemnify, defend and hold Vita Health, its Affiliates,
officers, directors and shareholders, and its successors and assigns and their
respective officers, directors, employees, agents, advisers, representatives
(collectively, "VITA HEALTH INDEMNIFIED PARTIES") from and against, and pay or
reimburse the Vita Health Indemnified Parties for any and all claims,
liabilities, obligations, losses, fines, costs, royalties, proceedings,
deficiencies or damages (whether absolute, accrued, conditional or otherwise and
whether or not resulting from Third Party claims), including Products returns or
recalls, out-of-pocket expenses and reasonable attorneys' and accountants' fees
incurred in the investigation or defense of any of the same or in
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asserting any of the rights hereunder (collectively, "LOSSES") to the extent
such Losses result from or arise out of any failure of any Buyer to perform
any covenant or agreement made or contained in this Agreement or fulfill any
other obligation in respect thereof.
11.2 Vita Health will indemnify, defend and hold the Buyers, their Affiliates,
officers, directors and shareholders, and their successors and assigns and their
respective officers, directors, employees, agents, advisers, representatives
(collectively, the "BUYER INDEMNIFIED PARTIES") from and against, and pay or
reimburse the Buyer Indemnified Parties for any and all claims, liabilities,
obligations, losses, fines, costs, royalties, proceedings, deficiencies or
damages (whether absolute, accrued, conditional or otherwise and whether or not
resulting from Third Party claims), including Products returns or recalls
(subject to Article 4) out-of-pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same or
in asserting any of the rights hereunder (collectively, "LOSSES") to the extent
such Losses result from or arise out of (A) Vita Health's negligent or wilful
misconduct in its performance under this Agreement, (B) any inaccuracy in any
representation or warranty by Vita Health when made or deemed made or contained
in this Agreement or in connection therewith; or (C) any failure of Vita Health
to perform any covenant or agreement made or contained in this Agreement or
fulfill any other obligation in respect thereof.
11.3 The party seeking indemnification (the "INDEMNIFIED PARTY") hereunder will
notify promptly in writing the party from whom indemnity is sought (the
"INDEMNIFYING PARTY") of any matter for which indemnity is sought and will give
the Indemnifying Party full information and assistance for the defense of any
such claim. The Indemnifying Party will pay all damages and costs awarded
against the Indemnified Party but will not be responsible for any settlement
made by the Indemnified Party without the Indemnifying Party's written consent
(which will not be unreasonably withheld).
ARTICLE 12. MISCELLANEOUS
12.1 ENTIRE AGREEMENT. This Agreement and the attached Schedule set forth the
entire understanding between the parties with respect to the subject matter
hereof. All express or implied agreements and understandings, either oral or
written, heretofore made are expressly superseded by this Agreement. This
Agreement may not be modified or amended except in writing signed by both
parties.
12.2 WAIVER. The waiver by either party of any right hereunder or the failure to
perform or of a breach by the other party will not be deemed a waiver of any
other right hereunder or of any other breach or failure by said other party
whether of a similar nature or otherwise.
12.3 SEVERABILITY. If and to the extent that any particular provision of this
Agreement is found to be void, voidable or unenforceable for any reason
whatsoever, then such provision or provisions will be deemed severed from the
remainder of this Agreement and all other provisions hereof will remain in full
force and effect. Such severed provisions will be replaced with a revised
written provision agreed to by the parties which accomplishes, to the extent
possible, the business purpose of the original provision in a valid and
enforceable manner.
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12.4 RELATIONSHIP. It is expressly agreed that Vita Health and the Buyers will
be independent contractors and nothing in this Agreement will create among the
parties a partnership, joint venture or agency. No party will have the authority
to make any statements, representations or commitments of any kind, or to take
any action, which will be binding on the other parties, without the prior
express written consent of the other parties to do so.
12.5 NO CONFLICT. Each party represents that neither this Agreement nor any of
its obligations hereunder will conflict or result in a breach of any arrangement
or agreement between such party and any Third Party.
12.6 OFFICIAL LANGUAGE. The official language of this Agreement, and of all
consents, notices and reports required or permitted to be given or made under
this Agreement, will be English.
12.7 HEADINGS. The headings of each article in this Agreement are for reference
and convenience and will not affect the meanings of the provisions of the
Agreement.
12.8 NOTICES. Any consent, notice or report required or permitted to be given or
made under this Agreement by one of the parties to the other will be in writing,
delivered by registered or certified mail, postage prepaid, or by facsimile and
confirmed by mail and addressed to such other party at its address indicated
below, or to such other address as the addressee will have last furnished in
writing to the addresser:
If to the Buyers:
Novopharm Limited
30 Novopharm Court
Toronto, Ontario, Canada
M1B 2K9
Facsimile: (416) 332-0321
ATTENTION: President and Chief Executive Officer
Copy to: General Counsel
If to Vita Health:
Vita Health Products Inc.
150 Beghin Avenue
Winnipeg, Manitoba
R2S 3W2
Facsimile: (204) 688-7043
ATTENTION: Eric Smith
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All notices will be deemed to be effective five days after the date of mailing
or upon receipt if sent by telex or facsimile (but only if followed by certified
or registered confirmation).
12.9 BENEFIT. This Agreement will be binding upon and inure to the benefit of
the parties hereto, their respective successors and permitted assigns.
12.10 DOLLAR CURRENCY. All dollar amounts referred to in this Agreement and in
Schedule A attached hereto are in Canadian dollars.
12.11 GOVERNING LAW. This Agreement will be governed in all respects, including
as to validity, interpretation and effect, by the laws of the Province of
British Columbia, without giving effect to the conflict of laws rules thereof to
the extent that the application of the law of another jurisdiction would be
required thereby.
12.12 NO THIRD PARTY BENEFICIARIES. Except as provided in Section 10 with
respect to indemnification of Indemnified Parties hereunder, nothing in this
Agreement will confer any rights upon any person or entity other than the
parties hereto and their respective heirs, successors and permitted assigns.
12.13 ASSIGNMENT. This Agreement will not be assignable or otherwise
transferable by any party hereto without the prior written consent of, in the
case of assignment or transfer by Vita Health, the Buyers, and in the case of
assignment or transfer by any Buyer, Vita Health, provided any Buyer may assign
this Agreement to any of its Affiliates, and provided, further, that each Buyer
remains obligated for performance under the terms of this Agreement
notwithstanding any assignment to any Affiliate.
12.14 REMEDIES. The rights and remedies provided in this Agreement are
cumulative and are not exclusive of any rights and remedies either party may
have otherwise have at law or in equity.
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12.15 COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which will be deemed an original and all of which will together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
VITA HEALTH PRODUCTS INC. NOVOPHARM LIMITED
By: By:
- ------------------------------ --------------------------------
Title: Title:
- ------------------------------ --------------------------------
HUMAN SERUM & WAMPOLE CANADA INC.
PHARMACEUTICAL
MANUFACTURING CO. LTD.
By: By:
- ------------------------------ --------------------------------
Title: Title:
- ------------------------------ --------------------------------
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