<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) OCTOBER 8, 1997
-----------------
COCENSYS, INC.
-------------------------------
(EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER)
DELAWARE 0-20954 33-0538836
- ----------------------------- -------------- -------------------
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
201 TECHNOLOGY DRIVE, IRVINE, CA 92718
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING
ZIP CODE)
(714) 753-6100
----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING
AREA CODE)
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- --------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 8, 1997, CoCensys Inc. (the "Company") entered into a Asset Purchase
Agreement (the "Agreement") to sell its Pharmaceutical Sales and Marketing
Division (the "Division") to Watson Laboratories, Inc. ("Watson"), a wholly
owned subsidiary of Watson Pharmaceuticals, Inc. The description contained in
this Item 2 of the transactions set forth in the Agreement is qualified in its
entirety by reference to the full text of the Agreement, a copy of which is
filed as an Exhibit hereto. Under the terms of the Agreement, Watson will
assume the Division's co-promotion agreements, acquire certain of its operating
assets and have the right to hire approximately 70 former employees of the
Division. As consideration for these assets, the Company received $8.0 million
from Watson, with up to $1.0 million more due to the Company if Watson is able
to hire and retain, as of specified dates, certain percentages of the employees
from the Division.
In order to satisfy certain provisions of the Agreement, the Company entered
into, and transferred to Watson, agreements with two pharmaceutical companies
for marketing rights and New Drug Approvals ("NDA")for two drugs at an aggregate
cost of $2.0 million, of which the Company has paid $1.0 million. An additional
$1.0 million is payable by the Company in future installments. Pursuant to the
Agreement, $1.0 million of the $8.0 million in proceeds from the sale of the
Division was deposited into an escrow account to satisfy the Company's future
obligations related to the acquisition of these co-promotion and supply rights.
The forward-looking statements contained herein involve risks and uncertainties.
Actual results and developments may differ materially from those described
herein, due to a number of factors, including future performance and payments
under the agreements described herein and additional factors discussed in the
Company's most recent Form 10-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
The Company's Pro Forma Condensed Balance Sheet as of
June 30, 1997 Pro Forma Condensed Statement of
Operations for the Six Months Ended June 30, 1997 and
Condensed Pro Forma Statement of Operations for the
Year ended December 31, 1996 are included on pages F-1
through F-4.
<PAGE>
(c) Exhibits.
10.1 Asset Purchase Agreement, dated October 8, 1997,
Between the Company and Watson.*
99.1 Press Release.
* Confidential treatment has been requested for certain information contained
in the agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CoCensys, Inc.
Date: October 223, 1997 By: /s/ Peter E. Jansen
----------------- --------------------------
Peter E. Jansen
Chief Financial Officer
<PAGE>
COCENSYS, INC.
(A development stage company)
PRO FORMA CONDENSED BALANCE SHEETS
(In thousands) (Unaudited)
This pro forma Condensed Balance Sheet (unaudited) presents the financial
position of the Company as if the disposition of the Pharmaceutical Sales and
Marketing Division and related co-promotion agreements and operating assets had
been completed as of June 30, 1997. This pro forma Condensed Balance Sheet is
not necessarily indicative of what the actual balance sheet would have been at
June 30, 1997, nor does it purport to represent the future financial position of
the Company.
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,192 $ 6,738 1 $ 8,930
Short-term investments 15,180 15,180
Receivables from corporate partners 657 657
Other current assets 810 810
-------- ------- --------
TOTAL CURRENT ASSETS 18,839 6,738 25,577
Property and equipment, net 2,494 (198) 2 2,296
Notes receivable from officers 279 279
Other assets, net 26 (1) 2 25
-------- ------- --------
$ 21,638 $ 6,539 $ 28,177
-------- ------- --------
-------- ------- --------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 764 $ 764
Other accrued liabilities 2,828 831 3 3,659
Advances from corporate partners 151 151
Capital lease obligation - current portion 559 (113) 1 446
-------- ------- --------
TOTAL CURRENT LIABILITIES 4,302 718 5,020
Capital lease obligation, less current portion 227 227
Other liabilities 38 500 3 538
Stockholders' equity:
Preferred stock 12,000 12,000
Common stock 96,076 570 4 96,646
Deficit accumulated during the development stage (90,468) 4,751 5 (85,717)
Deferred compensation (562) (562)
Unrealized gain (loss) on investments 25 25
-------- ------- --------
TOTAL STOCKHOLDERS' EQUITY 17,071 5,321 22,392
-------- ------- --------
$ 21,638 $ 6,539 $ 28,177
-------- ------- --------
-------- ------- --------
</TABLE>
- ------------------------
1. Represents $8,000 in proceeds from disposition of Division and related
co-promotion agreements, less $1,000 in cash used to obtain marketing
rights and NDAs that were transferred to Watson and less
F-1
<PAGE>
$262 in cash used to purchase leased assets, a portion of which were sold
to Watson. Excludes $1,000 that is contingent on Watson's ability to
retain former employees of the Division.
2. Represents operating assets sold to Watson.
3. Represents $1,000 liability related to purchase of marketing rights and
NDAs transferred to Watson, $231 in severance costs and an estimated $100
in transaction costs.
4. Represents compensation expense recorded in connection with the
extension of options previously granted to employees of the Division.
5. Gain on disposal of Division and related co-promotion agreements and
operating assets.
F-2
<PAGE>
COCENSYS, INC.
(A development stage company)
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(In thousands, except per share amounts) (Unaudited)
This pro forma Statement of Operations is presented as if the disposition of the
Sales and Marketing Division and related co-promotion agreements and operating
assets had occurred on January 1, 1996. This pro forma Statement of Operations
is not necessarily indicative of what the actual results of operations of the
Company would have been assuming the aforementioned event had been completed as
of January 1, 1996, nor does it purport to represent the results of operations
for future periods.
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE
Co-promotion $ 2,308 $(2,308) 1
Co-development 6,949 $ 6,949
------- ------- -------
Total revenue 9,257 $(2,308) $ 6,949
------- ------- -------
OPERATING EXPENSES
Research and development 11,416 11,416
Selling, general and administrative 5,504 (3,540) 2 1,964
------- ------- -------
Total operating expenses 16,920 (3,540) 13,380
------- ------- -------
OPERATING LOSS (7,663) 1,232 (6,431)
INTEREST INCOME, NET 357 172 3 529
------- ------- -------
NET LOSS $(7,306) $ 1,404 $(5,902)
------- ------- -------
------- ------- -------
NET LOSS PER SHARE $ (0.33) $ 0.06 $ (0.26)
------- ------- -------
------- ------- -------
</TABLE>
-------------------------
1. Represents co-promotion revenue attributable to the activities of the
Division.
2. Represents direct operating expenses of the Division.
3. Represents interest income on the net proceeds from the disposition of
the Division and related co-promotion agreements.
F-3
<PAGE>
COCENSYS, INC.
(A development stage company)
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(In thousands, except per share amounts) (Unaudited)
This pro forma Statement of Operations is presented as if the disposition of the
Pharmaceutical Sales and Marketing Division and related co-promotion agreements
and operating assets had occurred on January 1, 1996. This pro forma Statement
of Operations is not necessarily indicative of what the actual results of
operations of the Company would have been assuming the aforementioned event had
been completed as of January 1 , 1996, nor does it purport to represent the
results of operations for future periods.
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE
Co-promotion $ 9,085 $ (9,085) 1
Co-development 6,073 $ 6,073
-------- -------- --------
Total revenue 15,158 $ (9,085) $ 6,073
-------- -------- --------
OPERATING EXPENSES
Research and development 18,771 18,771
Selling, general and administrative 16,040 (8,410) 2 7,630
-------- -------- --------
Total operating expenses 34,811 (8,410) 26,401
-------- -------- --------
OPERATING LOSS (19,653) (675) (20,328)
INTEREST INCOME, NET 1,165 371 3 1,536
-------- -------- --------
NET LOSS $(18,488) $ (304) $(18,792)
-------- -------- --------
-------- -------- --------
NET LOSS PER SHARE $ (0.85) $ (0.01) $ (0.86)
-------- -------- --------
-------- -------- --------
</TABLE>
-------------------------
1. Represents fiscal 1996 co-promotion revenue attributable to the
activities of the Division.
2. Represents the direct operating expenses of the Division.
3. Represents interest income on the net proceeds from the disposition of
the Division and related co-promotion agreements.
F-4
<PAGE>
EXHIBIT INDEX
10.1 Asset Purchase Agreement, dated October 8, 1997, between the Company
and Watson.*
99.1 Press Release dated October 9, 1997
* Confidential treatment has been requested for certain information contained
in the agreement.
<PAGE>
ASSET PURCHASE AGREEMENT
WATSON LABORATORIES, INC.
AND
COCENSYS, INC.
OCTOBER 8, 1997
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED.
<PAGE>
TABLE OF CONTENTS
PAGE NUMBER
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. BASIC TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . 6
(b) Assumption of Liabilities . . . . . . . . . . . . . . . . . . . 6
(c) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . 8
(g) Other Agreements Regarding Loxitane.. . . . . . . . . . . . . . 8
(h) Adjustment of Purchase Price for Somerset Revenues. . . . . . . 9
(i) Adjustment of Purchase Price for Parke-Davis Revenues . . . . . 10
(j) Post-Closing Adjustment to Purchase Price.. . . . . . . . . . . 11
(k) Records Relating to Prorations. . . . . . . . . . . . . . . . . 12
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . . . . 12
(a) Organization of Seller. . . . . . . . . . . . . . . . . . . . . 12
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . . 12
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . 13
(h) Legal Compliance. . . . . . . . . . . . . . . . . . . . . . . . 13
(i) Intellectual Property . . . . . . . . . . . . . . . . . . . . . 13
(j) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(l) Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . 14
(m) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(n) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(o) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(p) Certain Business Relationships with the Division. . . . . . . . 14
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . 14
(a) Organization of Buyer . . . . . . . . . . . . . . . . . . . . . 14
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . . 15
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . 15
(d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5. POST-CLOSING COVENANTS. . . . . . . . . . . . . . . . . . . . . 15
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
(b) Litigation Support. . . . . . . . . . . . . . . . . . . . . . . 15
(c) Transition. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . 16
SECTION 6. REMEDIES FOR BREACHES OF THIS AGREEMENT . . . . . . . . . . . . 17
(a) Survival of Representations and Warranties. . . . . . . . . . . 17
(b) Indemnification Provisions for Benefit of Buyer . . . . . . . . 17
(c) Indemnification Provisions for Benefit of Seller. . . . . . . . 18
(d) Matters Involving Third Parties . . . . . . . . . . . . . . . . 19
(e) Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7. MISCELLANEOUS.. . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Press Releases and Public Announcements . . . . . . . . . . . . 20
(b) No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . 20
(c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Succession and Assignment . . . . . . . . . . . . . . . . . . . 20
(e) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 21
(i) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 22
(j) Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(k) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(l) Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 22
(m) Incorporation of Exhibits and Schedules . . . . . . . . . . . . 22
(n) Specific Performance. . . . . . . . . . . . . . . . . . . . . . 22
(o) Submission to Jurisdiction. . . . . . . . . . . . . . . . . . . 23
(p) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(q) Bulk Transfer Laws. . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT entered into as of October 8, 1997 (the "Effective Date"), by
and between WATSON LABORATORIES, INC., a Nevada corporation ("Buyer"), and
COCENSYS, INC., a Delaware corporation ("Seller"). Buyer and Seller are referred
to collectively herein as the "Parties".
THIS AGREEMENT contemplates a transaction in which Buyer will purchase the
identified assets (and assume certain identified liabilities) of the Sales and
Marketing Division of Seller in return for cash.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
SECTION 1. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title and interest in and to the
following assets of the Seller: (a) the tangible personal property listed on
Schedule 1(a); (b) the Intellectual Property listed on Schedule 1(b), including
the goodwill associated therewith, and the rights to protection of interests
therein under the laws of all jurisdictions; (c) the agreements, contracts,
instruments and other similar arrangements listed on Schedule 1(c) (the "Assumed
Contracts"), including all of Seller's rights thereunder; (d) all of Seller's
rights with respect to the contracts under negotiation identified on Schedule
1(d); (e) the deposits and prepayments listed on Schedule 1(e); (f) the books,
records, ledgers, files, documents, correspondence, lists, creative materials,
advertising and promotional materials, studies, reports and other printed or
written materials with respect to the Division identified on Schedule 1(f); and
(g) the rights to hire the President, Pharmaceutical Sales and Marketing
Division of Seller, the 56 Field Representatives currently employed by Seller
and the eight Manager/Directors currently employed by Seller, as listed on
Schedule 1(g) (the "Field Sales Force"); provided, however, that the Acquired
Assets shall not in any event include the Excluded Assets.
"ADDITIONAL PURCHASE PRICE" shall have the meaning set forth in Section
2(c).
"ADJUSTMENT DATE" shall have the meaning set forth in Section 2(j).
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses and
fees, including court costs and reasonable attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
1.
<PAGE>
"ASSUMED CONTRACT" shall have the meaning set forth in the definition of
"Acquired Assets" above.
"ASSUMED LIABILITIES" means the Liabilities and obligations of the
Division set forth in an appendix to the Disclosure Schedule under an express
statement (that Buyer has initialed) to the effect that the definition of
Assumed Liabilities will include the Liabilities and obligations so disclosed;
provided, however, that the Assumed Liabilities shall not in any event include
(i) any Liability of Seller for unpaid Taxes (with respect to the Division or
otherwise) for periods prior to the Closing, (ii) any Liability of Seller for
income, transfer, sales, use and other Taxes arising in connection with the
consummation of the transactions contemplated hereby (including any income Taxes
arising because Seller is transferring the Acquired Assets), (iii) any Liability
of Seller for the unpaid Taxes of any Person other than Seller under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise, (iv) any obligation of Seller
to indemnify any Person by reason of the fact that such Person was a director,
officer, employee or agent of Seller or was serving at the request of Seller as
a partner, trustee, director, officer, employee or agent of another entity
(whether such indemnification is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses or otherwise and whether
such indemnification is pursuant to any statute, charter document, bylaw,
agreement or otherwise), (v) any Liability of Seller for costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, (vi) Seller's obligations with respect to all vacation, holiday and
sick pay, bonus or profit sharing payments and all other forms of compensation
unpaid by Seller as of the Closing attributable to any period or partial period
of employment by Seller prior to Closing, plus employee payroll taxes applicable
to such unpaid vacation, holiday and sick pay, bonus or profit sharing payments
and other forms of compensation due or to become due, for those employees of
Seller who will be employed by Buyer immediately after the Closing or (vii) any
Liability or obligation of Seller under this Agreement (or under any side
agreement between Seller on the one hand and Buyer on the other hand entered
into on or after the date of this Agreement).
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that forms or could reasonably be expected to form
the basis for any specified consequence.
"BUNDLED CONTRACT LIABILITY" means Medicaid Liability and Contract
Liability, collectively.
"BUYER" has the meaning set forth in the preface above.
"BUYER'S ACCOUNTANTS" means Price Waterhouse LLP.
"CAUSE" has the meaning set forth in Section 2(d)(i).
"CLOSING" has the meaning set forth in Section 2(e) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
2.
<PAGE>
"CONFIDENTIAL INFORMATION" means any proprietary information concerning
the businesses and affairs of the Division that is not already generally
available to the public; PROVIDED, HOWEVER, that, notwithstanding the foregoing,
"Confidential Information" does not and will not include any material
containing: (1) any information that is obtained by or that is or becomes
available to Seller or any of its Affiliates after the date of this Agreement;
(2) any information that is obtained by or that is or becomes available to
Seller or any of its Affiliates in the normal course of any business dealings
between Seller or any of its Affiliates and Buyer; (3) any information that
enters the public domain or that otherwise becomes generally available; or
(4) any information that is independently developed by Seller or any of its
Affiliates.
"CONSTRUCTIVELY DISCHARGED" has the meaning set forth in Section 2(d)(ii).
"CONTRACT LIABILITY" means liabilities (other than Medicaid Liability)
that Buyer actually incurs as a result of the terms of the Bundled Contracts as
of the date hereof, except liabilities pursuant to Section 2(g)(ii) of this
Agreement.
"DEFERRED LNTERCOMPANY TRANSACTION" has the meaning set forth in Treas.
Reg. Section 1.1502-13.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"DIVISION" means the Sales and Marketing Division of Seller.
"ERGOSTAT-Registered Trademark- ASSET PURCHASE AGREEMENT" has the meaning
set forth in Section 6(b)(iii) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means all right, title and interest in and to the
following assets of Seller: (a) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates and other
documents relating to the organization, maintenance and existence of Seller as a
corporation; (b) any of the rights of Seller under this Agreement (or under any
side agreement between Seller on the one hand and Buyer on the other hand
entered into on or after the date of this Agreement); (c) the consideration
delivered by Buyer to Seller pursuant to this Agreement; (d) federal, state and
local income and franchise tax credits and tax refund claims with respect to
periods prior to the Closing; (e) Seller's income and franchise tax returns and
tax records; (f) credits relating to workers' compensation insurance premiums
paid with respect to periods prior to the Closing; (g) revenues pursuant to
Section 8(a) of the Parke-Davis Agreement for calendar quarters ending on or
prior to September 30, 1997; or (h) any asset of the Division not listed in
Schedules 1(a)-1(h).
"FIELD SALES FORCE" has the meaning set forth in the definition of
"Acquired Assets" above.
3.
<PAGE>
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"INCLUDING" has the meaning set forth in Section 7(l).
"INDEMNIFIED PARTY" has the meaning set forth in Section 6(d)(i) below.
"INITIAL PAYMENT" has the meaning set forth in Section 2(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section 6(d)(i) below.
"INTELLECTUAL PROPERTY" means (a) the works, copyrights and applications,
registrations and renewals in connection therewith identified on Schedule 1(b),
(b) all trade secrets and confidential business information (including ideas,
training materials, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals) identified on Schedule 1(b), (c)
all computer software (including data and related documentation) identified on
Schedule 1(b) and (d) all copies and tangible embodiments of the foregoing (in
whatever form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated and whether due or to become due),
including any liability for Taxes.
"LOXITANE-Registered Trademark- ASSET PURCHASE AGREEMENT" has the meaning
set forth in Section 6(b)(iii) below.
"LOXITANE-Registered Trademark- PATENT LICENSE AGREEMENT" has the meaning
set forth in Section 6(b)(iii) below.
"LOXITANE-Registered Trademark- SUPPLY AGREEMENT" has the meaning set
forth in Section 6(b)(iii) below.
"MEDICAID LIABILITY" means the Medicaid [*] liability that Buyer
actually incurs in a calendar quarter as a result of the [*] for Loxitane
established by the Bundled Contracts (as defined in the Loxitane Asset
Purchase Agreement) to the extent such [*] liability exceeds the [*], based
on the following formula: [*]. By way of example only, if there is one unit
of Loxitane sold for [*]
4.
* Confidential treatment requested
<PAGE>
[*].
"NDA" means a New Drug Application, as defined in the United States
Federal Food, Drug and Cosmetic Act and applicable regulations promulgated
thereunder.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARKE-DAVIS ADJUSTMENT" has the meaning set forth in Section 2(i)(i).
"PARKE-DAVIS AGREEMENT" means the letter agreement between Seller and the
Parke-Davis Pharmaceutical Division ("Parke-Davis") of Warner-Lambert Company
dated July 1, 1997.
"PARKE-DAVIS REVENUES" means the revenues received by Buyer after the
Closing pursuant to Section 8(a) of the Parke-Davis Agreement for the calendar
quarter commencing October 1, 1997 times a fraction, the numerator of which is
the number of days from October 1, 1997 to the Effective Date, inclusive, and
the denominator of which is 92.
"PARTIES" has the meaning set forth in the preface above.
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
"PURCHASE PRICE" has the meaning set forth in Section 2(c) below.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than (a) mechanic's, materialmen's and similar
liens, (b) liens for Taxes not yet due and payable, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and (d) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SELLER MEDICAID OBLIGATION" shall have the meaning set forth in Section
2(g).
"SELLER'S ACCOUNTANTS" has the meaning set forth in Section 2(h)(ii).
"SOMERSET ADJUSTMENT" shall have the meaning set forth in Section 2(h)(i).
* Confidential treatment requested
5.
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"SOMERSET AGREEMENT" means the 1997 Promotion Agreement between Somerset
Pharmaceuticals, Inc. and Seller dated April 7, 1997.
"SOMERSET REVENUES" means the revenues received by Buyer after the Closing
pursuant to Section 7.2 of the Somerset Agreement times a fraction, the
numerator of which is the number of days from January 1, 1997 to the Effective
Date, inclusive, and the denominator of which is 365.
"TAX" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD ACCOUNTING FIRM" has the meaning set forth in Section 2(h)(iii).
"THIRD PARTY CLAIM" has the meaning set forth in Section 6(d) below.
SECTION 2. BASIC TRANSACTION.
a. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase, acquire and receive from
Seller, and Seller agrees to sell, transfer, convey, assign and deliver to
Buyer, all of the Acquired Assets at the Closing for the Purchase Price.
b. ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Buyer agrees to assume and become responsible for
all of the Assumed Liabilities at the Closing. Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
Seller not included within the definition of Assumed Liabilities.
c. PURCHASE PRICE. Buyer agrees to pay (i) at the Closing, (A) five
million dollars ($5,000,000) (the "Initial Payment") by wire transfer or
delivery of other immediately available funds to Seller and (B) one million
dollars ($1,000,000) by wire transfer or delivery of other immediately
available funds to Imperial Trust Company as Escrow Agent (the "Escrow
Agent") under the Escrow Agreement dated as of the date of hereof by and
among Seller, Buyer and Escrow Agent; (ii) an additional [*] by wire transfer
or delivery of other immediately available funds to Seller on April 8, 1998
if on such date at least [*] of the Field Sales Force is still employed by
Buyer (or any of its Affiliates) and an additional [*] by wire transfer or
delivery of
* Confidential treatment requested
6.
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other immediately available funds to Seller on October 8, 1998 if on such
date at least [*] of the Field Sales Force is still employed by Buyer (or any
of its Affiliates); and (iii) an additional [*] by wire transfer or delivery
of other immediately available funds to Seller if Seller acquires, and
conveys to Buyer, all the NDA rights and all goodwill associated therewith
held by Parke-Davis with respect to Ergostat-Registered Trademark- by October
8, 1998, which amount shall be payable simultaneously with such acquisition
and transfer. The payments described in clauses (ii)-(iii) above are
referred to herein as the "Additional Purchase Price" and the payments
described in clauses (i)-(iii) above are referred to herein as the "Purchase
Price". The Purchase Price, including any adjustments thereto as provided in
Section 2(j) below, and the Additional Purchase Price shall not be
refundable, in whole or in part, for any reason.
d. DEFINITIONS. For purposes of Section 2(c), a member of the Field
Sales Force shall be considered employed if such person is actually employed, or
was dismissed other than for Cause (as defined below), or was Constructively
Discharged (as defined below).
i. For purposes of Section 2(c), the term "Cause" shall mean:
(1) an employee's theft or embezzlement or attempted theft
or embezzlement of money or tangible or intangible assets or property of Buyer
or any of Buyer's Affiliates;
(2) any act or acts of moral turpitude by an employee
materially injurious to the interest, property, operations, business or
reputation of Buyer or any of its Affiliates;
(3) an employee's violation of any law, statute, regulation
or ordinance which is material injurious to the interest, property, operations,
business or reputation of Buyer or any of its Affiliates;
(4) any acts by an employee which establish his business
loyalty to a person or entity other than Buyer and its Affiliates;
(5) gross negligence or willful misconduct in the
performance of an employee's duties;
(6) an employee's willful neglect of his or her duties;
and/or
(7) an employee's material breach of an employment agreement
between such employee and Buyer or any of its Affiliates.
ii. For purposes of Section 2(c), the term "Constructively
Discharged" shall mean:
7.
* Confidential treatment requested
<PAGE>
(1) a material change other than for Cause in an employee's
duties compared to such employee's duties with Seller immediately prior to
Closing which are not commensurate with such employee's position with Buyer or
its Affiliates;
(2) illegal discrimination or harassment by Buyer or any of
its Affiliates or their respective employees; or
(3) a material reduction in an employee's compensation from
the level of compensation of such employee by Seller immediately prior to the
Closing other than for Cause.
e. CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall take place simultaneously with the execution of
this Agreement through an exchange of funds, documents and instruments.
f. DELIVERIES AT THE CLOSING. At the Closing, (i) Seller will deliver
to Buyer an opinion from counsel to Seller; (ii) Buyer will deliver to Seller
opinions from counsel to Buyer; (iii) Seller will deliver to Buyer a letter from
American Cyanamid Company to the U.S. Food and Drug Administration transferring
all rights in Loxitane-Registered Trademark- to Seller, in form satisfactory to
counsel for Buyer; (iv) Seller will execute, acknowledge (if appropriate) and
deliver to Buyer such instruments of sale, transfer, conveyance, and assignment
as Buyer and its counsel reasonably may request; (v) Buyer will deliver to
Seller the Initial Payment; and (vi) Buyer shall have entered into an employment
agreement pursuant to which the current President of Seller's Sales and
Marketing Division agrees to be employed by Buyer or its nominee.
g. OTHER AGREEMENTS REGARDING LOXITANE.
(i) [*].
(1) Within fifteen business days after Buyer provides Seller
with reasonably acceptable documentation of Bundled Contract Liability incurred
by Buyer during each calendar year from the date of this Agreement through the
year in which Buyer ceases to incur Bundled Contract Liability, Seller shall pay
to Buyer [*].
(2) Buyer shall prepare and provide to Seller quarterly and
annual reports indicating its sales of Loxitane for which payors have obtained
Medicaid reimbursement and its rebate obligations in connection with such sales
for the quarterly and annual periods commencing on the date of this Agreement
and ending with the year in which Buyer ceases to incur Bundled Contract
Liability.
(ii) OTHER MATTERS. Buyer and Seller shall use their best efforts
to minimize the Medicaid Liability to the extent permissible under applicable
law and regulations and the Bundled Contracts; if agreed in advance in writing
by Seller, Seller shall pay to Buyer [*]
8.
* Confidential treatment requested
<PAGE>
[*].
h. ADJUSTMENT OF PURCHASE PRICE FOR SOMERSET REVENUES. On or before
the fifth business day following the determination of the Somerset Revenues
pursuant to Sections 2(h)(i)-(iv), Buyer shall pay to Seller the Somerset
Revenues. In no event will the amount due to Seller hereunder be reduced by any
offsets or other adjustments for any detail-based payment reductions pursuant to
Section 7.1(b) or 7.1(c) of the Somerset Agreement.
i. By February 15, 1998, Buyer shall provide to Seller a schedule
containing detailed information and documentation with respect to the Somerset
Revenues. The schedule shall set forth the amount of any payment to be made
pursuant to the first paragraph of Section 2(h) (the "Somerset Adjustment").
ii. Within ten (10) business days following the delivery of the
schedule pursuant to Section 2(h)(i) above, Seller or its independent
accountants, Ernst & Young LLP ("Seller's Accountants"), may object to any of
the information contained in said schedule or accompanying documentation which
could affect the necessity or amount of the Somerset Adjustment.
iii. In the event of a dispute or disagreement relating to the
determination of the Somerset Revenues which Buyer and Seller are unable to
resolve within fifteen (15) calendar days of any objection under Section
2(h)(ii), either party may elect to have all such disputes or disagreements
resolved by an accounting firm of nationally recognized standing (the "Third
Accounting Firm") to be mutually selected by Seller and Buyer or, if no
agreement is reached, then to be selected by Seller's Accountants and Buyer's
Accountants. The Third Accounting Firm shall make a resolution of the Somerset
Revenues, which shall be final and binding for purposes of this Section 2(h).
The Third Accounting Firm shall be instructed to use every reasonable effort to
perform its services within 15 days of submission of the proposed Somerset
Revenues to it and, in any case, as soon as practicable after such submission.
The fees and expenses for the services of the Third Accounting Firm shall be
shared by Buyer and Seller as follows:
Seller shall pay a percentage of such fees and expenses of the Third
Accounting Firm equal to A/(A+B) and Buyer shall pay a percentage of such fees
and expenses equal to B/(A+B), where A is equal to the absolute value of the
difference (in dollars) between the Somerset Revenues as finally determined by
the Third Accounting Firm and the Somerset Revenues as reflected in schedule
delivered pursuant to Section 2(h)(i), and B is equal to the absolute value of
the difference (in dollars) between the Somerset Revenues as finally determined
by the Third Accounting Firm and the Somerset Revenues as reflected in the
objection submitted pursuant to Section 2(h)(ii).
9.
* Confidential treatment requested
<PAGE>
iv. Buyer agrees to permit Seller, Seller's Accountants and their
respective representatives, during normal business hours, to have reasonable
access to, and to examine and make copies of, all books and records of Buyer,
including but not limited to the books, records, schedules, work papers and
audit programs of Buyer and Buyer's Accountants and access to representatives of
Buyer's Accountants, which documents and access are necessary to review the
information provided pursuant to Section 2(h)(i). Seller similarly agrees to
permit Buyer's Accountants and their respective representatives, during normal
business hours, to have reasonable access to any books and records of Seller, in
order to enable them to prepare such schedule.
i. ADJUSTMENT OF PURCHASE PRICE FOR PARKE-DAVIS REVENUES. On or before
the fifth business day following the determination of the Parke-Davis Revenues
pursuant to Sections 2(i)(i)-(iv), Buyer shall pay to Seller the Parke-Davis
Revenues.
i. Within 15 days of receipt of such information from Parke
Davis, Buyer shall deliver to Seller a schedule containing detailed information
and documentation with respect to the Parke-Davis Revenues. The schedule shall
set forth the amount of any payment to be made pursuant to the first paragraph
of Section 2(i) (the "Parke-Davis Adjustment").
ii. Within ten (10) business days following the delivery of the
schedule pursuant to Section 2(i)(i) above, Seller or its independent
accountants, Ernst & Young LLP ("Seller's Accountants"), may object to any of
the information contained in said schedule or accompanying documentation which
could affect the amount of the Parke-Davis Adjustment.
iii. In the event of a dispute or disagreement relating to the
determination of the Parke-Davis Revenues which Buyer and Seller are unable to
resolve within fifteen (15) calendar days of any objection under Section
2(i)(ii), either party may elect to have all such disputes or disagreements
resolved a Third Accounting Firm to be mutually selected by Seller and Buyer or,
if no agreement is reached, then to be selected by Seller's Accountants and
Buyer's Accountants. The Third Accounting Firm shall make a resolution of the
Parke-Davis Revenues, which shall be final and binding for purposes of this
Section 2(i). The Third Accounting Firm shall be instructed to use every
reasonable effort to perform its services within 15 days of submission of the
proposed Parke-Davis Revenues to it and, in any case, as soon as practicable
after such submission. The fees and expenses for the services of the Third
Accounting Firm shall be shared by Buyer and Seller as follows:
Seller shall pay a percentage of such fees and expenses of the Third
Accounting Firm equal to A/(A+B) and Buyer shall pay a percentage of such fees
and expenses equal to B/(A+B), where A is equal to the absolute value of the
difference (in dollars) between the Parke-Davis Revenues as finally determined
by the Third Accounting Firm and the Parke-Davis Revenues as reflected in
Schedule 2(i), and B is equal to the absolute value of the difference (in
dollars) between the Parke-Davis Revenues as finally determined by the Third
Accounting Firm and the Parke-Davis Revenues as reflected in the objection
submitted pursuant to Section 2(i)(ii).
10.
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iv. Buyer agrees to permit Seller, Seller's Accountants and their
respective representatives, during normal business hours, to have reasonable
access to, and to examine and make copies of, all books and records of Buyer,
including but not limited to the books, records, schedules, work papers and
audit programs of Buyer and Buyer's Accountants and access to the
representatives of Buyer's Accountants, which documents and access are necessary
to review Schedule 2(i). Seller similarly agrees to permit Buyer's Accountants
and their respective representatives, during normal business hours, to have
reasonable access to any books and records of Seller, in order to enable them to
prepare such schedule.
j. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE. In addition to the
Somerset Adjustment and the Parke-Davis Adjustment, the Purchase Price shall be
adjusted to reflect the following prorations related to the Acquired Assets,
with Seller liable to the extent such items relate to time periods up to and
including the date of the Closing and Buyer liable to the extent such items
relate to periods subsequent to the date of the Closing:
i. Any Taxes (except income taxes and sales and use taxes) on or
with respect to the Acquired Assets; provided that special assessments against
Seller then due and payable for work actually completed prior to the date of the
Closing shall be paid by Seller;
ii. Rents, additional rents, taxes and other items payable by
Seller under any lease, license, permit, contract or other agreement or
arrangement to be assigned to or assumed by Buyer;
iii. The amount of rents, taxes and charges for sewer, water, fuel,
telephone, electricity and other utilities; provided that if practicable, meter
readings shall be taken at the date of the Closing and the respective
obligations of the Parties determined in accordance with such readings;
iv. Expenses related to the operation of the Division, including
without limitation travel and other expenses of the Field Sales Force and
prepaid expenses for events occurring after the Closing; and
v. All other items normally adjusted in connection with similar
transactions.
If the actual expense of any of the above items for the billing
period within which the date of the Closing falls is not known on the Adjustment
Date, the proration shall be made based on the expense incurred in the previous
billing period. Except with respect to expenses described in subparagraph (iv)
above, the net amount of all such prorations will be settled and paid on or
before the 60th day following the date of the Closing (the "Adjustment Date") by
wire transfer or other immediately available funds. The expenses described in
subparagraph (iv) above shall be paid by Buyer immediately upon presentment of a
bill by Seller documenting expenses incurred by Seller on behalf of Buyer.
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k. RECORDS RELATING TO PRORATIONS. Seller and Buyer agree to furnish
each other with such documents and other records as shall be reasonably
requested in order to confirm all proration calculations.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement, except
as set forth in Schedules 3(a)-(p) of the disclosure schedule accompanying this
Agreement and initialed by the Parties (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged according to the lettered and numbered
paragraphs contained in this Section 3.
a. ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
b. AUTHORIZATION OF TRANSACTION. Seller has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Seller, enforceable in accordance with its terms and conditions, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above) will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which Seller is subject or any provision of the
certificate of incorporation or bylaws of Seller or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which Seller is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Seller is not required to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
d. BROKERS' FEES. None of Seller or its Affiliates has any Liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Buyer could
become liable or obligated.
e. TITLE TO ASSETS. Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
f. SUBSIDIARIES. Seller has no Subsidiaries.
12.
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g. UNDISCLOSED LIABILITIES. To the Knowledge of the executive officers
and directors of Seller, there is no Basis for any future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
Seller relating to the Division giving rise to any Liability.
h. LEGAL COMPLIANCE. With respect to the operation of the Division,
Seller and its Affiliates have at all times since January 1, 1994 complied with
all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings and charges thereunder) of federal, state,
local and foreign governments (and all agencies thereof) except where failure to
so comply would not reasonably be expected to have material Adverse Consequences
on Seller, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against Seller
alleging any failure to so comply.
i. INTELLECTUAL PROPERTY.
i. Seller owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder will be owned or available for use by Buyer on identical terms
and conditions immediately subsequent to the Closing hereunder.
j. TANGIBLE ASSETS. Seller owns or leases all of the Acquired Assets
identified on Schedule 1(a), which constitute all of the tangible assets
necessary for the conduct of the business of the Division as presently
conducted. Each such Acquired Asset is free from defects (patent and latent),
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is suitable
for the purposes for which it presently is used.
k. CONTRACTS. Seller has delivered to Buyer a correct and complete copy
of each written agreement (as amended to date) listed in Schedule 1(c) (as
amended to date). With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable and in full force and effect, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies; (B) the agreement will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in Section 2 above), subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies; (C) no party is in breach or default, and to the
Knowledge of the executive officers and directors of Seller, no event has
occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification or acceleration, under the agreement; and
(D) no party has repudiated any provision of the agreement; except with respect
to clauses (A)-(D) above where such breach, default, modification or repudiation
would not reasonably be expected to have Adverse Consequences on Buyer.
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l. POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Seller with respect to the operation of the Division.
m. INSURANCE. The Division has been covered during the past three (3)
years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. Schedule
3(m) describes any self-insurance arrangements affecting the Division.
n. LITIGATION. Schedule 3(n) of the Disclosure Schedule sets forth each
instance in which Seller (i) is subject to any outstanding injunction, judgment,
order, decree, ruling or charge relating to the Division or (ii) is a party or,
to the Knowledge of any of the directors and executive officers (and employees
with responsibility for litigation matters) of Seller, is threatened to be made
a party to any action, suit, proceeding, hearing or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator relating to the
Division. None of the actions, suits, proceedings, hearings and investigations
set forth in Schedule 3(n) of the Disclosure Schedule would reasonably be
expected to result in any material Adverse Consequences to the Division.
o. EMPLOYEES. To the Knowledge of the directors and executive officers
of Seller (and employees of Seller with responsibility for employment matters
with respect to the Division), no executive, key employee or group of employees
of Seller involved in the Division has any plans to terminate employment with
the Division. With respect to the operation of the Division, Seller is not a
party to or bound by any collective bargaining agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. With respect to the operation of the Division, Seller has
not committed any unfair labor practice. None of the directors and executive
officers of Seller (and employees of Seller with responsibility for employment
matters with respect to the Division) has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of Seller.
p. CERTAIN BUSINESS RELATIONSHIPS WITH THE DIVISION. None of the
directors or executive officers of Seller has been involved in any business
arrangement or relationship with Seller related to the operation of the Division
within the past 12 months, and none of such persons or their Affiliates owns any
asset, tangible or intangible, which is used in the business of the Division.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement, except
as set forth in Schedule 4(a)-(d) of the Disclosure Schedule. The Disclosure
Schedule will be arranged according to the lettered and numbered paragraphs
contained in this Section 4.
a. ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.
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b. AUTHORIZATION OF TRANSACTION. Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Buyer, enforceable in accordance with its terms and conditions, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above) will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which Buyer is subject or any provision of its
charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject. Buyer is not required to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in Section
2 above).
d. BROKERS' FEES. None of Buyer or its Affiliates has any Liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Seller
could become liable or obligated.
SECTION 5. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing.
a. GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as the other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 6 below).
Seller acknowledges and agrees that from and after the Closing Buyer will be
entitled to possession of the documents identified in Schedule 1(g).
b. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the date of this Agreement involving the Division, the other Party will
cooperate with the contesting or defending Party and its counsel in the contest
or defense, make available its personnel and provide such testimony and access
to its books and records as shall be necessary in connection
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with the contest or defense, all at the sole cost and expense of the contesting
or defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 6 below); notwithstanding the generality
of the foregoing, the contesting or defending Party shall reimburse the other
Party for such Party's reasonable out of pocket costs in excess of $100.00
(including payment of a pro rata portion of the salary of any employee who is
prevented from performing such employee's normal duties for more than four hours
in connection with any single request for assistance).
c. TRANSITION. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier or other business associate of the Division from maintaining the same
business relationships with Buyer and the Division after the Closing as it
maintained with the Division prior to the Closing. Seller will refer all
customer inquiries relating to the business of the Division to Buyer from and
after the Closing.
d. CONFIDENTIALITY. Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in its possession (PROVIDED,
HOWEVER, that Seller shall retain a copy of the physician lists maintained by
Seller for use in identifying potential research clinicians, but not for sales
and marketing purposes). In the event that Seller is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information, Seller will notify Buyer promptly of the
request or requirement so that Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 5(d). If, in the absence of
a protective order or the receipt of a waiver hereunder, Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, Seller may disclose the Confidential
Information to the tribunal; provided, however, that Seller shall use its
reasonable best efforts to obtain, at the reasonable request of Buyer, an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Buyer shall
designate.
e. COVENANT NOT TO COMPETE. Until [*], Seller will not engage
directly or indirectly in the sales, marketing or commercial distribution of
pharmaceutical products in any geographic area in which the Division conducts
such business as of the date of this Agreement; provided, however, that no
owner of less than [*] the outstanding stock of any publicly traded
corporation shall be deemed to engage solely by reason thereof in any of its
businesses. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 5(e) is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision,
and this Agreement shall be enforceable as so modified after the expiration
of the time within which the judgment may be appealed.
16.
* Confidential treatment requested
<PAGE>
SECTION 6. REMEDIES FOR BREACHES OF THIS AGREEMENT.
a. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Seller contained in Section 3(e)-(p) of this
Agreement shall survive the Closing (even if Buyer knew or had reason to know of
any misrepresentation or breach of warranty at the time of Closing) and continue
in full force and effect until March 31, 1999. All of the other representations
and warranties of Buyer and Seller contained in this Agreement (including the
representations and warranties of Seller contained in Section 3(a)-(d) hereof)
shall survive the Closing (even if the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect thereafter until the expiration of the
applicable statutes of limitations.
b. INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
i. Subject to Sections 6(b)(ii) - (iv) and provided that Buyer
makes a written claim for indemnification against Seller pursuant to Section
7(g) below within the survival period set forth in Section 6(a) above, then
Seller agrees to indemnify Buyer from and against the entirety of any Adverse
Consequences Buyer may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences Buyer may suffer after the
end of any applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by:
(A) any breach by Seller (or any allegation by a third party
of facts that, if true, would constitute a breach) of any of Seller's
representations, warranties and covenants contained in this Agreement; and
(B) any Liability of Seller which is not an Assumed
Liability (including any Liability of Seller that becomes a Liability of Buyer
under any bulk transfer law of any jurisdiction, under any common law doctrine
of de facto merger or successor liability, or otherwise by operation of law).
ii. Subject to Section 6(b)(iv), Seller shall not be required to
make any indemnification payment pursuant to Section 6(b)(i)(A) until such time
as the total amount of all Adverse Consequences that have been directly or
indirectly suffered or incurred by Buyer with respect to the matters described
in Section 6(b)(i)(A) exceed $200,000 in the aggregate. At such time as the
total amount of such Adverse Consequences exceeds $200,000 in the aggregate,
Buyer shall be entitled to be indemnified against the full amount of such
Adverse Consequences (and not merely the portion of such damages exceeding
$200,000).
iii. Subject to Section 6(b)(iv), the maximum liability of Seller
under Section 6(b)(i)(A) shall be equal to $9,000,000; PROVIDED, HOWEVER, that
(i) Seller's liability shall be reduced by any amounts obtained by Buyer
pursuant to indemnification rights of Seller (which rights have been assigned to
Buyer pursuant to this Agreement and documents delivered in connection herewith)
pursuant to the Asset Purchase Agreement by and between American
17.
<PAGE>
Cyanamid Company, a Maine corporation ("American Cyanamid"), and Seller dated
October 3, 1997 relating to Loxitane-Registered Trademark- (the
"Loxitane-Registered Trademark- Asset Purchase Agreement"), the Supply
Agreement between Seller and American Cyanamid dated October 3, 1997 relating
to Loxitane-Registered Trademark- (the "Loxitane-Registered Trademark- Supply
Agreement"), the Patent License Agreement between Seller and American
Cyanamid dated October 3, 1997 relating to Loxitane-Registered Trademark-
(the "Loxitane-Registered Trademark- Patent License Agreement") and the Asset
Purchase Agreement by and between Seller and Warner-Lambert Company, through
its division Parke-Davis, relating to the transfer to Seller of
Ergostat-Registered Trademark- or other agreement of similar effect (the
"Ergostat-Registered Trademark- Purchase Agreement"); and (ii) the $9,000,000
maximum liability of Seller under Section 6(b)(i)(A) shall be divided among
and limited to [*] for Adverse Consequences suffered by Buyer related to
Loxitane-Registered Trademark-, [*] for Adverse Consequences suffered by
Buyer related to Ergostat-Registered Trademark- and [*] for Adverse
Consequences suffered by Buyer that are not related to Loxitane-Registered
Trademark- or Ergostat-Registered Trademark-.
iv. The limitations on the indemnification obligations that are
set forth in Sections 6(b)(ii) and (iii) shall not apply to any Adverse
Consequences arising directly or indirectly from any fraudulent breach of any
representation, warranty or covenant in this Agreement by Seller.
c. INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER.
i. Subject to Sections 6(c)(ii) - (iv) and provided that Seller
makes a written claim for indemnification against Buyer pursuant to Section 7(g)
below within the survival period as set forth in Section 6(a) above, then Buyer
agrees to indemnify Seller from and against the entirety of any Adverse
Consequences Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences Seller may suffer after the
end of any applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by:
(A) any breach by Buyer (or any allegation by a third party
of facts that, if true, would constitute a breach) of any of Buyer's
representations, warranties and covenants contained in this Agreement;
(B) any Assumed Liability; and
(C) any Liability of Seller arising out of the
Loxitane-Registered Trademark- Asset Purchase Agreement, the
Loxitane-Registered Trademark- Supply Agreement, the
Loxitane-Registered Trademark- Patent License Agreement or the
Ergostat-Registered Trademark- Asset Purchase Agreement, except such Liability
arising out of breach of Seller's representations and warranties pursuant to
such agreements or as provided in Section 2(g) hereof.
ii. Subject to Section 6(c)(iv), Buyer shall not be required to
make any indemnification payment pursuant to Section 6(c)(i)(A) until such time
as the total amount of all Adverse Consequences that have been directly or
indirectly suffered or incurred by Seller with respect to the matters described
in Section 6(c)(i)(A) exceed $200,000 in the aggregate. At such time as the
total amount of such Adverse Consequences exceeds $200,000 in the aggregate,
18.
* Confidential treatment requested
<PAGE>
Seller shall be entitled to be indemnified against the full amount of such
Adverse Consequences (and not merely the portion of such damages exceeding
$200,000)
iii. Subject to Section 6(c)(iv), the maximum liability of Buyer
under Section 6(c)(i)(A) shall be equal to $4,000,000.
iv. The limitations on the indemnification obligations that are
set forth in Sections 6(c)(ii) and (iii) shall not apply to any Adverse
Consequences arising directly or indirectly from any fraudulent breach of any
representation, warranty or covenant in this Agreement by Buyer.
d. MATTERS INVOLVING THIRD PARTIES.
i. If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against the other Party (the "Indemnifying
Party") under this Section 6, then the Indemnified Party shall promptly notify
the Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
ii. The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
iii. So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 6(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party
19
<PAGE>
Claim without the prior written consent of the Indemnified Party (not to be
withheld unreasonably).
iv. In the event any of the conditions in Section 6(d)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (B) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 6.
e. EXCLUSIVE REMEDY. The foregoing indemnification provisions shall
represent the exclusive remedy any Party may have for breach of representation,
warranty or covenant by the other Party hereto.
SECTION 7. MISCELLANEOUS.
a. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
b. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
c. ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements or representations by or between the
Parties, written or oral, to the extent they have related in any way to the
subject matter hereof.
d. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Party, which approval shall not be unreasonably withheld; provided
however, that Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
Buyer nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
20.
<PAGE>
e. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below:
If to Buyer: Copy to:
----------- -------
Watson Laboratories, Inc. D'Ancona & Pflaum
311 Bonnie Circle 30 North LaSalle Street
Corona, CA 91720 Suite 2900
Fax: 909-270-1429 Chicago, IL 60602
Attn: Dr. Allen Chao Attn: Michel Feldman
Fax: 312-580-0923
If to Seller: Copy to:
------------ -------
CoCensys, Inc. Cooley Godward LLP
201 Technology Drive 3000 El Camino Real
Irvine, CA 92718 Five Palo Alto Square
Attn: Chief Financial Officer Palo Alto, CA 94306
Fax: 714-753-6161 Attn: Alan C. Mendelson
Fax: (650) 857-0663
Any Party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
h. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
21.
<PAGE>
i. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. No waiver by any Party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
j. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
k. EXPENSES. Each of Buyer and Seller will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
l. CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty or covenant.
m. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
n. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the
22.
<PAGE>
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 7(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity.
o. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Los Angeles or Orange
County, California, in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
7(g) above. Each Party agrees that a final judgment in any action or proceeding
so brought shall be conclusive and may be enforced by suit on the judgment or in
any other manner provided by law or in equity.
p. TAX MATTERS.
i. Seller will be responsible for the preparation and filing of
all Tax Returns for Seller for all periods as to which Tax Returns are due after
the date of this Agreement (including the consolidated, unitary, and combined
Tax Returns for Seller which include the operations of the Division for any
period ending on or before the date of this Agreement). Seller will make all
payments required with respect to any such Tax Return.
ii. Buyer will be responsible for the preparation and filing of
all Tax Returns for the Division for all periods as to which Tax Returns are due
after the date of this Agreement (other than for Taxes with respect to periods
for which the consolidated, unitary and combined Tax Returns of Seller will
include the operations of the Division). Buyer will make all payments required
with respect to any such Tax Return; provided, however, that Seller will
reimburse Buyer concurrently therewith to the extent any payment Buyer is making
relates to the operations of the Division for any period ending on or before the
date of this Agreement.
q. BULK TRANSFER LAWS. Buyer acknowledges that Seller will not comply
with the provisions of any bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.
23.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
WATSON LABORATORIES, INC.
By: /s/ CHATO ABAD
--------------------------------
Name: CHATO ABAD
------------------------------
Title: VP - FINANCE
-----------------------------
COCENSYS, INC.
By: /s/ F. R. NICHOL
--------------------------------
Name: F. R. NICHOL
------------------------------
Title: PRESIDENT
-----------------------------
24.
<PAGE>
SCHEDULE 1(a)
TANGIBLE PERSONAL PROPERTY
Location Asset Description
- -------- --------------------------------------------
New Jersey Sales Office All furniture, fixtures and office equipment
including, but not limited to, the following:
Overhead projector
Magnavox 25" color television
Hitachi VCR
LCD InFocus System LitePro 210 Projector
Kodak Ektagraphic III slide projector
GBC Image Maker 1000
GBC Shredder
Sears Kenmore Refrigerator and Microwave
IBM typewriter
3 HP LaserJet Printers
9 PC compatible desktop computers (various
manufacturers)
2 laptop docking stations
File server and all ancillary communications
equipment and modems
All office furniture including desks, chairs, filing
cabinets, artwork, plants, etc.
Sales Force 68 IBM laptop computers currently located in the
field, the New Jersey sales office or the
Irvine sales office
Irvine Sales Office 3 desktop Pcs currently used by Henson, Hradecky and
Schomer (including all software, modems and
related accessories)
Sales file server and all ancillary communications
equipment and modems
Inventory of spare parts and PCMCIA modems for the
IBM laptop computers
HP LaserJet 4si
3 Storage cabinets (for spare computer parts)
3M overhead projector and screen
Slide projector
Magnavox color television
Phillips VCR
Annual membership with Certified Medical
Representative (CMR) Institute
25.
<PAGE>
SCHEDULE 1(b)
INTELLECTUAL PROPERTY
1. [ * ].
2. [ * ].
3. [ * ].
4. [ * ].
5. Human resource materials for training, interviewing, performance
management, etc. of sales representatives.
6. Correspondence files for Sales & Marketing inside personnel.
7. [ * ].
8. Sales Contribution Reports for 1996 and Financial Statements for December
of 1994, 1995, and 1996 and January to present for 1997.
9. Files relating to prospects for New Business Development opportunities for
sales and marketing specifically.
10. Administrative manuals and reference manuals necessary for the operation
of the sales and marketing division.
11. All electronic files located on LAN_2 and LAN_3 network.
12. 1997 Parke-Davis Promotion Agreement (copy); contract terminated. All
correspondence, reports, etc. relating to the promotion to
Cognex-Registered Trademark- for the period of October 1995 to June 30,
1997.
13. All correspondence, reports, etc. relating to the promotion of
Eldepryl-Registered Trademark- for the period of January 1, 1996 to
present.
* Confidential treatment requested
26.
<PAGE>
14. [ * ].
15. [ * ].
16. Training and Development program materials developed for sales
representative development program.
17. [ * ].
18. Files containing information on conventions, symposiums, meetings, product
launches, etc.
27.
* Confidential treatment requested
<PAGE>
SCHEDULE 1(c)
ASSUMED CONTRACTS
1. 1997 Promotion Agreement between Somerset Pharmaceuticals, Inc. and Seller
dated April 7, 1997.
2. Letter agreement between Seller and the Parke-Davis Pharmaceutical
Division of Warner-Lambert Company dated July 1, 1997.
3. Asset Purchase Agreement by and between American Cyanamid Company and
Seller dated October 3, 1997 relating to Loxitane-Registered Trademark-.
4. Supply Agreement between American Cyanamid Company and Seller dated
October 3, 1997 relating to Loxitane-Registered Trademark-.
5. Patent License Agreement between American Cyanamid Company and Seller
dated October 3, 1997 relating to Loxitane-Registered Trademark-.
6. [ * ].
7. Motor Vehicle Equity Lease dated August 31, 1994 by and between Enterprise
Leasing Company and Seller.
8. Master Equity Lease Agreement (Open-End) dated May 1, 1996 by and between
Enterprise Fleet Services and Seller including vehicle lease schedules for
up to 64 vehicles at any given time.
9. Motor Vehicle Lease Agreement dated October 10, 1996 by and between Donlen
Corporation and Seller including vehicle lease schedules for up to 65
vehicles at any given time.
10. Lease Assumption Agreement Number 6524 dated June 14, 1994, by and between
PHH Vehicle Management Services Corporation and Seller regarding Lease
Agreement Number 0299 dated November 26, 1984 between PHH and Ciba-Geigy
Corporation.
11. 1997 Promotion Agreement by and between Somerset Pharmaceuticals, Inc. and
Seller.
12. Cellular Services Agreement dated May 29, 1996 by and between Airtouch
Cellular and Seller for Rick Henson's cellular phone.
28.
* Confidential treatment requested
<PAGE>
13. [ * ].
14. Maintenance Agreement dated September 30, 1996 by and between IBM and
Seller on all IBM Thinkpads utilized by the sales force.
15. 1997 Parke-Davis Promotion Agreement and all correspondence, reports, etc.
relating to the promotion of Zarontin-Registered Trademark- beginning in
July of 1997.
16. [ * ].
17. Lease Agreement dated September 1994 by and between Livingston Corporate
Park Associates and Seller for office space located at 220 South Orange
Avenue, Livingston, New Jersey.
18. [AT&T operating lease]
19. [Kodak operating lease]
20. [Pitney Bowes operating lease]
21. [Ricoh operating lease]
22. [General Binding Corporation service agreement]
23. Universal Network Service Agreement (Uni-Net) for voice mail/long distance
services for the division.
29.
* Confidential treatment requested
<PAGE>
SCHEDULE 1(d)
CONTRACTS UNDER NEGOTIATION
1. Asset Purchase Agreement by and between Warner-Lambert Company, through
its division Parke-Davis, and Seller relating to
Ergostat-Registered Trademark-.
2. [ * ].
3. [ * ].
4. [ * ]. Proposed contract would expire in December of 1997. Payments
have been made in good faith with no intent by either party to
sign a formal contract.
30.
* Confidential treatment requested
<PAGE>
SCHEDULE 1(e)
DEPOSITS
1. Somerset advance payment of $625,000 for period from October 1 to December
31, 1997. This amount is to be prorated to Buyer on the basis of $625,000
multiplied by the ratio of the number of days from the Closing date to
December 31, 1997 divided by 92 days.
31.
<PAGE>
SCHEDULE 1(f)
BOOKS AND RECORDS
1. Files related to AT&T services; copies of invoices, rate and service
agreements.
2. FDA materials related to sample fulfillment.
3. Fleet correspondence, invoice copies, maintenance records, accident
reports, etc. for vehicles covered under lease agreements with the
following vendors: Donlen Corporation, Enterprise Leasing and PHH.
4. Files, correspondence, manuals, warranties, etc. relating to the hardware
and software utilized by the Division from inception.
5. Certificates of insurance for vehicles leased from Donlen Corporation,
Enterprise Leasing and PHH.
6. FDA materials related to sample fulfillment; public information.
7. Copies of mutual non-disclosure agreements on various companies relating
to opportunities for new business development purposes.
32.
<PAGE>
SCHEDULE 1(g)
FIELD SALES FORCE
[ * ].
33.
* Confidential treatment requested
<PAGE>
APPENDIX TO DISCLOSURE SCHEDULE
ASSUMED LIABILITIES
1. Seller's Liabilities arising from and after the Closing under and pursuant
to the Assumed Contracts.
2. Seller's obligations arising from and after the Closing under any
governmental authorization listed in Schedule 1(f).
3. All Liabilities arising from and after the Closing with respect to the
operation of the Division from and after the Closing.
35.
<PAGE>
Contact: CoCensys, Inc.
Peter E. Jansen
Vice President & Chief Financial Officer
(714) 753-6100
or
Christi Foster
Director of Communications
(714) 753-6112
Watson Pharmaceuticals
Suzanne Craig, Lisa Laukkanen,
Doug Sherk
Morgen-Walke Associates, Inc.
(415) 296-7383
Sandra Badurina, Josh Passman
(212) 850-5698
FOR IMMEDIATE RELEASE
- ---------------------
COCENSYS SELLS SALES DIVISION TO WATSON PHARMACEUTICALS
IRVINE, California/PR Newswire/Oct. 9, 1997 - CoCensys, Inc. (Nasdaq: COCN)
and Watson Pharmaceuticals, Inc. (NYSE: WPI) announced today that they have
entered into a definitive agreement under which Watson's wholly owned
subsidiary, Watson Laboratories, Inc., has acquired CoCensys' Pharmaceutical
Sales and Marketing Division. The transaction is valued at approximately $9
million, of which $6 million was paid at closing. The balance will be paid
on the occurrence of certain events.
Although specific terms of the agreement were not disclosed, the transaction
includes the right to hire approximately 70 sales and marketing personnel
employed by the division; the division's operating and other assets; and the
current co-promotion agreements. In addition to the cash proceeds of the
sale, CoCensys estimates that, on an annualized basis, its net cash burn will
be reduced by approximately $3 million as a result of this transaction.
"This important transaction with Watson Pharmaceuticals furthers our strategy
of focusing our resources and energies on our core competency of discovering
and developing therapies for brain and central nervous system disorders,"
said F. Richard Nichol, Ph.D., President and Chief Executive Officer of
CoCensys. "The sales organization will certainly benefit by being part of an
operating environment that possesses a large portfolio of products and the
significant resources to maximize its marketing capabilities. At the same
time, CoCensys will maintain the potential opportunity, through collaborative
relationships with Watson, to leverage the sales force and Watson's
manufacturing capacity as our products come to market. It's an excellent
arrangement for everyone, and we look forward to exploring other
opportunities to work with Watson Pharmaceuticals," concluded Dr. Nichol.
<PAGE>
Allen Chao, Ph.D., Chairman and Chief Executive Officer of Watson
Pharmaceuticals commented, "As part of our strategy to diversify our revenue
base, this acquisition adds an important dimension to Watson's existing sales
and marketing capability. The CoCensys Sales and Marketing Division was
particularly attractive because the sales force is well-established and
expert in the areas of neurology and psychiatry. This sales force will
complement our existing primary and our recently established female
healthcare sales forces, as well as those of Oclassen's dermatological sales
force, and be a key component in our expansion and diversification program.
Additionally, this new relationship with CoCensys provides us with the
potential to access novel central nervous system compounds and research
expertise in the future," concluded Dr. Chao.
The following important factors may affect Watson's and CoCensys' actual
results and could cause such results to differ materially from
forward-looking statements made by or on behalf of Watson and/or CoCensys.
Such factors include, but are not limited to, changing market conditions, the
availability and cost of raw materials, the impact of competitive products
and pricing, the timely development, FDA approval and market acceptance of
Watson's and CoCensys' products, and other risks detailed from time to time
in Watson's and CoCensys' respective Securities and Exchange Commission
filings.
CoCensys is a biopharmaceutical company that discovers and develops products
to treat neurological and psychiatric disorders. The company's product
development programs focus on novel, small molecule compounds for the
treatment of migraine, epilepsy, anxiety, insomnia, stroke, head trauma and
neurodegenerative diseases. More information about the company is available
on its website: http://www.cocensys.com.
Watson Pharmaceuticals, Inc., headquartered in Corona, CA, is engaged in the
development, manufacture and sale of off-patent medications and proprietary
pharmaceutical products.
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