Exhibit 10.49
 
 
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH
“***”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY
OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE EXCHANGE ACT OF 1934.
ASSET PURCHASE AGREEMENT
by and among
AVANIR PHARMACEUTICALS, and
ALAMO PHARMACEUTICALS, LLC
on the one hand
and
AZUR PHARMA INTERNATIONAL III LIMITED, and
AZUR PHARMA INC.
on the other hand
Dated as of July 2, 2007
 
 

 

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TABLE OF CONTENTS

                      Page   ARTICLE I DEFINITIONS     1  
 
           
1.1
  Defined Terms     1  
1.2
  Other Defined Terms     12  
1.3
  Seller Knowledge     13  
 
            ARTICLE II PURCHASE AND SALE OF ASSETS     13  
 
           
2.1
  Transfer of Assets     13  
2.2
  Assumption of Liabilities     14  
2.3
  Purchase Price     14  
2.4
  Payment of Sales Percentage Amount     15  
2.5
  Allocation of Purchase Price     16  
2.6
  Closing Costs; Transfer Taxes and Fees     16  
2.7
  Further Assurances     17  
2.8
  Determination of Net Working Capital     17  
2.9
  Withholding Tax     19  
 
            ARTICLE III CLOSING     19  
 
           
3.1
  Closing     19  
3.2
  Deliveries at Closing     19  
3.3
  Consents to Assignment and Transfer of Certain Rights and Liabilities     21  
 
            ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES AND
PARENT     21    
4.1
  Organization     22  
4.2
  Authorization     22  
4.3
  No Conflict or Violation; Consents and Approvals   22
4.4
  Financial Information     23  
4.5
  Absence of Certain Changes or Events     23  
4.6
  Title to Purchased Assets and Sufficiency     23  
4.7
  Material Contracts     23  
4.8
  Permits     24  
4.9
  Litigation     24  
  4.10
  Compliance with Laws     24  
  4.11
  Brokers or Finders     26  
  4.12
  Employment, Labor and Employee Benefit Matters     26  
  4.13
  Intellectual Property     27  

 

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                      Page  
  4.14
  Environmental Matters     28  
  4.15
  Inventory     28  
  4.16
  Insurance     29  
  4.17
  Customers     29  
  4.18
  Taxes     29  
  4.19
  Cutler Agreement     30  
 
            ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER     30  
 
           
5.1
  Organization of Buyer     30  
5.2
  Authorization     30  
5.3
  Compliance with Applicable Law     30  
5.4
  Litigation     30  
5.5
  No Conflict or Violation; Consents and Approvals   30
5.6
  No Brokers or Finders     31  
5.7
  Sufficiency of Consideration     31  
5.8
  [* * *]     31  
 
            ARTICLE VI COVENANTS OF THE SELLING PARTIES AND BUYER     32  
 
           
6.1
  Access by Buyer; Confidentiality Agreement     32  
6.2
  Conduct of Business     33  
6.3
  Employee Matters     34  
6.4
  No Additional Representations and Warranties     36  
6.5
  Disclaimer of Estimates and Projections     37  
6.6
  Revision of Marketing Materials; Use of Names   37
6.7
  Customer Notifications     37  
6.8
  Regulatory Matters, Etc     38  
6.9
  Post Closing Cooperation     39  
  6.10
  Consents     40  
  6.11
  Financing     40  
  6.12
  Transition Services     40  
  6.13
  Transition Services Contracts     43  
  6.14
  Reporting Obligations     44  
  6.15
  Operation of Business by Buyer     44  
  6.16
  [* * *]     44  
  6.17
  Supplement of Disclosure Schedules     45  
 
            ARTICLE VII CONDITIONS TO THE SELLING PARTIES’ OBLIGATIONS     46  
 
           
7.1
  Representations, Warranties and Covenants     46  

 

* * *   Confidential Information, indicated by [***], has been omitted from this
filing and filed separately with the Securities and Exchange Commission

 

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                      Page  
7.2
  No Laws or Governmental Orders     46  
7.3
  Deliveries     46  
 
            ARTICLE VIII CONDITIONS TO BUYER’S OBLIGATIONS     46  
 
           
8.1
  Representations, Warranties and Covenants     46  
8.2
  No Law or Governmental Orders     47  
8.3
  Deliveries     47  
8.4
  Consents     47  
8.5
  Employees     47  
 
            ARTICLE IX POST-CLOSING COVENANTS     47  
 
           
9.1
  Selling Parties Maintenance of Insurance     47  
9.2
  Survival     47  
9.3
  Indemnification     48  
9.4
  Indemnification Procedures     49  
9.5
  Limitation on Liability     52  
9.6
  Calculation and Characterization of Damages     52  
9.7
  Exclusive Remedy     52  
9.8
  Mitigation of Damages     53  
9.9
  Certain Damages     53  
  9.10
  Covenant Not to Compete     53  
 
            ARTICLE X MISCELLANEOUS     54  
 
           
  10.1
  Termination     54  
  10.2
  Assignment     54  
  10.3
  Cooperation     55  
  10.4
  Notices     55  
  10.5
  Governing Law     56  
  10.6
  Entire Agreement; Amendments and Waivers     56  
  10.7
  Counterparts     56  
  10.8
  No Third Party Beneficiaries; Expenses     56  
  10.9
  Severability     57  
    10.10
  Titles; Gender; Certain Interpretive Matters     57  
    10.11
  Publicity     57  
    10.12
  Exhibits and Schedules; Construction of Certain Provisions   58
    10.13
  Bulk Transfer Laws     58  
    10.14
  Cumulative Remedies     58  
    10.15
  Arbitration     58  
    10.16
  Time of Essence     58  
    10.17
  Drafting     59  

 

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EXHIBITS

         
Exhibit A-1
      Form of Inc. Assignment and Assumption Agreement
Exhibit A-2
      Form of Limited Assignment and Assumption Agreement
Exhibit B-1
  —   Form of Inc. Assignment of Contracts
Exhibit B-2
      Form of Limited Assignment of Contracts
Exhibit C
  —   Form of Assignment of Owned Intellectual Property
Exhibit D
  —   Form of Assignment and Assumption of Lease

 

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ASSET PURCHASE AGREEMENT
          THIS ASSET PURCHASE AGREEMENT, dated as of July 2, 2007, is by and
among Avanir Pharmaceuticals, a California corporation (“Parent”), Alamo
Pharmaceuticals, LLC, a California limited liability company (“Seller” and
together, the “Selling Parties”), and Azur Pharma Inc., a New York corporation
(“Azur Inc.”), and Azur Pharma International III Limited, a Bermuda limited
liability company (“Azur Limited” and together with Azur Inc., “Buyer”).
RECITALS
          WHEREAS, Seller is a pharmaceutical company focused on developing,
acquiring and commercializing therapeutic products for the treatment of chronic
diseases, including a product known as FazaClo, an orally disintegrating tablet
that addresses the adherence needs in patients with refractory schizophrenia;
          WHEREAS, Seller is a wholly owned Subsidiary of Parent; and
          WHEREAS, Buyer desires to purchase from the Selling Parties, and the
Selling Parties desire to sell to Buyer, certain assets relating to the Business
(as defined in Section 1.1 below) and Buyer desires to assume from, and the
Selling Parties desire to transfer to Buyer, certain liabilities relating to the
Business, in each case upon the terms and subject to the conditions of this
Agreement.
AGREEMENT
          NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements of the parties contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
          1.1 Defined Terms. As used herein, the terms below when used with an
initial capital letter shall have the following meanings. Any of such terms,
unless the context otherwise requires, may be used in the singular or plural,
depending upon the reference.
          “Action” means any action, Claim, suit, litigation or other proceeding
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority or arbitrator.
          “Affiliate” has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.

 

--------------------------------------------------------------------------------

 

          “Agreement” means this Asset Purchase Agreement, including all
exhibits and schedules hereto (including the Disclosure Schedules), as the same
may be amended, modified or supplemented from time to time in accordance with
its terms.
          “Ancillary Agreements” means, collectively, (a) the Assignment and
Assumption Agreements, (b) the Assignments of Contracts, (c) the Assignment of
Owned Intellectual Property, (d) the Assignment and Assumption of Lease and
(e) all other instruments, certificates and documents delivered by the parties
pursuant to this Agreement, as each may be amended, modified or supplemented
from time to time in accordance with its terms.
          [* * *]
          “Assumed Liabilities” means all Liabilities, whether or not accruing,
arising out of or relating to events or occurrences happening or conditions
existing, before, on or after the Closing Date, which relate directly or
indirectly to the Business, other than Retained Liabilities. Without limiting
the foregoing, Assumed Liabilities include:
     (a) the UPA Payments;
     (b) all rebates, chargebacks (including all pricing allowances) and Product
returns relating exclusively to the Business;
     (c) all accounts payable and accrued expenses relating exclusively to the
Business;
     (d) all payment and performance obligations of the Selling Parties under
the Business Contracts (including the lease under which Seller is the tenant and
relating to the Facility, with respect to periods on and after the Closing
Date);
     (e) the Assumed Tax Liabilities;
     (f) except for Taxes to be paid by the Selling Parties under Section 2.6,
all Liabilities, whether or not accrued, arising out of or relating to events or
occurrences happening or conditions occurring after the Closing, for any Tax
that may be imposed by any Governmental Authority on the ownership, sale,
operation or use of the Purchased Assets; and
     (g) the Liabilities specified in Schedule 1.1(a).
          “Assumed Tax Liabilities” means all Liabilities for Taxes and fees
with respect to the Purchased Assets for which Buyer is liable pursuant to
Section 2.6 hereof.
 

[* * *]   Confidential Information, indicated by [***], has been omitted from
this filing and filed separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

          “Business” means the business activities and operations of the Selling
Parties involving the development, formulation, testing, production, licensing,
commercialization and distribution of the Product, including the development and
maintenance of a patient registry and sub-registry with respect to the Product.
          “Business Contracts” means all executory Contracts between the Selling
Parties or their Affiliates, on the one hand, and a third party, on the other
hand, relating exclusively to the operation of the Business, and all Contracts
of the Business listed on Schedule 1.1(b) but in all events excluding the
Contracts listed on Schedule 1.1(c).
          “Business Day” means any day other than Saturday, Sunday or any day
that is a legal holiday or a day in which banking institutions in Los Angeles,
California are authorized by Law or other governmental action to close.
          “Business Employees” means employees of the Selling Parties or any of
their Affiliates identified on Schedule 1.1(d) attached hereto.
          “Buyer Employees” means Business Employees who accept offers of
employment from Azur Inc. pursuant to Section 6.3(a) hereof.
          “CERCLA” means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. § 9601, et seq., as amended to date.
          “CIMA Agreements” means, in each case as amended, supplemented or
otherwise modified from time to time (a) that certain Amended and Restated
Development, License and Supply Agreement, dated as of August 22, 2005, by and
between Cima Labs Inc. and Seller; (b) that certain Quality Agreement, dated as
of December 29, 2003, by and between Cima Labs Inc. and Seller; and (c) that
certain Feasability Plan for Alamo Clozapine DuraSolv, dated as of May 2, 2005,
by and between Cima Labs Inc. and Seller.
          “Claim” means any claim, demand, cause of action, chose in action,
right of recovery or right of set-off of whatever kind or description against
any Person.
          “Closing Net Working Capital Overage” shall exist when the Closing Net
Working Capital Estimate exceeds the Target Net Working Capital and shall be
equal to the difference between the Closing Net Working Capital Estimate and the
Target Net Working Capital.
          “Closing Net Working Capital Underage” shall exist when the Closing
Net Working Capital Estimate is less than the Target Net Working Capital and
shall be equal to the difference between the Target Net Working Capital and the
Closing Net Working Capital Estimate.
          “Clozapine” or “clozapine” means the active ingredient in the
currently marketed product known as FazaClo® and shall include
8-chloro-11-(4-methyl-l-piperazinyl)-5H-dibenzo(b,e)(1,4) diazepine and any
salts, esters, metabolites, polymorphs, isomers, racemates, hydrates, solvates,
crystalline forms thereof and/or pro-drugs thereof.

 

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          “COBRA” shall mean the continuation coverage requirements set forth in
Sections 601 et seq. of the Employee Retirement Income Security Act of 1974 and
Section 4980B of the Code.
          “Code” means the Internal Revenue Code of 1986, as amended.
          “Confidentiality Agreement” means that certain confidentiality
agreement dated March 13, 2007 by and between Azur Pharma Limited and Seller.
          “Contract” means all contracts, subcontracts, agreements, leases,
licenses, commitments, loan agreements, mortgages, security agreements, trust
indentures, sales and purchase orders, statements of work, and other
instruments, arrangements or understandings of any kind, including any
amendments or alterations thereto.
          “Disclosure Schedules” means the disclosure schedules delivered by the
Selling Parties to Buyer on the date hereof which, among other things, set forth
certain exceptions to the representations and warranties contained in
Article IV.
          “Domain Names” means the domain names listed on Schedule 1.1(e).
          “Employee Records” means, with respect to Buyer Employees, copies of
all job-related employment documents.
          “Encumbrance” means any lien (including environmental and tax liens),
pledge, charge, other security interest, easement, servient easement, reversion,
reverter or purchase right.
          “Environmental Laws” means all Laws, as amended and now or hereafter
in effect and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, relating to the environment (including ambient air, indoor air,
surface water, ground water, land surface and subsurface strata), health,
safety, natural resources or Hazardous Substances, including CERCLA; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et seq.; the Clean
Water Act, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act, 15
U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. §§ 300f et seq. and the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.
          “ERISA” means the United States Employee Retirement Income Security
Act of 1974 and the rules and regulations promulgated thereunder.
          “ERISA Affiliate” means any Person that, together with the Seller,
would be deemed a “single employer” within the meaning of Section 414 of the
Code.
          “Exchange Act” means the Securities Exchange Act of 1934, as amended.
          “Excluded Assets” means any and all assets, properties, rights or
interests of the Selling Parties or their Affiliates that are not described in
the definition of Purchased Assets.

 

--------------------------------------------------------------------------------

 

          “Facility” means that certain facility used solely in connection with
the Business and located in New Jersey.
          “FDA” means the United States Food and Drug Administration, or any
successor agency thereto.
          “Federal Food, Drug and Cosmetic Act” means the Federal Food, Drug and
Cosmetic Act of 1938, as amended.
          “Final Net Working Capital Overage” shall only exist when the Final
Net Working Capital exceeds the Closing Net Working Capital Estimate by more
than Two Hundred Fifty Thousand Dollars ($250,000) and shall be equal to the
difference between the Final Net Working Capital and the Closing Net Working
Capital Estimate.
          “Final Net Working Capital Underage” shall only exist when the Final
Net Working Capital is less than the Closing Net Working Capital Estimate by
more than Two Hundred Fifty Thousand Dollars ($250,000) and shall be equal to
the difference between the Closing Net Working Capital Estimate and the Final
Net Working Capital.
          “Fixtures and Equipment” means all of the computers (but not
software), equipment, furniture, fixtures, furnishings, machinery, vehicles and
other tangible personal property owned or leased by the Selling Parties or their
Affiliates and solely used in connection with the Business, including those
items set forth on Schedule 1.1(f).
          “GAAP” means United States generally accepted accounting principles.
          “Governmental Authority” means any court, government (federal, state,
local, foreign or multinational) or other regulatory, administrative or
governmental agency or authority.
          “Governmental Order” means any judgment, decision, consent decree,
injunction, ruling, writ or order of or entered by any Governmental Authority
that is binding on any Person or its property under applicable Law.
          “Hazardous Substance” means petroleum, petroleum by-products,
polychlorinated biphenyls, asbestos, or substances containing asbestos, mold and
any other chemicals, compounds, constituents materials, substances or wastes in
any form regulated, or which can give rise to liability under any Environmental
Law.
          “Inc. Assumed Liabilities” means all Assumed Liabilities other than
the Limited Assumed Liabilities.
          “Inc. Business Contracts” means all Business Contracts other than the
Limited Business Contracts.
          “Inc. Purchased Assets” means all Purchased Assets other than the
Limited Purchased Assets.

 

--------------------------------------------------------------------------------

 

          “IND” means (a) the Investigational New Drug Application, as defined
in the Federal Food, Drug and Cosmetic Act and as it may be superseded or
amended from time to time, and the regulations promulgated thereunder, which is
required to be filed with the FDA before beginning clinical testing of a product
in human subjects, or any successor application or procedure, and (b) all
supplements and amendments that may be filed in respect to the foregoing.
          “Intellectual Property” means (a) Know How, (b) trademarks (including
service marks), trademark applications, trade dress, logos, trademark rights,
(c) United States, foreign and international patents and patent applications
(including any divisionals, continuation, continuations in part),
(d) copyrights, including registrations and applications for registration
thereof and (e) internet domain names.
          “Inventory” means all of the Selling Parties’ or any Affiliate’s
inventory held for resale in the Business and all of the Selling Parties’ or any
Affiliate’s raw materials, work in process or finished goods held for use in the
Business, including the inventory set forth on Schedule 1.1(g)
          “Know How” means confidential specifications, processes, designs,
plans, trade secrets, manufacturing, engineering and other manuals and drawings,
standard operating procedures, flow diagrams, safety, quality assurance and
quality control information, data, invention disclosures, customer and supplier
lists and all other similar confidential technical and business information and
data.
          “Laws” means any laws, statutes, ordinances, regulations, rules,
executive orders, court decisions and orders of any Governmental Authority.
          “Liabilities” means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether absolute or contingent, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, asserted or
unasserted, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including those liabilities, indebtedness and obligations
arising under any Law, Action, threatened Action, Governmental Order or any
award of any arbitrator of any kind, and those arising under any Contract,
commitment or undertaking.
          “Licensing Revenues” means, with respect to the Product, the licensing
revenues, including royalties, actually received by the Buyer or any of its
Affiliates from a Person (excluding any direct or indirect wholly-owned
subsidiary of Azur Pharma Limited) pursuant to any sublicense agreement with
such Person relating directly to the Product in any territory outside the United
States, reduced by (i) any royalty payments to CIMA Labs, Inc. pursuant to
Seller’s current contractual obligations to CIMA Labs, Inc. for such payments,
(ii) any Net Non-US Licensing Revenues (as such term is defined in the Unit
Purchase Agreement) payable pursuant to the Unit Purchase Agreement and
(iii) any of such licensing revenues that are non-recurring milestone payments
not based upon Product sales.
          “Licensed Intellectual Property” means the Intellectual Property
subject to the Licenses.

 

--------------------------------------------------------------------------------

 

          “Licenses” means the specific licenses and license rights set forth on
Schedule 1.1(h).
          “Limited Assumed Liabilities” means the Assumed Liabilities consisting
of (i) the UPA Payments and (ii) those Assumed Liabilities identified in
subsections (b) and (c) of the definition of Assumed Liabilities.
          “Limited Business Contracts” means the CIMA Agreements and the Supply
Agreements.
          “Limited Purchased Assets” means all Transferred Intellectual
Property, all Product Applications, all Product Registrations, all accounts
receivable relating exclusively to the Business, the Limited Business Contracts
and all Inventory.
          “Material Adverse Effect” means any event, circumstance or occurrence
that has had or that would be reasonably likely to have a material adverse
change in, or material adverse effect on, the financial condition or results of
operations of the Business, taken as a whole; provided that any such change or
effect resulting from (a) any change in general economic conditions or in the
industries in which the Business operates, to the extent the Business is not
disproportionately affected, (b) any change in Law, rule or regulation or GAAP
or interpretations thereof, or (c) the announcement or pendency of this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby, shall not be considered when determining whether a Material Adverse
Effect has occurred.
          “Most Recent Fiscal Month End” means May 31, 2007.
          “NDA” means a New Drug Application for any product, as appropriate,
requesting permission to place a drug on the market in accordance with the
Federal Food, Drug and Cosmetic Act, and all supplements or amendments filed
pursuant to the requirements of the FDA, including all documents, data and other
information concerning a product which are reasonably necessary for FDA approval
to market a product in the United States.
          “Net Sales” means, with respect to any period, the sum (without
duplication) of (i) the net sales of the Product in the Territory as would be
shown in the consolidated financial statements of Buyer’s ultimate parent entity
for such period, prepared in accordance with GAAP, (ii) the net sales of the
Product in the U.S. as would be shown in the consolidated financial statements
for such period of any Person to which a sublicense directly related to the
Product has been granted, prepared in accordance with GAAP and (iii) Licensing
Revenues for such period.
          “Net Sales Baseline” means Seventeen Million Dollars ($17,000,000);
provided that, with respect to the calendar year ended December 31, 2007, the
Net Sales Baseline shall be Seventeen Million Dollars ($17,000,000) multiplied
by the number of days between the Closing Date and December 31, 2007 and divided
by 365.
          “Net Working Capital” means (i) the value of Inventory, plus
(ii) accounts receivable (less any reserves for uncollectibility and payment
discounts), plus (iii) current prepaid expenses related to the Business minus
(iv) accounts payable to be assumed by Buyer under this Agreement, minus (v) all
accrued expenses, including rebates, chargebacks, Product returns (re-

 

--------------------------------------------------------------------------------

 

lating exclusively to Products sold prior to the Closing Date) and all other
pricing allowances (but excluding accrued compensation expenses), with each
amount determined in accordance with GAAP applied on a basis consistent with the
past practices of Parent. For purposes of this Agreement, Net Working Capital
shall, in all events, exclude cash, fixed assets, deferred tax assets, goodwill,
intangible assets and long term debt.
          “Ordinary Course of Business” or “Ordinary Course” or any similar
phrase means the ordinary course of the business conducted by the Selling
Parties or any Affiliate with respect to the Business consistent with past
practice (including with respect to quantity and frequency).
          “Owned Intellectual Property” means all Intellectual Property owned by
the Selling Parties that is exclusively used in the Business, including (i) the
Product Trademarks, (ii) the Patent Rights, (iii) the Domain Names and (iv) the
other Intellectual Property set forth on Schedule 1.1(i). Included within Owned
Intellectual Property shall be the right to sue for past infringement thereof.
          “Patent Rights” means the patents, patent applications (including any
divisionals, continuation, continuations-in-part) and patent rights set forth on
Schedule 1.1(j).
          “Permits” means permits, licenses, franchises and other governmental
authorizations, consents and approvals.
          “Permitted Encumbrances” means (a) Encumbrances imposed by Law, such
as carriers’, cashiers’, workmen’s, warehousemen’s, repairmen’s, mechanics’,
materialmen’s, landlords’, laborers’, suppliers’ and vendors’ liens securing
obligations which are not yet due or which are being contested in good faith,
(b) Permitted Tax Liens, (c) other Encumbrances which do not materially detract
from the value of, materially interfere with, or otherwise individually or
collectively materially adversely affect the present use and enjoyment of the
asset or property subject thereto or affected thereby, (d) any extensions,
renewals and replacements of any of the foregoing and (e) any of the foregoing
disclosed in the Disclosure Schedules.
          “Permitted Tax Liens” means (a) Encumbrances securing the payment of
Taxes which are being contested in good faith by appropriate proceedings and
(b) Encumbrances for current Taxes not yet due and payable.
          “Person” means an individual, a partnership, a corporation, a limited
liability company, a trust, an unincorporated organization, a Governmental
Authority or any department or agency thereof.
          “Post-Closing Net Working Capital” means the Net Working Capital
reflected on the Statement of Post-Closing Net Working Capital.
          “Product” means, individually and collectively, the orally
disintegrating pharmaceutical products that address the adherence needs in
patients with refractory schizophrenia (and all improvements to and formulations
thereof) currently marketed and sold in the United States pursuant to New Drug
Application No. 21-590 (or the foreign equivalent thereof) under the Product
Trademarks and, for the avoidance of doubt, includes the licenses applicable to
the DuraSolv and OraSolv formulations.

 

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          “Product Applications” means (i) the application for approval or
registrations by the Selling Parties and its Affiliates, for the investigation,
sale, distribution and/or marketing of the Product in the Territory set forth on
Schedule 1.1(k), and (ii) all dossiers, reports, data and other written
materials prepared by or filed as part of such applications for approvals or
registrations, or maintained by the Selling Parties and its Affiliates and
relating to such applications for approvals or registrations.
          “Product Records” means to the extent permitted by Law, all existing
books and records related solely to the conduct of the Business, including
copies of all material customer and supplier lists, account lists, sales
history, marketing studies, consultant reports, registry, subregistry and
correspondence (excluding invoices) with respect to the Product or the Business
to the extent maintained by the Selling Parties, all annual reports and adverse
event reports, correspondence with the FDA or any equivalent foreign
Governmental Authority (to the extent maintained by the Selling Parties),
exception reports, specifications for raw materials and, to the extent
maintained by the Selling Parties, FDA or any equivalent foreign Governmental
Authority communication thereon, communication relating to manufacturing or
packaging with any of the FDA or any equivalent foreign Governmental Authority,
vendors or suppliers, and all complaint files and adverse event files with
respect to the Product, provided, however, that (a) the Selling Parties may
retain (i) a copy of any such books and records to the extent necessary for Tax,
accounting, litigation or other valid business purposes and (ii) a copy of all
books, documents, records and files maintained by the Selling Parties and/or its
Representatives, agents or licensees in connection with their respective Tax,
legal, regulatory or reporting requirements, and (b) the following shall be
excluded from Product Records (i) attorney work product, attorney-client
communications and other items protected by privilege, (ii) Employee Records and
(ii) all books, documents, records and files prepared in connection with the
Agreement and the Ancillary Agreements, including bids received from other
parties and strategic, financial or Tax analyses relating to the divestiture of
the Purchased Assets, the Assumed Liabilities, the Product and the Business.
          “Product Registrations” means (i) the approvals or registrations which
have been received by the Selling Parties or their Affiliates, for the
investigation, sale, distribution and/or marketing of the Product or a current
Product improvement in the Territory (including any NDAs, INDs and other
relevant applications/approvals), including those approvals and registrations
set forth on Schedule 1.1(l), and (ii) all dossiers, reports, data and other
written materials filed as part of such approvals or registrations, or
maintained by the Selling Parties and their Affiliates and relating to such
approvals or registrations.
          “Product Trademarks” means trademarks (including service marks),
trademark applications, trade dress, logos and trademark rights as set forth on
Schedule 1.1(m).
          “Purchased Assets” means all of the Selling Parties’ or any of their
Affiliate’s right, title and interest in and to only the following properties:

  (a)   all assets listed on Schedule 1.1(n) hereto;     (b)   all Inventory;

 

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  (c)   all Business Contracts;     (d)   all Fixtures and Equipment;     (e)  
the Permits set forth on Schedule 1.1(o);     (f)   the Transferred Intellectual
Property;     (g)   all Product Applications and Product Registrations;     (h)
  the Software;     (i)   all accounts receivable relating exclusively to the
Business; and     (j)   the Product Records, including those Product Records set
forth on Schedule 1.1(p), other than to the extent they contain information,
data, Know-How or trade secrets of the Selling Parties not used in the Business.
Notwithstanding the foregoing, the Purchased Assets shall not include any of the
Excluded Assets.

          “Release” means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Substance into the environment.
          “Representative” means, with respect to any Person, any officer,
director, principal, attorney, agent, employee or other authorized
representative of such Person.
          “Retained Liabilities” means the following, and only the following,
Liabilities of the Selling Parties or any Affiliates relating to the Business,
which, notwithstanding any other provision of this Agreement, will not be
assumed by Buyer:
     (a) all Liabilities of the Selling Parties to the extent relating to
Excluded Assets;
     (b) all Liabilities of the Selling Parties for Taxes incurred, or arising
out of the operation of the Business through the Closing, other than Liabilities
that are apportioned to Buyer pursuant to Section 2.6 hereof;
     (c) all Liabilities arising out of, relating to or in connection with any
Action involving the Purchased Assets which was asserted before the Closing;
     (d) the notes in the original principal amount of $6.675 million,
$14.4 million, $4 million, and $2 million (Alternate Contingent Note 1) each
with Avanir as Payor and Neal R. Cutler as note holder, as described in
Section 1.04(d)(ii) of the Unit Purchase Agreement;
     (e) the Subsequent Run Rate Contingent Payment (that is dependent upon
achieving $1.5 million of Net Product Revenues (as defined in the Unit Purchase
Agreement) for three (3) consecutive months within a fiscal quarter), as more
clearly described

 

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in the Unit Purchase Agreement, and all other obligations and liabilities
relating to the Unit Purchase Agreement (other than the UPA Payments);
     (f) all Liabilities under the Selling Parties Plans, except as otherwise
set forth in Section 6.3 hereof;
     (g) subject to Section 6.3 hereof, all Liabilities for wages, pensions,
incentive compensation, equity compensation, severance, COBRA, retiree or other
benefits, overtime, workers compensation benefits, occupational safety and
health liabilities and other similar Liabilities in respect of Buyer Employees
relating to the period through the Closing and in respect of employees of the
Selling Parties or their Affiliates who are not Buyer Employees, whether
relating to the period before or after the Closing;
     (h) all Liabilities of the Selling Parties for costs and expenses
(including legal fees and expenses) that the Selling Parties have incurred in
connection with this Agreement and the transactions contemplated hereby;
     (i) all Liabilities resulting from any material quality, design manufacture
or safety defect in any Product sold prior to the Closing Date, whether used
prior to or after the Closing Date; and
     (j) any liability or obligation of the Selling Parties under this Agreement
and the Ancillary Agreements.
          “Sales Percentage Amount” means three percent (3%) multiplied by the
difference between (a) the Net Sales minus (b) the Net Sales Baseline.
          “Selling Parties Plans” means any bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employment, termination,
retention, severance, compensation, life insurance, retiree health benefits,
workers’ compensation, medical, health or other plans, agreements, policies or
arrangements that cover the Business Employees, whether offered by the Selling
Parties or any of their Affiliates.
          “Software” means the computer software and programs set forth on
Schedule 1.1(q).
          “Supply Agreements” means, in each case as amended, supplemented or
otherwise modified from time to time, (a) that certain Clozapine Supply
Agreement, dated June 1, 2005, by and among Betachem, Inc., Medichem, S.A. and
Seller; (b) that certain Packaging Agreement, dated as of January 13, 2005, by
and between Cardinal Health PTS, LLC and Seller; (c) that certain Quality
Agreement, dated as of June 22, 2004, by and between Cardinal Health PTS, LLC
and Seller; (d) that certain Exclusive Distribution Agreement, dated as of
July 29, 2004, by and between Cardinal Health PTS, LLC and Seller; and (e) that
certain Technical Test Protocol, designated TTP-AHJ-M0004.00, titled “Retain
Storage of Fazaclo Tablets” by and between Cardinal Health PTS, LLC and Seller.
          “Target Net Working Capital” means a Net Working Capital of Zero
Dollars ($0).

 

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          “Tax or Taxes” means all taxes (including franchise taxes), charges,
fees, levies or other assessments imposed by any Taxing Authority and based on
or measured solely with respect to net income or profits, including any
interest, penalties or additions attributable or imposed with respect thereto,
and all taxes, charges, levies, fees or other assessments, including transfer,
gross receipt, sales, use, service, occupation, ad valorem, property, payroll,
personal property, excise, severance, premium, stamp, documentary, license,
registration, social security, employment, unemployment, disability,
environmental (including taxes under Section 59A of the Code), add-on,
value-added, withholding (whether payable directly or by withholding and whether
or not requiring the filing of a Tax Return therefor), commercial rent and
occupancy taxes, and any estimated taxes, deficiency assessments, interest,
penalties and additions to tax or additional amounts in connection therewith,
imposed by any Taxing Authority, and including any obligation to indemnify or
otherwise assume or succeed to the Tax Liability of any other Person.
          “Tax Return” means any return, report or similar statement or form
required to be filed with respect to any Tax (including any attached schedules
and related or supporting information), including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
          “Taxing Authority” means any Governmental Authority responsible for
the imposition of any Tax or exercising Tax regulatory authority.
          “Transferred Intellectual Property” means all Owned Intellectual
Property and all Licenses.
          “Unit Purchase Agreement” means that certain Unit Purchase Agreement
by and among the Selling Parties and certain other parties listed therein, dated
as of May 22, 2006.
          “UPA Payments” means the Contingent Payments and the Non-U.S.
Licensing Earn-Out Payments, as such terms are defined in the Unit Purchase
Agreement, including all reporting obligations related thereto.
          1.2 Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:

      Term   Section  
Accounting Firm
  2.8(c)
Assignment and Assumption Agreements
  3.2(a)(i)
Assignment and Assumption of Lease
  3.2(a)(iv)
Assignments of Contracts
  3.2(a)(ii)
Assignment of Owned Intellectual Property
  3.2(a)(iii)
Buyer Indemnified Parties
  9.3(a)
Buyer Plans
  6.3(c)
Buyer Welfare Plans
  6.3(d)
Claim Notice
  9.4(a)
Closing
  3.1
Closing Date
  3.1

 

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      Term   Section  
Closing Net Working Capital Estimate
  2.8(a)
Contingent Cash Purchase Price
  2.3
Contingent Payment Quarterly Report
  Unit Purchase Agreement
Damages
  9.3(a)
Deductible Amount
  9.5(a)
Final Net Working Capital
  2.8(c)
Inc. Purchase Price Allocation Schedule
  2.5(a)
Inc. Up-Front Cash Purchase Price
  2.3(b)
Indemnified Party
  9.4(a)
Indemnifying Party
  9.4(a)
Indemnity Notice
  9.4(b)
Limited Purchase Price Allocation Schedule
  2.5(a)
Limited Up-Front Cash Purchase Price
  2.3(a)
Material Contracts
  4.7(a)
Notice of Disagreement
  2.8(c)
Purchase Price
  2.3(b)
Reimbursement
  9.6(a)
Sales Percentage Amount Dispute Notice
  2.4(b)
Selling Parties
  Preamble
Seller Indemnified Parties
  9.3(b)
Selling Parties Welfare Plans
  6.3(d)
SOL Representations and Warranties
  9.2(b)
Statement of Post-Closing Net Working Capital
  2.8(b)
Surviving Covenants
  9.2(c)
Territory
  9.10
Third-Party Claim
  9.4(a)
Transfer Fees
  2.6
Up-Front Cash Purchase Price
  2.3
WARN Act
  6.3(e)

          1.3 Seller Knowledge. Whenever a phrase herein is qualified by “to the
knowledge of Seller” or a similar phrase, it shall mean, with respect to a fact,
(a) the current actual knowledge of any of the following individuals: Keith
Katkin, Michael Puntoriero, Greg Flesher, Matt Ruth, Eric Benevich, Randall
Kaye, Mike Cruse, Susan Work and Laura Randa-King and (b) the knowledge of such
individuals obtained after making an inquiry of their direct reports or current
counsel or consultants of Parent most likely to have knowledge of such fact;
provided, however, that with respect to this subsection (b), with respect to
facts related to the Licensed Intellectual Property, the knowledge of Seller
shall only relate to facts of which the foregoing individuals have been informed
of by the applicable licensor.
ARTICLE II
PURCHASE AND SALE OF ASSETS
          2.1 Transfer of Assets.

 

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          (a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Selling Parties shall sell, convey, transfer,
assign and deliver to Azur Limited, and Azur Limited shall purchase and acquire
from the Selling Parties, the Selling Parties’ right, title and interest in and
to the Limited Purchased Assets free and clear of all Encumbrances, except for
Permitted Encumbrances, for the consideration specified below in Section 2.3(a).
          (b) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Selling Parties shall sell, convey, transfer,
assign and deliver to Azur Inc. the Inc. Purchased Assets free and clear of all
Encumbrances, except for Permitted Encumbrances, for the consideration specified
below in Section 2.3(b).
          2.2 Assumption of Liabilities.
          (a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Azur Limited shall assume, pay and perform and
discharge in due course the Limited Assumed Liabilities. Azur Limited shall
take, or cause to be taken, all actions necessary to cause the assumption at the
Closing Date by Azur Limited of the Limited Assumed Liabilities, including the
execution and delivery at the Closing of the Limited Assignment and Assumption
Agreement.
          (b) Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Azur Inc. shall assume, pay, perform and discharge in
due course the Inc. Assumed Liabilities. Azur Inc. shall take, or cause to be
taken, all actions necessary to cause the assumption on the Closing Date by Azur
Inc. of the Inc. Assumed Liabilities, including the execution and delivery at
the Closing of the Inc. Assignment and Assumption Agreement.
          2.3 Purchase Price. (a) The purchase price for the Limited Purchased
Assets (the “Limited Purchase Price”) shall be an amount equal to the sum of (a)
(i) Forty Million Seven Hundred Thousand Dollars ($40,700,000) plus (ii) the
Closing Net Working Capital Overage, if any, minus (iii) the Closing Net Working
Capital Underage, if any (the sum of the foregoing “(i)”, "(ii)” and “(iii)”,
the “Limited Up-Front Cash Purchase Price”), payable in cash at the Closing,
plus (b) Four Million Dollars ($4,000,000) payable on May 1, 2009 (the “First
Contingent Payment”), plus (c) Six Million Dollars ($6,000,000) payable on
December 31, 2009 (the “Second Contingent Payment” and, together with the First
Contingent Payment, the “Contingent Cash Purchase Price”) plus (d) the Sales
Percentage Amount, payable as set forth in Section 2.4, plus (e) the assumption
of the Limited Assumed Liabilities. Notwithstanding the foregoing, Azur Limited
shall have no obligation to make the First Contingent Payment and/or the Second
Contingent Payment in the event that on or before the date such payment is
otherwise required to be made Buyer provides (i) notice to the Selling Parties,
together with reasonable supporting documentation, that [* * *] and (ii) a
certificate executed by an executive officer of Azur Pharma Limited certifying
that Buyer and its Affiliates have at all times been in compliance with the
 

[* * *]   Confidential Information, indicated by [***], has been omitted from
this filing and filed separately with the Securities and Exchange Commission.

 

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covenant set forth in Section 6.16. If on or prior to September 30, 2010, Buyer
provides (i) a certificate executed by an executive officer of Azur Pharma
Limited certifying that Buyer and its Affiliates have at all times been in
compliance with the covenant set forth in Section 6.16 and (ii) notice to the
Selling Parties, together with reasonable supporting documentation, that [* * *]
prior to (y) the date the First Contingent Payment was required to be paid, the
Selling Parties shall, within ten (10) Business Days after the receipt of such
notice, remit the First Contingent Payment to Azur Limited and/or (z) the date
the Second Contingent Payment was required to be paid, the Selling Parties
shall, within ten (10) Business Days after the receipt of such notice, remit the
Second Contingent Payment to Azur Limited.
          (b) The purchase price for the Inc. Purchased Assets (the “Inc.
Purchase Price” and together with the “Limited Purchase Price,” the “Purchase
Price”) shall be an amount equal to One Million Three Hundred Thousand Dollars
($1,300,000 ) (the “Inc. Up-Front Cash Purchase Price”) plus the assumption of
the Inc. Assumed Liabilities.
          2.4 Payment of Sales Percentage Amount.
          (a) Until such time as Azur Limited has paid to Parent an aggregate
Sales Percentage Amount equal to Two Million Dollars ($2,000,000), Azur Limited
shall pay to Parent the Sales Percentage Amount in respect of each prior
calendar year (or with respect to the calendar year ended December 31, 2007, the
portion of such calendar year between the Closing Date and December 31, 2007),
if any. The Sales Percentage amount in respect of a calendar year, if any, shall
be due and payable concurrently with the delivery of the Contingent Payment
Quarterly Report to the Selling Parties pursuant to Section 6.14, delivered
pursuant to the Unit Purchase Agreement for the quarter ending December 31 of
such prior calendar year.
          (b) Not more than one (1) time during each calendar year, the Selling
Parties and their Representatives shall have the right, at their sole cost and
expense, to audit the Net Sales during the eight (8) fiscal quarters preceding
the commencement of such audit to the extent such fiscal quarters have not
previously been audited by the Selling Parties. Following such audit or review
of the materials supporting the preparation of a Contingent Payment Quarterly
Report, the Selling Parties shall have the right to dispute one or more
Contingent Payment Quarterly Reports covered by such audit that it reasonably
believes contain any errors. If the Selling Parties elect to dispute one or more
such Contingent Payment Quarterly Reports, in whole or in part, then the Selling
Parties shall provide a written notice to Azur Limited specifying in reasonable
detail its objections thereto (“Sales Percentage Amount Dispute Notice”).
Promptly following receipt by Azur Limited of any Sales Percentage Amount
Dispute Notice from the Selling Parties, Azur Limited and the Selling Parties
shall attempt to reconcile their differences, and any resolution by them as to
any disputed amounts shall be final, binding and conclusive on the parties
hereto. If the Selling Parties and Azur Limited are unable to reach a resolution
with such effect within twenty (20) Business Days after the receipt by Azur
Limited of the Sales Percent-
 

[* * *]   Confidential Information, indicated by [***], has been omitted from
this filing and filed separately with the Securities and Exchange Commission.

 

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age Amount Dispute Notice, the Selling Parties and Azur Limited shall submit the
items remaining in dispute for resolution to the Accounting Firm, which shall,
within thirty (30) days after such submission, determine and report to the
Selling Parties and Azur Limited upon such remaining disputed items, and such
report shall be final, binding and conclusive on the Selling Parties and Azur
Limited. The fees and disbursements of any accounting firm retained by the
Selling Parties or Azur Limited to assist it in any dispute regarding any
Contingent Payment Quarterly Report, together with the fees and expenses of the
Accounting Firm, shall be borne by the Selling Parties if an adjustment to the
Sales Percentage Amount for the period under dispute is less than five percent
(5%) of the Sales Percentage Amount reported for such prior calendar year.
Otherwise, the fees and disbursements of any accounting firm retained by the
Selling Parties or Azur Limited to assist it in any dispute regarding any
Contingent Payment Quarterly Report, together with the fees and expenses of the
Accounting Firm, shall be borne by Azur Limited.
          2.5 Allocation of Purchase Price.
          (a) The Limited Purchase Price shall be allocated among the Limited
Purchased Assets in accordance with Schedule 2.5(a)(i) hereof, as revised
pursuant to Section 2.5(b) hereof (the “Limited Purchase Price Allocation
Schedule”), and the Inc. Purchase Price shall be allocated among the Inc.
Purchased Assets in accordance with Schedule 2.5(a)(ii) hereof (the “Inc.
Purchase Price Allocation Schedule”). The Selling Parties and Azur Limited shall
prepare mutually acceptable and substantially identical IRS Forms 8594 “Asset
Acquisition Statements Under Section 1060” consistent with the Limited Purchase
Price Allocation Schedule and the Selling Parties and Azur Inc. shall prepare
mutually acceptable and substantially identical IRS Forms 8594 consistent with
the Inc. Purchase Price Allocation Schedule, which forms the parties shall use
to report the transactions contemplated by this Agreement to the applicable
Taxing Authorities. Each of the Selling Parties and Buyer agrees to provide the
other promptly with any other information required to complete IRS Form 8594.
Except as otherwise required by a “determination” within the meaning of Section
1313(a) of the Code, the Selling Parties and Buyer agree not to take any
position inconsistent with that allocation on their respective Tax Returns or
during any audit, examination or other administrative or judicial proceeding.
          (b) Within thirty (30) days after the determination of the Final
Working Capital, the Selling Parties shall prepare and deliver to Azur Limited
an amended Limited Purchase Price Allocation Schedule prepared in accordance
with Schedule 2.5(a)(i) hereof and Section 1060 of the Code and the regulations
thereunder that reflects (i) the Final Working Capital and (ii) any adjustments
in the allocation of the initial Limited Purchase Price and Limited Assumed
Liabilities among the Limited Purchased Assets reasonably necessary to reflect
changes in the Limited Purchased Assets between the date hereof and the Closing
Date.
          2.6 Closing Costs; Transfer Taxes and Fees. Buyer, on the one hand,
and the Selling Parties, on the other hand, shall each pay half (1/2) of (a) all
U.S. sales, use, transfer and other Taxes and fees, if any, imposed by reason of
the transfer of the Purchased Assets and the assumption of the Assumed
Liabilities provided hereunder (and any deficiency, interest or penalty asserted
with respect thereto), and (b) all recording, filing and registration fees or
other charges in connection with or as a direct result of the transfer of the
Purchased Assets (the foregoing a “Transfer Fee” and collectively, the “Transfer
Fees”). At Closing, upon the delivery by Buyer of reasonable documents
identifying such Transfer Fees, the Selling Parties’ half of the

 

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Transfer Fees shall be deducted from the Limited Up-Front Cash Purchase Price,
to the extent that such Transfer Fees relate to the Limited Purchased Assets,
and the Inc. Up-Front Cash Purchase Price, to the extent that such Transfer Fees
relate to the Inc. Purchased Assets. Azur Limited shall pay all non-U.S. sales,
use, transfer and other Taxes and fees, if any, imposed by reason of the
transfer of the Limited Purchased Assets and the assumption of the Limited
Assumed Liabilities provided hereunder. Azur Inc. shall pay all non-U.S. sales,
use, transfer and other Taxes and fees, if any, imposed by reason of the
transfer of the Inc. Purchased Assets and the assumption of Assumed Liabilities
other than Limited Assumed Liabilities. Buyer shall provide the Selling Parties
with any documentation that would exempt Buyer from or reduce sales, use,
transfer and other Taxes and shall file all necessary documentation and Tax
Returns required to be filed by Buyer with respect to such Transfer Fees, and
the Selling Parties shall reasonably cooperate upon Buyer’s request.
          2.7 Further Assurances. Upon the terms and subject to the conditions
contained herein, the parties agree, both before and after the Closing, (i) to
use commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including using commercially reasonable efforts to satisfy the conditions
precedent to each party’s obligations hereunder, (ii) to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder and
(iii) to cooperate with each other in connection with the foregoing. In
furtherance and not in limitation of the foregoing, each party hereto agrees
(1) to file all necessary applications for all necessary Governmental Approvals
with the appropriate Governmental Authority with respect to the transactions
contemplated hereby as promptly as practical after the date hereof, (including
the FDA transfer of ownership letters with respect to the transfer of the NDAs
with respect to the Products from the Selling Parties to Buyer), and (2) to use
commercially reasonable efforts to obtain from any Governmental Authority any
non-actions, clearances, waivers, consents, approvals, authorizations, permits
or orders required to be obtained in connection with the execution and
performance of this Agreement or the transactions contemplated by this
Agreement.
          2.8 Determination of Net Working Capital.
          (a) At least one (1) Business Day prior to the Closing Date, the
Selling Parties shall deliver to Buyer a certificate signed by an executive
officer of Parent, stating the estimated Net Working Capital as of the Closing
Date, prepared using the same principles as the unaudited statement of net
assets as of May 31, 2007 described in Section 4.4 (the “Closing Net Working
Capital Estimate”) and, if any, the resulting Closing Net Working Capital
Overage (which amount shall be used in determining the Limited Up-Front Cash
Purchase Price), or the resulting Closing Net Working Capital Underage (which
amount shall be used in determining the Limited Up-Front Cash Purchase Price),
together with related supporting schedules, calculations and documentation.
          (b) Prior to the fifth (5th) month anniversary of the Closing Date,
Buyer shall review the records and inventory of the Business to determine the
Net Working Capital existing as of the Closing Date and deliver a statement of
Net Working Capital to the Selling Parties and Buyer signed by an executive
officer of Buyer’s ultimate parent (the “Statement of Post-Closing

 

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Net Working Capital”). The Statement of Post-Closing Net Working Capital shall
set forth the Net Working Capital, including a detailed breakdown of the various
amounts of each component of Net Working Capital at the Closing Date, prepared
using the same principles as the unaudited statement of net assets as of May 31,
2007 described in Section 4.4, but taking into account additional information
that becomes available or events occurring after the Closing Date and prior to
the preparation of the Statement of Post-Closing Net Working Capital.
          (c) Within thirty (30) days following the Buyer’s delivery of the
Statement of Post Closing Net Working Capital, Parent shall deliver written
notice (the “Notice of Disagreement”) to Buyer of any dispute Parent has with
respect to the preparation or content of the Statement of Post Closing Net
Working Capital, including the Post Closing Net Working Capital. The Notice of
Disagreement shall describe in reasonable detail the items contained in the
Statement of Post Closing Net Working Capital that Parent disputes and the basis
for any such disputes. If Parent does not notify Buyer of a dispute with respect
to the Statement of Post Closing Net Working Capital within such 30-day period,
such Statement of Post Closing Net Working Capital shall be final, conclusive
and binding on the parties and the Post Closing Net Working Capital reflected
thereon shall become the “Final Net Working Capital.” In the event a Notice of
Disagreement is delivered to Buyer, Buyer and Parent shall negotiate in good
faith to resolve such dispute and agree upon the “Final Net Working Capital.” If
Buyer and Parent, notwithstanding such good faith effort, fail to resolve such
dispute within fourteen (14) days after Parent delivers the Notice of
Disagreement, then Buyer and Parent jointly shall engage a U.S. accounting firm
of national reputation as is reasonably acceptable to Buyer and Parent that has
not provided services to either of Buyer or its Affiliates or the Selling
Parties or their Affiliates during the prior three (3) years (the “Accounting
Firm”) to resolve such dispute in accordance with the standards set forth in
this Section 2.8. Parent and Buyer shall use commercially reasonable efforts to
cause the Accounting Firm to render a written decision resolving the matters
submitted to the Accounting Firm within thirty (30) days after the making of
such submission. The Accounting Firm shall address only those items in dispute.
The Accounting Firm shall determine, on such basis, whether and to what extent,
the Post Closing Net Working Capital or Closing Net Working Capital Estimate
require adjustment, which determination shall be consistent with either the
position of Buyer or the position of Parent or between the positions of Buyer
and Parent and the amount determined by the Accounting Firm shall become the
“Final Net Working Capital.” Judgment may be entered upon the determination of
the Accounting Firm in any court having jurisdiction over the party against
which such determination is to be enforced. All determinations made by the
Accounting Firm will be final, conclusive and binding on the parties. Buyer
and/or Parent shall share the fees and expenses of the Accounting Firm
proportionately based on which party’s position was closer to the determination
by the Accounting Firm.
          (d) If there is a Final Net Working Capital Overage, then, within five
(5) Business Days after the determination of the Final Net Working Capital, Azur
Limited shall pay to the Selling Parties an amount equal to the Final Net
Working Capital Overage by wire transfer to an account designated by Parent.
          (e) If there is a Final Net Working Capital Underage, then, within
five (5) Business Days of the determination of the Final Working Capital the
Selling Parties shall pay to Azur Limited an amount equal to the Final Net
Working Capital Underage by wire transfer to an account designated by Azur
Limited.

 

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          (f) Any amount payable by Buyer to the Selling Parties or by the
Selling Parties to Buyer pursuant to Section 2.8(d) or Section 2.8(e) shall
constitute an adjustment to the Purchase Price.
          (g) For purposes of complying with the terms set forth in this
Section 2.8, each party shall cooperate with and make available to the other
parties and their respective representatives all information, records, data and
working papers, and shall permit reasonable access to its facilities and
personnel, as may be reasonably required in connection with the preparation and
analysis of the Closing Net Working Capital Estimate and the Statement of Post
Closing Net Working Capital.
          2.9 Withholding Tax. Solely to the extent required by Law, Buyer shall
be entitled to deduct and withhold, or cause to be deducted and withheld, the
applicable Taxes from the amounts otherwise payable pursuant to this Agreement.
To the extent that amounts are so withheld, they shall be treated for all
purposes of this Agreement as having been paid to the Person for whom such
deduction and withholding was made.
ARTICLE III
CLOSING
          3.1 Closing. Unless this Agreement shall have been terminated in
accordance with Section 10.1 hereof, the closing of the purchase and sale of the
Purchased Assets, the assumption of the Assumed Liabilities and the consummation
of the other transactions contemplated herein relative thereto (the “Closing”)
shall be held at 8:00 a.m. Pacific time at 101 Enterprise, Suite 300, Aliso
Viejo, California on the later of (a) the thirtieth (30th) day after the date of
this Agreement or (b) the third (3rd) Business Day following the satisfaction or
waiver of all of the conditions precedent to the obligations of the parties set
forth in Articles VII and VIII (other than conditions which are not capable of
being satisfied until the Closing, but subject to the fulfillment or waiver of
those conditions at the Closing) (the “Closing Date”), unless the parties hereto
otherwise agree in writing.
          3.2 Deliveries at Closing.
          (a) To effect the transactions contemplated hereby, the Selling
Parties shall, at the Closing, deliver to Buyer, or cause to be delivered to
Buyer (unless previously delivered):
          (i) (x) an instrument of assignment and assumption in substantially
the form attached hereto as Exhibit A-1 conveying to Azur Inc. the owned
tangible personal property included in the Inc. Purchased Assets and assumption
by Azur Inc. of the Inc. Assumed Liabilities (the “Inc Assignment and Assumption
Agreement”), and (y) an instrument of assignment and assumption in substantially
the form attached hereto as Exhibit A-2 conveying to Azur Limited the owned
tangible personal property included in the Limited Purchased Assets and
assumption by Azur Limited of the Limited Assumed Liabilities (the “Limited
Assignment and Assumption Agreement”), each duly executed by the Selling Parties
(collectively, the “Assignment and Assumption Agreements”);

 

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          (ii) subject to Section 3.3 hereof, (x) an assignment and assumption
document in substantially the form attached hereto as Exhibit B-1 assigning the
Inc. Business Contracts to Azur Inc. (the “Inc Assignment of Contracts”), and
(y) an assignment and assumption document in substantially the form attached
hereto as Exhibit B-2 assigning the Limited Business Contracts to Azur Limited
(the “Limited Assignment of Contracts”, duly executed by the Selling Parties
(collectively, the “Assignments of Contracts”);
          (iii) an assignment of the Intellectual Property in substantially the
form attached hereto as Exhibit C (the “Assignment of Owned Intellectual
Property”), duly executed by the Selling Parties;
          (iv) an assignment and assumption of lease in substantially the form
attached hereto as Exhibit D (the “Lease Assignment”), duly executed by Seller;
          (v) counterparts to any other Ancillary Agreements, duly executed by
Parent or Seller or other Person, as applicable;
          (vi) a certificate from each of Seller and Parent, dated as of the
Closing Date, stating that such Person is not a “foreign person” within the
meaning of Section 1445(b)(2) of the Code; and
          (vii) the certificates and other documents required to be delivered at
Closing as described in Article VIII, duly executed by the Selling Parties, as
applicable.
          (b) To effect the transactions contemplated hereby, Buyer shall, at
the Closing, deliver to the Selling Parties, or cause to be delivered to the
Selling Parties (unless previously delivered):
          (i) an amount in cash equal to the Inc. Up-Front Cash Purchase Price,
payable by Azur Inc., and an amount in cash equal to the Limited Up-Front Cash
Purchase Price payable by Azur Limited, each by wire transfer of immediately
available funds to an account designated in writing by Parent;
          (ii) a counterpart to the Inc Assignment and Assumption Agreement,
duly executed by Azur Inc., and a counterpart to the Limited Assignment and
Assumption, duly executed by Azur Limited;
          (iii) a counterpart to the Inc Assignment of Contracts, duly executed
by Azur Inc., and a counterpart to the Limited Assignment of Contracts, duly
executed by Azur Limited;
          (iv) a counterpart to the Assignment of Owned Intellectual Property,
duly executed by Azur Limited;
          (v) a counterpart to the Assignment and Assumption of Lease duly
executed by Azur Inc.;

 

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          (vi) counterparts to any other Ancillary Agreements, duly executed by
Buyer; and
          (vii) the certificates and other documents required to be delivered at
the Closing as described in Article VII, duly executed by Buyer.
          (c) To the extent that a form of any document to be delivered
hereunder is not attached as an Exhibit hereto, such documents shall be in form
and substance, and shall be executed and delivered in a manner, reasonably
satisfactory to the parties.
          3.3 Consents to Assignment and Transfer of Certain Rights and
Liabilities. Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any Business Contract or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment or transfer thereof, without the consent of a third
party thereto, would constitute a breach or default thereof or give rise to a
right of termination or cancellation thereunder, or in any way materially
adversely affect the rights of Buyer thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
materially adversely affect the rights of Buyer thereunder, the Selling Parties
will cooperate with Buyer, and use commercially reasonable efforts, at Buyer’s
expense, to provide to Buyer the benefits under any such Business Contract or
claim or right, including enforcement for the benefit of Buyer of any and all
rights of the Selling Parties against a third party thereto arising out of the
breach, default, termination or cancellation by such third party or otherwise
or, at the Selling Parties’ option, to the maximum extent permitted by Law and
such Business Contract, appoint Buyer to be the Selling Parties’ Representative
and agent with respect to such Business Contract, as applicable. Following the
Closing, Buyer and the Selling Parties shall continue to cooperate and use
commercially reasonable efforts to effect the transfer to Buyer of such Business
Contracts. Subject to Article IX, Buyer shall indemnify, defend and hold
harmless the Selling Parties from and against any and all Liabilities incurred
by the Selling Parties in connection with, arising out of or resulting from any
actions taken or not taken by Buyer after the Closing Date as Representative or
agent with respect to any Business Contract or the non-compliance by Buyer on or
following the Closing Date with any Laws applicable to any such Business
Contract. Subject to Article IX, the Selling Parties shall indemnify, defend and
hold harmless Buyer from and against any and all Liabilities incurred by Buyer
in connection with, arising out of or resulting from any actions taken by the
Selling Parties on or after the Closing Date with respect to any such Business
Contract, other than actions taken in compliance with any such Business Contract
or as directed by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES AND PARENT
          Contemporaneously with the execution and delivery of this Agreement by
the Selling Parties, the Selling Parties are delivering to Buyer the Disclosure
Schedules with numbered sections and subsections corresponding to the relevant
sections and subsections in this Agreement. Disclosures included in any Schedule
to this Agreement shall be considered to be made for purposes of all sections
and subsections of the Disclosure Schedules to the extent that such item of
disclosure is made with such specificity that it is reasonably apparent that
such disclosure applies to such other Schedules. Nothing in the Disclosure
Schedules is intended to

 

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broaden the scope of any representation, warranty or covenant of the Selling
Parties contained in this Agreement. The inclusion of any information in the
Disclosure Schedules shall not be deemed to be an admission or acknowledgment,
in and of itself, that such information is required by the terms hereof to be
disclosed, is material to the Business, has resulted in or would result in a
Material Adverse Effect or is outside the Ordinary Course of Business. The
Selling Parties hereby represent and warrant to Buyer as of (a) the date hereof
and (b) the Closing Date, except (i) as to certain representations and
warranties that address matters as of a particular date, which are given only as
of such date and (ii) as otherwise set forth on the Disclosure Schedules, as
follows:
          4.1 Organization. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
California. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. The Selling Parties are in
good standing in each jurisdiction where such qualification is required, except
for any jurisdictions where the failure to so qualify does not have,
individually or in the aggregate, a Material Adverse Effect.
          4.2 Authorization. Each Selling Party has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. Without limiting the generality of the foregoing, the execution and
delivery of this Agreement and the Ancillary Agreements to which a Selling Party
is a party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized and approved by all requisite
action on the part of such Selling Party and its equity owners. This Agreement
has been, and as of the Closing each of the Ancillary Agreements to which each
Selling Party is a party will have been, duly executed and delivered by such
Selling Party, and, assuming the due authorization, execution and delivery of
this Agreement and the Ancillary Agreements by Buyer, will be at the Closing
valid and binding obligations of the Selling Parties, enforceable against the
Selling Parties in accordance with their terms, except as may be limited by the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar Laws relating to or affecting creditors’ rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law).
          4.3 No Conflict or Violation; Consents and Approvals.
          (a) Neither the execution, delivery or performance by the Selling
Parties of this Agreement or the Ancillary Agreements nor the consummation by
the Selling Parties of the transactions contemplated hereby and thereby will
(i) violate or conflict with any provision of the articles of organization or
operating agreement of Parent or Seller (as applicable), (ii) violate, conflict
with, or result in or constitute a breach or default under (with the giving of
notice or passage of time or both), or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, any Business Contract, or (iii) violate any Law or
Governmental Order applicable to the Selling Parties, the Business or the
Purchased Assets, except in the case of each of clauses (ii) and (iii) above,
for such violations, conflicts, breaches, defaults, terminations or
accelerations which do not, individually or in the aggregate, have a Material
Adverse Effect or materially and adversely affect the ability of the Selling
Parties to consummate the transactions contemplated hereby.

 

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          (b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Authority is required by or with
respect to the Business as a result of the execution and delivery of this
Agreement by the Selling Parties or the consummation of the transactions
contemplated hereby, except for any approval of or filing with a Governmental
Authority required by virtue of Buyer’s or their ultimate parent’s identity.
          4.4 Financial Information. Set forth on Schedule 4.4 is an unaudited
statement of net assets as of May 31, 2007 and an unaudited statement of net
wholesale shipments and direct operating expenses for the eight (8) month period
ended May 31, 2007 for the Business. Such statements were prepared in accordance
with the books and accounts and other financial records of the Selling Parties
and present fairly in all material respects the net wholesale shipments, direct
operating expenses and net assets of the Business based on managements’
reasonable assumptions as of and for the periods indicated and such statements
have been prepared in accordance with GAAP, applied on a basis consistent with
the past practices of Parent, except as indicated on Schedule 4.4.
          4.5 Absence of Certain Changes or Events. Since December 31, 2006,
(a) the Selling Parties have not engaged in any practice or taken any action, or
entered into any transaction with respect to the Business outside the Ordinary
Course of Business, (b) there has not occurred any event which if it had
occurred between the date hereof and the Closing Date would have been prohibited
by Section 6.2(b), and (c) there has not occurred any Material Adverse Effect.
          4.6 Title to Purchased Assets and Sufficiency. The Selling Parties
have good and valid title to the Purchased Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances. All the tangible personal
property (other than the Inventory) included in the Purchased Assets is suitable
for purposes for which it is used in good working condition, reasonable wear and
tear excepted. The Purchased Assets constitute all the assets required for the
operation of the Business, as currently conducted, in all material respects.
          4.7 Material Contracts.
          (a) Schedule 4.7(a) sets forth as of the date hereof each Business
Contract (i) involving individual annual payments in excess of One Hundred
Thousand Dollars ($100,000) and pursuant to which a Selling Party has continuing
obligations (other than an obligation of confidentiality), (ii) relating to the
Transferred Intellectual Property, (iii) that limits or purports to limit the
ability of a Selling Party to compete in any line of business or with any Person
in any geographic area or for any period of time or (iv) requiring the Selling
Parties to make payments to an unaffiliated third party based on the level of
income or revenues of the Selling Parties (collectively, the “Material
Contracts”).
          (b) Copies of the Material Contracts and all amendments and agreements
relating thereto have been made available to Buyer. To the knowledge of the
Selling Parties, all Business Contracts are in full force and effect and capable
of assignment without any additional consents or approvals. Except for such
exceptions as would not be material, (i) the Selling Parties have performed all
obligations required to be performed by them under each of the Business
Contracts, (ii) the Selling Parties are not in breach or violation of, or
default under, any of the

 

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Business Contracts, (iii) the Selling Parties have not received any written
notice that either is currently in breach or violation of any of the Business
Contracts and (iv) to the knowledge of the Selling Parties, no other party to
any Business Contract is (with or without the lapse of time or the giving of
notice or both) in breach thereof.
          4.8 Permits. To the knowledge of the Selling Parties, the Selling
Parties or their Affiliates have all Permits necessary to own and operate the
Business and the Purchased Assets as presently conducted, in all material
respects. Such Permits are in full force and effect, except for such failures to
be in full force and effect as do not have, individually or in the aggregate, a
Material Adverse Effect. The Selling Parties are not in material default, nor
have they received written notice of any claim of default, with respect to any
such Permit.
          4.9 Litigation.
          (a) There is no material Action pending or, to the knowledge of the
Selling Parties, threatened, against or affecting the Purchased Assets or the
Business, (b) neither the Selling Parties nor Parent is subject to any material
Governmental Order relating to the Purchased Assets or the Business and
(c) there are no unsatisfied judgments against the Purchased Assets or the
Business.
          (b) Between May 26, 2006 and the date of this Agreement, (i) the
Selling Parties have not been notified of any Claim against them or their
insurers relating to product liability or similar Liability in respect of the
Product and (ii) no payment or settlement of any kind has been made in response
to or in anticipation of such a Claim.
          (c) There are no outstanding Government Orders that apply to the
Purchased Assets or the Business that restrict the ownership, disposition or use
of the Purchased Assets or the conduct of the Business.
          (d) Schedule 4.9(d) lists, as of the date hereof, all litigation to
which any of the Selling Parties or their Affiliates is a party relating to the
Business.
          4.10 Compliance with Laws.
          (a) The Business is conducted by the Selling Parties and their
Affiliates in compliance with Laws including the Social Security Act, the rules
and regulations and policies of the U.S. Department of Health and Human
Services, and all public health and safety provisions of state Law and
regulations, permits, governmental licenses, registrations, approvals,
concessions, franchises, authorizations, orders, injunctions and decrees and
applicable laws, except as does not have, individually or in the aggregate, a
Material Adverse Effect.
          (b) Except as does not have, individually or in the aggregate, a
Material Adverse Effect, since May 26, 2006, no Governmental Authority has given
written notice to the Selling Parties or any of their Affiliates that the
Business (as of the date of this Agreement) or the Purchased Assets were or are
in violation of any Law or the subject of any investigation.
          (c) Except as does not have, individually or in the aggregate, a
Material Adverse Effect, since May 26, 2006, none of the Selling Parties or
their Affiliates has received writ-

 

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ten notice from any Governmental Authority that there are any circumstances
currently existing that would reasonably be expected to lead to any withdrawal
of, loss of or refusal to renew any material Permit or Product Registrations
relating to the Product or the Purchased Assets on terms less advantageous to
the Selling Parties or any of their Affiliates than the terms of those Permits
currently in force.
          (d) (i) Except as does not have, individually or in the aggregate, a
Material Adverse Effect, (A) the Business is conducted in compliance with all
applicable Laws in connection with the preparation and submission to the FDA or
any equivalent foreign Governmental Authority of each of the Product
Applications (including the INDs or NDAs) relating to the Product, (B) each of
the Product Registrations (including the INDs or NDAs) relating to the Product
has been approved by the FDA, (C) none of the Selling Parties or their
Affiliates has received any written notice that any of the Product Registrations
(including the INDs or NDAs) relating to the Product are not currently in good
standing with the FDA in the United States or any equivalent foreign
Governmental Authority in the country or countries of its jurisdiction. The
Selling Parties or their Affiliates have filed with the FDA all required
notices, supplemental applications and annual or other reports, including
adverse experience reports, with respect to each Product Registration and
Product Application (including IND or NDA) relating to the Product, except as
does not have, individually or in the aggregate, a Material Adverse Effect. To
the knowledge of the Selling Parties, with respect to the Product, the applicant
of each Product Registration and Product Application (including IND or NDA)
relating to the Product acted in compliance with 21 U.S.C. § 355 and 21 C.F.R.
Parts 312 or 314 et seq., respectively, and all terms and conditions of such
applications.
               (ii) To the knowledge of the Selling Parties, no Governmental
Authority (including the FDA) has commenced or threatened to initiate any action
to request the recall of the Product, or commenced or threatened to initiate any
action to enjoin production of the Product at any facility, nor have the Selling
Parties or their Affiliates received any notice to such effect. To the knowledge
of the Selling Parties, [* * *].
               (iii) To the knowledge of the Selling Parties, all manufacturing
and processing operations conducted by their current suppliers relating to the
manufacturing of the Product have, since May 26, 2006, been conducted in
compliance in all material respects with the FDA’s current Good Manufacturing
Practice regulations at 21 CFR Parts 210 and 211 as applicable to products sold
in the United States.
               (iv) With respect to current suppliers, the Selling Parties and
their Affiliates have delivered to Buyer copies of all (A) reports of the FDA
Form 483 inspection observations, (B) establishment inspection reports,
(C) warning letters, and (D) other documents that assert ongoing lack of
compliance in any material respect with any applicable laws or regulatory
requirements (including those of the FDA), in each case to the extent received
since May 26,
 

[* * *]   Confidential Information, indicated by [***], has been omitted from
this filing and filed separately with the Securities and Exchange Commission.

 

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2006 by the Selling Parties or their Affiliates from the FDA or any equivalent
foreign Governmental Authority relating to the Product and/or arising out of the
conduct of the Business.
               (v) To the knowledge of the Selling Parties, no employees or
agents of the Selling Parties or their Affiliates have made an untrue statement
of a material fact to any Governmental Authority with respect to the Product or
a current Product improvement (whether in any submission to such Governmental
Authority or otherwise), or failed to disclose a material fact required to be
disclosed to any Governmental Authority with respect to the Product or a current
Product improvement.
               (vi) To the knowledge of the Selling Parties, since May 26, 2006
the Selling Parties have materially complied with all regulations promulgated by
the FDA specific to the controlled distribution and operation and maintenance of
a patient registry in respect of the Product and complied with FDA regulations
and other applicable law in relation to the development of the subregistry.
          4.11 Brokers or Finders. Except for Reedland Capital Partners, neither
the Selling Parties nor Parent has engaged or made any agreement with any
broker, finder or similar agent or any Person or firm which will result in the
obligation of Buyer to pay any finder’s fee, brokerage fees or commission or
similar payment in connection with the transactions contemplated hereby. The
Selling Parties shall be solely responsible for the payment of any fees,
commissions or similar payments owed to Reedland Capital Partners.
          4.12 Employment, Labor and Employee Benefit Matters.
          (a) No liability under Title IV or Part 3 of Title I, Subtitle B of
ERISA or Section 4971 of the Code has been incurred by the Selling Parties or
any ERISA Affiliate for which the Buyer would be liable under applicable Law as
a result of the transactions contemplated by this Agreement.
          (b) There are no collective bargaining agreements involving any
Business Employees or any pending applications for certification of a collective
bargaining agreement against the Seller as of the date of this Agreement. There
are no employment or wage and hour claims pending or, to the knowledge of the
Selling Parties, threatened against or involving the Business. There is no claim
with the United States Equal Employment Opportunity Commission or similar
Governmental Authority pending or, to the knowledge of the Selling Parties,
threatened against or involving the Business. There is no unfair labor practice
complaint against the Business or pending before the National Labor Relations
Board or any other Governmental Authority relating to labor practices of the
Business. There is no labor strike, material dispute, slowdown or stoppage
actually pending or, to the knowledge of the Selling Parties, threatened against
or involving the Business.
          (c) The Selling Parties have made available to Buyer copies of the
Selling Parties Plans to which the Business Employees set forth on
Schedule 6.3(a)(i) are subject.

 

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          4.13 Intellectual Property.
          (a) (i) No claim has been asserted or, to the knowledge of the Selling
Parties, threatened against the Selling Parties that the conduct of the Business
as currently conducted infringes upon the Intellectual Property rights of any
third party; (ii) the Selling Parties own the Owned Intellectual Property free
and clear of all Encumbrances, other than Permitted Encumbrances; (iii) the
Selling Parties have the right to assign their rights with respect to the
Licenses; (iv) the Owned Intellectual Property and, to the knowledge of the
Selling Parties, the Licenced Intellectual Property, has not been adjudged, nor,
to the knowledge of the Selling Parties, asserted to be, invalid or
unenforceable in whole or in part; (v) to the knowledge of the Selling Parties,
no loss or expiration of any Transferred Intellectual Property is threatened,
pending or reasonably foreseeable, except for patents expiring at the end of
their statutory terms (and not as a result of any act or omission by the Selling
Parties, including a failure by the Selling Parties to pay any required
maintenance fees); (vi) to the knowledge of the Selling Parties, the conduct of
the Business as currently conducted does not infringe upon the Intellectual
Property rights of any third party; (vii) to the knowledge of the Selling
Parties, no Person is engaging in any activity that infringes upon the
Transferred Intellectual Property; (viii) the Transferred Intellectual Property
contains all of the Intellectual Property materially necessary to conduct the
Business as presently conducted; (ix) the Selling Parties have neither licensed
any of the Owned Intellectual Property nor sublicensed any of the Licensed
Intellectual Property to any third parties; (x) to the knowledge of the Selling
Parties, Parent has not failed to assert any breach of any representation and
warranty set forth in Section 4.15 of the Unit Purchase Agreement that it has
the legal right to assert; and (xi) to the knowledge of the Selling Parties, the
representations and warranties provided by the applicable licensor with respect
to the licensee are true and correct in all material respects.
          (b) The Selling Parties have the unrestricted right to assign,
transfer and/or grant to Buyer all rights in the Product Trademarks that are
being assigned, transferred and/or granted to Buyer under this Agreement and the
Ancillary Agreements, in each case free of Encumbrances, other than Permitted
Encumbrances.
          (c) Any necessary registration, maintenance and renewal fees due in
connection with the Product Trademarks have been paid in a timely manner and all
materially necessary documents and certificates in connection with the Product
Trademarks have, for the purposes of maintaining such Product Trademarks, been
filed in a timely manner with the relevant Governmental Entities.
          (d) The Selling Parties have taken reasonable and customary measures
to maintain and protect, as applicable, the confidentiality of the Know-How.
          (e) All current and former employees and consultants of the Selling
Parties who are or have been substantively involved in the design, review,
evaluation or development of the inventions embodied in the Product or the
Know-How have executed written contracts or are otherwise obligated to protect
the confidential status and value thereof and to vest in the Selling Parties’
exclusive ownership of such Product Trademarks or Know-How.

 

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          4.14 Environmental Matters. Except as does not have a Material Adverse
Effect:
          (a) The Business and Purchased Assets, and the Selling Parties as
relates to the Business and Purchased Assets, are in compliance in all material
respects with applicable Environmental Laws;
          (b) The Selling Parties have not received any written claim,
complaint, demand, notice of violation, notice of potential liability or request
for information, and there is no suit, action, proceeding or investigation
pending, or to the knowledge of the Selling Parties threatened, regarding any
alleged violation of, or potential liability under, any Environmental Law
relating to the Business or Purchased Assets;
          (c) There has been no Release of Hazardous Substances at, on, under or
from any properties or facilities currently or formerly owned, operated or
leased by the Selling Parties in connection with the Business, or any Purchased
Assets which would reasonably be expected to result in any material liability of
the Selling Parties under any Environmental Law;
          (d) No Hazardous Substances generated in connection with the Business
or any of its operations, properties or facilities, have been disposed of at, or
transported for disposal or treatment to, any location that would reasonably be
expected to result in material liability on the part of the Selling Parties
under any Environmental Law;
          (e) The Selling Parties are not currently financing or conducting any
investigation, response or corrective action at the Purchased Assets, or at any
other location, pursuant to any Environmental Law relating to the Business nor
are the Selling Parties subject or party to any decree, order or agreement which
would reasonably be expected to result in liability of the Selling Parties under
any Environmental Law relating to the Business or the Purchased Assets;
          (f) To the knowledge of the Selling Parties, there are no aboveground
or underground storage tanks or related piping, or asbestos or
asbestos-containing materials at any Purchased Assets; and
          (g) The Selling Parties have provided to Buyer all assessments,
audits, reports and other information in their possession or under their control
relating to environmental conditions at the Purchased Assets, if any.
          4.15 Inventory.
          (a) All finished Product that is included in the Inventory is in a
condition such that it would be saleable in the Ordinary Course of Business. To
the knowledge of the Selling Parties, the Inventory has been produced or
manufactured and stored in accordance with the Selling Parties specifications
established for the manufacture and storage thereof. All work-in-progress
included in the Inventory is, to the knowledge of the Selling Parties, usable in
the Ordinary Course of Business.
          (b) The amount of Product in the wholesale channel does not exceed
seven (7) weeks’ of demand for the Product. The value at which the Inventory is
carried on the books and

 

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records of the Selling Parties is at the lower of cost (determined on a first-in
or first-out method) or market values. The Inventory does not consist of, in any
material amount, items that are obsolete or damaged, except as reflected or
reserved on the statement of net assets to be delivered pursuant to Section 4.4
or the Closing Net Working Capital Estimate. The Inventory does not consist of
any items held on consignment. Neither of the Selling Parties is under any
obligation or liability with respect to accepting returns of items of Inventory
in the possession of their customers other than in the Ordinary Course of
Business and consistent with the Selling Parties’ Product returns policy.
Schedule 4.15 contains a complete list of the addresses of all warehouses and
other facilities in which the Inventory is located. Schedule 4.15 sets forth a
complete schedule of all wholesaler reports received by the Selling Parties
since January 1, 2007 and complete and accurate copies of all such wholesalers
reports have been provided by the Selling Parties to the Buyer.
          4.16 Insurance. Schedule 4.16 sets forth the current product liability
insurance held by Parent with respect to the Product as of the date hereof.
          4.17 Customers. The Selling Parties have used commercially reasonable
efforts to maintain, and, as of the date of this Agreement, currently maintain,
good working relationships with all of the customers, processors and suppliers
of the Business, taken as a whole. Schedule 4.17 specifies for the year ended
December 31, 2006 and the three-month period ended March 31, 2007 the names of
the customers that were, in the aggregate, the three (3) largest customers in
terms of dollar value of Products sold by the Business during such periods. As
of the date of this Agreement, none of such customers has given the Selling
Parties written notice terminating, canceling or threatening to terminate or
cancel any contract or relationship with the Selling Parties relating to the
Business.
          4.18 Taxes.
          (a) The Selling Parties have timely filed all material Tax Returns
required to be filed relating to the Purchased Assets and such Tax Returns were
correct and compete in all material respects at the time of filing.
          (b) The Selling Parties have timely paid all material Taxes relating
to the Purchased Assets required to be paid or collected by them.
          (c) Neither of the Selling Parties has received from any Taxing
Authority any written notice of proposed adjustment, deficiency or underpayment
of any material Taxes relating to the Purchased Assets that has not been
satisfied by payment or withdrawn, and no written claims related to such Taxes
have been asserted or threatened against the Selling Parties.
          (d) No agreement for the extension of time for the assessment of any
material Taxes relating to the Purchased Assets is currently in effect.
          (e) There are no liens for Taxes on the Purchased Assets other than
Permitted Tax Liens.
          (f) Neither of the Selling Parties is a “foreign person” within the
meaning of Section 1445(b)(2) of the Code.

 

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          4.19 Cutler Agreement. As of the date hereof, the Selling Parties have
entered into an agreement with Neal R. Cutler, substantially in the form
previously provided to Buyer.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
          Each Buyer hereby represents and warrants to the Selling Parties and
their Affiliates as of (a) the date hereof and (b) the Closing Date as follows:
          5.1 Organization of Buyer. Azur Inc. is duly organized, validly
existing and in good standing under the laws of New York. Azur Limited is duly
organized and validly existing under the laws of Bermuda.
          5.2 Authorization. Each Buyer has all requisite corporate power and
authority, and has taken all corporate action necessary, to execute and deliver
this Agreement and the Ancillary Agreements to which it is a party, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. Without limiting the generality of the
foregoing, the execution and delivery of this Agreement and the Ancillary
Agreements to which each Buyer is a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all requisite action on the part of each Buyer and
its equity owners. This Agreement has been, and as of the Closing each of the
Ancillary Agreements to which either Buyer is a party will have been, duly
executed and delivered by such Buyer, and, assuming the due authorization,
execution and delivery of this Agreement and the Ancillary Agreements by the
Selling Parties, is or, if executed at the Closing, will be, the valid and
binding obligations of such Buyer, enforceable against such Buyer in accordance
with their terms, except as may be limited by the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
Laws relating to or affecting creditors’ rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
          5.3 Compliance with Applicable Law. Each Buyer conducts its business
in compliance in all material respects with all applicable Laws, except for
violations, if any, which would not, individually or in the aggregate,
reasonably be expected to materially affect or delay the ability of either Buyer
to consummate the transactions contemplated hereby.
          5.4 Litigation. There is no material Action pending, or to the
knowledge of each Buyer, threatened against such Buyer that is reasonably likely
to adversely affect such Buyer’s performance under this Agreement or the
consummation of the transactions contemplated herein.
          5.5 No Conflict or Violation; Consents and Approvals.
          (a) Neither the execution, delivery or performance by either Buyer of
this Agreement or the Ancillary Agreements nor the consummation by either Buyer
of the transactions contemplated hereby and thereby will (i) violate or conflict
with any provision of the organizational documents of such Buyer, (ii) violate,
conflict with, or result in or constitute a breach or default under (with the
giving of notice or passage of time or both), or result in the

 

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termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, any of the terms, conditions or provisions
of any Contract to which such Buyer is a party or by which its assets are bound
or (iii) violate any Law or Governmental Order applicable to such Buyer, except
in the case of each of clauses (ii) and (iii) above, for such violations,
breaches, defaults, terminations or accelerations which would not reasonably be
expected to materially adversely affect the ability of such Buyer to consummate
the transactions contemplated hereby or subject any of the Selling Parties to
any Liability.
          (b) No material consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or other
Person, is required by or with respect to each Buyer or any Affiliate of such
Buyer as a result of the execution and delivery of this Agreement by Buyer or
the consummation of this transaction.
          5.6 No Brokers or Finders. Each Buyer has not engaged or made any
agreement with any broker, finder or similar agent or any Person or firm which
will result in the obligation of the Selling Parties or any of their Affiliates
to pay any finder’s fee, brokerage fees or commission or similar payment in
connection with the transactions contemplated hereby.
          5.7 Sufficiency of Consideration. Each Buyer has cash on hand or
commitments (which commitments are in full force and effect and neither Buyer is
in breach of any term thereof) sufficient, in the aggregate, to consummate the
transactions contemplated by this Agreement to pay the Limited Up-Front Cash
Purchase Price, the Inc. Up-Front Cash Purchase Price and all other costs and
expenses arising in connection herewith and therewith.
          5.8 [* * *]. To the knowledge of Buyer, after due inquiry, [* * *].
Neither Buyer (including any partnership or joint venture of which Buyer or any
of its Affiliates is a party), nor any of its Affiliates (other than their
employees outside of their capacity as such) or Representatives (in their
capacity as such) is currently:
          (a) [* * *];
          (b) [* * *];
          (c) [* * *]
          (d) [* * *],
[* * *]
 

[* * *]   Confidential Information, indicated by [***], has been omitted from
this filing and filed separately with the Securities and Exchange Commission.

 

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ARTICLE VI
COVENANTS OF THE SELLING PARTIES AND BUYER
          The Selling Parties and Buyer each covenant with the other as follows:
          6.1 Access by Buyer; Confidentiality Agreement.
          (a) From the date hereof through the Closing, the Selling Parties
shall permit (and shall cause their Representatives to permit) Buyer and its
Representatives to have access at reasonable times within normal business hours,
to all personnel, books, records (including Tax records), Business Contracts and
offices of the Business as may be reasonably requested by Buyer. Any information
furnished to Buyer or which Buyer receives in exercising its rights pursuant to
this Section 6.1(a) shall be subject to the terms of Section 6.1(b) hereof;
provided, however, that (i) any such investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the Business or
the conduct of the Business, (ii) the Selling Parties shall not be required to
take any action which would constitute a waiver of the attorney-client
privilege, (iii) the Selling Parties need not supply Buyer with any access or
information (A) which the Selling Parties are under a legal obligation not to
supply or (B) with respect to a Retained Liability or Excluded Asset, and
(iv) the Selling Parties shall not be required to provide such information or
access to any employee records other than the Employee Records. In the event
that the Selling Parties or their Affiliates receive written notice by a
Governmental Entity of a violation of any regulatory or other requirement
relating to the Business, any Purchased Assets, the Product or Product
Registrations, they shall promptly provide Buyer a copy of any such written
notice and use commercially reasonable efforts to undertake, in consultation
with Buyer, all such actions as may be reasonably necessary to cure such
violation.
          (b) The parties to this Agreement hereby agree to be bound by and
comply with the terms of the Confidentiality Agreement, which are hereby
incorporated into this Agreement by reference and shall continue in full force
and effect after the Closing Date, such that the information obtained by any
party to this Agreement, or its Representatives, during any investigation
conducted pursuant to this Section 6.1, or in connection with the negotiation
and execution of this Agreement or the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, or otherwise, shall
be governed by the terms of the Confidentiality Agreement.
          (c) The Selling Parties agree to keep confidential for five (5) years
after the Closing date all information regarding the Business, except as
required by Law, Exchange Act regulation or the rules of any national securities
exchange on which its securities are listed. Notwithstanding the foregoing, the
Selling Parties shall not be obligated to keep any information confidential that
(i) is or becomes generally available to the public, other than as a result of a
disclosure by the Selling Parties, or (ii) becomes available to the Selling
Parties on a non-confidential basis from a Person that is not, to the knowledge
of Seller, bound by a confidentiality agreement with, or other contractual,
legal or fiduciary obligation of confidentiality to, Buyer or any other party
with respect to such information.

 

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          6.2 Conduct of Business.
          (a) From the date hereof through the Closing, the Selling Parties
shall, except as contemplated by this Agreement and except as set forth on
Schedule 6.2, or as consented to in advance by Buyer in writing, operate the
Business in the Ordinary Course of Business and shall use their commercially
reasonable efforts to maintain intact the Business as it is currently organized
and maintain good relations with their suppliers, customers, creditors,
employees, agents and others (taken as a whole) having a relationship with the
Business (taken as a whole); provided, however, the Selling Parties shall use
commercially reasonable efforts to (i) market, sell and distribute the Product
and deal with any customer orders for Product in the Ordinary Course of
Business, (ii) continue to meet any contractual obligations owing and pay any
amounts due in respect of the Business, Product and the Purchased Assets as they
mature in the Ordinary Course of Business, (iii) continue to procure, and order
the processing and manufacturing of, the Product in the Ordinary Course of
Business and (iv) continue the pre-launch activities related to DuraSolv. The
parties do not intend the foregoing provisions of this Section 6.2 or any other
provision in this Agreement to effect an assignment of, or transfer of control
related to, the Purchased Assets prior to Closing.
          (b) Without limiting the generality of Section 6.2(a), the Selling
Parties shall not, with respect to the Business, except as set forth on
Schedule 6.2 or as consented to in advance by Buyer in writing, which consent
shall not be unreasonably withheld or delayed, take any of the following actions
from the date hereof through the Closing:
          (i) (other than with respect to any confidentiality or non-competition
agreement relating to the Business) enter into, extend, modify, terminate or
renew any Material Contract, except in the Ordinary Course of Business;
          (ii) sell, assign, transfer, convey, lease or otherwise dispose of any
of the Purchased Assets, or any interests therein, except, subject to clause
(vi) of this Section 6.2(b), for sales of Product in the Ordinary Course of
Business;
          (iii) subject any of the Purchased Assets or any part thereof, to any
Encumbrance, other than Permitted Encumbrances;
          (iv) pay, loan or advance any material amount to any Affiliate of the
Selling Parties in connection with the Business;
          (v) settle, release or forgive any Action relating to the Purchased
Assets or the Business, or waive any right thereto;
          (vi) fulfill any orders for the Product other than in the Ordinary
Course of Business;
          (vii) grant any license or sublicense to any Transferred Intellectual
Property;
          (viii) fail to maintain all Product Records in the Ordinary Course of
Business in all material respects;

 

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          (ix) fail to hold and store all Inventory in material compliance with
(i) all applicable Laws, (ii) in compliance in all material respects with the
FDA’s current Good Manufacturing Practice regulations at 21 CFR Parts 210 and
211 as applicable to products sold in the United States and (iii) the approvals
of Governmental Authorities, and (iv) applicable analytical methods and
procedures, material specifications, master batch records and stability
protocols established by the Selling Parties, if any; and
          (x) enter into any agreement, or otherwise become obligated, to do any
of the foregoing.
          6.3 Employee Matters.
          (a) As soon as reasonably practicable but in any event within five
(5) Business Days after the date hereof, Azur Inc. shall make offers of
employment (to be effective as of the Closing Date) to the Business Employees
set forth on Schedule 6.3(a)(i) who are then actively employed by Seller or
Parent immediately prior to the Closing. Effective as of the Closing, the
Selling Parties shall terminate the employment of all Buyer Employees. Azur Inc.
shall communicate offers of employment to such Business Employees in accordance
with applicable legal requirements and in a form determined by Azur Inc., which
form is reasonably acceptable to the Selling Parties. Such offers of employment
shall provide each of such Business Employees, effective immediately after the
Closing and for a period of six months thereafter, with (i) employment at a
level and with responsibilities that are substantially commensurate with their
level and responsibilities immediately prior to the Closing, (ii) base salary
that is at least comparable to the present base salary and bonus opportunity
that is at least comparable to their bonus opportunity immediately prior to the
Closing, (iii) health, dental, vision, 401(k) and other insurance benefits that
are at least comparable in the aggregate to their benefits immediately prior to
the Closing, (iv) a plan that would allow Buyer Employees that have over funded
their healthcare spending accounts with a Selling Party as of the Closing Date
to elect to continue to participate in such Selling Party’s healthcare spending
plan by electing COBRA coverage with respect to such plan at the Buyer
Employee’s expense, and (v) severance benefits equal to two weeks per year of
service with the Selling Parties or their Affiliates (recognizing such Buyer
Employee’s service with a Selling Party or any Affiliate of a Selling Party that
is recognized under the Selling Parties Plans for severance purposes). In
addition, Azur Inc. shall offer the Business Employees set forth on
Schedule 6.3(a)(i) employment at a location within a reasonable commuting
distance from their place of employment immediately prior to the Closing;
provided that Azur Inc. may require the Business Employees set forth on
Schedule 6.3(a)(ii) to relocate their principal location of employment anywhere
within the United States as a condition to such Business Employees’ employment
with Azur Inc. Following the Closing Date, Azur Inc. shall not be obligated to
continue the employment of any Buyer Employee for any period of time.
          (b) As soon as practicable following the Closing Date, the Selling
Parties shall cause the account balances of all Buyer Employees in any 401(k)
plans maintained by the Selling Parties to be fully vested and distributed and
Azur Inc. shall permit Buyer Employees who are participants in said plans to
rollover such distributions (including outstanding participant loan balances)
into Azur Inc.’s 401(k) plan. As soon as practicable following the Closing Date,
Parent shall cause all unvested equity awards held by the Buyer Employees
(including stock options, stock grants and restricted stock units which do not
provide for accelerated vesting) to become

 

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fully vested and exercisable by the holder thereof for the period specified in
the relevant Selling Parties Plan.
          (c) Effective as of the Closing Date, Azur Inc. or its designated
Affiliate shall cause each Buyer Employee who was covered under the Selling
Parties Plans immediately prior to such date to be covered under employee
benefit plans, programs and arrangements maintained or established by Azur Inc.
(the “Buyer Plans”). However, the Buyer Employees shall continue to participate
in the Selling Parties Plans providing for medical, dental and vision benefits
through the sixtieth (60th) day anniversary of the date of this Agreement, and
Azur Inc. shall bear the cost of such continued participation, which cost shall
be an amount equal to the COBRA continuation premium for the Selling Parties
Plans applicable to each Buyer Employee for the period of continued coverage
after the Closing Date. The Buyer Plans shall recognize each Buyer Employee’s
service with the Selling Parties or any Affiliate that is recognized under the
Selling Parties Plans (and prior service with the Selling Parties’ predecessors
to the extent such prior service is recognized under the Selling Parties Plans)
for eligibility and vesting purposes, but not benefit accrual purposes.
          (d) Effective as of the Closing Date, each Buyer Employee shall cease
to be covered by the Selling Parties Plans, except as otherwise described above.
The Selling Parties shall retain responsibility for all claims for welfare
benefits incurred by Business Employees prior to Closing Date. For purposes of
this subsection, a claim shall be deemed to have been incurred on the date the
medical, dental or vision service giving rise to the claim is performed. With
respect to the Buyer Employees, effective as of the Closing Date, Azur Inc.
shall use commercially reasonable efforts to cause all applicable Buyer Plans
that provide medical or dental coverage, life and accident insurance, and
disability or similar coverage (collectively, the “Buyer Welfare Plans”) to
waive pre-existing condition exclusions, evidence of insurability provisions,
waiting period requirements or similar provisions to the extent such exclusions,
requirements and provisions were waived or satisfied under the applicable
Selling Parties Welfare Plan as of the Closing Date. In addition, Azur Inc.
shall cause the applicable Buyer Welfare Plans to credit Buyer Employees with
amounts credited by the Selling Parties under the Selling Parties’ health and
dental plans toward the satisfaction of annual deductible and out-of-pocket
maximums under such Azur Inc. health and dental plans during the calendar year
which includes the Closing Date.
          (e) The Selling Parties shall provide to Azur Inc., at Buyer’s
request, access to job-related employment documents with the exception of
non-work-related medical records or other records the disclosure of which would
be in violation of applicable Law, as needed for Buyer to comply with this
Section 6.3 prior to the Closing Date. The Selling Parties and Azur Inc. shall
each cooperate with the other and shall provide to the other such documentation,
information and assistance as is reasonably necessary to effect the provisions
of this Section 6.3. Buyer is solely responsible for the use of the Employee
Records and other employee information furnished by the Selling Parties and,
subject to Article IX Buyer shall indemnify and hold the Selling Parties
harmless from and against any Damages or Liabilities incurred by the Selling
Parties as a result of Azur Inc.’s use of such Employee Records or other
employee information.
          (f) The Selling Parties shall be responsible for providing or
discharging any and all notifications, benefits and Liabilities to Business
Employees and governmental entities under the Worker Adjustment and Retraining
Notification Act of 1988 (the “WARN Act”) or by

 

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any other Law relating to plant closings, mass layoffs or employee separations
or severance pay that are first required to be provided or discharged on or
prior to the Closing Date, and Azur Inc. shall be responsible for providing any
notice required pursuant to the WARN Act with respect to a plant closing, layoff
or employee separation or severance pay relating to the Buyer Employees after
the Closing Date. Azur Inc. shall be responsible for the administration of and
shall assume any and all obligations, if any, arising after the Closing Date
under COBRA with respect to Buyer Employees and their beneficiaries.
          (g) From the date hereof until the Closing Date, the Selling Parties
shall not increase or change the compensation or benefits for the Business
Employees other than in the Ordinary Course of Business.
          (h) The provisions of this Section 6.3 pertaining to the employment
and employee benefits of the Buyer Employees are solely for the benefit of the
parties to this Agreement, and no employee or former employee of the Selling
Parties or Buyer or any other individual associated therewith shall be regarded
for any purpose as a third party beneficiary of this Agreement.
          6.4 No Additional Representations and Warranties. Buyer acknowledges
and agrees that except for the representations and warranties contained in
Article IV (as modified by the Disclosure Schedules), neither the Selling
Parties nor any other Person makes any express or implied representation or
warranty, including as to the accuracy or completeness of any information
regarding the Business, on behalf of the Selling Parties. The Selling Parties
specifically disclaim any such representation or warranty, whether by the
Selling Parties or any of their Representatives or any other Person, with
respect to the execution and delivery of this Agreement, the Ancillary
Agreements or the consummation of the transactions contemplated hereby or the
Business or Purchased Assets notwithstanding the delivery or disclosure to Buyer
or any of its Representatives or any other Person of any documentation or other
information with respect to the foregoing. Buyer further agrees that neither the
Selling Parties nor any other Person shall have or be subject to any Liability
to Buyer or any other Person resulting from the distribution to Buyer or such
Person, or Buyer’s or such Person’s use of, any such information, including any
information, documents, data or materials made available to Buyer by the Selling
Parties, management presentations or other form in expectation of the
transactions contemplated by this Agreement. OTHER THAN THE EXPRESS
REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE IV (AS MODIFIED BY THE
DISCLOSURE SCHEDULES), IT IS THE EXPRESS INTENT OF THE PARTIES HERETO THAT THE
SELLING PARTIES MAKE NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, AT LAW OR IN EQUITY IN RESPECT OF THE BUSINESS OR THE PURCHASED ASSETS
OR ANY OTHER MATTER, INCLUDING, ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE
CONDITION, MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF
THE PURCHASED ASSETS, AND ANY SUCH REPRESENTATIONS OR WARRANTIES ARE EXPRESSLY
DISCLAIMED. THE SELLING PARTIES RECOGNIZE AND AGREE THAT BUYER, IN CONNECTION
WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT, IS RELYING UPON THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY GIVEN IN ARTICLE IV OF THIS AGREEMENT
(AS MODIFIED BY THE DISCLOSURE SCHEDULES).

 

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          6.5 Disclaimer of Estimates and Projections. In connection with
Buyer’s investigation of the Business and the Purchased Assets, Buyer may have
received from or on behalf of the Selling Parties certain estimates, forecasts,
plans and financial projections. Buyer acknowledges that (a) there are
uncertainties inherent in making such estimates, forecasts, plans and
projections and that Buyer is familiar with such uncertainties, and (b) Buyer is
taking full responsibility for conducting its own evaluation of the adequacy and
accuracy of such estimates, forecasts, plans and projections (including the
reasonableness of the assumptions underlying such estimates, forecasts, plans
and projections) and (c) Buyer shall have no Claim against Seller, Parent, any
of their Affiliates or any other Person with respect to such estimates,
forecasts, plans or projections. Accordingly, the Selling Parties are making no
representation or warranty with respect to such estimates, forecasts, plans and
projections (including such underlying assumptions).
          6.6 Revision of Marketing Materials; Use of Names.
          (a) Removal of Names. Buyer shall revise all marketing materials and
other product literature related to the Product to delete all reference to the
names and other references to the Selling Parties and implement such materials
as soon as reasonably practicable, and in any event, within one (1) year after
the date of this Agreement.
          (b) Transitional Use of Names. For one (1) year after the Closing
Date, Buyer may continue to distribute marketing materials in connection with
the marketing of the Product that use names, addresses or phone numbers to the
extent that such marketing materials exist at the Closing Date.
          (c) No Other Use. Other than as expressly provided in this Agreement,
Buyer shall not use or permit any of its Affiliates or distributors to use any
of the names or any other corporate, trademarks or service marks or names now or
hereafter owned or used by the Selling Parties or any of its Affiliates, other
than the Transferred Intellectual Property (on the terms provided herein and in
the Ancillary Agreements).
          (d) Website Information. Within thirty (30) days following the Closing
Date, the Selling Parties shall remove all references to the Product from the
“Products” section of their website.
          6.7 Customer Notifications. Promptly after the Closing Date, Buyer
shall notify all current customers of the Product (i) of the transfer of the
Purchased Assets to Buyer and (ii) that all purchase orders for Product received
by the Selling Parties or any of their Affiliates prior to the Agreement Date
but not filled as of such date will be transferred to Buyer; provided, however,
that to the extent that any purchase order cannot be so transferred, the Selling
Parties and Buyer shall cooperate with each other to ensure that such purchase
order is filled and that Buyer receives the same economic benefit and assumes
the same liability associated with filling such purchase order as if such
purchase order had been so transferred; provided, however, that Buyer’s
obligations to provide such notices is subject to the Selling Parties providing
Buyer with a complete list of all current customers of the Product and their
contact information.

 

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          6.8 Regulatory Matters, Etc.
          (a) From and after the Closing Date, Buyer shall assume all regulatory
responsibilities in connection with the Products and the Product Applications,
including responsibility for (i) all periodic and annual reports or other
regulatory filings with the FDA or any equivalent foreign Governmental Authority
with respect to the 2007 calendar year (provided that Selling Parties shall
provide assistance as reasonably requested in connection with such reports and
filings), (ii) reporting any product quality complaints and adverse drug events
in connection with the NDA, and (iii) compliance with the Federal Food, Drug and
Cosmetic Act and the Public Health Service Act, as the same may be amended from
time to time. For a period of six (6) months after the Closing Date, if the
Selling Parties receive any adverse event reports regarding the Product, the
Selling Parties shall promptly notify Buyer of such.
          (b) Notwithstanding anything in this Agreement to the contrary and
subject to Section 2.7, the Selling Parties shall have no obligation whatsoever
in connection with any regulatory filings, requests or applications related to
the Product.
          (c) From and after the Closing Date, the Selling Parties shall direct
all complaints or inquiries concerning the Product to Buyer to the attention of
the “Senior Director of Medical Affairs” of Buyer, or such other person or
persons as Buyer may specify from time to time by written notice to the Selling
Parties.
          (d) From and after the Closing Date, Buyer shall have all
responsibility for any and all Governmental Authority fee obligations for
holders or owners of the Product Registration and the Product Applications that
relate to periods on or after the Closing Date, and the Selling Parties shall
retain responsibility for such fee obligations as they relate to periods prior
to the Closing Date. Each party shall promptly reimburse the other to the extent
a party pays amounts that are the responsibility of the other party hereunder.
          (e) From and after the Closing Date, Buyer shall have the sole
authority and responsibility to respond to any Governmental Authorities, to
respond to product technical complaints and medical complaints and to handle all
recalls, market withdrawals and field corrections of the Product in accordance
with applicable Laws, all at Buyer’s sole cost and expense.
          (f) Beginning at the Closing Date and ending two (2) years thereafter,
Buyer shall promptly (but in any case, within forty-eight (48) hours) notify the
Selling Parties in writing of any decision, order, request or directive of a
court or other Governmental Authority to recall, withdraw, or field correct the
Product. Buyer has the sole authority and responsibility for determining if and
when to issue any recall, withdrawal, or field correction (but shall comply with
all applicable laws, rules, regulations, directives and orders in making such
determination), with respect to all Products whether they are sold or
distributed before, on or after the Closing Date. Except as otherwise provided
in this Agreement, Buyer shall be responsible for, and, subject to Article IX,
shall indemnify the Selling Parties with respect to, the cost and expense of any
such recall, withdrawal, or field correction, with respect to any Products sold
or distributed by Buyer after the Closing Date. The Selling Parties shall have
sole responsibility for, and, subject to Article IX, shall indemnify the Buyer
with respect to, the cost and expense of any such recall, with-

 

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drawal, or field correction, with respect to any Product sold or distributed by
the Selling Parties on or prior to the Closing Date.
          6.9 Post Closing Cooperation.
          (a) Each party further agrees that it will cooperate with and make
available to the other party, its employees, auditors, counsel and
representatives, during normal business hours, all books and records,
information and employees (without substantial disruption of employment)
retained and remaining in existence after the Closing which are necessary or
useful in connection with any Tax filing inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
books and records, information or employees for any reasonable business purpose.
Buyer shall retain all such books and records in a manner consistent with the
Selling Parties’ record retention policy. The party requesting any such books
and records, information or employees shall bear all of the out-of-pocket costs
and expenses (including attorneys’ fees, but excluding reimbursement for
salaries and employee benefits) reasonably incurred in connection with providing
such books and records, information or employees. All information received
pursuant to this Section 6.9 shall be subject to the terms of Section 6.1(b)
hereof.
          (b) For a period of four (4) years after the Closing Date, the Selling
Parties shall (i) cooperate with Buyer in connection with Buyer’s preparation of
financial statements, and use commercially reasonable efforts to provide Buyer
with such information or documents, pertaining to the Product that Buyer
reasonably requests in connection therewith and (ii) use commercially reasonable
efforts to cause the accountants for the Selling Parties to deliver such
information and provide access to files and work papers in connection therewith
as Buyer may reasonably request. Buyer shall pay for all third party costs
related to such work and those reasonable costs related to the Selling Parties’
time and expenses.
          (c) After the Closing Date, upon reasonable written notice, Buyer and
the Selling Parties shall furnish or cause to be furnished to each other, as
promptly as practicable, such information and assistance (to the extent within
the control of such party) relating to the Purchased Assets (including access to
books and records) as is reasonably requested for the filing of all Tax Returns,
and making of any election related to Taxes, the preparation for any audit by
any Taxing authority, and the prosecution or defense of any claim, suit or
proceeding related to any Tax Return. In the event it is necessary under this
Agreement to allocate any Tax between pre- and post- Closing periods, such
allocation shall be performed based on the number of days in each such period,
on the basis of a 365-day calendar year, or such other method as the parties
hereto shall reasonably agree. The Selling Parties and Buyer shall cooperate
with each other in the conduct of any audit or other proceeding relating to
Taxes involving the Purchased Assets. Buyer shall retain the books and records
of the Selling Parties and their Affiliates included in the Purchased Assets for
a period of seven years after the Closing Date. After the end of such seven-year
period, before disposing of such books or records, Buyer shall give notice to
such effect to the Selling Parties and shall give the Selling Parties, at the
Selling Parties’ cost and expense, an opportunity to remove and retain all or
any part of such books or records as the Selling Parties may select.

 

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          (d) The Selling Parties shall provide assistance to Buyer as
reasonably requested with respect to financial and other information relating to
the conduct of the Business prior to the Closing Date in connection with Buyer’s
performance of obligations and enjoyment of benefits under the Business
Contracts.
          6.10 Consents. The parties hereto shall use commercially reasonable
efforts to obtain the approvals of the FDA and consents of the Persons listed on
Schedule 6.10 on the Closing Date. The Selling Parties shall use commercially
reasonable efforts to deliver to each relevant Governmental Authority and to
Buyer a copy of the Selling Parties’ FDA transfer of ownership letter, and each
other document required to initiate transfer of any Permits.
          6.11 Financing. Buyer shall use its commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to arrange and obtain the financing on the
terms and conditions described in its financing commitment letter, including
using commercially reasonable efforts to (a) maintain in effect the financing
commitment letter and negotiate and enter into definitive agreements with
respect to the financing on the terms and conditions reflected in the financing
commitment letter, (b) satisfy on a timely basis all material conditions
applicable to Buyer in such definitive agreements that are within its control,
(c) consummate the financing at such time or from time to time as is necessary
for Buyer to satisfy its obligations under this Agreement (d) enforce its rights
under the financing commitment letter; provided, however, that Buyer shall have
the right to substitute alternative financing with a different letter or a
letter from alternative lenders so long as such substitute letter is subject to
financing conditions that are at least as favorable to Buyer as the financing
conditions set forth in the financing commitment letter. In the event any
portion of the financing becomes unavailable on the terms and conditions
contemplated in the financing commitment letter for any reason, Buyer shall use
it’s commercially reasonable efforts to obtain alternative financing from
alternative sources as promptly as practicable following the occurrence of such
event. For the avoidance of doubt, Buyer’s obligation to consummate the
transactions contemplated by this Agreement are not (and shall not be) subject
to any financing condition.
          6.12 Transition Services.
          (a) Following the Closing and for a period of six (6) months
thereafter (the “Transition Period”), Azur Inc. shall have the right, subject to
Sections 6.12(b) and (f) through (k) below, to utilize the services of each
employee or consultant of the Selling Parties identified on Schedule 6.12 as a
“FazaClo Transition Services Employee” (the “FazaClo Transition Services
Employees”) for transition services within such employee’s area of
responsibility mutually agreed to by the parties (such services, the “FazaClo
Transition Services”). As used in this Section 6.12, a month shall be defined as
each monthly anniversary of the Closing Date. The parties agree that in the
event Azur Inc. seeks, after the Closing, to utilize services of additional
employees of the Selling Parties that were useful in the operation of the
Business and did not become Buyer Employees, the parties will consult with one
another to reach mutual agreement regarding an amendment to Schedule 6.12 that
identifies the terms of, and payment associated with, the services to be
provided by such employees.
          (b) Azur Inc. shall pay a monthly fee for each FazaClo Transition
Services Employee equal to the amount set forth opposite such FazaClo Transition
Services Employee’s

 

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name for the applicable month following the Closing on Schedule 6.12 (the
aggregate of such monthly fees payable is referred to herein as the “FazaClo
Monthly Fee”). In the event that, during the Transition Period, Azur Inc.
determines that it no longer requires the services of a FazaClo Transition
Services Employee, Azur Inc. may provide Parent with written notice to that
effect (a “Termination Notice”). Such Termination Notice shall be effective
beginning on the first Monday following five (5) Business Days after its receipt
by Parent and the monthly fee amount applicable to such FazaClo Transition
Services Employee shall thereafter no longer be taken into account in
calculating the FazaClo Monthly Fee (with any amount of FazaClo Monthly Fee
relating to such FazaClo Transition Services Employee for the month in which the
Termination Notice is delivered, pro rated on the basis of a 30 day month).
          (c) During the Transition Services Period, Azur Inc. shall have the
right, subject to Sections 6.12(e)-(k) below, to utilize the services of each
employee of the Selling Parties identified on Schedule 6.12 as an
“Administrative Transition Services Employees” (the “Administrative Transition
Services Employees”) for transition services within such employee’s area of
responsibility mutually agreed to by the parties (such services, the
“Administrative Transition Services”), up to the maximum percentage of such
Administrative Transition Services Employee’s time during such month as is set
forth opposite such Administrative Transition Services Employee’s name on
Schedule 6.12. The monthly rate payable for each such Administrative Transition
Services Employee’s time shall be equal to the fully burdened annual base salary
and bonus (which amount is listed opposite such Administrative Transition
Services Employee’s name on Schedule 6.12 under the heading “Annual Base
Salary”), divided by 365 and multiplied by the number of days (including any
fraction of a day and with partially worked days aggregated) in such month in
which such Administrative Transition Services Employee provided Administrative
Transition Services (the aggregate of such monthly fees payable is referred to
herein as the “Admin Monthly Fee”).
          (d) During the Transition Services Period, Azur Inc. shall have the
right, subject to Sections 6.12(e)-(k) below, to utilize the services of each
consultant of the Selling Parties identified on Schedule 6.12 as a “Transition
Consultant” (the “Transition Consultants”, and along with the FazaClo Transition
Services Employees and the Administrative Transition Services Employees, the
“Transition Services Employees”) for transition services within such
consultant’s area of responsibility mutually agreed to by the parties for up to
the maximum percentage of such Transition Consultant’s time set forth opposite
such Transition Consultant’s name on Schedule 6.12 (such services, the
“Consultant Transition Services”). In respect of the Consultant Transition
Services, Azur Inc. shall pay the monthly rate set forth opposite such
Transition Consultant’s name on Schedule 6.12 (the aggregate of such monthly
fees payable is referred to herein as the “Consultant Monthly Fee”; the
aggregate FazaClo Monthly Fee, Admin Monthly Fee and the Consultant Monthly Fee
referred to herein as the “Monthly Fee”). Notwithstanding the foregoing
provisions of this Section 6.12(d), following the sixtieth (60th) day after the
Closing, Parent may notify Azur Inc. that it no longer requires the services of
any one or more Transition Consultants. Within five (5) days of receiving such
notice, Azur Inc. shall indicate either (i) that the services of the Transition
Consultant may be terminated (which shall have the same effect as the delivery
of a Termination Notice as described in the remainder of this Section 6.12(d))
or (ii) that it commits to increase the percentage of time associated with such
Transition Consultant on Schedule 6.12, and until a Termination Notice is
delivered and effective, to pay for, 100% of

 

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such Transition Consultant’s time. In the event that, during the Transition
Period, Azur Inc. determines that it no longer requires the services of a
Transition Consultant, Azur Inc. may provide Parent with a Termination Notice.
Such Termination Notice shall be effective beginning on the first Monday
following five (5) Business Days after its receipt by Parent and the monthly fee
amount applicable to such Transition Consultant shall thereafter no longer be
taken into account in calculating the Consultant Monthly Fee (with any amount of
Consultant Monthly Fee relating to such Transition Consultant for the month in
which the Termination Notice is delivered, pro rated on the basis of a 30 day
month).
          (e) The Monthly Fee shall be payable each month in which
Administrative Transition Services are provided within five (5) Business Days
after the end of such month by wire transfer of immediately available funds to
an account designated by Parent.
          (f) The parties agree that neither the Selling Parties nor any of
their Affiliates shall be obligated to replace any Transition Services Employee
whose employment terminates during the Transition Period either at the election
of the Transition Services Employee or at the election of Parent for cause or,
with respect to an Administrative Transition Service Employee, in connection
with layoffs or other reorganization by Parent. In the event of such a
termination, the Monthly Fee, as applicable to such Transition Services
Employee, shall no longer be payable by Buyer; provided that if Parent elects to
replace any Administrative Transition Services Employee whose employment is
terminated, such replacement employee shall provide the Administrative
Transition Services to Azur Inc. on the same terms and at the same rate as the
terminated Administrative Transition Services Employee provided such services.
Except as otherwise provided herein, the Selling Parties agree not to terminate
the employment of any FazaClo Transition Services Employee during the Transition
Period, unless Azur Inc. has delivered a Termination Notice in respect of such
FazaClo Transition Services Employee. In no event shall Parent be obligated to
provide any replacement services or arrange for substitute employees to provide
services during the Transition Services Period, if any, that a Transition
Services Employee is absent from work and uses illness, personal or vacation
time accrued under Parent’s illness, personal or vacation policy in the Ordinary
Course of Business. Notwithstanding anything to the contrary in this Section
6.12, if and only if the Selling Parties terminate the contract of a Transition
Consultant, then Azur Inc. may engage such Transition Consultant for all of the
services provided under such contract.
          (g) During the Transition Period, Parent shall make available the
Transition Services Employees that are then providing Transition Services
pursuant to this Section 6.12 for reasonable consultation with Azur Inc.’s
representatives, whether via telephone, written or electronic correspondence or
in person at the Parent’s facilities, for the purpose of conveying and
transferring information and performing activities related to the Business. Such
consultation shall occur for reasonable periods of time and during Parent’s
normal business hours. All Transition Services shall be performed at or from the
premises of Parent or an Affiliate of Parent, unless otherwise agreed by Parent
and Azur Inc.
          (h) Parent shall use commercially reasonable efforts to cause the
Transition Services Employees to perform Transition Services with at least the
same level of quality and efforts they rendered in relation to the Business
prior to the Closing Date; provided, that Azur

 

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Inc.’s sole recourse for any breach of this Section 6.12 by a Transition
Services Employee (e.g., for failure or refusal of such employee to provide
Transition Services or to provide Transition Services of an acceptable quality)
shall be the termination of such Transition Services in the manner set forth in
Section (b) above. The parties agree to cooperate in good faith to realize their
intent in relation to the provision of Transition Services, including:
          (i) Parent and Azur Inc. agree to each appoint and maintain a
coordinator with responsibility for coordinating the provision of the Transition
Services;
          (ii) Parent shall, consistent with past practice, supervise the
activities of its officers, employees and representatives with respect to
provision of the Transition Services;
          (iii) Parent shall maintain books and records relevant to the
provision of the Transition Services in a manner consistent with past practice
and shall make such books and records available to Azur Inc. upon reasonable
request by Azur Inc.; and
          (iv) The parties will use their commercially reasonable efforts to
ensure that all transactions and activities conducted by Transition Services
Employees hereunder are conducted in material compliance with all applicable
Laws.
          (i) Transition Services Employees shall act, and the parties intend
that they be treated, as employees of Parent or its Affiliates. Nothing
contained in this Agreement shall be construed or implied to create an agency,
partnership, joint venture, or employer and employee relationship between Azur
Inc. and the Transition Services Employees.
          (j) Except as otherwise provided herein, neither party may make any
representation, warranty or commitment, whether express or implied, on behalf of
or incur any charges or expenses for or in the name of the other party. No party
shall be liable for the act of any other party except as otherwise provided
herein or unless such act is otherwise expressly authorized in writing by both
parties hereto. For the avoidance of doubt, Transition Services Employees shall
not have the authority to negotiate or enter into contracts or agreements on
behalf of Azur Inc. or any of their Affiliates.
          (k) Notwithstanding anything to the contrary set forth in this
Section 6.12, Selling Parties shall provide Azur Inc. a credit in the amount of
Four Hundred Thousand Dollars ($400,000) to be applied exclusively to each
consecutive Monthly Fee after the Closing Date, and Azur Inc. shall not be
required to make any cash payments to the Selling Parties for any Transition
Services under this Section 6.12 until such credit has been exhausted.
          6.13 Transition Services Contracts. Schedule 6.13 lists certain
Contracts that are included in the Excluded Assets but may be useful to Azur
Inc. in the operation of the Business (the “Transition Services Contracts”).
Following the Closing and for a period of ninety (90) days thereafter, Parent
shall request on behalf of Azur Inc. that the other party to the applicable
Transition Services Contract provide such services as Azur Inc. requests and
Azur Inc. shall pay all amounts due and payable for such services to Parent or,
if so directed by Parent, to the other party to the Transition Services Contract
upon the terms and subject to the conditions of such

 

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Transition Services Contract. Subject to Article IX, Buyer shall indemnify
Parent for Buyer’s failure to comply with the foregoing sentence. It is
expressly understood by the parties that nothing in this Section 6.13 shall
limit or in anyway modify Parent’s rights under the Transition Services
Contracts. It is further understood that Parent is not liable for any loss
incurred by the Azur Inc. due to the expiration or termination of any of the
Transition Services Contracts.
          6.14 Reporting Obligations. Azur Limited acknowledges and agrees that
it shall deliver to Sellers’ Representative (as defined in the Unit Purchase
Agreement) the Contingent Payment Quarterly Report throughout the term of the
Contingent Payment Period (as defined in the Unit Purchase Agreement) at the
time and in the manner required under the Unit Purchase Agreement. Furthermore,
Azur Limited acknowledges and agrees that it shall deliver to Seller, at least
five (5) Business Days before the delivery to the Sellers’ Representative, and
thereafter so long as Azur Limited has an obligation to make payment of the
Sales Percentage Amount, a copy of the Contingent Payment Quarterly Report
(provided that such reports shall be deliverable by Azur Limited once annually
within seventy five (75) days after the end of each calendar year after the
Subsequent Run Rate Contingent Payment has become due and payable by Parent
under the Unit Purchase Agreement). In addition to the applicable Contingent
Payment Quarterly Report, Azur Limited shall deliver to Parent a consolidated
report of each of the Contingent Payment Quarterly Reports delivered in the
applicable calendar year. Upon reasonable notice, Azur Limited shall make
available to the Selling Parties and their Representatives during normal
business hours all of the books, records, personnel and workpapers used by Azur
Limited to prepare each Contingent Payment Quarterly Report. Azur Limited shall
notify Parent as soon as reasonably practicable if Buyer reasonably believes the
Subsequent Run Rate Contingent Payment (that is dependent upon achieving One
Million Five Hundred Thousand Dollars ($1,500,000) of Net Product Revenues for
three (3) consecutive months within a fiscal quarter) will be earned under the
Unit Purchase Agreement.
          6.15 Operation of Business by Buyer. Buyer agrees that, to the full
extent that it fails to operate the Business in such a manner as to not
negatively affect the Final Net Working Capital (or the financial components
contained therein), including failing to use its commercially reasonable efforts
to collect all accounts receivable reflected in the Closing Net Working Capital
Estimate or taking actions to accept Product returns other than in accordance
with the Selling Parties’ return policy in effect as of the date of this
Agreement (including, with the commercial launch of DuraSolv), the effect of
such actions on the Net Working Capital shall not be taken into account by the
parties or the Accounting Firm in determining the Post-Closing Statement of Net
Working Capital or otherwise calculating the Final Net Working Capital.
          6.16 [* * *] . Prior to the earlier of (i) January 1, 2010 and
(ii) the date on which the full amount of the Contingent Cash Purchase Price has
been paid or is no longer payable, neither Buyer (including any successor (that
at the time of becoming a successor is not already actively engaged in taking
any of the actions set forth in this Section 6.16), partnership or joint
 

[* * *]   Confidential Information, indicated by [***], has been omitted from
this filing and filed separately with the Securities and Exchange Commission.

 

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venture of which Buyer or any of its Affiliates is a party), nor any of its
Affiliates (other than their employees outside of their capacity as such) or
Representatives (in their capacity as such) shall:
          (a) [* * *];
          (b) [* * *];
          (c) [* * *]
          (d) [* * *],
[* * *], provided, further, however, if Buyer or an Affiliate of Buyer invests
in or provides financing to any Person which Buyer or such Affiliate does not
control and continues not to control, and at the time of such investment the
Person in which the investment is being made, to the knowledge of Buyer and its
Affiliates after due inquiry, does not plan to and is not preparing to [* * *],
such Person thereafter [* * *] shall not be a violation of this Section 6.16.
          6.17 Supplement of Disclosure Schedules. The Selling Parties may (but
shall not be required to) from time to time, prior to the Closing Date,
supplement the Disclosure Schedules in writing to disclose events or information
that occurred or became available after the date of this Agreement that would
otherwise render any representation or warranty of the Selling Parties contained
in Article IV, if made on such Closing Date (or, in the case of representations
and warranties which address matters only as of a particular date, as of such
date), untrue or inaccurate in a manner that would reasonably be expected to
cause the Selling Parties to be unable to satisfy the condition set forth in
Section 8.1 hereof (any such notice, a “Seller Notice”). For a period of five
(5) Business Days following its receipt of a Seller Notice (and in the event
such Seller Notice is provided within five (5) Business Days of the Closing, the
Closing shall occur not earlier than the sixth (6th) Business Day after the
delivery of such Seller Notice), Buyer shall have the right to, in its sole
discretion, terminate this Agreement by providing written notice of such
termination to the Selling Parties. Such right to terminate shall be Buyer’s
sole and exclusive remedy relating to any matters set forth in the Seller
Notice. If Buyer fails to provide written notice of such termination to the
Selling Parties by the fifth Business Day after Buyer’s receipt of the Seller
Notice then the Seller Notice shall be deemed to have amended the Disclosure
Schedules, to have qualified the representations and warranties in Article IV,
and to have cured any misrepresentation or breach of representation or warranty
that otherwise might have existed hereunder by reason of the occurrence, or
failure to occur, of the event or events set forth in the Seller Notice.
 

[* * *]   Confidential Information, indicated by [***], has been omitted from
this filing and filed separately with the Securities and Exchange Commission.

 

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ARTICLE VII
CONDITIONS TO THE SELLING PARTIES’ OBLIGATIONS
          The obligations of the Selling Parties to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or prior to
the Closing Date, of each of the following conditions, any of which may be
waived by the Selling Parties:
          7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement (disregarding all qualifications
and exceptions contained herein relating to materiality or Material Adverse
Effect) shall be true and correct as of the Closing Date or, in the case of
representations and warranties that address matters only as of a particular
date, as of such date, in each case except to the extent that the failure of
such representations and warranties to be true and correct would not,
individually or in the aggregate, (a) have a material adverse effect on the
ability of Buyer to consummate the transactions contemplated hereby or
(b) subject the Selling Parties to any Liability. Buyer shall have performed and
satisfied in all material respects the agreements and covenants required hereby
to be performed by it prior to or on the Closing Date. Buyer shall furnish the
Selling Parties with a certificate executed by a duly authorized officer of
Buyer to the effect that the conditions set forth in this Section 7.1 are
satisfied.
          7.2 No Laws or Governmental Orders. No preliminary or permanent
injunction or other Governmental Order which prevents the consummation of the
sale of the Purchased Assets contemplated hereby shall have been issued and
remain in effect (each party agreeing to use its commercially reasonable efforts
to have any such injunction or Governmental Order lifted) and no Law shall have
been enacted which prohibits the consummation of the sale of the Purchased
Assets.
          7.3 Deliveries. The Selling Parties shall have received from Buyer
each of the deliveries described in Section 3.2(b) hereof.
ARTICLE VIII
CONDITIONS TO BUYER’S OBLIGATIONS
          The obligations of Buyer to consummate the transactions contemplated
by this Agreement are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by Buyer:
          8.1 Representations, Warranties and Covenants. All representations and
warranties of the Selling Parties contained in this Agreement (disregarding all
qualifications and exceptions contained herein relating to materiality or
Material Adverse Effect) shall be true and correct as of the Closing Date or, in
the case of representations and warranties that address matters only as of a
particular date, as of such date, in each case except to the extent that the
failure of such representations and warranties to be true and correct do not,
individually or in the aggregate, have a Material Adverse Effect. The Selling
Parties shall have performed and satisfied in all material respects the
agreements and covenants required hereby to be performed by them prior to or on
the Closing Date. The Selling Parties shall furnish Buyer with a certificate
exe-

 

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cuted by a duly authorized officer of each Selling Party to the effect that the
conditions set forth in this Section 8.1 are satisfied.
          8.2 No Law or Governmental Orders. No preliminary or permanent
injunction or other Governmental Order which prevents the consummation of the
sale of the Purchased Assets contemplated hereby shall have been issued and
remain in effect (each party agreeing to use its commercially reasonable efforts
to have any such injunction or Governmental Order lifted) and no Law shall have
been enacted which prohibits the consummation of the sale of the Purchased
Assets.
          8.3 Deliveries. Buyer shall have received from the Selling Parties
each of the deliveries described in Section 3.2(a) hereof.
          8.4 Consents. The consents of the Persons listed on Schedule 8.4 shall
have been duly obtained and shall be in full force and effect on the Closing
Date.
          8.5 Employees. At least eighty percent (80%) of the Business Employees
identified on Schedule 6.3(a)(i) shall have accepted Azur Inc.’s offer of
employment pursuant to Section 6.3.
ARTICLE IX
POST-CLOSING COVENANTS
          9.1 Selling Parties Maintenance of Insurance. The Selling Parties
shall maintain product liability insurance against claims regarding the
manufacture and use of the Products in amounts of not less than Five Million
Dollars ($5,000,000) for each claim and Ten Million Dollars ($10,000,000) in the
aggregate for a period of not less than one (1) year following the Closing Date.
          9.2 Survival.
          (a) The representations, warranties and covenants of the parties
contained in this Agreement shall survive the Closing Date for the applicable
period set forth in this Section 9.2, and no party shall have any liability to
the other for breach of a representation, warranty or covenant except to the
extent that notice of a Claim is asserted in writing and delivered to it prior
to the termination of the applicable survival period. No notice of a Claim with
respect to a breach of a representation, warranty or covenant may be given after
the applicable time set forth above.
          (b) Each and every representation and warranty contained in this
Agreement and the Ancillary Agreements (other than the representations and
warranties contained in Sections 4.1 (the Selling Parties’ Organization), 4.2
(the Selling Parties’ Authorization), 4.6 (Title to Purchased Assets), 4.11 (No
Brokers or Finders), (Buyer’s Organization), 5.2 (Buyer’s Authorization), and
5.6 (No Brokers or Finders) hereof (collectively, the “SOL Representations and
Warranties”)) shall survive the Closing Date solely for purposes of Section 9.3
hereof until the first anniversary of the Closing Date and then expire. Each SOL
Representation and Warranty

 

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shall survive the Closing Date solely for purposes of Section 9.3 hereof until,
and will expire when, the statute of limitation applicable to such SOL
Representation and Warranty expires.
          (c) Each and every covenant contained in this Agreement and the
Ancillary Agreements (other than the covenants contained in Section 6.1(b),
covenants for which a party hereto has brought a Claim prior to the Closing Date
against the other party for a breach of such covenant and the covenants
contained in this Agreement and the Ancillary Agreements, which by their terms
are to be performed by the parties following the Closing (collectively, the
“Surviving Covenants”)), shall expire with, and be terminated and extinguished
by, the consummation of the sale of the Purchased Assets and the transfer of the
Assumed Liabilities pursuant to this Agreement and shall not survive the Closing
Date; and none of the Selling Parties, Buyer or any Representative or Affiliate
of any of them shall have any Liability whatsoever with respect to any such
covenant. Each Surviving Covenant shall survive the Closing Date solely for
purposes of Sections 3.3, 6.3, 6.8, 6.13 and this Article IX until, and will
expire when, the statute of limitation applicable to the performance of such
covenant expires. The Selling Parties’ indemnification obligations pursuant to
Section 9.3(a)(iii) and Buyer’s indemnification obligations pursuant to
Section 9.3(b)(iv) shall survive the Closing Date in perpetuity.
          (d) The expiration of the representations, warranties, covenants and
indemnification obligations as provided in this Section 9.2 shall not affect the
rights of a party in respect of any Claim made by such party in a writing
received by the other party prior to the expiration of the applicable survival
period provided herein, which Claim shall survive until its ultimate resolution.
          9.3 Indemnification.
          (a) Subject to the provisions of this Article IX, after the Closing,
the Selling Parties shall indemnify and hold harmless Buyer and its Affiliates
and Buyer’s and such Affiliates’ respective Representatives, and each of their
respective successors and assigns (collectively, the “Buyer Indemnified
Parties”) from and against all losses, liabilities, damages, (excluding, except
as stated in the last paragraph of Section 9.9, consequential, incidental,
special or punitive damages), Actions, Claims, judgments, injunctions, orders,
decrees, rulings, settlements, costs, expenses (including reasonable fees and
expenses of counsel, consultants, experts and other professional fees), demands,
penalties, fines, interest and assessments (collectively, “Damages”) incurred by
the Buyer Indemnified Parties or any of them arising from or as a result of:
          (i) the breach of any representation or warranty of the Selling
Parties in this Agreement (provided that any “Material Adverse Effect”
qualification limiting the scope of such representation or warranty shall not be
given effect and any such representation or warranty so modified shall be
breached only if such representation or warranty as so modified is not accurate
in all material respects);
          (ii) the breach or non-performance of any Surviving Covenant made by
the Selling Parties in this Agreement or any Ancillary Agreement;
          (iii) any Retained Liabilities; and

 

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          (iv) the indemnification obligations of the Selling Parties under
Section 3.3 and 6.8(f) hereof.
          (b) Subject to the provisions of this Article IX, after the Closing,
Buyer shall indemnify and hold harmless each of the Selling Parties and their
Affiliates and the Selling Parties’ and such Affiliates’ Representatives, and
each of their respective successors and assigns (collectively, the “Seller
Indemnified Parties”) from and against all Damages as incurred by the Seller
Indemnified Parties or any of them arising from or as a result of:
          (i) the breach of any representation or warranty of Buyer in this
Agreement (provided that any “Material Adverse Effect” qualification limiting
the scope of such representation or warranty shall not be given effect and any
such representation or warranty so modified shall be breached only if such
representation or warranty as so modified is not accurate in all material
respects);
          (ii) the breach or non-performance of any Surviving Covenant made by
Buyer in this Agreement or any Ancillary Agreement;
          (iii) the indemnification obligations of Buyer under Sections 3.3,
6.3, 6.8, and 6.13 hereof; and
          (iv) any Assumed Liabilities.
          (c) The knowledge of an Indemnifying Party of a breach of
representation, warranty or covenant hereunder (other than by virtue of any
Disclosure Schedule) shall not affect the obligation of an Indemnifying Party to
indemnify an Indemnified Party for Damages resulting from such breach.
          9.4 Indemnification Procedures. Claims for indemnification under this
Agreement shall be asserted and resolved as follows:
          (a) A party claiming indemnification hereunder (an “Indemnified
Party”) with respect to any Claims asserted against it by an unaffiliated
third-party (a “Third-Party Claim”) that could give rise to a right of
indemnification hereunder shall promptly (and in any event within ten
(10) Business Days) (i) notify the party from whom indemnification is sought
(such notified party, the “Indemnifying Party”) of the Third-Party Claim, and
(ii) transmit to the Indemnifying Party a written notice (a “Claim Notice”)
describing in reasonable detail the nature of the Third-Party Claim, a copy of
all papers served with respect to such Claim (if any), the basis of the
Indemnified Party’s request for indemnification hereunder and a good-faith
estimate of the amount of Damages attributable to such Claim. Failure to provide
such Claim Notice shall not affect the right of the Indemnified Party’s
indemnification hereunder, except to the extent that the Indemnifying Party is
materially prejudiced as a result of such failure.
          (b) The Indemnifying Party shall have the right to defend the
Indemnified Party against such Third-Party Claim, it being understood that such
election shall be without prejudice to the right of the Indemnifying Party to
dispute whether such Claim involves indemnifiable Damages hereunder. If the
Indemnifying Party notifies the Indemnified Party within thirty (30) days after
receipt of any Claim Notice that the Indemnifying Party elects to assume the de-

 

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fense of the Third-Party Claim, then the Indemnifying Party shall have the right
to defend such Third-Party Claim with counsel selected by the Indemnifying Party
who is reasonably acceptable to the Indemnified Party, by all appropriate
proceedings. If the Indemnifying Party irrevocably agrees that the Third Party
Claim involves Damages entitled to be indemnified, all costs of such defense or
any settlement by Seller as Indemnifying Party, including reasonable attorneys’
fees, accountants’ fees and any other reasonable fees and expenses related to
such defense, shall, subject to the limitations set forth in this Article IX, be
indemnifiable Damages. The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement thereof,
provided that the Indemnifying Party shall not consent to the entry of a
judgment or enter into any settlement with respect to the matter without the
prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). If an Indemnifying Party assumes such
defense, the Indemnifying Party shall not be liable for any amount required to
be paid by the Indemnified Party that exceeds, where the Indemnified Party has
withheld or delayed consent in connection with the proposed compromise or
settlement of a Third-Party Claim, the amount for which that Third-Party Claim
could have been settled pursuant to that proposed compromise or settlement
(provided that (i) such final compromise or settlement is on substantially the
same terms (other than the monetary amount) as the proposed compromise or
settlement where the Indemnified Party has withheld or delayed such consent, or
(ii) any final judgment in such matter is for a larger monetary amount). No
Third-Party Claim that is being defended in good faith by the Indemnifying Party
shall be settled or compromised by the Indemnified Party without the written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld or delayed). Notwithstanding any dispute as to liability as between any
parties hereunder, if requested by the Indemnifying Party, the Indemnified Party
shall act in good faith in responding to, defending against, settling or
otherwise dealing with any Third-Party Claim and the Indemnified Party shall (in
addition to, and not in limitation of, its obligation to act in good faith), at
the sole cost and expense of the Indemnifying Party, cooperate with the
Indemnifying Party and its counsel in contesting any Third-Party Claim which the
Indemnifying Party elects to contest, including the making of any related
counterclaim against the Person asserting the Third-Party Claim or any cross
complaint against any Person and making available to the Indemnifying Party all
witnesses, records, materials and information in the Indemnified Party’s
possession or under its control (or in the possession or control of any of its
Affiliates or Representatives) relating to the Third-Party Claim as may be
reasonably requested by the Indemnifying Party or its counsel. The Indemnified
Party may participate in, but not control, any defense or settlement of any
Third-Party Claim controlled by the Indemnifying Party pursuant to this
Section 9.4(b), and the Indemnified Party shall bear its own costs and expenses
with respect to such participation; provided, however, if in the opinion of
counsel of the Indemnified Party there is a conflict of interest between the
Indemnifying Party and the Indemnified Party, the Indemnifying Party shall bear
the reasonable costs and expenses of one counsel to the Indemnified Party in
connection with such defense.
          (c) If the Indemnifying Party fails to notify the Indemnified Party
within thirty (30) days after receipt of any Claim Notice that the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 9.4(b), the
Indemnified Party shall have the right to defend, at, subject to the limitations
of this Article IX and the last sentence of this Section 9.4(c), the sole cost
and expense of the Indemnifying Party, the Third-Party Claim by all appropriate
proceedings. The Indemnified Party shall have full control of such defense and
proceedings; provided, however, that the Indemnified Party may not enter into
any compromise or settlement

 

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of such Third-Party Claim if indemnification is to be sought hereunder, without
the Indemnifying Party’s consent, which consent shall not be unreasonably
withheld or delayed. The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant to this
Section 9.4(c), and the Indemnifying Party shall bear its own costs and expenses
with respect to such participation. If the Indemnifying Party elects not to (or
is deemed to have elected not to) assume the defense of a Third-Party Claim, or
elects to assume the defense of a Third-Party Claim, but reserves the right to
dispute whether such Claim is an indemnifiable Damage hereunder, the
determination of whether the Indemnified Party is entitled to indemnification
hereunder shall be resolved either by the parties hereto or pursuant to
arbitration as provided herein.
          (d) With respect to any indemnification sought by an Indemnified Party
from the Indemnifying Party that does not involve a Third-Party Claim, the
Indemnified Party shall promptly provide written notice to the Indemnifying
Party of any Claim with respect to which the Indemnified Party believes it is or
may be entitled to indemnification hereunder (an “Indemnity Notice”). The
Indemnity Notice shall describe in reasonable detail the nature of the Claim,
the Indemnified Party’s best estimate of the amount of Damages attributable to
such Claim (the “Claimed Amount”) and the basis of the Indemnified Party’s
request for indemnification hereunder.
          (e) If the Indemnifying Party does not notify the Indemnified Party
within thirty (30) days after its receipt of the Indemnity Notice that the
Indemnifying Party disputes such Claim (the “Dispute Notice”) in which the
Indemnifying Party (i) agrees that part, but not all, of the Claimed Amount is
owed to the Indemnified Party (the “Agreed Amount”) or (ii) asserts that no part
of the Claimed Amount is owed to the Indemnified Party (any part of the Claimed
Amount that is not agreed by the Indemnifying Party to be owed to the
Indemnified Party pursuant to the Dispute Notice (or the entire Claimed Amount
if the Indemnifying Party asserts that no part of the Claimed Amount is owed)
shall be referred to as the “Contested Amount”), the Indemnifying Party shall be
deemed to have accepted and agreed with such Claim. The Indemnifying Party shall
pay within fifteen (15) days of the receipt of the Dispute Notice the Agreed
Amount.
          (f) If the Indemnifying Party has disputed a Claim for indemnification
(including any Third-Party Claim), the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution to such dispute. If
the Indemnifying Party and the Indemnified Party are unable to resolve such
dispute regarding a Contested Amount within thirty (30) days after delivery of
the Dispute Notice, such dispute shall be resolved by confidential binding
arbitration as provided in Section 10.15. Neither party shall have the right to
offset any amounts owed to the other party for Damages such party is otherwise
entitled to recover unless so determined by the arbitrator or such amount is an
Agreed Amount.
          (g) The term “Damages” as used in this Article IX is not limited to
matters asserted by third parties against an Indemnified Party, but includes
Damages incurred or sustained by an Indemnified Party in the absence of
Third-Party Claims. An Indemnified Party’s right to indemnification pursuant to
this Article IX shall not be conditioned upon the payment of amounts by such
Indemnified Party.

 

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          9.5 Limitation on Liability. Notwithstanding anything to the contrary
in this Agreement:
          (a) (i) the Selling Parties shall not be obligated to indemnify any
Buyer Indemnified Party under Sections 9.3(a)(i) or 9.3(a)(ii), and (ii) Buyer
shall not be obligated to indemnify any Seller Indemnified Party under
Section 9.3(b)(i) or 9.3(b)(ii), unless and until the aggregate Damages suffered
by all Buyer Indemnified Parties or by all the Seller Indemnified Parties, as
the case may be, that would otherwise be subject to indemnification hereunder,
exceeds the sum of Five Hundred Thousand Dollars ($500,000) (the “Deductible
Amount”), and then such Indemnified Party shall be entitled to indemnification
for all Damages in excess of the Deductible Amount;
          (b) Except for Damages indemnified pursuant to Section 9.3(a)(iii) or
Section 9.3(b)(iv), no Indemnifying Party shall be responsible for indemnifying
any Indemnified Party for any individual Claims or series of related Claims
under this Agreement where the Damages relating thereto are less than Thirty
Thousand Dollars ($30,000), and such items shall not be aggregated for purposes
of clause (a) above; and
          (c) (i) the Selling Parties shall not be obligated to indemnify any
Buyer Indemnified Party under Sections 9.3(a)(i) or 9.3(a)(ii), and (ii) Buyer
shall not be obligated to indemnify any Seller Indemnified Party under
Section 9.3(b)(i) or 9.3(b)(ii), to the extent the aggregate liability of the
Selling Parties to the Buyer Indemnified Parties and Buyer to the Seller
Indemnified Parties for indemnification, as the case may be, exceeds an
aggregate amount equal to Eight Million Dollars ($8,000,000).
          9.6 Calculation and Characterization of Damages.
          (a) In calculating the amount of the Damages to any Indemnified Party
hereunder, the amount of Damages will be net of (i) any amounts recovered by the
Indemnified Party from any third party (including insurance proceeds) as a
result of the facts or circumstances giving rise to the Damages and (ii) any Tax
benefits or Tax losses that are actually realized by the Indemnified Party as a
result of the incurrence of Damages from which indemnification is sought (such
amounts referred to in clauses (i) or (ii), a “Reimbursement”). The Indemnified
Parties shall pursue payment under or from any insurer or third party in respect
of such Damages prior to pursuing payment from any Indemnifying Party.
          (b) Any indemnity payment made pursuant to the provisions of this
Article IX shall be deemed to be and treated, to the extent permitted by Law, as
an adjustment to the Purchase Price for all purposes.
          9.7 Exclusive Remedy. From and after the Closing, except for any
equitable relief to which any party hereto may be entitled or in the case of
actual fraud, the indemnification provisions of Sections 3.3, 6.3, 6.8, 6.13 and
this Article IX shall be the sole and exclusive remedy with respect to any and
all Claims relating to the subject matter of this Agreement and no party shall
pursue or seek to pursue any other remedy. In furtherance of the foregoing,
Buyer hereby waives, to the fullest extent permitted under applicable Law, any
and all rights, Claims

 

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and causes of action it or any of its Affiliates may have against the Selling
Parties arising under or based upon any Law.
          9.8 Mitigation of Damages. The parties hereto shall cooperate with
each other to mitigate any Damages.
          9.9 Certain Damages. IN NO EVENT SHALL THE INDEMNIFICATION OBLIGATIONS
UNDER THIS AGREEMENT (INCLUDING UNDER THIS ARTICLE IX) OR THE TERM “DAMAGES”
COVER OR INCLUDE CONSEQUENTIAL, INCIDENTAL, SPECIAL, INDIRECT, OR PUNITIVE
DAMAGES OR LOST PROFITS, DIMINUTION IN VALUE OR ANY DAMAGES BASED ON ANY TYPE OF
MULTIPLE, WHETHER BASED ON STATUTE, CONTRACT, TORT OR OTHERWISE, AND WHETHER OR
NOT ARISING FROM THE INDEMNIFYING PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE,
STRICT LIABILITY OR OTHER FAULT.
          For the avoidance of doubt, in the event a third party obtains
consequential, incidental, special, indirect or punitive Damages or lost profits
from a Buyer Indemnified Party or a Seller Indemnified Party, such Damages
shall, to the extent they would otherwise be indemnifiable under this Agreement
but for the fact that they are consequential, incidental, special, indirect or
punitive Damages, be direct Damages to such Buyer Indemnified Party or Seller
Indemnified Party for purposes of this Agreement.
          9.10 Covenant Not to Compete.
          (a) As an inducement to Buyer to enter into this Agreement, the
Selling Parties and their Affiliates agree that for a period of five (5) years
after the Closing Date the Selling Parties shall not, directly or indirectly,
own an interest in, manage, operate, join, control or participate in the
ownership, management, operation or control of any profit or non-profit business
or organization which anywhere in the world (the “Territory”) develops,
formulates, tests, produces, licenses, commercializes, manufactures or
distributes a product for medical or industry purposes incorporating Clozapine.
          (b) If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable Law, including with respect to
time or space, the court is hereby requested and authorized by the parties to
revise the foregoing restriction to include the maximum restrictions allowable
under applicable Law. Each of the parties acknowledges, however, that this
Section 9.10 has been negotiated by the parties and that the geographical and
time limitations on activities are reasonable in light of the circumstances
pertaining to the parties.
          (c) In the event of any breach or threatened breach by the Selling
Parties of any provision of this Section 9.10, Buyer shall be entitled to seek
injunctive or other equitable relief restraining such party from competing or
soliciting in violation of this Section. Such relief, if obtained, shall be in
addition to and not in lieu of any other remedies that may be available,
including an action for the recovery of Damages.
          (d) Notwithstanding the foregoing, the covenant not to compete
contained in this Section 9.10 shall not apply to any independent third party
that has initiated the development, formulation, test, production, license,
commercialization, manufacture or distribution of a

 

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product for medical or industry purposes incorporating Clozapine and that
subsequently acquires control of a Selling Party or any of its Affiliates by way
of merger, stock purchase, unit purchase or otherwise, or acquires all or
substantially all of the assets of the Selling Parties or any of their
Affiliates and holds such assets in a separate subsidiary, but the provisions of
this Section 9.10 shall thereafter continue to apply to the acquired Selling
Party, Affiliate or such Subsidiary.
ARTICLE X
MISCELLANEOUS
          10.1 Termination.
          (a) This Agreement may be terminated at any time prior to Closing:
          (i) by mutual written consent of Buyer and Parent;
          (ii) by Buyer or either Selling Party if the Closing shall not have
occurred on or before the date which is sixty (60) days after date of this
Agreement, unless the failure to consummate the transactions contemplated hereby
on or prior to such date is the result of any action or inaction under this
Agreement by the party seeking to terminate the Agreement pursuant to the terms
of this Section 10.1(a)(ii); or
          (iii) by Buyer or either Selling Party by written notice to the other
party if any Governmental Authority with jurisdiction over such matters shall
have issued a Governmental Order permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby, and such Governmental Order
shall have become final and unappealable; provided, however, that the terms of
this Section 10.1(a)(iii) shall not be available to any party unless such party
shall have used its commercially reasonable efforts to oppose any such
Governmental Order or to have such Governmental Order vacated or made
inapplicable to the transactions contemplated hereby.
          (b) In the event of termination of this Agreement, no party hereto
shall have any Liability under this Agreement to any other party hereto, except
for any willful breach of this Agreement occurring prior to the termination of
this Agreement for which all legal remedies will remain available. Upon any such
termination, each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same. The provisions of Section 6.2(b) and this Article X shall
continue in full force and effect notwithstanding any termination of this
Agreement or any provision hereof to the contrary.
          10.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party (by Contract, operation of
Law or otherwise) without the prior written consent of the other party.
Notwithstanding the foregoing, each of the Selling Parties and Buyer shall have
the right, in its sole and absolute discretion, to assign this Agreement and its
rights and obligations hereunder to the acquiring party in connection with the
sale of all or substantially all of its assets or in connection with a merger
between it and a Person that is not an Affiliate of Parent. No such assignment
shall relieve the assignor of its obligations here-

 

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under. Subject to the foregoing, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
          10.3 Cooperation. To the extent the parties determine after the
Closing that any of the Purchased Assets were not conveyed or delivered to Buyer
at the Closing, the Selling Parties shall and shall cause their Affiliates to,
subject to Section 3.3, transfer and deliver such assets to Buyer without
additional consideration and, upon reasonable request, execute and deliver a
bill of sale or other instrument of transfer evidencing such transfer. To the
extent the parties determine after the Closing that any of the Excluded Assets
were conveyed or are in the possession of Buyer, Buyer shall and shall cause its
Affiliates to, subject to Section 3.3, transfer and deliver such assets to the
Selling Parties without consideration and, upon reasonable request, execute and
deliver a bill of sale or other instrument of transfer evidencing such transfer.
          10.4 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given (a) when received if personally
delivered, (b) when transmitted if transmitted by telecopy, electronic or
digital transmission with confirmation of delivery, (c) the day after it is
sent, if sent for next day delivery to a domestic address by recognized
overnight delivery service and (d) upon receipt, if sent by certified or
registered mail, return receipt requested. In each case any such notice,
request, demand or other communication shall be sent to:
          If to the Selling Parties or Parent, to:
Avanir Pharmaceuticals
101 Enterprise, Suite 300
Aliso Viejo, CA 92656
Attention: Greg Flesher
Facsimile: (949) 643-6869
          with a copy to (which shall not constitute notice):
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Attention: Jonn R. Beeson, Esq.
Facsimile: (714) 755-8212
          If to Buyer, to:
Azur Pharma International III Limited
Clarendon House
2 Church Street
Hamilton HM11 Bermuda
Attention: Secretary
Facsimile: (441) 295-2408

 

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Azur Pharma Inc.
102 Pickering Way, Suite 200
Exton, PA 19341
Attention: Michael Kelly
Facsimile: (484) 875-5814
          with a copy to (which shall not constitute notice):
Cahill Gordon & Reindel llp
80 Pine Street
New York, NY 10005
Attention: Christopher T. Cox
Facsimile: (212) 378-2173
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other.
          10.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
THE RIGHTS OF THE PARTIES AND ALL CLAIMS ARISING OUT OF OR RELATING TO THIS
AGREEMENT DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS).
          10.6 Entire Agreement; Amendments and Waivers. This Agreement
(together with all Exhibits and Schedules hereto), the Confidentiality Agreement
and the Ancillary Agreements constitute the entire agreement among the parties
pertaining to the subject matter hereof and thereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
          10.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument, binding upon the parties
hereto. A facsimile signature page shall be deemed an original, unless an
original is required by applicable Law.
          10.8 No Third Party Beneficiaries; Expenses.
          (a) This Agreement and all of its conditions and provisions are for
the sole and exclusive benefit of the parties hereto and their respective
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person, including any union or
employee or former employee of the Selling Parties any rights or remedies of any
nature whatsoever, including any rights of employment for any specified period,
under or by reason of this Agreement or any provision hereof; provided, however,
that any Person

 

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that is not a party to this Agreement, but, by the terms of Article IX, is
entitled to indemnification, shall be considered a third-party beneficiary of
this Agreement, with full rights of enforcement as though such Person was a
signatory to this Agreement; provided, however, that Cutler (as defined in the
Unit Purchase Agreement) and the Sellers’ Representative (as defined in the Unit
Purchase Agreement) shall be considered a third-party beneficiary of this
Agreement, with full rights of enforcement as though such Person was a signatory
to this Agreement with respect to Buyer’s assumption of the obligations relating
to the Contingent Payments and Non-U.S. Licensing Earn-Out Payment, including
the reporting obligations related thereto.
          (b) Except as otherwise provided in Section 2.6 hereof, each party
hereto shall pay the fees and expenses incurred by it in connection with the
negotiation and preparation of this Agreement and the Ancillary Agreements, the
performance of the terms of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby.
          10.9 Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
then to the maximum extent permitted by Law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other such instrument.
          10.10 Titles; Gender; Certain Interpretive Matters. The titles,
captions or headings of the Articles and Sections herein, and the use of a
particular gender, are for convenience of reference only and are not intended to
be a part of or to affect or restrict the meaning or interpretation of this
Agreement. Any terms used in this Agreement, unless the context otherwise
requires, may be used in the singular or plural, depending upon the reference.
All references in this Agreement to Dollars or “$” shall mean U.S. Dollars.
Except as otherwise provided or if the context otherwise requires, whenever used
in this Agreement, (a) the terms “include” and “including” shall be deemed to be
followed by the phrase “without limitation,” (b) the words “herein,” “hereof”
and “hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Section or other subdivision, (c) any definition
of or reference to any Law, agreement, instrument or other document herein will
be construed as referring to such Law, agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified and (d) any
definition of or reference to any statute will be construed as referring also to
any rules and regulations promulgated thereunder.
          10.11 Publicity. Except as required by Law, the rules of any national
securities exchange on which its securities are listed or otherwise consistent
with Parent’s past practices as a publicly traded company, the parties hereto
shall not, without the prior consent of the other parties, which shall not be
unreasonably withheld or delayed, issue any press release or make any public
statement regarding the transactions contemplated hereby. Notwithstanding
anything to the contrary herein, the Buyer may make such disclosure, after
Closing, as it reasonably deems appropriate in connection with communications
with its co-investors or in connection with a private placement of its equity or
debt securities. Notwithstanding anything to the contrary herein, Buyer, the
Selling Parties or any of their respective Affiliates may make any public
statement in response to specific questions by the press, analysts, investors or
those attending industry conferences or financial analyst conference calls, so
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with previous press releases, public disclosures or public statements made by
Buyer and the Selling Parties and do not reveal non-public information regarding
Buyer or the Selling Parties.
          10.12 Exhibits and Schedules; Construction of Certain Provisions. The
Exhibits and Schedules referred to in this Agreement shall be construed with and
be deemed as an integral part of this Agreement to the same extent as if the
same had been set forth in their entirety herein.
          10.13 Bulk Transfer Laws. Buyer acknowledges that the Selling Parties
will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement
and waives any remedies against the Selling Parties for noncompliance therewith.
          10.14 Cumulative Remedies. Subject to Section 9.7 hereof, all rights
and remedies of either party hereto are cumulative of each other and of every
other right or remedy such party may otherwise have at Law or in equity, and the
exercise of one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
          10.15 Arbitration. If any controversy or claim arising out of or
relating to this Agreement or any Ancillary Agreement, or the breach thereof,
cannot first be resolved by the parties within thirty (30) days after the
written notice thereof, then either party may submit the controversy or claim to
confidential binding arbitration in accordance with the JAMS Comprehensive
Arbitration Rules and Procedures then in effect. The arbitration will be
conducted by one arbitrator, mutually selected by the Indemnified Party and the
Indemnifying Party; provided, however, that if the Indemnified Party and the
Indemnifying Party fail to mutually select an arbitrator within fifteen
(15) Business Days after the contested portion of the indemnification claim is
submitted to arbitration, then the arbitrator shall be selected by JAMS in
accordance with its Comprehensive Arbitration Rules and Procedures then in
effect. The parties agree to use commercially reasonable efforts to cause the
arbitration hearing to be conducted within seventy-five (75) days after the
appointment of the arbitrator, and to use commercially reasonable efforts to
cause the decision of the arbitrator to be furnished within fifteen (15) days
after the conclusion of the arbitration hearing. The final decision of the
arbitrator shall be furnished in writing to the Indemnifying Party and the
Indemnified Party and include (a) the dollar amount of the award to the
Indemnified Party, if any, and (b) a determination as to whether either party to
the arbitration shall be required to bear and pay all or a portion of the other
party’s attorneys’ fees and other expenses relating to the arbitration. Judgment
upon any award, judgment, decree or order rendered by the arbitrator may be
entered in any court having competent jurisdiction. The place of the arbitration
shall be in the City of New York, New York and the language of the arbitration
shall be English.
          10.16 Time of Essence. Time is of the essence in this Agreement. If
the date specified in this Agreement for giving any notice or taking any action
is not a Business Day (or if the period during which any notice is required to
be given or any action taken expires on a date which is not a Business Day),
then the date for giving such notice or taking such action (and the expiration
date of such period during which notice is required to be given or action taken)
shall be the next day which is a Business Day.

 

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          10.17 Drafting. The parties hereto agree that this Agreement is the
product of negotiations between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
[Signature Page Follows]

 

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalves, by their respective officers
thereunto duly authorized, all as of the day and year first above written.

            Seller:

ALAMO PHARMACEUTICALS, LLC,
a California limited liability corporation
      By:   Avanir Pharmaceuticals, its sole member         By:          Name:
Keith Katkin      Title:   President and Chief Executive Officer        Parent:

AVANIR PHARMACEUTICALS,
a California corporation
      By:           Name:   Keith Katkin        Title:   President and Chief
Executive Officer     

Signature Page To Asset Purchase Agreement

 

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[Signature Page of Buyer]

            Buyer:

AZUR PHARMA INTERNATIONAL III
LIMITED
      By:           Name:           Title:           AZUR PHARMA INC.
      By:           Name:           Title:        

Signature Page To Asset Purchase Agreement

 

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EXHIBIT A-1
FORM OF INC. ASSIGNMENT AND ASSUMPTION AGREEMENT

 

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EXHIBIT A-2
FORM OF LIMITED ASSIGNMENT AND ASSUMPTION AGREEMENT

 

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EXHIBIT B-1
FORM OF INC. ASSIGNMENT OF CONTRACTS

 

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EXHIBIT B-2
FORM OF LIMITED ASSIGNMENT OF CONTRACTS

 

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EXHIBIT C
FORM OF ASSIGNMENT OF OWNED INTELLECTUAL PROPERTY

 

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EXHIBIT D
FORM OF ASSIGNMENT AND ASSUMPTION OF LEASE