OTHERWISE HAVE BEEN DUE AND PAYABLE;
(II)
SECOND TO THE SHAREHOLDERS, TO THE EXTENT
THAT IT DID OFFSET ANY PATENT DEFENSE COSTS AGAINST EARN OUT CONSIDERATION THAT
WOULD OTHERWISE HAVE BEEN DUE AND PAYABLE; AND
(III)
ANY BALANCE SHALL BE DISTRIBUTED [**]% TO
COLLAGENEX AND [**]%, COLLECTIVELY, TO THE SHAREHOLDERS ON A PRO RATA BASIS IN
ACCORDANCE WITH THEIR RESPECTIVE OWNERSHIP AS SHOWN ON EXHIBIT A.
(H)
ROYALTIES TO THIRD PARTIES.
IN THE EVENT
THAT
9
(I)
COLLAGENEX IS REQUIRED TO PAY:
A.
ROYALTIES OR EQUIVALENT PAYMENTS TO A THIRD
PARTY OR PARTIES IN ORDER TO SETTLE ANY DISPUTES WITH THIRD PARTIES, ARISING
FROM INTERFERENCE OR OPPOSITION PROCEEDINGS (OR THE PROSPECT THEREOF), AND OR
B.
ROYALTIES OR EQUIVALENT PAYMENTS TO A
THIRD PARTY OR PARTIES IN ORDER IN ANY OTHER CONTEXT TO OBTAIN FREEDOM TO
OPERATE IN CONNECTION WITH THE SALE OF ANY SANSROSA PRODUCT,
and
(II)
THE COMBINATION OF SUCH ROYALTIES AND
COLLAGENEX OBLIGATION TO PAY THE EARN OUT CONSIDERATION UNDER PARAGRAPH 2(C)(I)A
TO THE SHAREHOLDERS WITH RESPECT TO SUCH SANSROSA PRODUCT, EXCEEDS [**]% OF THE
NET SALES OF SUCH SANSROSA PRODUCT IN ANY JURISDICTION IN ANY CALENDAR YEAR,
then the Shareholders and CollaGenex shall in good faith renegotiate the Earn
Out Consideration, provided, however, that in determining whether or not the
[**]% threshold has been met, royalties or equivalent payments payable to a
third party or parties in order to settle any disputes arising from interference
or opposition proceedings (or the prospect thereof) shall not be included to the
extent they exceed [**]% of Net Sales.
4.
PRE-CLOSING COVENANTS
(A)
ACCESS.
SHAREHOLDERS SHALL GIVE TO
COLLAGENEX AND ITS REPRESENTATIVES, FROM THE DATE OF THIS AGREEMENT UNTIL THE
FIRST CLOSING, SUCH ACCESS AS IS REASONABLY REQUESTED BY COLLAGENEX TO THE
BOOKS, RECORDS, PREMISES, AND CONSULTANTS OF SANSROSA, TO ENABLE COLLAGENEX TO
INSPECT AND EVALUATE THE ASSETS, PROPERTIES AND OPERATIONS OF SANSROSA.
(B)
CONDUCT OF BUSINESS.
FROM THE DATE OF THIS
AGREEMENT UNTIL THE FIRST CLOSING, SHAREHOLDERS SHALL, IN CONSULTATION WITH
COLLAGENEX, CAUSE SANSROSA TO CONTINUE TO:
(I)
ORDINARY COURSE.
OPERATE AND CONDUCT
ITS BUSINESS DILIGENTLY IN THE ORDINARY COURSE FOR BUSINESSES OF THE SAME TYPE;
AND
(II)
WARRANTIES.
CONDUCT ITS BUSINESS IN SUCH
A MANNER THAT ALL THE WARRANTIES AND REPRESENTATIONS OF SHAREHOLDERS IN THIS
AGREEMENT WILL BE TRUE, COMPLETE AND ACCURATE IN ALL RESPECTS AS OF THE DATE OF
THE FIRST CLOSING.
(III)
DELIVERIES.
ENSURE THAT IT WILL OBTAIN AND
DELIVER TO COLLAGENEX ALL THE DOCUMENTS IDENTIFIED BELOW AS DELIVERABLE AT OR
BEFORE THE FIRST CLOSING.
(C)
NO SOLICITATION.
FROM THE DATE OF THIS
AGREEMENT UNTIL THE LAST CLOSING, SANSROSA'S OFFICERS, SHAREHOLDERS, EMPLOYEES,
FINANCIAL ADVISORS, AGENTS OR OTHER
10
ADVISORS OR REPRESENTATIVES SHALL NOT, DIRECTLY OR INDIRECTLY, AT ANY TIME PRIOR
TO THE SALE OF ALL THE SHARES
(I)
SOLICIT, INITIATE OR ENCOURAGE THE
SUBMISSION OF ANY ACQUISITION PROPOSAL (AS DEFINED BELOW),
(II)
ENTER INTO ANY AGREEMENT WITH RESPECT TO
OR APPROVE ANY ACQUISITION PROPOSAL,
(III)
PARTICIPATE IN ANY DISCUSSIONS OR
NEGOTIATIONS REGARDING ANY ACQUISITION PROPOSAL,