Document:

Exhibit
10.1

 

ASSET
PURCHASE AGREEMENT

 

BY AND

BETWEEN

 

ANESTA AG,

as Buyer

 

and

 

E.
CLAIBORNE ROBINS COMPANY, INC.,

as Seller

 

August 23,
2007

 

 

TABLE OF CONTENTS

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE I.     DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  DEFINED TERMS

  	
   

  	
  6

  
	
  Section 1.02

  	
   

  	
  CONSTRUCTION OF CERTAIN TERMS AND PHRASES

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE II.     SALE
  AND ASSIGNMENT OF THE PURCHASED ASSETS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  SALE AND ASSIGNMENT OF THE PURCHASED ASSETS

  	
   

  	
  14

  
	
  Section 2.02

  	
   

  	
  EXCLUDED ASSETS

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE III.     ASSUMPTION
  OF ASSUMED LIABILITIES; EXCLUDED LIABILITIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  ASSUMPTION OF ASSUMED LIABILITIES

  	
   

  	
  15

  
	
  Section 3.02

  	
   

  	
  EXCLUDED LIABILITIES

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE IV.     PURCHASE
  PRICE AND PAYMENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  BASE PURCHASE PRICE

  	
   

  	
  16

  
	
  Section 4.02

  	
   

  	
  ADDITIONAL CONSIDERATION

  	
   

  	
  16

  
	
  Section 4.03

  	
   

  	
  ALLOCATION OF PURCHASE PRICE

  	
   

  	
  18

  
	
  Section 4.04

  	
   

  	
  PAYMENT OF SALES, USE AND OTHER TAXES

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE V.     CLOSING

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  TIME AND PLACE

  	
   

  	
  19

  
	
  Section 5.02

  	
   

  	
  DELIVERIES AT CLOSING

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE VI.     REPRESENTATIONS
  AND WARRANTIES OF SELLER

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01

  	
   

  	
  ORGANIZATION

  	
   

  	
  21

  
	
  Section 6.02

  	
   

  	
  AUTHORITY OF SELLER

  	
   

  	
  21

  
	
  Section 6.03

  	
   

  	
  NON-CONTRAVENTION

  	
   

  	
  22

  
	
  Section 6.04

  	
   

  	
  CONSENTS AND APPROVALS

  	
   

  	
  22

  
	
  Section 6.05

  	
   

  	
  PRODUCT CONTRACTS

  	
   

  	
  23

  
	
  Section 6.06

  	
   

  	
  INTELLECTUAL PROPERTY RIGHTS

  	
   

  	
  23

  
	
  Section 6.07

  	
   

  	
  LITIGATION

  	
   

  	
  24

  
	
  Section 6.08

  	
   

  	
  COMPLIANCE WITH LAW

  	
   

  	
  25

  
	
  Section 6.09

  	
   

  	
  INVENTORY; SALES OF THE PRODUCT

  	
   

  	
  25

  
	
  Section 6.10

  	
   

  	
  REGULATORY MATTERS

  	
   

  	
  25

  
	
  Section 6.11

  	
   

  	
  TITLE; SUFFICIENCY OF ASSETS

  	
   

  	
  27

  
	
  Section 6.12

  	
   

  	
  BROKERS

  	
   

  	
  28

  

 

 

	
  Section 6.13

  	
   

  	
  ENVIRONMENTAL MATTERS

  	
   

  	
  28

  
	
  Section 6.14

  	
   

  	
  TAXES

  	
   

  	
  28

  
	
  Section 6.15

  	
   

  	
  SUPPLIERS

  	
   

  	
  29

  
	
  Section 6.16

  	
   

  	
  INSURANCE

  	
   

  	
  29

  
	
  Section 6.17

  	
   

  	
  DISCLOSURE

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE VII.     REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  CORPORATE ORGANIZATION

  	
   

  	
  30

  
	
  Section 7.02

  	
   

  	
  AUTHORITY OF BUYER

  	
   

  	
  30

  
	
  Section 7.03

  	
   

  	
  NON-CONTRAVENTION

  	
   

  	
  31

  
	
  Section 7.04

  	
   

  	
  CONSENTS AND APPROVALS

  	
   

  	
  31

  
	
  Section 7.05

  	
   

  	
  LITIGATION

  	
   

  	
  31

  
	
  Section 7.06

  	
   

  	
  BROKERS

  	
   

  	
  32

  
	
  Section 7.07

  	
   

  	
  FINANCIAL CAPABILITY

  	
   

  	
  32

  
	
  Section 7.08

  	
   

  	
  NON-COMPETITION

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE
  VIII.     COVENANTS OF THE PARTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  MAINTENANCE OF BUSINESS PRIOR TO CLOSING

  	
   

  	
  32

  
	
  Section 8.02

  	
   

  	
  COMMERCIALLY REASONABLE EFFORTS

  	
   

  	
  33

  
	
  Section 8.03

  	
   

  	
  PRESERVE
  ACCURACY OF REPRESENTATIONS AND WARRANTIES; NOTIFICATION OF CERTAIN MATTERS

  	
   

  	
  33

  
	
  Section 8.04

  	
   

  	
  ACCESS

  	
   

  	
  34

  
	
  Section 8.05

  	
   

  	
  PUBLIC ANNOUNCEMENTS

  	
   

  	
  35

  
	
  Section 8.06

  	
   

  	
  BULK SALES

  	
   

  	
  35

  
	
  Section 8.07

  	
   

  	
  SELLER’S EMPLOYEES

  	
   

  	
  35

  
	
  Section 8.08

  	
   

  	
  CORPORATE NAMES

  	
   

  	
  35

  
	
  Section 8.09

  	
   

  	
  RECEIPT OF CERTAIN AMOUNTS

  	
   

  	
  36

  
	
  Section 8.10

  	
   

  	
  REGULATORY MATTERS

  	
   

  	
  36

  
	
  Section 8.11

  	
   

  	
  FURTHER ASSURANCES

  	
   

  	
  36

  
	
  Section 8.12

  	
   

  	
  REGULATORY TRANSITION BY SELLER

  	
   

  	
  36

  
	
  Section 8.13

  	
   

  	
  TAXES

  	
   

  	
  37

  
	
  Section 8.14

  	
   

  	
  COVENANT NOT TO COMPETE OR SOLICIT BUSINESS

  	
   

  	
  38

  
	
  Section 8.15

  	
   

  	
  ACQUISITION PROPOSALS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE IX.     CONDITIONS
  TO THE OBLIGATIONS OF SELLER

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01

  	
   

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
   

  	
  39

  
	
  Section 9.02

  	
   

  	
  NO ACTIONS OR PROCEEDINGS

  	
   

  	
  39

  
	
  Section 9.03

  	
   

  	
  CONSENTS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE X.     CONDITIONS
  TO THE OBLIGATIONS OF BUYER

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01

  	
   

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
   

  	
  40

  

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

3

 

	
  Section 10.02

  	
   

  	
  NO MATERIAL ADVERSE EFFECT

  	
   

  	
  40

  
	
  Section 10.03

  	
   

  	
  NO ACTIONS OR PROCEEDINGS

  	
   

  	
  40

  
	
  Section 10.04

  	
   

  	
  CONSENTS

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE XI.     INDEMNIFICATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01

  	
   

  	
  SURVIVAL OF REPRESENTATIONS, WARRANTIES,
  ETC.

  	
   

  	
  40

  
	
  Section 11.02

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  41

  
	
  Section 11.03

  	
   

  	
  LIMITATIONS

  	
   

  	
  43

  
	
  Section 11.04

  	
   

  	
  REMEDIES EXCLUSIVE

  	
   

  	
  44

  
	
  Section 11.05

  	
   

  	
  SET-OFF

  	
   

  	
  44

  
	
  Section 11.06

  	
   

  	
  ADJUSTMENT TO PURCHASE PRICE

  	
   

  	
  44

  
	
  Section 11.07

  	
   

  	
  TAX MATTERS

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE XII.     TERMINATION
  AND ABANDONMENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.01

  	
   

  	
  METHODS OF TERMINATION

  	
   

  	
  45

  
	
  Section 12.02

  	
   

  	
  PROCEDURE UPON TERMINATION

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE
  XIII.     MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.01

  	
   

  	
  CONFIDENTIALITY

  	
   

  	
  46

  
	
  Section 13.02

  	
   

  	
  NOTICES

  	
   

  	
  46

  
	
  Section 13.03

  	
   

  	
  ENTIRE AGREEMENT

  	
   

  	
  48

  
	
  Section 13.04

  	
   

  	
  WAIVER

  	
   

  	
  48

  
	
  Section 13.05

  	
   

  	
  AMENDMENT

  	
   

  	
  48

  
	
  Section 13.06

  	
   

  	
  THIRD PARTY BENEFICIARIES

  	
   

  	
  48

  
	
  Section 13.07

  	
   

  	
  ASSIGNMENT; BINDING EFFECT

  	
   

  	
  48

  
	
  Section 13.08

  	
   

  	
  HEADINGS

  	
   

  	
  49

  
	
  Section 13.09

  	
   

  	
  SEVERABILITY

  	
   

  	
  49

  
	
  Section 13.10

  	
   

  	
  GOVERNING LAW

  	
   

  	
  49

  
	
  Section 13.11

  	
   

  	
  VENUE

  	
   

  	
  49

  
	
  Section 13.12

  	
   

  	
  EXPENSES; ATTORNEY’S FEES

  	
   

  	
  50

  
	
  Section 13.13

  	
   

  	
  COUNTERPARTS

  	
   

  	
  50

  

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

4

 

Exhibits

 

Exhibit A                Form
of Assignment and Assumption Agreement

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

5

 

ASSET
PURCHASE AGREEMENT

 

This Asset
Purchase Agreement (this “Agreement”) is made and entered into as of August 23,
2007, by and between ANESTA AG, a company organized under the laws of
Switzerland (“Buyer”), and E. CLAIBORNE ROBINS COMPANY, INC., a Virginia
corporation d/b/a “ECR Pharmaceuticals” (“Seller”).

 

RECITALS

 

WHEREAS,
Seller is engaged in the business of developing, manufacturing (or having
manufactured), marketing, in-licensing, selling and distributing the Product
(as defined below) in the Territory (the “Business”).

 

WHEREAS,
subject to the terms and conditions of this Agreement, Seller desires to sell
to Buyer, and Buyer desires to purchase from Seller, substantially all of
Seller’s assets and properties, tangible and intangible, associated with the
Business and the Product.

 

WHEREAS,
concurrently with the execution and delivery of this Agreement, Parent is
executing and delivering to Seller a guarantee of all of the obligations of
Buyer hereunder.

 

AGREEMENT

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties agree as
follows:

 

ARTICLE I.     DEFINITIONS

 

Section 1.01           DEFINED TERMS.

 

As used in
this Agreement, the following defined terms have the meanings described below:

 

(a)           “Action
or Proceeding” means any claim, action, charge, complaint, suit, proceeding,
arbitration, Order, inquiry, hearing, assessment with respect to fines or
penalties, or litigation (whether civil, criminal, administrative, investigative
or informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental or Regulatory Authority.

 

(b)           “Affiliate”
means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such Person. “Control” and, with correlative
meanings, the terms “controlled by” and “under common control with” means the
power to direct or cause the direction of the

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

6

 

management or policies of a Person, whether
through the ownership of voting securities or by contract, resolution or
regulation.

 

(c)           “Agreement”
has the meaning set forth in the Preamble hereto.

 

(d)           “Allocation”
has the meaning set forth in Section 4.03(a).

 

(e)           “Allocation
Statement” has the meaning set forth in Section 4.03(a).

 

(f)            “Assets
and Properties” and “Assets or Properties” of any Person means all assets and
properties of any kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person, including cash, cash equivalents, accounts and notes receivable, chattel
paper, documents, instruments, general intangibles, real estate, equipment,
inventory, goods and Intellectual Property.

 

(g)           “Assignment and Assumption Agreement”
means the Assignment and Assumption Agreement in the form of Exhibit A attached hereto.

 

(h)           “Assumed
Liabilities” means (i) all Liabilities and obligations of Seller under or
pursuant to the Product Contracts to be performed following the Closing, except
to the extent such Liabilities and obligations, but for the breach or default
by Seller, would have been paid, performed or otherwise discharged on or prior
to the Closing Date or to the extent the same arise out of such breach or
default and (ii) all Liabilities in respect of Taxes other than Taxes for which
Seller is liable pursuant to Sections 4.04 and 8.13.

 

(i)            “Base
Purchase Price” has the meaning set forth in Section 4.01.

 

(j)            “Books
and Records” means all files, documents, instruments, papers, books and records
(scientific or financial) of Seller to the extent relating to the Purchased Assets,
the Product or Business (other than Marketing Materials), including any pricing
lists, customer lists (to the extent owned by Seller), vendor lists, financial
data, regulatory information or files (including adverse event reports and
annual regulatory reports), litigation, adverse claims or demands,
investigation information or files, Trademark registration certificates,
Trademark renewal certificates, and other documentation relating to
Intellectual Property, the Product or the Regulatory Approvals, but excluding
any such items specifically prepared by Seller for the negotiation of this
Agreement.

 

(k)           “Business”
has the meaning set forth in the recitals to this Agreement.

 

(l)            “Business
Day” means a day other than Saturday, Sunday or any day on which banks located
in New York City or Switzerland are authorized or obligated by Law to be
closed.

 

(m)          “Buyer”
has the meaning set forth in the preamble to this Agreement.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

7

 

(n)           “Buyer
Ancillary Agreements” means all agreements, instruments and documents being or
to be executed and delivered by Buyer under this Agreement or in connection
herewith.

 

(o)           “Buyer
Disclosure Schedule” has the meaning set forth in the preamble of Article VII
to this Agreement.

 

(p)           “Buyer
Governmental Consents” has the meaning set forth in Section 7.04.

 

(q)           “Buyer
Group Member” has the meaning set forth in Section 11.02(a).

 

(r)            “Change
of Control” means a transaction which results in:  (a) the voting securities of Parent immediately
prior to such transaction ceasing to represent at least fifty percent (50%) of
the combined voting power of Parent or the Successor Entity to Parent
immediately after such transaction; (b) any third party (other than a trustee
or other fiduciary holding securities under an employee benefit plan and other
than any Affiliate of Buyer) becoming the beneficial owner of fifty percent
(50%) or more of the combined voting power of the outstanding securities of
Parent or Buyer; or (c) a sale or other disposition to a third party (other
than any Affiliate of Buyer) of all or substantially all of the assets or
business of Parent or Buyer.

 

(s)           “Closing”
has the meaning set forth in Section 5.01.

 

(t)            “Closing
Date” means the date that the Closing actually occurs as provided in Section
5.01.

 

(u)           “Commercially
Reasonable Efforts” has the meaning set forth in Section 4.02(c).

 

(v)           “Code”
means the Internal Revenue Code of 1986.

 

(w)          “Contaminant”
has the meaning set forth in Section 6.13(b).

 

(x)            “Contract”
means any and all commitments, contracts, purchase orders, leases, licenses,
sublicenses, notes, instruments or other agreements, undertakings or
arrangements of any nature, whether written or oral.

 

(y)           “Copyrights”
means United States and non-U.S. copyrights (as defined in 17 U.S.C. § 901),
whether registered or unregistered, and pending applications to register the
same.

 

(z)            “Corporate
Names” has the meaning set forth in Section 8.08(a).

 

(aa)         “Damages”
has the meaning set forth in Section 11.02(a).

 

(bb)         “Encumbrance”
means any mortgage, pledge, assessment, security interest, deed of trust,
easement, encroachment, lease, lien, adverse claim, defect of title, levy,
charge, preference, priority, right of first refusal, covenant or other
encumbrance or restriction of any

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

8

 

kind, or any conditional sale
or title retention agreement or other agreement to give any of the foregoing in
the future.

 

(cc)         “Environmental
Law” has the meaning set forth in Section 6.13(b).

 

(dd)         “Eurand”
means Eurand, Inc. (formerly doing business as Eurand America, Inc.), a Nevada
corporation.

 

(ee)         “Eurand
Agreement” means that certain Development, License and Contract Manufacturing
Agreement dated July 3, 2000 between Seller and Eurand, as amended by Amendment
No. 1 dated June 15, 2007, the Eurand Amendment and three addenda dated March
11, 2003, July 18, 2003 and August 6, 2003, respectively.

 

(ff)           “Eurand
Amendment” means Amendment No. 2 to the Eurand Agreement, dated August 23,
2007, between Seller and Eurand.

 

(gg)         “Eurand
Intellectual Property” means the Intellectual Property rights of Eurand related
to the Product, the Business or the Purchased Assets, as such rights are
described in, identified in or established under the Eurand Agreement (as
amended by the Eurand Amendment).

 

(hh)         “Excluded
Assets” has the meaning set forth in Section 2.02.

 

(ii)           “Excluded
Liabilities” has the meaning set forth in Section 3.02.

 

(jj)           “Expiration
Date” means the date two years after the Closing Date.

 

(kk)         “FDA”
means the United States Food and Drug Administration.

 

(ll)           “FDCA”
shall mean the Federal Food, Drug and Cosmetic Act.

 

(mm)       “Governmental
or Regulatory Authority” means any court, tribunal, arbitrator, arbitration
panel or authority, authority, agency, commission, official or other
instrumentality of the United States or other country, or any supra-national
organization, state, county, city or other political subdivision or any
self-regulatory organization.

 

(nn)         “Indemnification
Claim Notice” has the meaning set forth in Section 11.02(c).

 

(oo)         “Indemnified
Party” has the meaning set forth in Section 11.02(c).

 

(pp)         “Indemnifying
Party” has the meaning set forth in Section 11.02(c)

 

(qq)         “Intellectual
Property” means any and all of the following intellectual property rights: (i)
Know-How; (ii) Patents; (iii) Copyrights; (iv) internet domain names; and (v)
Trademarks.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

9

 

(rr)           “Inventory”
means all inventory of Product packaged in commercial bottles or physician
sample units and all work-in-process (including all inventory of Product in
bulk lots) owned by Seller, whether held at a location or facility of Seller
(or any other Person on behalf of Seller) or in transit to or from Seller (or
any such other Person).

 

(ss)         “Know-How”
means, to the extent relating to the Product, the Purchased Assets or the
Business, all Product specifications, technical knowledge, expertise, skill,
practice, procedures, formulae, trade secrets, inventions, confidential
information, analytical methodology, processes, methods, preclinical, clinical,
stability and other data and results, market studies, customer lists, supplier
lists, mailing lists, business plans and other proprietary information, and all
other experience and know-how, in each case in tangible form, whether or not
patentable.

 

(tt)           “Knowledge”
with respect to Seller means the actual knowledge of the Persons listed in Section
1.01(tt) of the Seller Disclosure Schedule, after due inquiry.

 

(uu)         “Law”
means any law, statute, code, treaty, order, ordinance, rule, regulation or
other requirement promulgated or enacted by any Governmental or Regulatory
Authority.

 

(vv)         “Liability”
means any liability, debt or obligation (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due).

 

(ww)       “Marketing
Materials” means (i) all market research, marketing plans, media plans,
advertising, marketing-related clinical study results, form letters and medical
queries, sales training materials, customer lists and information with respect
to sales of Product (including doctors and pharmacists), promotional and
marketing books and owned by Seller and used in connection with the marketing and
promotion of the Product; and (ii) those items of advertising and promotional
materials and literature owned by Seller as of the Closing and used in
connection with the advertising and promotion of the Product, provided
that “Marketing Materials” shall exclude the labeling of the Product, which
shall be deemed part of the Regulatory Approvals.

 

(xx)          “Material
Adverse Effect” means an effect or condition that individually or in the
aggregate is materially adverse to:  (i)
the Purchased Assets; (ii) the results of operations, business, operations,
condition (financial or otherwise) or prospects of the Business; or (iii)
Seller’s ability to consummate the transactions contemplated hereby.

 

(yy)         “Net
Sales” means the aggregate amount invoiced on account of sales of the Product
by Buyer or any of its Affiliates or their sublicensees to a third party in the
Territory (but not including sales between Buyer and its Affiliates where the
Product is intended for resale) less the following reductions relating to such
sales: (a) trade, quantity and cash discounts or rebates, which are not already
reflected in the amount invoiced; (b) any adjustments or allowances on account
of price adjustments, billing errors, rejected goods, damaged goods and
returns; (c) credits, volume rebates, charge-back and prime vendor rebates,
fees, reimbursements or similar

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

10

 

payments granted or given to wholesalers and
other distributors, buying groups, health care insurance carriers, pharmacy
benefit management companies, health maintenance organizations or other
institutions or health care organizations, which are not already reflected in
the amount invoiced; (d) any tax, tariff, customs duty, excise or other duty or
other governmental charge (other than a tax on income) levied on the sale,
transportation or delivery of the Product and borne by the seller thereof,
itemized on the applicable invoice and remitted to the applicable taxing
authority; (e) payments or rebates paid in connection with sales of the Product
to any governmental or regulatory authority in respect of any state or federal
Medicare, Medicaid or similar programs, which are not already reflected in the
amount invoiced; and (f) any invoiced charge for freight, insurance or other
transportation costs charged to the customer.  For purposes of this
definition, the Product shall be considered “sold” and “reductions” allowed
when so recorded in Parent’s consolidated and consolidating financial
statements prepared in accordance with generally accepted accounting
principles.

 

(zz)          “Net
Sales Milestone” has the meaning set forth in Section 4.02(a).

 

(aaa)       “Net
Sales Milestone Payment” has the meaning set forth in Section 4.02(a).

 

(bbb)      “Net
Sales Milestone Termination Date” means the date that is the later to occur of
(i) twelve (12) years from the Closing Date and (ii) the date of the first
commercial sale of a generic version of the Product in the Territory.

 

(ccc)       “Open
Territories List” has the meaning set forth in Section 8.07.

 

(ddd)      “Order”
means any writ, judgment, decree, injunction, award or similar order of any
Governmental or Regulatory Authority, including any award in an arbitration
proceeding (in each such case whether preliminary or final).

 

(eee)       “Ordinary
Course of Business” means such action that is in the ordinary course of the
Business and consistent with the past practices of the Business.

 

(fff)         “Parent”
means Cephalon, Inc., a Delaware corporation.

 

(ggg)      “Patents”
means United
States and non-U.S. patents, provisional patent applications, patent
applications, continuations, continuations-in-part, divisions and reissues.

 

(hhh)      “Permits”
has the meaning set forth in Section 6.10(a).

 

(iii)          “Permitted
Encumbrance” means (i) any Encumbrance for Taxes not yet due or delinquent or
for those Taxes being contested in good faith by appropriate proceedings for
which adequate reserves have been established and (ii) any Encumbrance or
imperfection of title on property that does not adversely affect title to,
detract from the value of or impair the existing use of, the property affected
by such Encumbrance or imperfection.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

11

 

(jjj)          “Person”
means any natural person, corporation, general partnership, limited
partnership, limited liability company, joint venture, proprietorship, other
business organization or entity, trust, union, association or Governmental or
Regulatory Authority.

 

(kkk)       “Product”
means cyclobenzaprine hydrochloride extended-release capsules (currently being
marketed with the trade name
AMRIX), as approved by the FDA and described in the New Drug Application for
the Product identified in Section 6.10(a) of the Seller Disclosure
Schedule.

 

(lll)          “Product
Contract” has the meaning set forth in Section 6.05(a).

 

(mmm)    “Purchased
Assets” means, subject to Section 2.02, all of the Assets and Properties
of Seller used primarily in connection with the Product or the Business,
including all right, title and interest of Seller in, to and under:  (i) the Intellectual Property owned by or
licensed to Seller, to the extent used in connection with or pertaining to the
Purchased Assets, the Product or the Business, including all rights in domain
names used primarily in connection with the Business; (ii) the Eurand
Agreement; (iii) all of the other Product Contracts; (iv) the Marketing
Materials; (v) the Books and Records; (vi) the Regulatory Approvals and the
other Permits; (vii) the Product; (viii) the Inventory; and (ix) all telephone,
telex and telephone facsimile numbers and other directory listings utilized by
Seller primarily in connection with the Business. The Purchased Assets do not
include any fixed assets.

 

(nnn)      “Registered
Intellectual Property” means all of the following Intellectual Property
registered or filed in the Territory owned by or licensed to Seller, to the
extent used in connection with or pertaining to the Purchased Assets, the
Product or the Business:  (i) the
Trademarks listed in Section 6.06(a) of the Seller Disclosure Schedule;
(ii) the Internet domain names listed in Section 6.06(a) of the Seller
Disclosure Schedule; (iii) the Patents listed in Section 6.06(a) of the
Seller Disclosure Schedule; and (iv) the Copyrights listed in Section
6.06(a) of the Seller Disclosure Schedule.

 

(ooo)      “Regulatory
Approvals” means, with respect to the Product, the New Drug Application for the
Product identified in Section 6.10(a) of the Seller Disclosure Schedule,
all supplements thereto and the official regulatory files and data in Seller’s
possession as of the Closing relating thereto.

 

(ppp)      “Required
Seller Third Party Consents” has the meaning set forth in Section 6.04(b).

 

(qqq)      “Release”
has the meaning set forth in Section 6.13(b).

 

(rrr)         “Seller”
has the meaning set forth in the Preamble to this Agreement.

 

(sss)       “Seller Ancillary Agreements” means all
agreements, instruments and documents being or to be executed and delivered by
Seller under this Agreement or in connection herewith.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

12

 

(ttt)         “Seller
Disclosure Schedule” has the meaning set forth in the preamble to Article VI of
this Agreement.

 

(uuu)      “Seller
Governmental Consents” has the meaning set forth in Section 6.04(a).

 

(vvv)      “Seller
Group Member” has the meaning set forth in Section 11.02(b).

 

(www)    “Seller
Property” has the meaning set forth in Section 6.13(b).

 

(xxx)        “Straddle
Period” means any taxable year or period beginning on or before and ending
after the Closing Date.

 

(yyy)      “Successor
Entity” means a successor entity to Buyer following a Change of Control.

 

(zzz)        “Tax”
means all of the following tax in connection with the operations of the
Business or the transactions contemplated hereby: (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, excise, severance, stamp,
occupation, employment, payroll, production, withholding, value added, premium,
property, environmental or windfall profit tax, or any other tax, custom, duty
or other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any Governmental or Regulatory Authority; (ii) any
Liability for the payment of any amounts of the type described in (i) above as
a result of being a member of any affiliated, consolidated, combined, unitary
or other group for any Taxable period; and (iii) any Liability for the payment
of any amounts of the type described in (i) or (ii) above as a result of any express
or implied obligation to indemnify any other person.

 

(aaaa)     “Tax
Return” means any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including any
information return, claim for refund, amended return or declaration of
estimated Tax.

 

(bbbb)    “Territory”
means the United States of America, including its territories and possessions,
Canada and Mexico.

 

(cccc)     “Third
Party Claim” has the meaning set forth in Section 11.02(d).

 

(dddd)    “Trademarks”
means United States, state and non-U.S. trademarks, service marks, trade names,
designs, logos, slogans and general intangibles of like nature, whether
registered or unregistered, and pending registrations and applications to
register the foregoing, together with all goodwill of the Business associated
with the foregoing.

 

Section 1.02           CONSTRUCTION OF CERTAIN TERMS AND
PHRASES.

 

Unless the
context of this Agreement otherwise requires: (a) words of any gender include
each other gender; (b) words using the singular or plural number also include
the plural or

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

13

 

singular
number, respectively; (c) the terms “hereof,” “herein,” “hereby” and derivative
or similar words refer to this entire Agreement; (d) the terms “Article” or “Section”
refer to the specified Article or Section of this Agreement; (e) the term “or”
has, except where otherwise indicated, the inclusive meaning represented by the
phrase “and/or”; and (f) the term “including” or “includes” means “including
without limitation” or “includes without limitation.”  The Seller Disclosure Schedule, Buyer
Disclosure Schedule and Exhibits referred to herein shall be construed with and
as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein. Whenever this Agreement refers to a number of days, such
number shall refer to calendar days unless Business Days are specified.

 

ARTICLE II.     SALE
AND ASSIGNMENT OF THE PURCHASED ASSETS

 

Section 2.01           SALE AND ASSIGNMENT OF THE PURCHASED
ASSETS.

 

(a)           Subject
to the terms and conditions of this Agreement, on the Closing Date, pursuant to
the Assignment and Assumption Agreement, Seller shall sell, transfer, convey,
assign and deliver to Buyer, free and clear from all Encumbrances other than
Permitted Encumbrances, and Buyer shall purchase, acquire and accept from
Seller all of Seller’s right, title and interest, as of the Closing, in and to
the Purchased Assets.

 

(b)           Buyer
acknowledges and agrees that the Eurand Agreement (i) contains a restriction on
the right of Seller to manufacture, market or sell the Product outside of the
Territory and (ii) does not provide any rights to manufacture, market, sell,
distribute or otherwise exploit the Product outside of the Territory.

 

(c)           Notwithstanding
anything contained in this Agreement to the contrary, (i) from and after the
Closing Seller shall retain all of its right, title and interest in and to the
Excluded Assets; and (ii) Seller may retain an archival copy of all Product
Contracts, Books and Records, Marketing Materials and other documents or
materials included in the Purchased Assets (but Seller shall not use any such
archival copy for any other purposes than as an archive and shall maintain the
confidentiality of such materials pursuant to Section 13.01).

 

Section 2.02           EXCLUDED ASSETS. Notwithstanding the
provisions of Section 2.01, the Purchased
Assets shall not include the following (herein referred to as the “Excluded
Assets”):

 

(a)           except
to the extent provided in Section 8.08, the
Corporate Names;

 

(b)           Seller’s
rights, claims or causes of action against third parties relating to the Assets
and Properties, business or operations of Seller which might arise in
connection with the discharge by Seller of the Excluded Liabilities;

 

(c)           all
contracts of insurance;

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

14

 

(d)           all
corporate minute books and stock transfer books and the corporate seal of
Seller;

 

(e)           all
machinery, equipment, vehicles, furniture or other personal property;

 

(f)            all
Assets and Properties relating to any employee benefit plan, program or
arrangement of Seller;

 

(g)           all
fixed assets;

 

(h)           all
refunds of any Tax for which Seller is liable pursuant to Section 8.13;

 

(i)            any
and all claims that Seller has or may have against Eurand under the Eurand
Agreement with respect to, or arising out of, actions taken, events occurring
or circumstances arising prior to the Closing Date; and

 

(j)            any
other Assets and Properties of Seller not used in connection with the Product
or the Business.

 

ARTICLE III.     ASSUMPTION
OF ASSUMED LIABILITIES; EXCLUDED LIABILITIES.

 

Section 3.01           ASSUMPTION OF ASSUMED LIABILITIES.

 

Subject to the
terms and conditions of this Agreement, on the Closing Date, Buyer shall
deliver to Seller the Assignment and Assumption Agreement pursuant to which
Buyer shall assume and agree to satisfy, perform, pay and discharge all of the
Assumed Liabilities.

 

Section 3.02           EXCLUDED LIABILITIES.

 

Buyer shall
not assume or be obligated to satisfy, pay, perform or otherwise discharge any
Liability or obligation of Seller not expressly assumed by Buyer pursuant to
the Assignment and Assumption Agreement (all such Liabilities and obligations
not being assumed being herein called the “Excluded Liabilities”) and, notwithstanding
anything to the contrary in Section 3.01,
none of the following shall be Assumed Liabilities for purposes of this
Agreement:

 

(a)           any
Liabilities in respect of Taxes for which Seller is liable pursuant to Section
8.13;

 

(b)           any
payables and other Liabilities or obligations of Seller to any of Seller’s
Affiliates;

 

(c)           any
costs and expenses incurred by Seller incident to its negotiation and
preparation of this Agreement and its performance and compliance with the
agreements and conditions contained herein;

 

(d)           any
Liabilities or obligations in respect of any Excluded Assets;

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

15

 

(e)           any
Liabilities in respect of the lawsuits, claims, suits, proceedings or
investigations set forth in Section 6.07 of the Seller Disclosure
Schedule;

 

(f)            any
product liability or claims for injury to person or property, regardless of
when made or asserted, relating to any Product manufactured, marketed, sold or
licensed by or on behalf of Seller prior to the Closing Date, but only if such
liability or claim involves or relates to the inaccuracy or breach of any
representation or warranty made by Seller in this Agreement; or

 

(g)           any
recalls on or after the Closing Date mandated by any Governmental or Regulatory
Authority of any Product manufactured, marketed, sold or licensed by or on
behalf of Seller prior to the Closing Date, but only if such recall involves or
relates to the inaccuracy or breach of any representation or warranty made by
Seller in this Agreement.

 

ARTICLE IV.     PURCHASE
PRICE AND PAYMENT

 

Subject to the
terms and conditions set forth herein, the purchase price for the Purchased
Assets shall be paid by Buyer in accordance with Sections 4.01 and 4.02.

 

Section 4.01           BASE PURCHASE PRICE.

 

As consideration
for the Purchased Assets, Buyer shall, subject to the satisfaction or waiver of
the conditions set forth in Article X, deliver or cause to be delivered
to Seller at the Closing the sum of $100,122,000 (the “Base Purchase Price”) in
immediately available funds by wire transfer into an account designated by
Seller in writing at least two (2) Business Days prior to the Closing Date.

 

Section 4.02           ADDITIONAL CONSIDERATION.

 

(a)           In
addition to the Base Purchase Price, upon the attainment by Buyer of the Net Sales
milestones of the Product in the Territory set forth below (each a “Net Sales
Milestone” and collectively the “Net Sales Milestones”), Buyer shall pay to
Seller the respective amounts set forth below (each a “Net Sales Milestone
Payment” and collectively the “Net Sales Milestone Payments”):

 

(i)            [**] if cumulative Net Sales of the
Product in the Territory after the Closing Date and prior to the Net Sales Milestone
Termination Date equal [**];

 

(ii)           [**] (not to exceed [**] in the
aggregate) for each additional [**] of cumulative Net Sales of the Product in
the Territory after the Closing Date and prior to the Net Sales Milestone
Termination Date in excess of [**];

 

(iii)          [**] (not to exceed [**] in the
aggregate) for each additional [**] of cumulative Net Sales of the Product in
the Territory after the Closing Date and prior to the Net Sales Milestone
Termination Date in excess of [**]; and

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

16

 

(iv)          [**] (not to exceed [**] in the
aggregate) for each additional [**] of cumulative Net Sales of the Product in
the Territory after the Closing Date and prior to the Net Sales Milestone
Termination Date in excess of [**].

 

No additional payments will be due and
payable by Buyer to Seller following the attainment of cumulative Net Sales of
the Product in the Territory after the Closing Date and prior to the Net Sales
Milestone Termination Date in excess of [**].

 

(b)           The
Net Sales Milestone Payments, if any, shall be payable within sixty (60) days
of the end of the calendar quarter in which the relevant Net Sales Milestone is
achieved by wire transfer of immediately available funds to an account
designated by Seller in writing within two (2) Business Days after Seller
becomes entitled to receive such payment. Upon at least thirty (30) days prior
written notice to Buyer, Seller and its agents shall have the right to inspect
and audit Buyer’s books and records related to Net Sales of the Product and the
calculation of any such payments due and payable to Seller for the five (5)
year period prior to the end of the last fiscal quarter of Buyer ending prior
to the date of commencement of such audit during Buyer’s normal business hours;
provided, that Seller shall not inspect and audit such books and records
more than once during any calendar year. The costs of any such audit shall be
borne by Seller, unless the audit reveals an underpayment of [**] or more of
the amount actually due, in which case, Buyer shall reimburse Seller for any
and all reasonable costs associated with the audit.

 

(c)           From
and after the Closing until the Net Sales Milestone Termination Date, Buyer
hereby agrees to use, or to cause its Affiliates to use, Commercially
Reasonable Efforts with respect to the marketing and sale of the Product. If at
any time between the Closing Date and the Net Sales Milestone Termination Date
the business strategy of (i) Buyer or Parent or (ii) following a Change of
Control, any Successor Entity changes such that Buyer or its Affiliates or such
Successor Entity fails to use Commercially Reasonable Efforts with respect to
the marketing and sale of the Product, then Seller shall be entitled to receive
an amount equal to [**], which amount shall be paid within sixty (60) days of
Seller becoming entitled thereto by wire transfer of immediately available
funds to the account designated by Seller in writing within two (2) Business
Days after Seller becomes entitled to receive such payment. As used in this Section
4.02(c), “Commercially Reasonable Efforts” means, with respect to any
Person, the efforts and resources that would be used (including the promptness
in which such efforts and resources would be applied) by such Person consistent
with its normal business practices, which in no event shall be less than the
level of efforts and resources standard in the pharmaceutical industry for a
company similar in size and scope to such Person, with respect to a product at
a similar stage in its development or product life taking into account
efficacy, safety, commercial value, the competitiveness of alternative products
of third parties that are in the marketplace or under development, and the
Patent and other proprietary position of such product. Notwithstanding anything
herein to the contrary, the “Commercially Reasonable Efforts” to be used by
Buyer under this Section 4.02(c) shall not be less than those efforts Parent
would be obligated to take under this Section 4.02(c) if Parent had executed
and delivered this Agreement as Buyer.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

17

 

(d)           With
respect to each calendar quarter from and after the Closing until the Net Sales
Milestone Termination Date, Buyer shall deliver to Seller, within fifty (50)
days after the end of such calendar quarter (other than the fourth quarter) and
within seventy (70) days after the end of the fourth calendar quarter of each
year, a report, certified by an officer of Buyer and setting forth in
reasonable detail a calculation of the Net Sales for such calendar quarter.

 

(e)           From
and after the Closing Date until the Net Sales Milestone Termination Date,
Buyer shall not consummate a transaction involving a sale or other transfer of
all or substantially all of the Purchased Assets that does not constitute a
Change of Control transaction without the prior written consent of Seller,
which consent may not be unreasonably withheld.

 

(f)            The
provisions of this Section 4.02 shall survive until the Net Sales
Milestone Termination Date, except that the right of Seller to conduct an audit
of Buyer’s books and records pursuant to Section 4.02(b) shall continue
for a period of five (5) years after the Net Sales Milestone Termination Date
and the obligation of Buyer pursuant to Section 4.02(d) shall continue
until a report relating to the quarter in which the Net Sales Milestone
Termination Date occurs has been delivered.

 

(g)           Buyer
and Seller each agrees that the Net Sales Milestone Payments, if any, are part
of the purchase price for the Purchased Assets for Tax purposes, and each
agrees to treat the same as such as required by applicable Tax law.

 

Section 4.03           ALLOCATION OF PURCHASE PRICE.

 

(a)           As
promptly as reasonably practical, but in no event later than sixty (60) days
after the Closing Date, Seller shall deliver to Buyer a schedule (the “Allocation
Statement”) reflecting the allocation of the Base Purchase Price among the
Purchased Assets in a manner that is consistent with the allocation methodology
provided by Section 1060 of the Code and the Treasury regulations promulgated
thereunder (the “Allocation”). Within thirty (30) days following the receipt by
Buyer of the Allocation Statement, Buyer shall review the Allocation. If the
Allocation Statement is not objected to by Buyer (by written notice to Seller)
by the expiration of such thirty (30) day period, it shall be deemed agreed
upon by the parties and shall be deemed conclusive for purposes of the
Allocation.

 

(b)           Except
to the extent required to comply with audit determinations of any tax authority
with jurisdiction over a party, Buyer and Seller shall report the transactions
contemplated by this Agreement for all required federal income tax and all
other tax purposes in a manner consistent with the Allocation. Buyer and Seller
shall not take any position in any Tax Return or Tax proceeding that is
inconsistent with the Allocation without the consent of the other party; provided,
however, that nothing contained herein shall prevent Buyer or Seller
from settling in good faith any proposed deficiency or adjustment by any
Governmental or Regulatory Authority based upon, or arising out of, the
Allocation, and none of the parties shall be required to litigate before any
court, any proposed deficiency or adjustment by any Governmental or Regulatory
Authority challenging the Allocation.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

18

 

Section 4.04           PAYMENT OF SALES, USE AND OTHER
TAXES.

 

Seller shall
be solely liable for and pay all sales, use, transfer, value added and other
related Taxes, if any, arising out of the sale by Seller of the Business and
the Purchased Assets to Buyer pursuant to this Agreement. Buyer agrees to
timely sign and deliver such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or file Tax
Returns with respect to, such Taxes.

 

ARTICLE V.     CLOSING

 

Section 5.01           TIME AND PLACE.

 

Unless this
Agreement is earlier terminated pursuant to Article XII, upon the terms and
subject to the conditions of this Agreement, the Closing of the transactions
contemplated by this Agreement, including the purchase and sale of the
Purchased Assets and the assumption of the Assumed Liabilities (the “Closing”),
shall take place on the third Business Day after the conditions set forth in Articles
IX and X have been satisfied or waived at the offices of Cantor
Arkema, P.C., 1111 E. Main Street, 16th Floor, Richmond, VA, unless
another time or place shall be agreed to by the parties.

 

Section 5.02           DELIVERIES AT CLOSING.

 

(a)           Closing
Deliveries by Seller. Subject to the satisfaction or waiver of the
conditions set forth in Article IX, at the Closing, Seller shall deliver
or cause to be delivered to Buyer:

 

(i)            a copy of Seller’s Articles of
Incorporation certified as of a recent date by the Secretary of the
Commonwealth of the Commonwealth of Virginia;

 

(ii)           a certificate of good standing of
Seller issued as of a recent date by the Secretary of the Commonwealth of the
Commonwealth of Virginia;

 

(iii)          a certificate dated the Closing Date
and executed by the secretary or an assistant secretary of Seller, in form and
substance reasonably satisfactory to Buyer, as to:  (i) no amendments to the Articles of
Incorporation of Seller since a specified date; (ii) the by-laws of Seller;
(iii) the resolutions of the Board of Directors of Seller authorizing the
execution, delivery and performance of this Agreement and each of the Seller
Ancillary Agreements; and (iv) the incumbency and signatures of the officers of
Seller executing this Agreement and each of the Seller Ancillary Agreements;

 

(iv)          physical possession of the Purchased
Assets, including:  (A) the Inventory
(which shall be delivered at the respective locations listed in Section
6.09(c) of the Seller Disclosure Schedule); (B) the Regulatory Approvals;
(C) the Marketing Materials; and (D) the Books and Records, and appropriate
documents of transfer related thereto in form and substance reasonably
acceptable to Seller and Buyer;

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

19

 

(v)           the Assignment and Assumption
Agreement, duly executed by Seller;

 

(vi)          an assignment of the Intellectual
Property included in the Purchased Assets in form and substance reasonably
acceptable to Seller and Buyer;

 

(vii)         copies of all Seller Governmental
Consents and Required Seller Third Party Consents, including the consent of
Eurand relating to the Eurand Agreement;

 

(viii)        the certificates of Seller contemplated
by Sections 10.01 and 10.02, duly executed by an authorized officer of
Seller;

 

(ix)           the Eurand Amendment, duly executed
by each of Seller and Eurand; and

 

(x)            such other bills of sale,
assignments and other instruments of transfer or conveyance as Buyer may
reasonably request or as may be otherwise necessary to evidence and effect the
sale, assignment, transfer, conveyance and delivery of the Purchased Assets to
Buyer.

 

In addition to
the above deliveries, Seller shall take all steps and actions as Buyer may
reasonably request or as may otherwise be necessary to put Buyer in actual
possession or control of the Purchased Assets.

 

(b)           Closing
Deliveries by Buyer. Subject to the satisfaction or waiver of the
conditions set forth in Article X, at the Closing, Buyer will deliver or
cause to be delivered to Seller:

 

(i)            the Base Purchase Price pursuant to Section
4.01;

 

(ii)           a copy of Buyer’s articles of
incorporation certified as of a recent date by the register of commerce of the
canton of Zug, Switzerland;

 

(iii)          an extract from the register of
commerce of the canton of Zug, Switzerland as of a recent date relating to
Buyer;

 

(iv)          a certificate dated the Closing Date
and executed by the Chairman of Buyer, in form and substance reasonably
satisfactory to Seller, as to:  (i) no
amendments to the articles of incorporation of Buyer since a specified date;
and (ii) the incumbency and signatures of the officers of Buyer executing this
Agreement and each of the Buyer Ancillary Agreements;

 

(v)           copies of all Buyer Governmental
Consents;

 

(vi)          the Assignment and Assumption
Agreement, duly executed by Buyer; and

 

(vii)         the certificate of Buyer contemplated
by Section 9.01, duly executed by an authorized officer of Buyer.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

20

 

ARTICLE VI.     REPRESENTATIONS
AND WARRANTIES OF SELLER

 

As an
inducement to Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller represents and warrants to Buyer,
subject to such exceptions as are specifically disclosed in the disclosure
schedule (referencing the specific Section(s) hereof being qualified) supplied
by Seller to Buyer and dated as of the date hereof (the “Seller Disclosure
Schedule”), which Seller Disclosure Schedule shall be deemed to be
representations and warranties of Seller as if made herein, as follows:

 

Section 6.01           ORGANIZATION.

 

(a)           Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia and has all requisite power and
authority to own or lease its assets and carry on the Business as currently
conducted by it. Seller is duly authorized to conduct its business and is in
good standing in each jurisdiction where such qualification is required, except
for any jurisdiction where failure to so qualify would not have a Material
Adverse Effect.

 

(b)           Seller
is its own sole “ultimate parent entity” (as defined in 16 C.F.R. § 801.1(a)(3).
The “person” (as defined in 16 C.F.R. § 801.1(a)(1)) of which Seller is the “ultimate
parent entity” (as defined in 16 C.F.R. § 801.1(a)(3))—i.e., the “person”
consisting of Seller and all entities that Seller controls directly or
indirectly, does not have “total assets” (as defined in 16 C.F.R. § 801.11) as
of June 30, 2007, the date of the most recent balance sheet of Seller, or “annual
net sales” (as defined in 16 C.F.R. § 801.11) for the year ended December 31,
2006 of $12.0 million or more.

 

Section 6.02           AUTHORITY OF SELLER.

 

Seller has all
necessary power and authority and has taken all actions necessary to enter into
this Agreement and the Seller Ancillary Agreements and to carry out the
transactions contemplated hereby and thereby. Seller has taken all action
required by Law, its Bylaws, Articles of Incorporation or otherwise to be taken
by it to duly and validly authorize the execution and delivery by Seller of
this Agreement and the Seller Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby, and no other corporate
proceedings on the part of Seller or its shareholders is necessary to
consummate the transactions contemplated hereby or thereby. This Agreement has
been duly and validly authorized, executed and delivered by Seller and, when
executed and delivered by Buyer, will constitute a legal, valid and binding
obligation of Seller enforceable against it in accordance with its terms, and
each of the Seller Ancillary Agreements has been duly authorized by Seller and
upon execution and delivery by Seller will constitute a legal, valid and
binding obligation of Seller enforceable against it in accordance with its
terms, in each case except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, and (b) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

21

 

Section 6.03           NON-CONTRAVENTION.

 

The execution
and delivery by Seller of this Agreement and the Seller Ancillary Agreements do
not, and the performance by it of its obligations under this Agreement and the
Seller Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby will not (with or without notice or lapse of
time or both):

 

(a)           contravene,
conflict with or result in a violation or breach of, or the creation of any
Encumbrance upon any of the Purchased Assets under, any of the terms,
conditions or provisions of the Bylaws, Articles of Incorporation or other
organizational documents of Seller or any material Contract to which Seller is
a party or any of its Assets and Properties is subject or by which Seller is
bound;

 

(b)           assuming
the receipt or making of all Seller Governmental Consents, contravene, conflict
with or result in a violation or breach of, or the creation of any Encumbrance
(other than any Permitted Encumbrance) upon any of the Purchased Assets under,
any term or provision of (i) any Law applicable to Seller, the Business, the
Product or the Purchased Assets or (ii) any Order to which Seller, the
Business, the Product or the Purchased Assets is subject or by which Seller is
bound; or

 

(c)           assuming
the receipt of all Required Seller Third Party Consents, contravene, conflict
with or result in a violation or breach or default (or an event which, with
notice or lapse of time or both, would constitute a breach or default) under,
or the creation of any Encumbrance (other than any Permitted Encumbrance) upon
any of the Purchased Assets under, require any consent under, or give to others
any rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, any Product Contract or any material Contract to which Seller
is a party or any of its Assets and Properties is subject or by which Seller is
bound.

 

Section 6.04           CONSENTS AND APPROVALS.

 

(a)           Section
6.04(a) of the Seller Disclosure Schedule sets forth a complete and
accurate list of all consents, waivers, approvals, Orders or authorizations of,
or registrations, declarations or filings with, any Governmental or Regulatory
Authority that are required to be obtained or made by Seller in connection with
the execution and delivery by Seller of this Agreement and the Seller Ancillary
Agreements or the performance of its obligations hereunder and thereunder
(collectively, the “Seller Governmental Consents”).

 

(b)           Section
6.04(b) of the Seller Disclosure Schedule sets forth a complete and
accurate list of all consents, waivers, approvals, or authorizations of, or
notices to, any third party (other than a Governmental or Regulatory Authority)
that are required to be obtained or made by Seller under any Product Contract
or otherwise in connection with the execution and delivery by Seller of this
Agreement and the Seller Ancillary Agreements or the performance of its
obligations hereunder and thereunder, including the consent of Eurand under the
Eurand Agreement (collectively, the “Required Seller Third Party Consents”).

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

22

 

Section 6.05           PRODUCT CONTRACTS.

 

(a)           Section
6.05(a) of the Seller Disclosure Schedule sets forth a complete and correct
list of each Contract to which Seller or any of its Affiliates is a party
that:  (i) relates to the manufacture,
marketing, sale, licensing or distribution of the Product;(ii) relates to
the acquisition, sale, licensing in or out, assignment or use of Intellectual
Property included in the Purchased Assets; (iii) relates to the purchase
or disposition of assets, or the provision of services, to or by the Business;
(iv) relates to the sale or distribution of the Product to any Governmental or
Regulatory Authority or any other Person; (v) limits or restricts where Seller
may conduct the Business or the Product may be sold, or grants any preferential
rights to purchase or license the Purchased Assets; or (vi) is not
otherwise described in clauses (i) – (v) above but is material to the conduct
of the Business as currently conducted or as planned to be conducted in the
future, or was not entered into by Seller in the Ordinary Course of Business
(collectively, the “Product Contracts”). Seller has made available to Buyer
complete and correct copies (including any schedules, annexes, exhibits or
amendments) of all Contracts identified in Section 6.05(a) of the Seller
Disclosure Schedule.

 

(b)           Except
for the Contracts set forth in Section 6.05(b) of the Seller Disclosure
Schedule, the Product Contracts are the only Contracts material to the conduct
of the Business by Seller or its Affiliates. Each of the Product Contracts is
in full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of Seller and each other party thereto
and may be transferred to Buyer pursuant to this Agreement and will continue in
full force and effect immediately after the Closing, in each case without
breaching the terms thereof or resulting in the forfeiture or impairment of any
rights thereunder and without the consent, approval or act of, or the making of
any filing with, any other party. Seller has performed in all material respects
all of its required obligations under, and is not, and is not alleged to be, in
violation or breach of or default under, in any material respect, any such
Contract, nor is there or is there alleged to be any basis for termination of
any Product Contract. To the Knowledge of Seller, the other parties to the
Product Contracts are not in violation or breach of or default under any such
Contract. No condition or state of facts exists which, with or without notice
or lapse of time or both, would constitute a violation, breach or default by
Seller or, to the Knowledge of Seller, any third party under any Product
Contract. Seller has not received any notice alleging any actual or possible
violation or breach of, or default under, any Product Contract.

 

Section 6.06           INTELLECTUAL PROPERTY RIGHTS.

 

(a)           Section
6.06(a) of the Seller Disclosure Schedule sets forth a complete and correct
list of all Registered Intellectual Property. Except as set forth in Section
6.06(a) of the Seller Disclosure Schedule, and except with respect to the
rights of Eurand with respect to the Eurand Intellectual Property, Seller owns
all right, title and interest in and to, or has a worldwide, royalty-free,
perpetual, sublicenseable license, sublicense or other permission to use, all
of the Registered Intellectual Property, free and clear of all Encumbrances
except Permitted Encumbrances. To the Knowledge of Seller, with respect to any
registrations required with respect to any items that are part of the Eurand
Intellectual Property, all necessary registration,

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

23

 

maintenance and renewal fees due in connection
with such Registered Intellectual Property have been paid and all necessary
documents and certificates in connection with such Registered Intellectual
Property have been filed with the relevant Copyright, Trademark, other
Governmental or Regulatory Authorities or domain name registrar for the
purposes of registering and maintaining such Registered Intellectual Property. Except
as set forth in Section 6.06(a) of the Seller Disclosure Schedule:  (i) none of the Intellectual Property
included in the Purchased Assets has been cancelled or abandoned; (ii) to the
Knowledge of Seller, none of the Eurand Intellectual Property has been
cancelled or abandoned; and (iii) Seller has the sole and exclusive right to
bring actions for infringement, misappropriation, dilution, violation or
unauthorized use of the Intellectual Property included in the Purchased Assets,
and to the Knowledge of Seller, there is no basis for any such action.

 

(b)           To
the Knowledge of Seller, (i) Seller owns all right, title and interest or other
permission to use all of the Intellectual Property included in the Purchased
Assets, free and clear of all Encumbrances except Permitted Encumbrances, and
(ii) Eurand owns all right, title and interest or other permission to use all
of the Eurand Intellectual Property, free and clear of all Encumbrances except
Permitted Encumbrances.

 

(c)           Seller
has not received any notice from any Person, or has Knowledge, that the
operation of the Business as currently conducted, or the Product, may or does
infringe or may or does misappropriate the Intellectual Property rights of any
third party. No claim of invalidity of any Intellectual Property included in
the Purchased Assets has been made by any other Person.

 

(d)           All
Trademarks owned by Seller and included in the Registered Intellectual Property
are the subject of current registrations, and have been continuously used as
specified in such registrations. Except for the rights of Eurand under the
Eurand Intellectual Property, there are no third-party rights in Seller’s
current or pending Trademark registrations relating to the Product. Seller has
no Knowledge of any prior use, infringement, piracy or counterfeiting of such
Trademarks, any superior rights by any third party in such Trademarks, or any
adverse claims pertaining to such Trademarks.

 

(e)           To
the Knowledge of Seller, there is no Intellectual Property, other than the
Intellectual Property included in the Purchased Assets, necessary to conduct
the Business as currently conducted or currently planned to be conducted.

 

(f)            There
has been no unauthorized disclosure or use by employees, consultants, officers,
shareholders and agents of Seller of Know-How included in the Purchased Assets.

 

Section 6.07           LITIGATION.

 

There are no
Actions or Proceedings pending to which Seller is a party, or to the Knowledge
of Seller, to which Eurand is a party, or, to the Knowledge of Seller,
threatened or reasonably anticipated, nor to the Knowledge of Seller is there
any basis for any of the same, against, relating to, affecting or arising in
connection with:  (a) the Purchased
Assets or the Business; (b) this Agreement; (c) the transactions
contemplated by this Agreement; or (d) the

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

24

 

Product. Neither
Seller nor any of its Assets and Properties is subject to any Order, nor, to
the Knowledge of Seller, are any such Orders threatened to be imposed by any
Governmental or Regulatory Authority.

 

Section 6.08           COMPLIANCE WITH LAW.

 

Seller has
operated and is operating the Business in compliance in all material respects
with all Laws and Orders applicable to Seller, the Business, the Product or the
Purchased Assets, and Seller is not in violation of any such Laws or Orders in
any material respect.

 

Section 6.09           INVENTORY; SALES OF THE PRODUCT.

 

(a)           All
of the Product included in the Inventory: 
(i) is in good, merchantable and useable condition; (ii) is, in the case
of finished goods, saleable in the Ordinary Course of Business or for
distribution as physician samples and, in the case of all other Product
included in the Inventory, is of a quality and quantity useable in the Ordinary
Course of Business; and (iii) was produced or manufactured in accordance with
the specifications for the Product as set forth in the applicable Regulatory
Approval and in compliance in all material respects with applicable Law.

 

(b)           Commercially
bottled Product included in the Inventory will have at least 42 months of
shelf-life remaining as of the Closing, and physician sample Product will have
at least 30 months of shelf-life remaining as of Closing.

 

(c)           Section
6.09(c) of the Seller Disclosure Schedule contains a list and description
of all Product included in the Inventory as of the date hereof and the Closing
Date, including lot numbers, shelf life and type and location thereof.

 

(d)           None
of Seller, any of its Affiliates or any Person acting on behalf of Seller or
any of its Affiliates has sold or distributed the Product to any Person,
including physicians.

 

Section 6.10           REGULATORY MATTERS.

 

(a)           Seller
owns, holds or possesses all permits, licenses, franchises, privileges,
approvals and other authorizations from any Governmental or Regulatory
Authority which are necessary to entitle it to own or lease, operate and use
the Purchased Assets and to carry on and conduct the Business as currently
conducted or planned to be conducted by it (collectively, the “Permits”). Section 6.10(a)
of the Seller Disclosure Schedule sets forth a list and brief description of
each Permit. Seller is not in violation of or default in any material respect
under any Permit. Seller has fulfilled and performed in all material respects
its obligations under each Permit, and, to the Knowledge of Seller, no event
has occurred or condition or state of facts exists which constitutes or, after
notice or lapse of time or both, would constitute a breach of or default under
any such Permit or which permits or, after notice or lapse of time or both,
would permit revocation or termination of any such Permit. To the Knowledge of
Sellers, no notice of cancellation, of default or of any dispute concerning any
Permit, or of any event, condition or 

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

25

 

state of facts described in the preceding
sentence, has been received by Seller. Each of the Permits is valid, subsisting
and in full force and effect and may be assigned and transferred to Buyer in
accordance with this Agreement and will continue in full force and effect
immediately after the Closing, in each case without (x) the occurrence of any breach,
default or forfeiture of rights thereunder, or (y) the consent, approval or act
of, or the making of any filing with, and Governmental or Regulatory Authority.

 

(b)           Complete
and correct copies of each submission of Seller to the FDA with respect to the
Product, and all amendments and supplements thereto, including all related
pre-clinical and clinical data, have heretofore been provided to Buyer by
Seller. Complete and correct copies of all correspondence received by Seller
from the FDA with respect to the Product and Seller’s responses thereto have
heretofore been provided to Buyer by Seller. Complete and correct copies of all
complaint information, adverse event information and safety information
relating to the Product and the Regulatory Approvals have heretofore been
provided to Buyer.

 

(c)           The
Product has been and is being manufactured, distributed and marketed in
compliance with all applicable requirements under the FDCA and any similar Law,
including those relating to investigational use, premarket approval, good
manufacturing practices, labeling, advertising, record keeping, and the filing
of adverse event reports and compliance with other postmarketing obligations. Seller
has not received any formal or informal notice or other communication from the
FDA or any other Governmental or Regulatory Authority, including a warning or
untitled letter, (i) contesting the premarket approval, approved labeling, or
promotion (including advertising, promotional labeling and sampling) of, the
Product or (ii) otherwise alleging any violation or appearance of any
violation of any Law by Seller relating to the Product.

 

(d)           The
Product has not been recalled, withdrawn, suspended or discontinued by Seller
in the Territory (whether voluntarily or otherwise) since January 1, 2007. No
proceedings in the Territory (whether completed or pending) seeking the recall,
withdrawal, suspension or seizure of the Product or premarket approvals or
marketing authorizations are pending, or to the Knowledge of Seller,
threatened, against Seller, nor have any such proceedings been pending at any
time since January 1, 2007.

 

(e)           Seller
has been and is in substantial compliance with 21 U.S.C. sec. 355 and
applicable FDA implementing regulations, including 21 C.F.R. Parts 312 or 314,
and similar Laws and all terms and conditions of the applicable new drug
application and investigational new drug exemption submission under section
505(i) of the FDCA. Seller and its officers, employees or agents have included
in the application for the Product, where required, the certification described
in 21 U.S.C. sec. 335a(k)(1) or any similar Law, and such certification and
such list was in each case true and accurate when made and remained true and
accurate in all material respects thereafter. In addition, Seller is in
compliance in all material respects with all applicable registration and
listing requirements set forth in 21 U.S.C. sec. 360 and 21 C.F.R. Part 207 and
all similar Laws with respect to the Product.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

26

 

(f)            Each
article of the Product manufactured and/or distributed by Seller (including
Product in Inventory) is not adulterated within the meaning of 21 U.S.C. sec.
351 (or similar Law) or misbranded within the meaning of 21 U.S.C. sec. 352 (or
similar Law), and is not in violation of 21 U.S.C. sec. 355 (or similar Law).

 

(g)           Neither
Seller nor any of its officers, employees or agents has with respect to the
Product made an untrue statement of a material fact or fraudulent statement to
the FDA or other Governmental or Regulatory Authority, failed to disclose a
material fact required to be disclosed to the FDA or any other Governmental or
Regulatory Authority, or committed an act, made a statement, or failed to make
a statement that, at the time such disclosure was made, could reasonably be
expected to provide a basis for the FDA or any other Governmental or Regulatory
Authority to invoke its policy respecting “Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191
(September 10, 1991) or any similar policy and, to the Knowledge of Seller,
neither Seller nor any of its officers, employees or agents is the subject,
officially or otherwise, of any pending or threatened investigation by any Governmental
or Regulatory Authority under such policy or under the Federal Anti-Kickback
Statute or the Civil False Claims Act or any regulations promulgated thereunder.
Neither Seller nor any of its officers, employees or agents has been convicted
of any crime or engaged in any conduct with respect to the Product for which
debarment is mandated by 21 U.S.C. sec. 335a(a) or any similar Law or
authorized by 21 U.S.C. sec. 335a(b) or any similar Law.

 

(h)           To
the Knowledge of Seller, all pre-clinical and clinical investigations conducted
or sponsored by it with respect to the Product have been and are being
conducted in compliance with all recommendations of the FDA and all applicable
Laws, including those with respect to good laboratory practices, investigational
new drug requirements, good clinical practice requirements (including informed
consent and institutional review boards designed to ensure the protection of
the rights and welfare of human subjects), and federal and state laws
restricting the use and disclosure of individually identifiable health
information.

 

(i)            To
the Knowledge of Seller, no Governmental or Regulatory Authority is considering
issuing any “talk paper” or other public statement, pursuant to 21 U.S.C. sec.
375 or otherwise, questioning the safety, effectiveness or risk-benefit ratio
of the Product, and no Governmental or Regulatory Authority is considering
requesting or directing that the approved labeling for the Product be revised
to include additional or strengthened warning or other risk information.

 

Section 6.11           TITLE; SUFFICIENCY OF ASSETS.

 

(a)           Seller
has good and marketable title to all of the Purchased Assets, free and clear of
any Encumbrance, other than Permitted Encumbrances. Upon delivery to Buyer of
the Assignment and Assumption Agreement and other instruments of transfer
contemplated by Section 5.02(a), Seller will thereby transfer to Buyer
good and marketable title to all of the Purchased Assets, free and clear of all
Encumbrances, other than Permitted Encumbrances.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

27

 

(b)           Except as set forth in Section
6.11(b) of the Seller Disclosure Schedule, the Purchased Assets
collectively include all the assets used in the Business and all of the assets
necessary to conduct the Business as currently conducted or planned to be
conducted.

 

Section 6.12           BROKERS.

 

Seller has not
retained any broker, finder, investment banker or financial advisor in
connection with the transactions contemplated hereunder. Buyer has no, and will
have no, obligation to pay any brokers, finders, investment bankers, financial
advisors or similar fees in connection with this Agreement or the transactions
contemplated hereby by reason of any action taken by or on behalf of Seller.

 

Section 6.13           ENVIRONMENTAL MATTERS.

 

(a)           The
operations of the Business comply in all material respects with all applicable
Environmental Laws and, to the Knowledge of the Sellers, no circumstances or
conditions exist that may prevent or interfere with such compliance in the
future. Seller is not subject to any Action or Order alleging or addressing a
violation of or Liability under any Environmental Law. The Business is not
required to have any Permits under Environmental Laws. No Contaminant has been
generated, transported, used, disposed, stored or treated by Seller in
connection with the Business, and there has been no Release of any Contaminant
by Seller in connection with the Business.

 

(b)           For
purposes of this Agreement:

 

(i)            “Contaminant” shall mean any waste,
pollutant, hazardous or toxic substance or waste, petroleum, petroleum-based
substance or waste, special waste, or any constituent of any such substance or
waste;

 

(ii)           “Environmental Law” means all Laws
derived from or relating to all non-U.S., federal, state and local laws or
regulations relating to or addressing the environment, health or safety; and

 

(iii)          “Release” means any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of a Contaminant into the indoor or outdoor environment
or into or out of any Seller Property, including the movement of Contaminants
through or in the air, soil, surface water, groundwater or Seller Property.

 

(iv)          “Seller Property” means any real or
personal property, plan, building, facility, structure, underground storage
tank, equipment or unit, or other asset owned, leased or operated by Seller.

 

Section 6.14           TAXES.

 

(a)           Except
as set forth in Section 6.14 of the Seller Disclosure Schedule:  (i) Seller has, in respect of the Business
and the Purchased Assets, filed all Tax Returns which are required

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

28

 

to be filed and has paid all Taxes which have
become due pursuant to such Tax Returns or pursuant to any assessment which has
become payable; (ii) all such Tax Returns are complete and accurate and
disclose all Taxes required to be paid in respect of the Business and the
Purchased Assets; (iii) Seller is not currently the beneficiary of any
extension of time within which to file any Tax Return required to be filed in
respect of the Business and the Purchased Assets; (iv) there is no action,
suit, investigation, audit, claim or assessment pending or proposed or
threatened with respect to Taxes required to be paid in respect of the Business
and the Purchased Assets, and, to the Knowledge of Seller, no basis exists
therefor; (v) Seller has not waived or been requested to waive any statute of
limitations with respect to Taxes required to be paid in respect of the
Business and the Purchased Assets which waiver is currently in effect; and (vi)
all monies required to be withheld by Seller (including from employees of the
Business for income Taxes and social security and other payroll Taxes) have
been collected or withheld, and either paid to the relevant Government or
Regulatory Authorities, set aside in accounts for such purpose, or accrued,
reserved against and entered upon the books of the Business.

 

(b)           No
transaction contemplated by this Agreement is subject to withholding under
Section 1445 of the Code and no sales Taxes, use Taxes, real estate transfer
Taxes or other similar Taxes will be imposed on the transfer of the Purchased
Assets or the assumption of the Assumed Liabilities pursuant to this Agreement.

 

Section 6.15           SUPPLIERS.

 

Section 6.15 of the Seller Disclosure Schedule
sets forth a list of each material supplier of Seller with respect to the
Business. Copies of the forms of purchase order for the Product and other
supplies and sales contracts for the Product, if any, used by Seller have been
previously delivered by Seller to Buyer. Except as set forth in Section 6.15
of the Seller Disclosure Schedule, there exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of Seller with any supplier or group of suppliers
material to the operations of the Business, and there exists no present or
future condition or state of facts or circumstances involving suppliers which
Seller can now reasonably foresee would have a Material Adverse Effect or
prevent the conduct of the Business after the consummation of the transactions
contemplated by this Agreement in essentially the same manner in which it has
heretofore been conducted.

 

Section 6.16           INSURANCE.

 

Seller has
provided to Buyer true and complete copies of all policies of insurance
maintained by Seller with respect to the Purchased Assets or the Business, or
true and complete summaries of the material terms of such insurance policies. All
such policies are in full force and effect and Seller has complied in all
material respects with the provisions of such policies.

 

Section 6.17           DISCLOSURE.

 

None of the
representations or warranties of Seller contained herein, none of the
information contained in the Seller Disclosure Schedule, and none of the other
information or

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

29

 

documents
furnished to Buyer or any of its representatives by Seller or its
representatives pursuant to the terms of this Agreement, is false or misleading
in any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect. There
is no fact which adversely affects or in the future is likely to adversely
affect the Purchased Assets or the Business in any material respect which has
not been set forth or referred to in this Agreement or the Seller Disclosure
Schedule.

 

ARTICLE VII.     REPRESENTATIONS
AND WARRANTIES OF BUYER

 

As an
inducement to Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer represents and warrants to Seller,
subject to such exceptions as are specifically disclosed in the disclosure
schedule (referencing the specific Section(s) hereof being qualified) supplied
by Buyer to Seller and dated as of the date hereof (the “Buyer Disclosure
Schedule”), which Buyer Disclosure Schedule shall be deemed to be
representations and warranties of Buyer as if made herein, as follows:

 

Section 7.01           CORPORATE ORGANIZATION.

 

Buyer is a
company duly organized and validly existing under the laws of Switzerland and
has all requisite power and authority to own its assets and carry on its
business as currently conducted by it. Buyer is duly authorized to conduct its
business and is in good standing in each jurisdiction where such qualification
is required, except for any jurisdiction where failure to so qualify would not
have a material adverse effect on Buyer’s ability to perform its obligations
hereunder.

 

Section 7.02           AUTHORITY OF BUYER.

 

Buyer has all
necessary power and authority and has taken all actions necessary to enter into
this Agreement and the Buyer Ancillary Agreements and to carry out the
transactions contemplated hereby and thereby. Buyer has taken all action
required by Law, its articles of incorporation or otherwise to be taken by it
to duly and validly authorize the execution and delivery by Buyer of this
Agreement and the Buyer Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby, and no other corporate
proceedings on the part of Buyer are necessary to consummate the transactions
contemplated hereby or thereby. This Agreement has been duly and validly
authorized, executed and delivered by Buyer and, when executed and delivered by
Seller, will constitute a legal, valid and binding obligation of Buyer
enforceable against it in accordance with its terms, and each of the Buyer
Ancillary Agreements has been duly authorized by Buyer and upon execution and
delivery by Seller will constitute a legal, valid and binding obligation of
Buyer enforceable against it in accordance with its terms, in each case except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’
rights generally; and (b) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

30

 

Section 7.03           NON-CONTRAVENTION.

 

The execution
and delivery by Buyer of this Agreement and the Buyer Ancillary Agreements do
not, and the performance by it of its obligations under this Agreement and the
Buyer Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby will not (with or without notice or lapse of
time or both):

 

(a)           contravene,
conflict with or result in a violation or breach of, or the creation of any
Encumbrance upon any of the Assets and Properties of Buyer under, any of the
terms, conditions or provisions of the articles  of
incorporation or other organizational documents of Buyer;

 

(b)           assuming
the receipt or making of all Buyer Governmental Consents, contravene, conflict
with or result in a violation or breach of any term or provision of, or the
creation of any Encumbrance (other than any Permitted Encumbrance) upon any of
the Assets and Properties of Buyer under, (i) any Law applicable to Buyer or
(ii) any Order to which Buyer is subject or by which Buyer is bound; or

 

(c)           conflict
with or result in a breach or default (or an event which, with notice or lapse
of time or both, would constitute a breach or default) under, or the creation
of any Encumbrance (other than any Permitted Encumbrance) upon any of the
Assets and Properties of Buyer under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any material Contract to which Buyer is a party,
any of its Assets and Properties is subject or Buyer is bound.

 

Section 7.04           CONSENTS AND APPROVALS.

 

Section 7.04
of the Buyer Disclosure Schedule sets forth a complete and accurate list of all
consents, waivers, approvals, Orders or authorizations of, or registrations,
declarations or filings with, any Governmental or Regulatory Authority that are
required to be obtained or made by Buyer in connection with the execution and
delivery by Buyer of this Agreement and the Buyer Ancillary Agreements or the
performance of its obligations hereunder and thereunder (collectively, the “Buyer
Governmental Consents”).

 

Section 7.05           LITIGATION.

 

There are no
Actions or Proceedings pending to which Buyer is a party or, to the knowledge
of Buyer, threatened or anticipated, against, relating to, affecting or arising
in connection with (a) this Agreement or (b) the transactions contemplated by
this Agreement. Buyer is not subject to any Order that could reasonably be
expected to materially impair or delay the ability of Buyer to perform its
obligations hereunder.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

31

 

Section 7.06           BROKERS.

 

Buyer has not
retained any broker, finder, investment banker or financial advisor in
connection with the transactions contemplated hereunder. Seller has no, and
will have no, obligation to pay any brokers, finders, investment bankers,
financial advisors or similar fees in connection with this Agreement or the
transactions contemplated hereby by reason of any action taken by or on behalf
of Buyer.

 

Section 7.07           FINANCIAL CAPABILITY.

 

Buyer has, or
will have on the Closing Date, sufficient funds available to pay the Base
Purchase Price on the Closing Date.

 

Section 7.08           NON-COMPETITION.

 

Neither Buyer
nor Parent currently manufactures, distributes, markets or sells any product
that competes directly with the Product in the Territory in any material
respects. Neither Buyer nor Parent is a party to any non-competition or similar
agreement that restricts in any material respect Buyer’s or Parent’s right or
ability to sell or market the Product in the Territory as contemplated hereby.

 

ARTICLE VIII.     COVENANTS
OF THE PARTIES

 

Section 8.01           MAINTENANCE OF BUSINESS PRIOR TO
CLOSING.

 

(a)           From
the date of this Agreement to the Closing Date, Seller shall operate and carry
on the Business only in the Ordinary Course of Business and substantially as
presently operated. Consistent with the foregoing, Seller shall keep and
maintain the Purchased Assets in good operating condition and repair and shall
use its best efforts consistent with good business practice to maintain its
business organization intact and to preserve the goodwill of the suppliers,
contractors, licensors, employees, customers, distributors and others having
business relations with Seller.

 

(b)           Notwithstanding Section 8.01(a),
except as expressly contemplated by this Agreement or except with the express
written approval of Buyer, Seller shall not:

 

(i)            make any change in the Business or
the operations of Seller with respect to the Business;

 

(ii)           enter into any Contract which would
have been required to be set forth in Section 6.05(a) of the Seller
Disclosure Schedule if in effect on the date hereof or otherwise relating to
the Business or the Purchased Assets or amend any Product Contract;

 

(iii)          enter into or amend any Contract (A)
giving any third party any right, title or interest in, to or under the
Business, the Product, the Regulatory Approvals or the Purchased

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

32

 

Assets or (B) creating any Encumbrance on any
of the foregoing other than Permitted Encumbrances;

 

(iv)          sell, lease (as lessor), transfer or
otherwise dispose of (including any transfers by Seller to any of its
Affiliates), or mortgage or pledge, or impose or suffer to be imposed any
Encumbrance on, any of the Purchased Assets, including any Product in
Inventory; or

 

(v)           allow the levels of raw materials,
supplies, work-in-process, finished goods or other materials included in the
Inventory to vary in any material respect from the levels maintained in the
Business on the date hereof.

 

Section 8.02           COMMERCIALLY REASONABLE EFFORTS.

 

(a)           Seller will use commercially
reasonable efforts to obtain, before the Closing Date, the Required Seller
Third Party Consents, in form and substance reasonably satisfactory to Buyer; provided
that neither Seller nor Buyer shall have any obligation to offer or pay any
consideration in order to obtain any such consents or approvals; and provided
further, that Seller shall not make any agreement or understanding
affecting the Purchased Assets or the Business as a condition for obtaining any
such Required Seller Third Party Consents except with the prior written consent
of Buyer. During the period prior to the Closing Date, Buyer shall act
diligently and reasonably to cooperate with Seller in attempting to obtain the
Required Seller Third Party Consents.

 

(b)           During the period prior to the
Closing Date, Seller and Buyer shall use their respective commercially
reasonable efforts, and shall cooperate with each other, in attempting to
obtain any consents and approvals of any Governmental or Regulatory Authority
required to be obtained by them in order to assign or transfer any Permits to
Buyer, to permit the consummation of the transactions contemplated by this
Agreement, or to otherwise satisfy the conditions set forth in Section 10.04;
provided that Seller shall not make any agreement or understanding
affecting the Purchased Assets or the Business as a condition for obtaining any
such consents or approvals except with the prior written consent of Buyer.

 

Section 8.03           PRESERVE
ACCURACY OF REPRESENTATIONS AND WARRANTIES; NOTIFICATION OF CERTAIN MATTERS.

 

(a)           From the date of this Agreement to
the Closing Date, each party hereto shall refrain from taking any action which
would render any representation or warranty contained in Article VI or VII
inaccurate as of the Closing Date. Each party shall promptly notify the other
of any action, suit or proceeding that shall be instituted or threatened
against such party to restrain, prohibit or otherwise challenge the legality of
any transaction contemplated by this Agreement.

 

(b)           From
the date of this Agreement to the Closing Date, Seller will notify Buyer of (i)
any Material Adverse Effect, (ii) any lawsuit, claim, proceeding or
investigation that is threatened, brought, asserted or commenced against Seller
which would have been listed in

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

33

 

Section 6.07
of the Seller Disclosure Schedule if such lawsuit, claim, proceeding or
investigation had arisen prior to the date hereof, (iii) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement and (iv) any material default under any Product Contract or
event which, with notice or lapse of time or both, would become such a default
on or prior to the Closing Date.

 

Section 8.04           ACCESS.

 

(a)           From the date hereof until the
Closing, Seller shall permit Buyer and its representatives to have access,
during regular business hours and upon reasonable advance notice, to the assets
of the Business that will be Purchased Assets and to the offices, properties,
employees and business and financial records of Seller as Buyer shall
reasonably require in order to enable Buyer or its representatives to verify
the accuracy of the representations and warranties contained in this Agreement,
to verify that the covenants of Seller contained in this Agreement have been
complied with and to determine whether the conditions set forth in Article X
have been satisfied. Buyer acknowledges and agrees that all such access, and
requests therefor, shall be coordinated through Davis Caskey, Vice President of
Seller. Seller shall instruct its employees, counsel and financial advisors to
cooperate with Buyer in its investigation of the Business; it being understood
that Buyer shall reimburse Seller promptly for reasonable and necessary out of
pocket expenses incurred by Seller in complying with any such request by or on
behalf of Buyer (other than the fees and costs of Seller’s attorneys). No
investigation made by Buyer or its representatives hereunder shall affect the
representations and warranties of Seller hereunder.

 

(b)           (i)  Buyer shall, for a period seven years after
the Closing, keep and maintain all Books and Records and other documents
obtained from Seller on the Closing Date and make personnel of Buyer or its
Affiliates available to Seller or its representatives to the extent reasonably
be required by Seller in connection with matters relating to or affected by the
operations of the Business prior to the Closing Date, it being understood that
Seller shall reimburse Buyer promptly for its reasonable and necessary out of
pocket expenses incurred in complying with any such request by or on behalf of
Seller (other than the fees and costs of Buyer’s attorneys). For a period of
seven years after the Closing Date, upon the request of Seller, Buyer shall
grant to Seller and its representatives reasonable access, during regular
business hours and upon reasonable advance notice, to inspect and (at Seller’s
expense) copy the Books and Records and other documents obtained from Seller in
Buyer’s possession, to the extent relating to or affected by the operations of
the Business prior to the Closing Date.

 

(ii)           Seller shall, for a period of seven
years after the Closing, keep and maintain all Books and Records and other
documents retained by Seller on the Closing Date and make personnel of Seller
or its Affiliates available to Buyer or its representatives to the extent such
access is reasonably required by Buyer, it being understood that Buyer shall
reimburse Seller promptly for its reasonable and necessary out of pocket
expenses incurred in complying with any such request by or on behalf of Buyer (other
than the fees and costs of Buyer’s attorneys). For a period of seven years
after the Closing Date, upon the request of Buyer, Seller

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

34

 

shall grant to Buyer and its representatives
reasonable access, during regular business hours and upon reasonable advance
notice, to inspect and (at Buyer’s expense) copy the Books and Records and
other documents retained by Seller with respect to the Business.

 

Section 8.05           PUBLIC ANNOUNCEMENTS.

 

Neither Buyer
nor Seller shall, without the approval of the other, make any press release or
other public announcement concerning the transactions contemplated by this
Agreement, except as and to the extent that any such party shall be so
obligated by law or the rules of any stock exchange, in which case the other
party shall be advised and the parties shall use their best efforts to cause a
mutually agreeable release or announcement to be issued; provided, that
the foregoing shall not preclude communications or disclosures necessary to
implement the provisions of this Agreement or to comply with disclosure
obligations under United States generally accepted accounting principles or the
rules and regulations of the Securities and Exchange Commission.

 

Section 8.06           BULK SALES.

 

Buyer and
Seller waive compliance with all bulk sales Laws applicable to the transactions
contemplated by this Agreement.

 

Section 8.07           SELLER’S EMPLOYEES

 

At the
Closing, Buyer shall deliver to Seller a list of open sales territories for
which Parent is currently interviewing sales representatives (the “Open
Territories List”). Buyer hereby agrees to (or
cause Parent to) interview in good faith, within three months following
Closing, those members of Seller’s sales force as identified by Seller with
responsibility for sales in the territories identified in the Open Territories
List. Each of the parties hereto agrees that Buyer and Parent shall not have
any obligation to hire any members of Seller’s sales force and may hire or
decline to hire any such individual in its sole discretion. [**]. Notwithstanding
the foregoing, Buyer shall not have any Liability with respect to or
responsibility for any such severance program implemented by Seller or any
Liability or obligation of Seller with respect to any of its current or former
employees.

 

Section 8.08           CORPORATE NAMES.

 

(a)           Except
as set forth in this Section 8.08, following the Closing, Buyer shall
not have any rights by virtue of this Agreement or any of the transactions or
agreements contemplated hereby to any names or Trademarks relating to Seller
other than those included in the Intellectual Property that is part of the
Purchased Assets (the “Corporate Names”).

 

(b)           Buyer
may use in connection with its operation of the Business (i) for up to twelve
(12) months following the Closing, packaging included in Inventory that bears
any of the Corporate Names; and (ii) for up to six (6) months following the
Closing, Marketing Materials that were transferred to Buyer as Purchased Assets
that bear any of the Corporate Names.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

35

 

Section 8.09           RECEIPT OF CERTAIN AMOUNTS.

 

From and after
the Closing Date, Seller shall remit promptly to Buyer any payments or other
sums received by Seller after the Closing Date that relate to any sales or
shipments made by Buyer after the Closing Date and Seller shall use reasonable
efforts to transmit to Buyer all written inquiries or orders, and to refer to
Buyer all oral inquiries or orders, relating to the Business (to the extent
relating to operations thereof following the Closing) that are received by
Seller following the Closing Date.

 

Section 8.10           REGULATORY MATTERS.

 

From and after
the transfer by Seller to Buyer of each Regulatory Approval pursuant to the
terms hereof, Seller promptly shall notify Buyer if Seller receives a complaint
or a report of an adverse drug experience in respect of a Product sold pursuant
to such Regulatory Approval.  In
addition, Seller shall cooperate with Buyer’s reasonable requests and use
commercially reasonable efforts to assist Buyer in connection with the investigation
of and response to any complaint or adverse drug experience related to the
Product sold by Seller.

 

Section 8.11           FURTHER ASSURANCES.

 

On and after
the Closing, Seller shall from time to time, at the request of Buyer, execute
and deliver, or cause to be executed and delivered, to Buyer such other
instruments of conveyance and transfer and take such other actions as Buyer may
reasonably request or as may be otherwise necessary to more effectively
consummate the transactions contemplated hereby and to vest in Buyer good and
marketable title to the Purchased Assets (including assistance in the
collection or reduction to possession of any of the Purchased Assets), and, in
the case of licenses, certificates, approvals, authorizations, agreements,
contracts, leases, easements and other commitments included in the Purchased
Assets (a) which cannot be transferred or assigned effectively without the
consent of third parties which consent has not been obtained prior to the
Closing, to cooperate with Buyer at its request in endeavoring to obtain such
consent promptly, and if any such consent is unobtainable, to use its
commercially reasonable efforts to secure to Buyer the benefits thereof in some
other manner, or (b) which are otherwise not transferable or assignable, to use
its commercially reasonable efforts jointly with Buyer to secure to Buyer the
benefits thereof in some other manner (including the exercise of the rights of
Seller thereunder); provided, however, that nothing herein shall relieve Seller
of its obligations under Section 8.02. 
Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any license, certificate,
approval, authorization, agreement, contract, lease, easement or other commitment
included in the Purchased Assets if an attempted assignment thereof without the
consent of a third party thereto would constitute a breach thereof

 

Section 8.12           REGULATORY TRANSITION BY SELLER.

 

During a
transitional period of up to 180 days following the Closing (or such sooner
period as Buyer completes arrangements for transfer of such regulatory
activities), Seller shall, upon the reasonable request of Buyer, assist Buyer
in the maintenance of the Regulatory

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

36

 

Approvals of
the Product and carry out the other regulatory compliance activities required
to be carried out under the Regulatory Approvals (to the extent that such
activities have not then been taken over by Buyer) in a manner and intensity of
effort consistent with the regulatory procedures of Seller during the calendar
year 2006 and 2007 to date, and in accordance with all legal requirements.
Buyer shall make all filings with, and take all other actions required by,
applicable Governmental or Regulatory Authorities that are necessary to permit
Seller to perform its obligations under this Section 8.12.

 

Section 8.13           TAXES.

 

(a)           From
and after the Closing, Seller shall be liable for and pay, and pursuant to Article
XI shall indemnify, reimburse, defend and hold harmless each Buyer Group
Member from and against any and all Damages incurred in connection with,
arising out of, resulting from or incident to, Taxes applicable to the
Business, the Purchased Assets and the Assumed Liabilities, in each case
attributable to taxable years or periods ending on or prior to the Closing Date
and, with respect to any Straddle Period, the portion of such Straddle Period
ending on and including the Closing Date. 
For purposes of this Section 8.13, any Straddle Period shall be
treated on a “closing of the books” basis as two partial periods, one ending at
the close of the Closing Date and the other beginning on the day after the
Closing Date, except that Taxes (such as property Taxes) imposed on a periodic
basis shall be allocated on a daily basis.

 

(b)           From
and after the Closing, Seller shall provide reimbursement for any Tax paid by
Buyer all or a portion of which is the responsibility of Seller in accordance
with the terms of this Section 8.13 without regard to the
indemnification limitations set forth in Section 11.03.  Not later than 30 days prior to the payment
of any such Tax, Buyer shall give notice to Seller of the Tax payable and the
portion which is the liability of Seller, although failure to do so will not
relieve Seller from its liability hereunder.

 

(c)           From
and after the Closing, each of Seller and Buyer shall (and cause their
respective Affiliates to):  (i) assist
the other party in preparing any Tax Returns which such other party is
responsible for preparing and filing; (ii) cooperate fully in preparing for any
audits of, or disputes with any Governmental or Regulatory Authority regarding,
any Tax Returns required to be filed in respect of the Business or the
Purchased Assets; (iii) make available to the other and to any Governmental or
Regulatory Authority as reasonably requested all information, records, and
documents relating to Taxes required to be paid in respect of the Business or
the Purchased Assets; (iv) provide timely notice to the other in writing of any
pending or threatened Tax audits or assessments relating to Taxes required to
be paid in respect of the Business or the Purchased Assets for taxable periods
for which the other may have a liability under this Section 8.13 or as a
matter of law; and (v) furnish the other with copies of all correspondence
received from any Governmental or Regulatory Authority in connection with any
Tax audit or information request with respect to any such taxable period.

 

(d)           Notwithstanding
anything to the contrary in this Agreement, the obligations of the parties set
forth in this Section 8.13 shall be unconditional and absolute and
shall remain in effect without limitation as to time.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

37

 

Section 8.14           COVENANT NOT TO COMPETE OR SOLICIT
BUSINESS.

 

(a)           In
furtherance of the sale of the Purchased Assets and the Business to Buyer
hereunder by virtue of the transactions contemplated hereby and more
effectively to protect the value and goodwill of the Purchased Assets and the
Business so sold, Seller covenants and agrees that, for a period ending on the
third anniversary of the Closing Date, neither Seller nor any of its Affiliates
will:

 

(i)            directly or indirectly (whether as
principal, agent, independent contractor, partner or otherwise) own, manage,
operate, control, participate in, perform services for, sell materials to, or
otherwise carry on, a business similar to or competitive with the Business as
conducted at the Closing Date (including developing, marketing, licensing,
selling or distributing any extended release cyclobenzaprine product) anywhere
in the Territory (it being understood by the parties hereto that the Business
is not limited to any particular region of the Territory and that the Business
may be engaged in effectively from any location in the Territory); or

 

(ii)           induce or attempt to persuade any
distributor, agent, supplier or customer of the Business to terminate such
distributor, agency or business relationship in order to enter into any such
relationship on behalf of any other business organization in competition with
the Business;

 

provided, however,
that nothing set forth in this Section 8.14 shall prohibit Seller or its
Affiliates from owning not in excess of 5% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and listed on
any national or regional stock exchange. 
Seller also covenants and agrees that from and after the Closing Date it
will not, nor will it permit any of its Affiliates to, divulge or make use of
any trade secrets or other confidential information of the Business other than
to disclose such secrets and information to Buyer or its Affiliates.

 

(b)           If
Seller or any Affiliate of Seller violates any of its obligations under this Section
8.14, Buyer may proceed against it in law or in equity for such damages or
other relief as a court may deem appropriate. 
Seller acknowledges that a violation of this Section 8.14 may
cause Buyer irreparable harm which may not be adequately compensated for by
money damages.  Seller therefore agrees
that in the event of any actual or threatened violation of this Section 8.14,
Buyer shall be entitled, in addition to other remedies that it may have, to a
temporary restraining order and to preliminary and final injunctive relief
against Seller or such Affiliate of Seller to prevent any violations of this
Section 8.14, without the necessity of posting a bond.  The prevailing party in any action commenced
under this Section 8.14 shall also be entitled to receive reasonable
attorneys’ fees and court costs.  It is
the intent and understanding of each party hereto that if, in any action before
any court or agency legally empowered to enforce this Section 8.14, any
term, restriction, covenant or promise in this Section 8.14 is found to
be unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

38

 

Section 8.15           ACQUISITION PROPOSALS.

 

Seller will
not, and will not authorize or permit any officer, director or employee of
Seller or any Affiliate of Seller or authorize any investment banker, attorney,
accountant or other representative retained by Seller or any Affiliate of
Seller to, directly or indirectly, solicit or encourage, or furnish information
with respect to any portion of the Purchased Assets or the Business or engage
in any discussions with any Person in connection with, any proposal for the
acquisition of any portion of the Purchased Assets or the Business, other than
as contemplated by this Agreement. 
Seller will promptly cease or cause to be terminated any existing
activities or discussions with any Person (other than Buyer) with respect to
any of the foregoing and will promptly request the return of any confidential
information provided to any Person in connection with a prospective acquisition
of the Purchased Assets or the Business.

 

ARTICLE IX.    CONDITIONS
TO THE OBLIGATIONS OF SELLER

 

The obligation
of Seller to effect the transactions contemplated hereby is subject to the
satisfaction (or waiver by Seller), at or before the Closing, of each of the
following conditions:

 

Section 9.01           REPRESENTATIONS, WARRANTIES AND
COVENANTS.

 

All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with
the same force and effect as if made on and as of the Closing Date (other than
any representations and warranties which contain any materiality qualification,
which representations and warranties, to the extent so qualified, shall be true
and correct in all respects), except for such representations and warranties as
are made as of another date, which shall have been true and correct in all
material respects or true and correct in all respects, as applicable, as of
such specified date, and Buyer shall have performed all agreements and
covenants required by this Agreement to be performed by it prior to or on the
Closing Date; and there shall have been delivered to Seller a certificate to
such effect, dated the Closing Date, executed by a duly authorized officer of
Buyer.

 

Section 9.02           NO ACTIONS OR PROCEEDINGS.

 

No Actions or
Proceedings that restrain, prohibit or question the validity or legality of the
transactions contemplated hereby shall have been instituted or threatened and
not settled or otherwise terminated.

 

Section 9.03           CONSENTS.

 

All Seller
Governmental Consents and Buyer Governmental Consents shall have been obtained
or made, as the case may be.

 

ARTICLE X.    CONDITIONS
TO THE OBLIGATIONS OF BUYER

 

The obligation
of Buyer to effect the transactions contemplated hereby is subject to the
satisfaction (or waiver by Buyer), at or before the Closing, of each of the
following conditions:

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

39

 

Section 10.01         REPRESENTATIONS, WARRANTIES AND
COVENANTS.

 

All
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with
the same force and effect as if made on and as of the Closing Date (other than
any representations and warranties which contain any materiality or “Material
Adverse Effect” qualification, which representations and warranties, to the
extent so qualified, shall be true and correct in all respects), except for
such representations and warranties as are made as of another date, which shall
have been true and correct in all material respects or true and correct in all
respects, as applicable, as of such specified date, and Seller shall have
performed all agreements and covenants required by this Agreement to be
performed by it prior to or on the Closing Date; and there shall have been delivered
to Buyer a certificate to such effect, dated the Closing Date, executed by a
duly authorized officer of Seller.

 

Section 10.02         NO MATERIAL ADVERSE EFFECT.

 

Between the
date hereof and the Closing Date, there shall have been (a) no Material Adverse
Effect and (b) no material adverse federal or state legislative or regulatory
change affecting the Business or the Product, and there shall have been
delivered to Buyer a certificate to such effect, dated the Closing Date,
executed by a duly authorized officer of Seller.

 

Section 10.03         NO ACTIONS OR PROCEEDINGS.

 

No Actions or
Proceedings that restrain, prohibit or question the validity or legality of the
transactions contemplated hereby shall have been instituted or threatened and
not settled or otherwise terminated.

 

Section 10.04         CONSENTS.

 

All Seller
Governmental Consents, Required Seller Third Party Consents and Buyer
Governmental Consents shall have been obtained or made, as the case may be.

 

ARTICLE XI.    INDEMNIFICATION

 

Section 11.01         SURVIVAL OF REPRESENTATIONS,
WARRANTIES, ETC.

 

The
representations and warranties of Seller and Buyer contained in this Agreement,
and all claims with respect thereto, shall survive the Closing and remain in
full force and effect until the Expiration Date; provided that the
representations and warranties contained in Sections 6.01, 6.02, 6.03,
6.11(a), 6.12, 7.01, 7.02, 7.03 and 7.06,
and all claims with respect thereto, shall survive the Closing
indefinitely.  Except with respect to Section
8.14, which shall terminate one (1) year after the termination of the
non-competition period set forth therein, the covenants and agreements of
Seller and Buyer contained in this Agreement, and all claims with respect
thereto, shall survive the Closing indefinitely.  Notwithstanding the foregoing, if notice of
any claim for indemnification pursuant to Section 11.02(a)(ii) or 11.02(b)(ii)
shall have been given prior to the time the representation or warranty with
respect to such claim would otherwise terminate in

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

40

 

accordance
with this Section 11.01, then such indemnification claim shall survive
until such time as such claim is finally resolved and the Indemnifying Party
(as defined herein) shall have reimbursed the Indemnified Party for all Damages
in accordance with this Article XI.

 

Section 11.02         INDEMNIFICATION.

 

(a)           By
Seller. Subject to Section 11.03, from and after the Closing, Seller
shall indemnify, reimburse, defend and hold harmless Buyer, its Affiliates, and
their respective officers, directors, employees, agents, successors and assigns
(“Buyer Group Members”) from and against any and all costs, losses,
Liabilities, damages, lawsuits, deficiencies, fines, penalties, judgments,
claims and expenses (including reasonable expenses of investigation and
reasonable fees and disbursements of attorneys) (collectively, the “Damages”),
incurred in connection with, arising out of, resulting from or incident to (i)
any breach of, or failure to comply with, any covenant or agreement of Seller
herein; (ii) the inaccuracy or breach of any representation or warranty made by
Seller in this Agreement or in any Seller Ancillary Agreement; (iii) the
Excluded Liabilities; (iv) any failure by Seller to obtain any Required Seller
Third Party Consent; or (v) any failure by Seller to comply with any applicable
bulk sales law, except that this clause (v) shall not affect the obligation of
Buyer to pay and discharge the Assumed Liabilities.

 

(b)           By
Buyer. Subject to Section 11.03, from and after the Closing, Buyer
shall indemnify, defend and hold harmless Seller, its Affiliates and their
respective officers, directors, employees, agents, successors and assigns (“Seller
Group Members”) from and against any and all Damages incurred in connection
with, arising out of, resulting from or incident to (i) any breach of, or
failure to comply with, any covenant or agreement of Buyer herein (other than
the covenants and agreements of Buyer set forth in Section 4.02, as to
which the provisions of such Section shall apply exclusively with
respect to any claims relating thereto); (ii) the inaccuracy or breach of any
representation or warranty made by Buyer in this Agreement or in any Buyer
Ancillary Agreement; (iii) the failure of Buyer to assume, pay, perform and
discharge any Assumed Liabilities; or (iv) any Third Party Claim relating to
Buyer’s operation of the Business, use of the Purchased Assets or sale of the
Product, in each case following Closing (unless such Third Party Claim relates
to or arises from matters with respect to which Buyer Group Members are
entitled to indemnification pursuant to Section 11.02(a) (including any
breach by Seller of any representation, warranty, covenant or agreement set
forth herein).

 

(c)           Procedures.  (i) 
The Buyer Group Member or Seller Group Member seeking indemnification
hereunder (the “Indemnified Party”) shall give the party obligated to provide
indemnification hereunder (the “Indemnifying Party”) written notice (an “Indemnification
Claim Notice”) of any Damages or discovery of fact upon which such Indemnified
Party intends to base a request for indemnification under Section 11.02(a)
or Section  11.02(b), as
applicable.  The failure to give such
notice shall not relieve the Indemnifying Party of its obligations hereunder
except to the extent it shall have been prejudiced by such failure.  Each Indemnification Claim Notice must
contain a reasonable description of the claim and the nature and amount of such
Damages (to the extent that the nature and amount of such Damages are known at
such time).

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

41

 

The Indemnified Party shall furnish promptly
to the Indemnifying Party copies of all papers and official documents received
in respect of any Damages.

 

(ii)           After the giving of any Indemnification
Claim Notice pursuant hereto, the amount of indemnification to which an
Indemnified Party shall be entitled under this Article
XI shall be determined:  (A)
by the written agreement between the Indemnified Party and the Indemnifying
Party; (B) by a final judgment or decree of any court of competent
jurisdiction; or (C) by any other means to which the Indemnified Party and the
Indemnifying Party shall agree.  The
judgment or decree of a court shall be deemed final when the time for appeal,
if any, shall have expired and no appeal shall have been taken or when all
appeals taken shall have been finally determined.  The Indemnified Party shall have the burden
of proof in establishing the amount of Damages suffered by it.

 

(d)           Third
Party Claims.  (i)  Subject to Section 11.02(d)(ii), the
Indemnified Party shall have the right to conduct and control, through counsel
of its choosing, the defense, compromise or settlement of any claim of any
third party against such Indemnified Party that is subject to indemnification
as provided for in Section 11.02(a) or Section 11.02(b) (a “Third
Party Claim”), and in any such case the Indemnifying Party shall cooperate in
connection therewith and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and
appeals as may be reasonably requested by the Indemnified Party in connection
therewith; provided, that:

 

(A)          the Indemnifying
Party may participate, through counsel chosen by it and at its own expense, in
the defense of any such Third Party Claim as to which the Indemnified Party has
so elected to conduct and control the defense thereof; and

 

(B)           the Indemnified
Party shall not, without the written consent of the Indemnifying Party (which
written consent shall not be unreasonably withheld), pay, compromise or settle
any such Third Party Claim, except that no such consent shall be required if,
following a written request from the Indemnified Party, the Indemnifying Party
shall fail, within 14 days after the making of such request, to acknowledge and
agree in writing that, if such Third Party Claim shall be adversely determined,
such Indemnifying Party has an obligation to provide indemnification hereunder
to such Indemnified Party.

 

Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay, settle or compromise any such
Third Party Claim without such consent, provided,
that in such event the Indemnified Party shall waive any right to indemnity
therefor hereunder unless such consent is unreasonably withheld.

 

(ii)           If any Third Party Claim against any
Indemnified Party is solely for money damages or, where Seller is the
Indemnifying Party, will have no continuing effect in any material respect on
the Business or the Purchased Assets, then the Indemnifying Party shall have
the right to conduct and control, through counsel of its choosing, the defense,
compromise or

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

42

 

settlement of any such Third Party Claim as
to which indemnification will be sought by an Indemnified Party from an
Indemnifying Party hereunder if the Indemnifying Party has acknowledged and
agreed in writing that, if the same is adversely determined, the Indemnifying
Party has an obligation to provide indemnification to the Indemnified Party in
respect thereof, and in any such case the Indemnified Party shall cooperate in
connection therewith and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnifying Party in connection
therewith; provided, that the Indemnified
Party may participate, through counsel chosen by it and at its own expense, in
the defense of any such Third Party Claim as to which the Indemnifying Party
has so elected to conduct and control the defense thereof.  Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay, settle or compromise any such
Third Party Claim, provided, that in such
event the Indemnified Party shall waive any right to indemnity therefor
hereunder unless the Indemnified Party shall have sought the consent of the
Indemnifying Party to such payment, settlement or compromise and such consent
was unreasonably withheld, in which event no claim for indemnity therefor
hereunder shall be waived.

 

Section 11.03         LIMITATIONS.

 

(a)           (i)  Notwithstanding Section 11.02(a),
Seller will not be required to indemnify Buyer pursuant to clause (ii) of Section
11.02(a) for Damages that exceed a maximum aggregate liability of
$17,500,000; provided, that such limitation shall not apply to the
Damages in connection with any indemnification claims arising out of a breach
of Seller’s representations and warranties in Sections 6.01, 6.02,
6.03, 6.11(a) and 6.12.

 

(ii)           Notwithstanding Section 11.02(b),
Buyer will not be required to indemnify Seller pursuant to clause (ii) of Section
11.02(b) for Damages that exceed a maximum aggregate liability of
$17,500,000; provided, that such limitation shall not apply to the
Damages in connection with any indemnification claims arising out of a breach
of Buyer’s representations and warranties in Sections 7.01, 7.02, 7.03
and 7.06.

 

(b)           The
amount of any Damages under Section 11.02(a) or Section 11.02(b),
as the case may be, shall be reduced by the net amount of any insurance
proceeds paid to the Indemnified Party relating to such claim, after upward
adjustment for any insurance proceeds repayment obligations owed as a result of
receipt of such indemnification and any increase in premiums resulting from the
payment of such insurance proceeds.

 

(c)           THE
INDEMNIFICATION OBLIGATIONS OF THE PARTIES HERETO SHALL NOT EXTEND TO SPECIAL,
EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, EXCEPT TO THE EXTENT SUCH DAMAGES
RESULT FROM A THIRD PARTY CLAIM; PROVIDED, HOWEVER, THIS EXCLUSION IS NOT
INTENDED TO, NOR SHALL, EXCLUDE ACTUAL OR COMPENSATORY DAMAGES OF THE AFFECTED
PARTY, INCLUDING SUCH DAMAGES RESULTING FROM A THIRD PARTY CLAIM.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

43

 

Section 11.04         REMEDIES EXCLUSIVE.

 

Except with
respect to claims based on fraud, claims for equitable relief, remedies that
cannot be waived as a matter of law and injunctive and provisional relief
(including specific performance), from and after the Closing, the remedies set
forth in this Article XI shall be exclusive and in lieu of any other
remedies that may be available to the parties pursuant to any statutory or
common law with respect to any Damages of any kind or nature incurred directly
or indirectly resulting from or arising out of any breach of this Agreement
(including alleged breaches or inaccuracies of any representation, warranty or
covenant or for any alleged misrepresentation) or the transactions contemplated
hereby.  Nothing herein is intended to,
nor shall be construed to, affect, have an interpretative effect on, modify or
terminate any other contract between either party hereto or its Affiliates or
any rights or obligations under any such contracts.

 

Section 11.05         SET-OFF.

 

Buyer shall
have the right, exercisable by delivery of written notice to Seller, (a) to set
off against, and reduce the amount otherwise payable in respect of, any Net
Sales Milestone Payment otherwise payable to Seller any Damages to which a
Buyer Group Member is entitled to be reimbursed as determined pursuant to Section
11.02(c)(ii) and (b) to deposit into an escrow account with an escrow agent
mutually agreed upon by Buyer and Seller all or such portion of any Net Sales
Milestone Payment otherwise payable to Seller in an amount equal to the amount
of any Damages for which any Buyer Group Member has delivered an
Indemnification Claim Notice pursuant to Section 11.02(c)(i) and with
respect to which the amount of Damages that the Buyer Group Member is entitled
to be reimbursed has not yet been determined pursuant to Section
11.02(c)(ii), which escrowed amount shall be disbursed to the Buyer Group
Member and/or Seller, as appropriate, once the amount of Damages that the Buyer
Group Member is entitled to be reimbursed has been determined pursuant to Section
11.02(c)(ii).  If any Damages for
which any Buyer Group Member is entitled to be indemnified pursuant to this Article
XI are not satisfied by set-off against the Net Sales Milestone Payments,
such indemnification payment shall be made by Seller in cash.

 

Section 11.06         ADJUSTMENT TO PURCHASE PRICE.

 

Buyer and
Seller each agrees to report each indemnification payment hereunder as an
adjustment to the purchase price being paid for the Purchased Assets for
federal income Tax purposes unless the Indemnified Party determines in good
faith that such reporting position is incorrect (it being understood that if
any reporting position is later disallowed in any administrative or court
proceedings, the Indemnifying Party shall indemnify the Indemnified Party for
the effects of such disallowance, and it being further understood that the
obligations under this parenthetical clause shall remain in effect without
limitation as to time).

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

44

 

Section 11.07         TAX MATTERS.

 

Notwithstanding
anything to the contrary in this Agreement, if there shall be any conflicts
between the provisions of this Article XI and Section 8.13,
the provisions of Section 8.13 shall govern all matters relating to
Taxes.

 

ARTICLE XII.    TERMINATION
AND ABANDONMENT

 

Section 12.01         METHODS OF TERMINATION.

 

Anything
contained in this Agreement to the contrary notwithstanding, this Agreement may
be terminated and the transactions contemplated herein may be terminated and/or
abandoned at any time prior to the Closing:

 

(a)           by
mutual written agreement of Seller and Buyer;

 

(b)           by
either Seller or Buyer if the Closing shall not have occurred by August 31,
2007; provided, however, that the right to terminate this
Agreement under this Section 12.01(b) shall not be available to any
party if such party’s action or failure to act shall have been the cause of, or
shall have resulted in, the failure of the Closing to occur on or prior to such
date and such action or failure to act constitutes a breach of this Agreement;

 

(c)           by
either Seller or Buyer, if a Governmental or Regulatory Authority shall have
enacted, issued, promulgated, enforced or entered any Law or Order which is
then in effect and has the effect of making the transactions contemplated hereby
illegal or otherwise prohibiting consummation of the transactions contemplated
hereby, which Law or Order is final and non-appealable; or

 

(d)           by
either Seller or Buyer in the event of the material breach by the other party
of any of the other party’s agreements, representations or warranties contained
herein that remains uncured for a period of 15 days after written notice and
demand for cure thereof by the non-breaching party, unless such breach is not
capable of cure in which event the non-breaching party may terminate
immediately.

 

Section 12.02         PROCEDURE UPON TERMINATION.

 

In the event
of termination and abandonment under Section 12.01 hereof, written
notice thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated and abandoned, without
further action by the parties hereto.  If
the transactions contemplated by this Agreement are terminated and/or abandoned
as provided herein:

 

(a)           All
confidential information received by any party hereto with respect to the
business of any other party or its Affiliates shall be treated in accordance
with Section 13.01; and

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

45

 

(b)           No
party hereto and none of their respective directors, officers, stockholders,
Affiliates or controlling Persons shall have any further liability or
obligation to any other party to this Agreement except as stated in
subparagraphs (a) and (b) of this Section 12.02,
except that (i) nothing in this Section 12.02 shall prejudice any
rights, claims, or causes of action that may have accrued hereunder or with
respect hereto prior to the date of such termination, (ii) nothing herein shall
relieve any party from liability for its willful breach of this Agreement and
(ii) the provisions of Article XIII shall survive any termination of
this Agreement.

 

ARTICLE XIII.    MISCELLANEOUS

 

Section 13.01         CONFIDENTIALITY.

 

Each party
agrees that it will treat in confidence all documents, materials and other
information which it shall have obtained regarding the other party during the
course of the negotiations leading to the consummation of the transactions
contemplated hereby (whether obtained before or after the date of this
Agreement), the investigation provided for herein and the preparation of this
Agreement and other related documents, and, if the transactions contemplated
hereby are not consummated, each party will return to the other party or
destroy all copies of nonpublic documents and materials which have been
furnished in connection therewith.  Such
documents, materials and information shall not be communicated to any third
party (other than, in the case of Buyer, to its counsel, accountants or
financial advisors, and in the case of Seller, to its counsel or
accountants).  No other party shall use
any confidential information in any manner whatsoever except solely for the
purpose of evaluating the proposed purchase and sale of the Purchased Assets; provided, however,
that after the Closing Buyer may use or disclose any confidential information
included in the Purchased Assets or otherwise reasonably related to the
Business or the Purchased Assets.  The
obligation of each party to treat such documents, materials and other
information in confidence shall not apply to any information which (i) is or
becomes available to such party from a source other than the other party, (ii)
is or becomes available to the public other than as a result of disclosure by
such party or its agents, (iii) is required to be disclosed under applicable
law or judicial process, but only to the extent it must be disclosed, or (iv)
such party reasonably deems necessary to disclose to obtain any of the consents
or approvals contemplated hereby.

 

Section 13.02         NOTICES.

 

All notices,
requests and other communications hereunder must be in writing and will be
deemed to have been duly given only if delivered personally against written
receipt or by facsimile transmission with answer back confirmation or mailed
(postage prepaid by certified or registered mail, return receipt requested) or
delivered by nationally recognized overnight courier that maintains records of
delivery to the parties at the following addresses or facsimile numbers:

 

If to Buyer to:

 

Anesta AG
 Baarerstrasse
23

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

46

 

CH – 6300 Zug

Switzerland

Telephone:  ++41-41-729 80 60

Facsimile:  ++41-41-729 80 66

 

With copies to:

 

Cephalon, Inc.

41 Moores Road

P.O. Box 4011

Frazer, Pennsylvania 19355

Attention:  General Counsel

Telephone:  (610) 344-0200

Facsimile:  (610) 344-0065

 

and

 

Sidley Austin LLP

One South Dearborn Street

Chicago, Illinois 60603

Attention: Pran Jha

Telephone:  (312) 853-7000

Facsimile:  (312) 853-7036

 

If to Seller to:

 

E. Claiborne Robins Company, Inc.

3969 Deep Rock Road

P.O. Box 71600

Richmond, Virginia 23233

Attn:  E. Claiborne Robins, Jr.

Telephone:  (804) 527-1950

Facsimile:  (804) 527-1959

 

With copies to:

 

Cantor Arkema, P.C.

1111 E. Main Street

P.O. Box 561

Richmond, Virginia 23219

Attn:  Grant S. Grayson

Telephone:  (804) 644-1400

Facsimile:  (804) 225-8706

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

47

 

All such
notices, requests and other communications will (a) if delivered personally to
the address as provided in this Section, be deemed given upon receipt,
(b) if delivered by facsimile to the facsimile number as provided in this Section,
be deemed given upon receipt by the sender of the answer back confirmation, (c)
if delivered by mail in the manner described above to the address as provided
in this Section, be deemed given three (3) Business Days after it is
sent and (d) if delivered by overnight courier to the address provided in this Section,
be deemed given one (1) Business Day after it is sent upon receipt (in each
case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such
change to the other parties hereto in accordance with the terms of this Section.

 

Section 13.03         ENTIRE AGREEMENT.

 

This Agreement
(and all Exhibits and Schedules attached hereto and all other documents
delivered in connection herewith) supersedes all prior discussions and
agreements among the parties with respect to the subject matter hereof and
contains the sole and entire agreement among the parties hereto with respect to
the subject matter hereof.

 

Section 13.04         WAIVER.

 

Any term or
condition of this Agreement may be waived at any time by the party that is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party hereto of any term or
condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or
by law or otherwise afforded, will be cumulative and not alternative.

 

Section 13.05         AMENDMENT.

 

This Agreement
may be amended, supplemented or modified only by a written instrument duly
executed by each party hereto.

 

Section 13.06         THIRD PARTY BENEFICIARIES.

 

The terms and
provisions of this Agreement are intended solely for the benefit of each party
hereto and their respective successors or permitted assigns and it is not the
intention of the parties to confer third-party beneficiary rights upon any
other Person.

 

Section 13.07         ASSIGNMENT; BINDING EFFECT.

 

Prior to the
Closing, neither this Agreement nor any right, interest or obligation hereunder
may be assigned by either party hereto without the prior written consent of the
other

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

48

 

party hereto,
and any attempt to do so will be void, except that the rights of Buyer
hereunder may be assigned, in whole or in part, prior to the Closing, without
the consent of Seller, to Parent or to any corporation or limited liability
company all of the outstanding capital stock or membership interests of which
are owned or controlled by Buyer, provided that Buyer shall not be
released from any of its obligations hereunder by reason of such
assignment.  Following the Closing,
either party may assign any of its rights hereunder, but no such assignment
shall relieve it of its obligations hereunder. 
This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and permitted
assigns.

 

Section 13.08         HEADINGS.

 

The headings
used in this Agreement have been inserted for convenience of reference only and
do not define or limit the provisions hereof.

 

Section 13.09         SEVERABILITY.

 

Wherever
possible, each provision hereof shall be interpreted in such manner as to be
effective and valid under applicable law, but in case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions hereof, unless
such a construction would be unreasonable.

 

Section 13.10         GOVERNING LAW.

 

THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

 

Section 13.11         VENUE.

 

Each party
hereby irrevocably submits to the jurisdiction of, and agrees that any action
arising out of this Agreement shall be brought in, (i) the United States
District Court for the Southern District of New York or, if such federal
jurisdiction is unavailable, the state courts in the Borough of Manhattan, City
of New York, (ii) the United States District Court for the Eastern District of
Pennsylvania or, if such federal jurisdiction is unavailable, the state courts
in the County of Chester, Pennsylvania, or (iii) the United States District
Court for the Eastern District of Virginia or, if such federal jurisdiction is
unavailable, the state courts in the City of Richmond, Virginia, and each party
hereby irrevocably waives any objection which such party may now or hereafter
have to the laying of improper venue or forum non conveniens
in any such jurisdiction.  Each party
agrees that a judgment in any such action or proceeding may be enforced in
other jurisdictions by suit on the judgment or in any manner provided by
law.  Any

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

49

 

and all
service of process and any other notice in any such suit, action or proceeding
with respect to this Agreement shall be effective against a party if given as
provided herein.

 

Section 13.12         EXPENSES; ATTORNEY’S FEES.

 

(a)           Except
as otherwise provided in this Agreement, each party hereto shall pay its own
expenses and costs incidental to the preparation of this Agreement and to the
consummation of the transactions contemplated hereby.

 

(b)           In
the event a Party brings an action to enforce any terms and provisions of this
Agreement in a court of law or equity, the non-prevailing Party in such action
shall pay all of the out-of-pocket costs incurred by the prevailing Party,
including reasonable attorney’s fees.

 

Section 13.13         COUNTERPARTS.

 

This Agreement
may be executed in any number of counterparts and by facsimile, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.

 

**Portions of the Exhibit have
been omitted and have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

50

 

IN WITNESS
WHEREOF, this Agreement has been executed by the parties hereto all as of the
date first above written.

 

	
   

  	
  ANESTA AG

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Kevin Buchi

  	
   

  
	
   

  	
  Name:

  	
  J. Kevin Buchi

  	
   

  
	
   

  	
  Title:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
  E. CLAIBORNE ROBINS COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ E. Claiborne Robins, Jr.

  	
   

  
	
   

  	
  Name:

  	
  E. Claiborne Robins, Jr.

  	
   

  
	
   

  	
  Title:

  	
  President & CEOExhibit
10.1

 

CONFIDENTIAL TREATMENT REQUESTED

—

CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN
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CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT
(this “Agreement”) is entered into as of July 13, 2007, by and between SUNPOWER
CORPORATION, a Delaware corporation (“Borrower”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Bank”).

 

RECITALS

 

Borrower has requested
that Bank extend or continue credit to Borrower as described below, and Bank
has agreed to provide such credit to Borrower on the terms and conditions
contained herein.

 

NOW, THEREFORE, for
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.         LINE OF CREDIT.

 

(a)    Line of Credit. Subject to the terms
and conditions of this Agreement, Bank hereby agrees to make advances to
Borrower from time to time up to and including July 31, 2008, not to exceed at
any time the aggregate principal amount of Fifty Million Dollars ($50,000,000.00)
(“Line of Credit”), the proceeds of which shall be used for working capital and
other corporate requirements. Borrower’s obligation to repay advances under the
Line of Credit shall be evidenced by a promissory note dated as of July 13,
2007 (“Line of Credit Note”), all terms of which are incorporated herein by
this reference.

 

(b)    Borrowing and Repayment. Borrower may
from time to time during the term of the Line of Credit borrow, partially or
wholly repay its outstanding borrowings, and reborrow, subject to all of the
limitations, terms and conditions contained herein or in the Line of Credit
Note; provided however, that the total outstanding borrowings under the Line of
Credit shall not at any time exceed the maximum principal amount available
thereunder, as set forth above.

 

SECTION 1.2.         LETTER OF CREDIT LINE.

 

(a)    Letter of Credit Line. Subject to the
terms and conditions of this Agreement, Bank hereby agrees to establish a
letter of credit line (“Letter of Credit Line”) under which Bank shall issue or
cause an affiliate to issue commercial and standby letters of credit for the
account of Borrower to finance working capital and other corporate requirements
(each, a “Letter of Credit” and collectively, “Letters of Credit”) from time to
time up to and including July 31, 2010; provided however, that the aggregate of
all undrawn amounts, and all amounts drawn and unreimbursed, under any Letters
of Credit issued under the Letter of Credit Line shall not at any time exceed
the principal amount of Fifteen Million Dollars ($15,000,000.00). The form and
substance of each Letter of Credit shall be subject to approval by Bank, in its
sole discretion. Each Letter of Credit shall be issued for an initial term not
to exceed 365 days, as designated by Borrower; provided however, that no Letter
of Credit shall have a final expiration date subsequent to July 31, 2010. Each
Letter of Credit shall be subject to the additional terms of the Commercial and
Standby Letter of Credit Agreements, as applicable, to be dated as of the date
of their respective execution, applications thereunder, and any related
documents required by Bank in connection with the issuance thereof (each, a “Letter
of Credit Agreement”).

 

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(b)    Repayment of Drafts. Each drawing
paid under any Letter of Credit shall be repaid by Borrower in accordance with
the provisions of the applicable Letter of Credit Agreement.

 

SECTION 1.3.         INTEREST/FEES.

 

(a)    Interest.           The outstanding principal balance of each credit subject
hereto shall bear interest, and the amount of each drawing paid under anyLetter
of Credit shall bear interest from the date such drawing is paid to the date
such amount is fully repaid by Borrower, at the rate of interest set forth in each
promissory note or other instrument or document executed in connection
therewith.

 

(b)    Computation and Payment. Interest
shall be computed on the basis of a 360-day year, actual days elapsed. Interest
shall be payable at the times and place set forth in each promissory note or
other instrument or document required hereby.

 

(c)     Letter of Credit Fees. Borrower
shall pay to Bank (i) fees upon the issuance of each Letter of Credit
equal to fifteen-hundredths percent (0.15%) per annum (computed on the basis of
a 360-day year, actual days elapsed) of the face amount thereof, and
(ii) fees upon the payment or negotiation of each drawing under any Letter
of Credit and fees upon the occurrence of any other activity with respect to
any Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any Letter of Credit) determined in accordance with Bank’s
standard fees and charges then in effect for such activity. The standard fees
and charges in effect as of the date hereof are set forth in Schedule 1.3
hereto.

 

SECTION 1.4.         COLLECTION OF PAYMENTS. Borrower authorizes
Bank to collect all interest and fees due under each credit subject hereto by
charging Borrower’s deposit account number #*** with Bank of America for the
full amount thereof. Should there be insufficient funds in any such deposit
account to pay all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower.

 

SECTION 1.5.         COLLATERAL.

 

As security for all
indebtedness of Borrower to Bank in connection with Letters of Credit issued
(or deemed issued) under the Letter of Credit Line, Borrower shall grant to
Bank security interests in Debtor’s deposit account #*** maintained at Bank and
all renewals thereof, together with all proceeds thereof.

 

All of the foregoing
shall be evidenced by and subject to the terms of a security agreement dated as
of the date hereof. Borrower
shall pay to Bank immediately upon demand the full amount of all charges, costs
and expenses (to include fees paid to third parties and all allocated costs of
Bank personnel), expended or incurred by Bank in connection with any of the
foregoing security.

 

SECTION 1.6.         GUARANTIES. The payment and performance of all
indebtedness and other obligations of Borrower to Bank under this
Agreement shall be jointly and severally guaranteed by SunPower Corporation,
Systems (formerly known as PowerLight Corporation), a Delaware corporation, and
SunPower North America, Inc., a Delaware corporation in the principal amount of
Fifty Million Dollars ($50,000,000.00) each, as evidenced by and subject to the
terms of a guaranty in form and substance satisfactory to Bank. Borrower shall
cause each newly-acquired or newly-formed Domestic Material Subsidiary (as
defined in Section 2.12) to

 

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execute a joinder to said guaranty within 30 days after its qualifying
as a Domestic Material Subsidiary. Each Subsidiary which executes or is
required to execute such guaranty or a joinder thereto shall be referred to as
a “Third Party Obligor.”

 

ARTICLE II

REPRESENTATIONS
AND WARRANTIES

 

Borrower makes the
following representations and warranties to Bank, which representations and
warranties shall survive the execution of this Agreement and shall continue in
full force and effect until the full and final payment, and satisfaction and
discharge, of all obligations of Borrower to Bank subject to this Agreement.

 

SECTION 2.1.         LEGAL STATUS. Borrower and each Third
Party Obligor is a corporation, duly organized and existing and in good
standing under the laws of its formation, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could not reasonably be
expected to have a material adverse effect on Borrower’s consolidated financial
condition or operations or on the prospects of Borrower’s performance of its
obligations under this Agreement and the other Loan Documents (a “Material
Adverse Effect”).

 

SECTION 2.2.         AUTHORIZATION AND VALIDITY. This
Agreement and each promissory note, contract, instrument and other document
required hereby or at any time hereafter delivered to Bank in connection
herewith (collectively, the “Loan Documents”) have been duly authorized, and
upon their execution and delivery in accordance with the provisions hereof will
constitute legal, valid and binding agreements and obligations of Borrower or
the party which executes the same, enforceable in accordance with their
respective terms.

 

SECTION 2.3.         NO VIOLATION. The execution, delivery
and performance by Borrower and each Third Party Obligor of each of the Loan
Documents do not violate any provision of any law or regulation, or contravene
any provision of the Articles of Incorporation or Bylaws of such entity, or
result in any breach of or default under any contract, obligation, indenture or
other instrument to which such entity is a party or by which such entity may be
bound.

 

SECTION 2.4.         LITIGATION. There are no pending, or to
the best of Borrower’s knowledge threatened, actions, claims, investigations,
suits or proceedings by or before any governmental authority, arbitrator, court
or administrative agency which could reasonably be expected to have a Material Adverse
Effect other than those disclosed by Borrower to Bank in writing prior to the
date hereof.

 

SECTION 2.5.         CORRECTNESS OF FINANCIAL STATEMENT. The annual financial statement of Borrower
dated December 31, 2006, and all interim financial statements delivered to Bank
since said date, true copies of which have been delivered by Borrower to Bank
prior to the date hereof, (a) are complete and correct and present fairly the consolidated
financial condition of Borrower, (b) disclose all consolidated liabilities of
Borrower that are required to be reflected or reserved against under generally
accepted accounting principles, whether liquidated or unliquidated, fixed or
contingent, and (c) have been prepared in accordance with generally accepted
accounting principles consistently applied (“GAAP”). Since the dates of such
financial statements there has been no material adverse change in the
consolidated financial condition of Borrower, nor has Borrower mortgaged, pledged,
granted a security interest in or otherwise

 

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encumbered any of its assets or properties except Permitted Liens and
security interests and liens in favor of Bank. “Permitted Liens” means (i)
liens for taxes not yet due or that are being contested in good faith by
appropriate proceedings; (ii) carriers’, warehousemen’s, materialmen’s,
repairmen’s or other like liens arising in the ordinary course of business that
are not overdue for a period of more than 90 days or that are being contested
in good faith by appropriate proceedings; (iii) pledges or deposits in
connection with workers’ compensation, unemployment insurance and other social
security legislation; (iv) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business; (v) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business that, in the aggregate are not substantial in
amount and that do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries; (vi) any lien granted
as a replacement or substitute for another Permitted Lien; (vii) liens existing
as of the date of this Agreement and securing indebtedness of Borrower or any
Subsidiary, incurred to finance the acquisition of fixed or capital assets
(including refinancings thereof); (viii) liens created pursuant to the Loan
Documents; (ix) any interest or title of a lessor under any lease entered into
by the Borrower or any other Subsidiary in the ordinary course of its business
and covering only the assets so leased; (x) liens in favor of customers or
suppliers of the Borrower and its Subsidiaries on equipment, supplies and
inventory purchased with the proceeds of advances made by such customers or
suppliers under, and securing obligations in connection with, supply
agreements; (xi) liens in favor of customs and revenue authorities arising as a
mater of law to secure payment of customs duties in connection with the
importation of goods; (xii) licenses of patents, trademarks and other
intellectual property rights granted by the Borrower or any of is Subsidiaries
in the ordinary course of business and not interfering in any respect with the
ordinary conduct of the business of the Borrower or such Subsidiary; (xiii)
bankers’ liens, rights of setoff and other similar liens existing solely with
respect to cash and cash equivalents on deposit in one or more accounts
maintained by the Borrower or any of its Subsidiaries, in each case granted or
existing in the ordinary course of business in favor of the bank or banks with
which such accounts are maintained, securing amounts owing to such bank; (xv)
liens that arise by operation of law; (xvi) liens arising out of judgments or
awards not resulting in a default under this Agreement; (xvii) liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by Borrower in the ordinary course of
business; (xviii) existing and future liens related to or arising from rebates
in the ordinary course of business; and (xix) existing and future liens in
favor of the borrower’s bonding company covering materials, contracts,
receivables and other assets which are related to, or arise out of, contracts
which are bonded by that bonding company; and (xx) other liens so long as the
aggregate outstanding principal amount of the obligations secured thereby does
not exceed (as to the Borrower and all Subsidiaries on a consolidated basis) Five
Million Dollars ($5,000,000.00) at any one time.

 

SECTION 2.6.         INCOME TAX RETURNS. Neither Borrower nor
any Third Party Obligor  has any
knowledge of any pending assessments or adjustments of its income tax payable
with respect to any year which could reasonably be expected to have a Material
Adverse Effect.

 

SECTION 2.7.         NO SUBORDINATION. There is no
agreement, indenture, contract or instrument to which Borrower or a Third Party
Obligor is a party or by which Borrower or a Third Party Obligor may be bound
that requires the subordination in right of payment of any of Borrower’s or
such Third Party Obligor obligations subject to this Agreement to any other
obligation of Borrower.

 

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SECTION 2.8.         PERMITS, FRANCHISES. Borrower and each Third
Party Obligor possesses, and will hereafter possess, all permits, consents,
approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable it to conduct
the business in which it is now engaged in compliance with applicable law
except to the extent that non-compliance could not reasonably be expected to
have a Material Adverse Effect.

 

SECTION 2.9.         ERISA. Borrower is in compliance in all
material respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended or recodified from time to time (“ERISA”);
Borrower has not violated any provision of any defined employee pension benefit
plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”);
no Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

 

SECTION 2.10.      OTHER OBLIGATIONS. Neither Borrower nor
any Third Party Obligor  is in default on
any obligation for borrowed money or any material purchase money obligation, lease,
commitment, contract, instrument or obligation that could reasonably be
expected to result in a Material Adverse Effect.

 

SECTION 2.11.      ENVIRONMENTAL MATTERS. Except as disclosed
by Borrower to Bank in writing prior to the date hereof, Borrower and each or a
Third Party Obligor is in compliance in all material respects with all
applicable federal or state environmental, hazardous waste, health and safety
statutes, and any rules or regulations adopted pursuant thereto, which govern
or affect any of Borrower’s operations and/or properties, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of
1986, the Federal Resource Conservation and Recovery Act of 1976, and the
Federal Toxic Substances Control Act, as any of the same may be amended,
modified or supplemented from time to time. None of the operations of Borrower or
any or a Third Party Obligor is the subject of any federal or state
investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste
or substance into the environment. Neither Borrower nor any Third Party Obligor
has any material contingent liability in connection with any release of any
toxic or hazardous waste or substance into the environment.

 

SECTION 2.12.      SUBSIDIARIES. As of the date hereof, the
entities named in Schedule 2.12(a) hereto are the only entities in which
Borrower, directly or indirectly, owns a controlling or majority interest, with
the Borrower’s direct or indirect percentage ownership interest and the state
or country of formation set forth in said Schedule. Each entity (whether now
existing or hereafter formed or acquired) in which Borrower, directly or
indirectly, owns a controlling or majority interest, is referred to as a “Subsidiary.”  The term “Material Subsidiary” means any
Subsidiary whose assets have a book value which exceed 10% of the book value of
Borrower’s consolidated assets, (based on the then most recent fiscal year end
financial statement then delivered or deemed delivered to Bank hereunder). The
term “Domestic” as applied to a Subsidiary means that such Subsidiary is
incorporated or organized under the laws of the United States or of any state
thereof. In no event shall any Special Purpose Entity be considered a Material
Subsidiary for any purpose under this Agreement. For purposes of this Section
2.12, “Special Purpose Entity” shall mean an entity formed in connection with a
specific

 

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transaction with a customer, investor, lender and/or financing party of
Borrower or any Subsidiary wherein such entity is used solely in connection
with such transaction. Schedule 2.12(b) lists the Special Purpose Entities
existing as of the date hereof. Borrower shall notify Bank of the formation,
acquisition, dissolution or disposition of any Subsidiary, including Special
Purpose Entities, with 30 days of such formation, acquisition, dissolution or
disposition.

 

ARTICLE III

CONDITIONS

 

SECTION 3.1.         CONDITIONS OF INITIAL EXTENSION OF
CREDIT. The obligation of Bank to extend any credit contemplated by this
Agreement is subject to the fulfillment to Bank’s satisfaction of all of the
following conditions:

 

(a)    Approval of Bank Counsel. All legal
matters incidental to the extension of credit by Bank shall be satisfactory to
Bank’s counsel.

 

(b)    Documentation. Bank shall have
received, in form and substance satisfactory to Bank, each of the following,
duly executed:

 

(i)                                     This
Agreement and each promissory note or other instrument or document required
hereby.

(ii)                                  Corporate
Resolution: Borrowing.

(iii)                               Corporate
Resolution: Continuing Guaranty (2).

(iv)                              Continuing
Guaranty.

(v)                                 Joinder
to Continuing Guaranty (2).

(vi)                              Certificate
of Incumbency (3).

(vii)                           Disbursement
Order.

(viii)                        Security
Agreement:  Deposit Agreement.

(ix)                              Commercial
Money Market Account Agreement.

(x)                                 Evidence
of termination of the security interests held by Union Bank of California and
Credit Suisse First Boston.

(xi)                              Such
other documents as Bank may require under any other Section of this Agreement.

 

(c)     Financial Condition. There shall
have been no material adverse change, as determined by Bank, in the financial
condition or business of Borrower or any guarantor hereunder, nor any material
decline, as determined by Bank, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of Borrower or any
such guarantor.

 

SECTION 3.2.         CONDITIONS OF EACH EXTENSION OF CREDIT.
The obligation of Bank to make each extension of credit requested by Borrower
hereunder shall be subject to the fulfillment to Bank’s satisfaction of each of
the following conditions:

 

(a)    Compliance. The representations and
warranties contained herein and in each of the other Loan Documents shall be
true on and as of the date of the signing of this Agreement and on the date of
each extension of credit by Bank pursuant hereto, with the same effect as
though such representations and warranties had been made on and as of each such
date, and on each such date, no Event of Default as defined herein, and no
condition, event or act which

 

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with the giving of notice or the passage of time or both would
constitute such an Event of Default, shall have occurred and be continuing or
shall exist.

 

(b)    Documentation. Bank shall have
received all additional documents which may be required in connection with such
extension of credit.

 

ARTICLE IV

AFFIRMATIVE
COVENANTS

 

Borrower covenants that
so long as Bank remains committed to extend credit to Borrower pursuant hereto,
or any liabilities (whether direct or contingent, liquidated or unliquidated)
of Borrower to Bank under any of the Loan Documents remain outstanding, and
until payment in full of all obligations of Borrower subject hereto, Borrower
shall, and (with respect to Sections 4.2, 4.4, 4.5, 4.6 and 4.7) shall cause
each Third Party Obligor to, unless Bank otherwise consents in writing:

 

SECTION 4.1.         PUNCTUAL PAYMENTS. Punctually pay all
principal, interest, fees or other liabilities due under any of the Loan
Documents at the times and place and in the manner specified therein.

 

SECTION 4.2.         ACCOUNTING RECORDS. Maintain adequate
books and records in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, after reasonable
notice (except during the existence of an Event of Default) and during regular
business hours, to inspect, audit and examine such books and records, to make
copies of the same, and to inspect the properties of Borrower or such Third
Party Obligor. Bank’s use of confidential information of Borrower shall be
governed by that certain Confidentiality Agreement (the “Confidentiality
Agreement”), dated June 19, 2007, by and between Bank and Borrower.

 

SECTION 4.3.         FINANCIAL STATEMENTS. Provide to Bank
all of the following, in form and detail satisfactory to Bank:

 

(a)    not later than 120 days after and as of the
end of each fiscal year, Borrower’s audited annual financial statements,
prepared by a certified public accountant acceptable to Bank, to include
balance sheet, income statement, statement of cash flow and footnotes, which
may be in the form of Borrower’s annual report on Form 10K filed with the
Securities Exchange Commission (“SEC”); such report shall be deemed delivered
to Bank upon filing with the SEC;

 

(b)    not later than 45 days after and as of the
end of each fiscal quarter, Borrower’s quarterly financial statements, prepared
by Borrower, to include balance sheet, income statement and statement of cash
flow, which may be in the form of Borrower’s quarterly report on From 10Q filed
with the SEC; such report shall be deemed delivered to Bank upon filing with
the SEC.

 

(c)     not later than 10 days after and as of the
end of each month, bank and/or brokerage statements reflecting compliance with
the Liquidity covenant set forth in Section 4.9(a) below;

 

(d)    contemporaneously with each annual and fiscal
quarter end financial statement of Borrower required hereby, a certificate of the
chief executive officer or chief financial officer of Borrower that said
financial statements are accurate and that there exists no Event of Default

 

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nor any condition, act or event which with the giving of notice or the
passage of time or both would constitute an Event of Default, and with
supporting calculations showing compliance with financial covenants; and

 

(e)     from time to time such other information as
Bank may reasonably request.

 

SECTION 4.4.         COMPLIANCE. Preserve and maintain all
licenses, permits, governmental approvals, rights, privileges and franchises
necessary for the conduct of its business; comply with the provisions of all
documents pursuant to which Borrower or such Third Party Obligor is organized
and/or which govern Borrower’s or such Third Party Obligor continued existence
and with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower, such Third Party Obligor  and/or its business, except to the extent that
non-compliance could not reasonably be expected to have a Material Adverse
Effect

 

SECTION 4.5.         INSURANCE. Maintain and keep in force,
for each business in which Borrower or such Third Party Obligor is engaged,
insurance of the types and in amounts customarily carried in similar lines of
business, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers’ compensation, and deliver to
Bank from time to time at Bank’s request schedules setting forth all insurance
then in effect.

 

SECTION 4.6.         FACILITIES. Keep all properties useful
or necessary to Borrower’s or such Third Party Obligor’s business in good
repair and condition, and from time to time make necessary repairs, renewals
and replacements thereto so that such properties shall be fully and efficiently
preserved and maintained, except to the extent that non-compliance could not
reasonably be expected to have a Material Adverse Effect.

 

SECTION 4.7.         TAXES AND OTHER LIABILITIES. Pay and
discharge when due any and all indebtedness, obligations, assessments and
taxes, both real or personal, including without limitation federal and state
income taxes and state and local property taxes and assessments, except (a) such
as Borrower or such Third Party Obligor may in good faith contest or as to
which a bona fide dispute may arise, and (b) for which Borrower has made
provision, to Bank’s satisfaction, for eventual payment thereof in the event
Borrower or such Third Party Obligor is obligated to make such payment.

 

SECTION 4.8.         LITIGATION. Promptly give notice in
writing to Bank of any litigation pending or threatened against Borrower or any
Subsidiary which is required to be disclosed to the SEC or which could
reasonably be expected to have a Material Adverse Effect.

 

SECTION 4.9.         FINANCIAL CONDITION. Maintain Borrower’s
consolidated financial condition as follows, using generally accepted
accounting principles consistently applied and used consistently with prior
practices (except to the extent modified by the definitions herein), with
compliance determined commencing with Borrower’s financial statements for the
period ending September 30, 2007:

 

(a)    Minimum Liquidity (defined as unencumbered and
unrestricted cash, cash equivalents, and marketable securities acceptable to
Bank, which, if cash, is U.S. Dollar denominated, and, if other than cash,
consist of financial instruments or securities, acceptable to Bank, maintained in
United States domiciled accounts) equal to or greater than one and one half
(1.50) times the outstanding principal balance of the Line of Credit,
determined as of the end of each calendar month.

 

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(b)    Total Liabilities divided by Tangible Net
Worth not greater than 1.50 to 1.0, determined as of the end of each fiscal
quarter, with “Total Liabilities” defined as the aggregate of current liabilities
and non-current liabilities less subordinated debt, and with “Tangible Net
Worth” defined as the aggregate of total stockholders’ equity plus subordinated
debt less any intangible assets and less any loans or advances to, or
investments in, any related entities or individuals. Without limitation of the
foregoing, Total Liabilities shall include the amount available to be drawn
under all outstanding letters of credit (including Letters of Credit) issued
for the account of Borrower and/or any Subsidiary.

 

(c)     Net Income after taxes not less than $1.00 in
each period of four consecutive fiscal quarters, determined as of each fiscal
quarter end on a rolling 4-quarter basis, and with “Net Income” defined as net
income on a GAAP basis plus amortization of intangibles and in-process research
and development related to the acquisition of PowerLight Corporation, a
California corporation, by Borrower on January 10, 2007.

 

SECTION 4.10.      NOTICE TO BANK. Promptly (but in no event
more than ten (10) business days after an officer Borrower first has knowledge
of the occurrence of each such event or matter) give written notice to Bank in
reasonable detail of:  (a) the
occurrence of any Event of Default, or any condition, event or act which with
the giving of notice or the passage of time or both would constitute an Event
of Default; (b) any change in the name or the organizational structure of
Borrower or any Third Party Obligor; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower or any Third Party Obligor is
required to maintain, or any uninsured or partially uninsured loss through
liability or property damage, or through fire, theft or any other cause
affecting Borrower’s property which could reasonably be expected to have a
Material Adverse Effect.

 

SECTION
4.11.      DOMESTIC SUBSIDIARY ASSET LIMIT.
Ensure that Domestic Subsidiaries which are not Third Party Obligors
represent no more than 25% of Borrower’s consolidated assets.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenants
that so long as Bank remains committed to extend credit to Borrower pursuant
hereto, or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower will not (and, as applicable, will not cause or permit any Third
Party Obligor, and as to Section 5.11, SunPower Philippines Manufacturing, Ltd.
to) without Bank’s prior written consent:

 

SECTION 5.1.         USE OF FUNDS. Use any of the proceeds
of any credit extended hereunder except for the purposes stated in Article I
hereof.

 

SECTION 5.2.         CAPITAL EXPENDITURES. Make any
additional investment in fixed assets in fiscal year ending 2007 in excess of
an aggregate of Two Hundred Twenty Million Dollars ($220,000,000.00) on a
consolidated basis.

 

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SECTION 5.3.         OTHER INDEBTEDNESS. Create, incur,
assume or permit to exist any indebtedness or liabilities resulting from
borrowings, loans or advances, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, except (a) the
liabilities of Borrower or such Third Party Obligor to Bank, and (b) Permitted
Indebtedness. “Permitted Indebtedness” shall mean (i) indebtedness of Borrower or
a Third Party Obligor to Borrower or any Subsidiary in the ordinary course of
business, (ii)  indebtedness in favor of
Solon AG and its affiliates under the Amended and Restated Supply Agreement,
dated as of April 14, 2005, as amended, between Borrower and Solon AG fur
Solartechnik; (iii) indebtedness in favor of customers and suppliers of the
Borrower and its Subsidiaries in connection with supply and purchase agreements
in an aggregate principal amount not to exceed Two Hundred Million Dollars ($200,000,000.00)
at any one time and any refinancings, refundings, renewals or extensions
thereof (without shortening the maturity thereof or increasing the principal
amount thereof); (iv) 1.25% senior convertible debentures issued in February
2007 in the aggregate principal amount of Two Hundred Million Dollars ($200,000,000.00)
plus accrued interest thereon; (v) unsecured contingent liabilities in favor of
Union Bank of California in connection with 3 outstanding letters of credit
issued by Union Bank of California, (vi) obligations owed to Travelers Casualty
and Surety Company of America and St. Paul Fire and Marine Insurance Company,
and their affiliates (collectively, “Travelers”) in connection with obligations
under the General Contract of Indemnity with Travelers, pursuant to which
Travelers issues bonds or otherwise secures performance of Borrower and
Subsidiaries for the benefit of their customers and contract counterparties; (vii)
additional convertible debentures in the maximum aggregate principal amount of Two
Hundred Fifty Million Dollars ($250,000,000.00) with an interest not to exceed
2.00% per annum, and with a maturity date no earlier than January 1, 2013; and
(viii) additional indebtedness of Borrower and Third Party Obligors in an
aggregate principal amount not to exceed Fifteen Million Dollars ($15,000,000.00)
outstanding at any one time.

 

SECTION 5.4.         GUARANTIES. Guarantee or become liable
in any way as surety, endorser (other than as endorser of negotiable
instruments for deposit or collection in the ordinary course of business),
accommodation endorser or otherwise for, nor pledge or hypothecate any assets
of Borrower or such Third Party Obligor as security for, any liabilities or
obligations of any person or entity, other than (i) in the ordinary course of
business, Borrower, any Third Party Obligor or any other Subsidiary, with the principal
amount of such non-Third Party Obligor Subsidiaries’ obligations subject hereto
not to exceed an aggregate of Fifty Million Dollars ($50,000,000.00)
outstanding at any time, (ii) Bank, (iii) Travelers Casualty and Surety Company
of America and St. Paul Fire and Marine Insurance Company (together with their
affiliates, collectively, “Travelers”) in connection with obligations under the
General Contract of Indemnity with Travelers, pursuant to which Travelers
issues bonds or otherwise secures performance of Borrower and Subsidiaries for
the benefit of their customers and contract counterparties, and (iv) guarantees
and liabilities that constitute Permitted Indebtedness.

 

SECTION 5.5.         LOANS, ADVANCES, INVESTMENTS. Make any
loans or advances to or investments in any person or entity, except (a) any of
the foregoing existing as of, and disclosed to Bank prior to, the date hereof, (b)
additional loans or advances by Borrower or such Third Party Obligor to employees
and officers in the ordinary course of business and in amounts not to exceed an
aggregate of Five Million Dollars ($5,000,000.00) outstanding at any time, (c)
investments which are made in accordance with Borrower’s Investment Policy as
from time to time adopted by its Board of Directors, (d) investments which
constitute Specified Transactions, as defined in Section 5.8, below, (e) any of
the foregoing that constitute Permitted Indebtedness, (f) advances to, or investments
in, a Subsidiary or in Woongjin Energy by Borrower or any Third Party Obligor
in the ordinary course of business; (g)
prepayment of

 

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10

 

obligations to vendors and suppliers in the ordinary course in an
amount not to exceed Two Hundred Million Dollars ($200,000,000.00).

 

SECTION 5.6.         DIVIDENDS, DISTRIBUTIONS. Declare or
pay any dividend or distribution either in cash, stock or any other property on
Borrower’s stock now or hereafter outstanding, nor redeem, retire, repurchase
or otherwise acquire any shares of any class of Borrower’s stock now or
hereafter outstanding (other than repurchases or the like from employees,
consultants, officers, and directors in connection with Borrower’s stock plan);
nor agree (or cause or permit any Subsidiary to agree) with any third party to
prohibit, condition or restrict the payment of dividends and distributions by
such Subsidiary to Borrower or to another Subsidiary.

 

SECTION 5.7.         PLEDGE OF ASSETS. Mortgage, pledge,
grant or permit to exist a security interest in, or lien upon, all or any
portion of Borrower’s or such Third Party Obligor’s assets (including all
intellectual property) now owned or hereafter acquired, except (a) Permitted
Liens, and (b) any of the foregoing in favor of Bank or which is existing as
of, and disclosed to Bank in writing prior to, the date hereof; nor agree (or
cause or permit any Third Party Obligor to agree) with any third party to
prohibit, condition or restrict the granting of security interests or liens in the
assets of Borrower or such Third Party Obligor.

 

SECTION 5.8.         SPECIFIED
TRANSACTIONS. Enter in to any Specified Transaction with respect to which the
Total Non-Stock Consideration paid or payable by Borrower and/or any Subsidiary
exceeds Fifty Million Dollars ($50,000,000.00); provided, however, that
Borrower and any Third Party Obligor may enter into a Specified Transaction
regardless of the value of Total Non-Stock Consideration so long as such
Specified Transaction involves no unaffiliated third parties and involves only
(i) the Borrower and one or more Subsidiaries or (ii) two or more Subsidiaries.
“Specified Transaction” means any of the following, provided that the
applicable transaction has been approved by the Board of Directors of the
entity (i) whose assets or equity interests are being acquired, or (ii) which
is merging with Borrower or a Third Party Obligor:

 

(a)    the acquisition by Borrower or a Third Party Obligor
of all or substantially all of
the assets of another entity or division of such entity;

 

(b)    the merger or consolidation of any Third Party Obligor
with or into any other entity,
provided that the surviving entity shall be a Third Party Obligor; and

 

(c)     the acquisition by Borrower or any Third Party Obligor
of a controlling or majority
interest in any other entity;

 

“Total Non-Stock
Consideration” means all consideration whatsoever (other than stock in Borrower
or a Subsidiary) and shall include, without limitation, cash, other property,
assumed indebtedness, amounts payable, whether evidenced by notes or otherwise
and “earn-out” payments.

 

SECTION 5.9.         CHANGE
OF CONTROL. In no event shall Borrower (i) merge into or consolidate
with any other entity; (ii) make any substantial change in the nature of
Borrower’s business as conducted as of the date hereof (iii) cause or permit
any Third
Party Obligor to engage in any material business substantially unrelated
to Borrower’s business; or (iv) sell, lease, transfer or otherwise dispose of
all or a material portion of Borrower’s consolidated assets, or cause or permit
any Material Subsidiary to do so, except transfers by and among Borrower and Subsidiaries
in the ordinary course of business, and with “a material portion”

 

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11

 

defined for the purpose of this covenant as 25% or more of the book
value of such consolidated assets (based on the then most recent fiscal year
end financial statement then delivered or deemed delivered to Bank hereunder) in
any fiscal year.

 

SECTION
5.10.      CASH LIMIT. Cause or permit SunPower
Philippines Manufacturing, Ltd.’s cash, cash equivalents and marketable
securities at any time to exceed an aggregate of Twenty Million Dollars ($20,000,000.00).

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1.         The occurrence of any of the following
shall constitute an “Event of Default” under this Agreement:

 

(a)    Borrower shall fail to pay when due any
principal, interest, fees or other amounts payable under any of the Loan
Documents.

 

(b)    Any financial statement or certificate
furnished to Bank in connection with, or any representation or warranty made by
Borrower or any other party under this Agreement or any other Loan Document
shall prove to be incorrect, false or misleading in any material respect when
furnished or made.

 

(c)     Any default in the performance of or
compliance with any obligation, agreement or other provision contained herein
or in any other Loan Document (other than those referred to in subsections (a)
and (b) above), and with respect to any such default which by its nature can be
cured, such default shall continue for a period of thirty (30) days from the
date an officer of Borrower first learned (or had reasonable due diligence been
exercised, should have learned) of its occurrence.

 

(d)    Any default in the payment or performance of
any obligation, or any defined event of default, under the terms of any
contract or instrument (other than any of the Loan Documents) pursuant to which
Borrower or any Third Party Obligor has incurred any debt or other liability to
any person or entity, including Bank, and, if the debt or other liability is
owed to a party other than Bank, such default accelerates or causes or permits to
become immediately due and payable an amount in excess of Ten Million Dollars ($10,000,000.00).

 

(e)     The filing of a notice of judgment lien(s) in
excess of an aggregate of Ten Million Dollars ($10,000,000.00) against Borrower
or any Third Party Obligor; or the recording of any abstract(s) of judgment in
excess of an aggregate of Ten Million Dollars ($10,000,000.00) against Borrower
or any Third Party Obligor in any county in which Borrower or such Third Party
Obligor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, in excess
of an aggregate of Ten Million Dollars ($10,000,000.00) against the assets of
Borrower or any Third Party Obligor; or the entry of a judgment(s) in excess of
an aggregate of Ten Million Dollars ($10,000,000.00) against Borrower or any
Third Party Obligor.

 

(f)     Borrower, any Subsidiary or any Third Party
Obligor shall become insolvent, or shall suffer or consent to or apply for the
appointment of a receiver, trustee, custodian or liquidator of itself or any of
its property, or shall generally fail to pay its debts as they become due, or
shall make a general assignment for the benefit of creditors; Borrower, any
Subsidiary or any Third

 

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12

 

Party Obligor shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors
or any other relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time (“Bankruptcy Code”), or
under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower, any Subsidiary or any Third Party Obligor, or Borrower, any
Subsidiary or any Third Party Obligor shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower, any Subsidiary or any Third Party Obligor shall be
adjudicated a bankrupt, or an order for relief shall be entered against
Borrower, any Subsidiary or any Third Party Obligor by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.

 

(g)     Reserved.

 

(h)    The dissolution or liquidation of Borrower
or, except as otherwise permitted under this Agreement, any Third Party
Obligor; or Borrower or, except as otherwise permitted under this Agreement, any
such Third Party Obligor, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such Third Party Obligor. The dissolution of a Third Party Obligor shall not
constitute an Event of Default if the assets and liabilities of such Third
Party Obligor are transferred to Borrower or to another Third Party Obligor by
reason of such dissolution.

 

(i)      Any single entity or group of affiliated
entities, other than Cypress Semiconductor Corp., shall acquire all or
substantially all of the common stock of Borrower.

 

SECTION 6.2.         REMEDIES. Upon the occurrence of any
Event of Default:  (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1.         NO WAIVER. No delay, failure or
discontinuance of Bank in exercising any right, power or remedy under any of
the Loan Documents shall affect or operate as a waiver of such right, power or
remedy; nor shall any single or partial exercise of any such right, power or
remedy preclude, waive or otherwise affect any other or further exercise
thereof or the exercise of any other right, power or remedy. Any waiver,
permit, consent or approval of any kind by Bank of any breach of or default
under any of the Loan Documents must be in writing and shall be effective only
to the extent set forth in such writing.

 

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13

 

SECTION 7.2.         NOTICES. All notices, requests and
demands which any party is required or may desire to give to any other party
under any provision of this Agreement must be in writing delivered to each
party at the following address:

 

	
  BORROWER:

  	
  SUNPOWER CORPORATION

  
	
   

  	
  ATTN: General Counsel

  
	
   

  	
  3939 N. First Street

  
	
   

  	
  San Jose, CA 95134

  
	
   

  	
  Fax: (408) 240-5400

  
	
   

  	
   

  
	
  BANK:

  	
  WELLS FARGO BANK,
  NATIONAL ASSOCIATION

  
	
   

  	
  Peninsula RCBO

  
	
   

  	
  400 Hamilton Avenue

  
	
   

  	
  Palo Alto, CA 94301

  

 

or to such other address
as any party may designate by written notice to all other parties. Each such
notice, request and demand shall be deemed given or made as follows:  (a) if sent by hand delivery, upon
delivery; (b) if sent by mail, upon the earlier of the date of receipt or
three (3) days after deposit in the U.S. mail, first class and postage prepaid;
and (c) if sent by telecopy, upon receipt.

 

SECTION 7.3.         COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower
shall pay to Bank immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all allocated costs of Bank’s in-house
counsel), expended or incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Bank’s continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Bank’s
rights and/or the collection of any amounts which become due to Bank under any
of the Loan Documents, and (c) the prosecution or defense of any action in
any way related to any of the Loan Documents, including without limitation, any
action for declaratory relief, whether incurred at the trial or appellate
level, in an arbitration proceeding or otherwise, and including any of the
foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion
brought by Bank or any other person) relating to Borrower or any other person or
entity.

 

SECTION 7.4.         SUCCESSORS, ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of the parties;
provided however, that Borrower may not assign or transfer its interests or
rights hereunder without Bank’s prior written consent. Bank reserves the right
to sell, assign, transfer, negotiate or grant participations in all or any part
of, or any interest in, Bank’s rights and benefits under each of the Loan
Documents. In connection therewith, Bank may disclose all documents and
information which Bank now has or may hereafter acquire relating to any credit
subject hereto, Borrower or its business, any guarantor hereunder or the
business of such guarantor, or any collateral required hereunder; provided, that
any such prospective assignee or participant agree to be bound by the terms of the
Confidentiality Agreement.

 

SECTION 7.5.         ENTIRE AGREEMENT; AMENDMENT. This
Agreement and the other Loan Documents constitute the entire agreement between
Borrower and Bank with respect to

 

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each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by
each party hereto.

 

SECTION 7.6.         NO THIRD PARTY BENEFICIARIES. This
Agreement is made and entered into for the sole protection and benefit of the
parties hereto and their respective permitted successors and assigns, and no
other person or entity shall be a third party beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any other of the Loan Documents to which it is not a party.

 

SECTION 7.7.         TIME. Time is of the essence of each
and every provision of this Agreement and each other of the Loan Documents.

 

SECTION 7.8.         SEVERABILITY OF PROVISIONS. If any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or any
remaining provisions of this Agreement.

 

SECTION 7.9.         COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which when executed and
delivered shall be deemed to be an original, and all of which when taken
together shall constitute one and the same Agreement.

 

SECTION 7.10.      GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California.

 

SECTION 7.11.      ARBITRATION.

 

(a)    Arbitration. The parties hereto
agree, upon demand by any party, to submit to binding arbitration all claims,
disputes and controversies between or among them (and their respective
employees, officers, directors, attorneys, and other agents), whether in tort,
contract or otherwise in any way arising out of or relating to (i) any credit
subject hereto, or any of the Loan Documents, and their negotiation, execution,
collateralization, administration, repayment, modification, extension,
substitution, formation, inducement, enforcement, default or termination; or
(ii) requests for additional credit.

 

(b)    Governing Rules. Any arbitration
proceeding will (i) proceed in a location in California selected by the
American Arbitration Association (“AAA”); (ii) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the
parties; and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA’s commercial
dispute resolution procedures, unless the claim or counterclaim is at least One
Million Dollars ($1,000,000.00) exclusive of claimed interest, arbitration fees
and costs in which case the arbitration shall be conducted in accordance with
the AAA’s optional procedures for large, complex commercial disputes (the
commercial dispute resolution procedures or the optional procedures for large,
complex commercial disputes to be referred to herein, as applicable, as the “Rules”).
If there is any inconsistency between the terms hereof and the Rules, the terms
and procedures set forth herein shall control. Any party who fails or refuses
to submit to arbitration following a demand by any other party shall bear all
costs and expenses incurred by such other party in compelling arbitration of
any dispute. Nothing contained herein shall be deemed to be a waiver by any
party that is a bank of the protections afforded to it under 12 U.S.C. §91 or
any similar applicable state law.

 

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15

 

(c)     No
Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration
requirement does not limit the right of any party to (i) foreclose against real
or personal property collateral; (ii) exercise self-help remedies relating to
collateral or proceeds of collateral such as setoff or repossession; or (iii)
obtain provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise
of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)    Arbitrator Qualifications and Powers.
Any arbitration proceeding in which the amount in controversy is Five Million
Dollars ($5,000,000.00) or less will be decided by a single arbitrator selected
according to the Rules, and who shall not render an award of greater than Five
Million Dollars ($5,000,000.00). Any dispute in which the amount in controversy
exceeds Five Million Dollars ($5,000,000.00) shall be decided by majority vote
of a panel of three arbitrators; provided however, that all three arbitrators
must actively participate in all hearings and deliberations. The arbitrator
will be a neutral attorney licensed in the State of California or a neutral
retired judge of the state or federal judiciary of California, in either case
with a minimum of ten years experience in the substantive law applicable to the
subject matter of the dispute to be arbitrated. The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of
limitation in determining any claim. In any arbitration proceeding the
arbitrator will decide (by documents only or with a hearing at the arbitrator’s
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication. The arbitrator
shall resolve all disputes in accordance with the substantive law of California
and may grant any remedy or relief that a court of such state could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award. The arbitrator shall also have the power to award recovery
of all costs and fees, to impose sanctions and to take such other action as the
arbitrator deems necessary to the same extent a judge could pursuant to the
Federal Rules of Civil Procedure, the California Rules of Civil Procedure or
other applicable law. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.

 

(e)     Discovery. In any arbitration
proceeding, discovery will be permitted in accordance with the Rules. All
discovery shall be expressly limited to matters directly relevant to the
dispute being arbitrated and must be completed no later than 20 days before the
hearing date. Any requests for an extension of the discovery periods, or any
discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party’s
presentation and that no alternative means for obtaining information is
available.

 

(f)     Class Proceedings and Consolidations.
No party hereto shall be
entitled to join or consolidate disputes by or against others in any
arbitration, except parties who have executed any Loan Document, or to include
in any arbitration any dispute as a representative or member of a class, or to
act in any arbitration in the interest of the general public or in a private
attorney general capacity.

 

(g)     Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the
arbitration proceeding.

 

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16

 

(h)    Real Property Collateral; Judicial
Reference. Notwithstanding anything herein to the contrary, no dispute
shall be submitted to arbitration if the dispute concerns indebtedness secured
directly or indirectly, in whole or in part, by any real property unless (i)
the holder of the mortgage, lien or security interest specifically elects in
writing to proceed with the arbitration, or (ii) all parties to the arbitration
waive any rights or benefits that might accrue to them by virtue of the single
action rule statute of California, thereby agreeing that all indebtedness and
obligations of the parties, and all mortgages, liens and security interests
securing such indebtedness and obligations, shall remain fully valid and
enforceable. If any such dispute is not submitted to arbitration, the dispute
shall be referred to a referee in accordance with California Code of Civil
Procedure Section 638 et seq., and this general reference agreement is intended
to be specifically enforceable in accordance with said Section 638. A referee
with the qualifications required herein for arbitrators shall be selected
pursuant to the AAA’s selection procedures. Judgment upon the decision rendered
by a referee shall be entered in the court in which such proceeding was
commenced in accordance with California Code of Civil Procedure Sections 644
and 645.

 

(i)      Miscellaneous. To the maximum
extent practicable, the AAA, the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 180 days of the filing
of the dispute with the AAA. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results thereof, except for
disclosures of information by a party required by applicable law or regulation.
If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the
parties.

 

(j)     Small Claims Court. Notwithstanding
anything herein to the contrary, each party retains the right to pursue in
Small Claims Court any dispute within that court’s jurisdiction. Further, this
arbitration provision shall apply only to disputes in which either party seeks
to recover an amount of money (excluding attorneys’ fees and costs) that
exceeds the jurisdictional limit of the Small Claims Court.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the day and year
first written above.

 

	
   

  	
  WELLS FARGO BANK,

  
	
  SUNPOWER CORPORATION

  	
  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
  By:

  	
  /s/ EMMANUEL T.
  HERNANDEZ

  	
   

  	
  By:

  	
  /s/ MATTHEW A.
  SERVATIUS

  	
   

  
	
   

  	
   Emmanuel T.
  Hernandez

  	
   

  	
  Matthew A. Servatius

  
	
   

  	
   Chief Financial
  Officer

  	
   

  	
  Vice President

  
						

 

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17

 

Schedule 2.12(a) –
Subsidiaries

 

1.              SunPower North
America, Inc., a Delaware corporation and wholly owned subsidiary of SunPower
Corporation;

2.              Pluto Acquisition
Company, LLC, a Delaware limited liability company in which SunPower
Corporation is the sole member;

3.              SunPower
Corporation, Systems, a Delaware corporation, formerly known as PowerLight
Corporation, and wholly owned subsidiary of SunPower Corporation;

4.              Solar Star TO, LLC,
a Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

5.              Solar Star YC, LLC,
a Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

6.              Solar Star I, LLC, a
Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

7.              Solar Star II, LLC,
a Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

8.              Solar Star MW I,
LLC, a Delaware limited liability company in which SunPower Corporation,
Systems is the sole member;

9.              Solar Star TM I,
LLC, a Delaware limited liability company in which SunPower Corporation,
Systems is the sole member; and

10.       Solar Star Agilent I LLC, a
Delaware limited liability company in which SunPower Corporation, Systems is
the sole member.

11.       SunPower Technology, Ltd.,
a Cayman Islands entity and wholly owned subsidiary of SunPower Corporation;

12.       SunPower Corporation
(Switzerland), Ltd., a Swiss entity and wholly owned subsidiary of SunPower
Technology, Ltd.;

13.       SunPower Philippines Manufacturing,
Ltd., a Cayman Islands entity and wholly owned subsidiary of SunPower
Technology, Ltd.;

14.       PowerLight Systems AG(1), a
Swiss entity and wholly owned subsidiary of SunPower Corporation, Systems;

15.       SunPower GmbH, a German
entity and wholly owned subsidiary of PowerLight Systems AG;

16.       Powerlight Energias
Renovaveis Unipessoal Limitada(2), a Portuguese entity and wholly owned
subsidiary of PowerLight Systems AG; and

17.       SunPower Energy Systems
Spain, S.L., a Spanish entity and wholly owned subsidiary of PowerLight Systems
AG.

 

Schedule 2.12(b) –
Special Purpose Entities

 

1.              Solar Star TO, LLC,
a Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

2.              Solar Star YC, LLC,
a Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

3.              Solar Star I, LLC, a
Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

4.              Solar Star II, LLC,
a Delaware limited liability company in which SunPower Corporation, Systems is
the sole member;

5.              Solar Star MW I,
LLC, a Delaware limited liability company in which SunPower Corporation,
Systems is the sole member;

6.              Solar Star TM I,
LLC, a Delaware limited liability company in which SunPower Corporation,
Systems is the sole member; and

7.              Solar Star Agilent I
LLC, a Delaware limited liability company in which SunPower Corporation,
Systems is the sole member.

 

(1)  SunPower intends to change
the name to “SunPower System SA” or “SunPower Europe SA”, depending on
availability according to the government agency overseeing such. 

(2)  SunPower is filing with the
appropriate government agency the necessary paperwork to change the name to
“SPWR Energias Renovaveis Unipessoal Limitada.”

 

***                 CONFIDENTIAL
MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION

 

18

 

Schedule 1.3 to
Credit Agreement dated as of July 13, 2007

Price Schedule –
Trade Services

 

	
  As of April 2006

  	
   

  	
   

  
	
  Services

  	
   

  	
  Price

  
	
  STANDBY LC

  	
   

  	
   

  
	
  Issuance

  	
   

  	
  15 bps p.a.

  
	
  Amendment-Increase

  	
   

  	
  15 bps p.a.

  
	
  Amendment-No Increase

  	
   

  	
  $65.00 min.

  
	
  Examination/Payment

  	
   

  	
  15 bps, $250.00
  min.

  
	
  Transfer

  	
   

  	
  15 bps, $250.00
  min.

  
	
  Assignment

  	
   

  	
  $500.00 ($750.00
  with LC copy)

  
	
  Consultation to
  Structure LC

  	
   

  	
  $200.00/hr

  
	
  Special Handling

  	
   

  	
  $250.00 min.

  
	
  Cancellation

  	
   

  	
  $100.00

  

 

***                 CONFIDENTIAL
MATERIAL REDACTED AND SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION

 

19

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