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Exhibit 10.35    
  

 
  CHEMICAL MANUFACTURING SUPPLY AGREEMENT    
  

        1    PURPOSE:    Procter & Gamble Pharmaceuticals S.A.R.L., with principle offices at Route de Saint Georges
47, 1213 Petit Lancy 1, Geneva Switzerland herein after called P&GP SARL and OSG Norwich Pharmaceuticals, Inc. with principal offices at 6826 State Highway 12, Norwich, New York 13815,
hereinafter called OSGP desire that OSGP will manufacture and P&GP SARL will purchase certain bulk chemical Products, as these terms are defined herein. This document sets forth the obligations of the
parties and is effective June 29, 2001. 

 

 
 

TABLE OF CONTENTS    
  

	1	 	Purpose	 	 
	

Table of Contents	
 	

 
	

2	
 	

Certain Definitions	
 	

 
	

3	
 	

Contract Manufacturing Services	
 	

 
	 	 	3.1	 	Manufacturing Obligations	 	 
	 	 	3.2	 	Manufacturing Standards and Warranties	 	 
	 	 	3.3	 	Exclusivity	 	 
	 	 	3.4	 	Labeling and Packaging of Products	 	 
	 	 	3.5	 	Maintenance of Equipment	 	 
	

4	
 	

Forecasts and Ordering	
 	

 
	 	 	4.1	 	Firm Orders	 	 
	 	 	4.2	 	Forecasting	 	 
	 	 	4.3	 	Customer Service	 	 
	 	 	4.4	 	Service Level Execution Agreement (SLEA) Between the Parties	 	 
	 	 	4.5	 	Losses and Scrap	 	 
	

5	
 	

Quality Control and Testing	
 	

 
	 	 	5.1	 	Testing and Certificate of Analysis	 	 
	 	 	5.2	 	Preservation Samples and Retained Samples	 	 
	 	 	5.3	 	Stability Testing	 	 
	 	 	5.4	 	P&GP SARL Testing Rights	 	 
	 	 	5.5	 	Quality Disputes	 	 
	 	 	5.6	 	Customer Complaints	 	 
	 	 	5.7	 	Health Authority Inquiries	 	 
	 	 	5.8	 	Quality Assurance Key Elements	 	 
	

6	
 	

Inventory Control	
 	

 
	

7	
 	

Change Management	
 	

 
	 	 	7.1	 	Non-Discretionary Changes	 	 
	 	 	7.2	 	Discretionary Changes	 	 
	 	 	7.3	 	Disclaimer Of Incidental Damages	 	 
	 	 	7.4	 	Authorizations	 	 
	

8	
 	

Failure To Perform	
 	

 
	

9	
 	

Initiatives and Projects	
 	

 
	

10	
 	

Services Provided By P&GP SARL to OSGP	
 	

 
	

11	
 	

Term	
 	

 
	 	 	11.1	 	Initial Term	 	 
	 	 	11.2	 	Extension	 	 
	 	 	11.3	 	Termination	 	 
	

12	
 	

Price	
 	

 
	 	 	12.1	 	Charges and Prices	 	 
	 	 	12.2	 	Extra Charges	 	 
	

13	
 	

Delivery	
 	

 

2

 

	

14	
 	

Payment Terms	
 	

 
	

15	
 	

Invoicing	
 	

 
	

16	
 	

Compliance With Laws and Safety Measures	
 	

 
	

17	
 	

Acceptance and Return	
 	

 
	

18	
 	

Access For P&GP SARL's Representatives	
 	

 
	

19	
 	

Security Precautions	
 	

 
	

20	
 	

Confidentiality	
 	

 
	

21	
 	

Intellectual Property	
 	

 
	

22	
 	

OSGP's Indemnification Of P&GP SARL	
 	

 
	

23	
 	

P&GP SARL's Indemnification Of OSGP	
 	

 
	

24	
 	

Change In OSGP's Ownership	
 	

 
	

25	
 	

Termination For Cause	
 	

 
	

26	
 	

Assignment	
 	

 
	

27	
 	

Contractor Status	
 	

 
	

28	
 	

Reporting Requirements	
 	

 
	

29	
 	

Force Majeure	
 	

 
	 	 	29.1	 	Force Majeure	 	 
	 	 	29.2	 	Effect of Force Majeure	 	 
	

30	
 	

Governing Law and Language	
 	

 
	

31	
 	

Hiring Employees	
 	

 
	

32	
 	

Headings and References	
 	

 
	

33	
 	

Agreement Precedence	
 	

 
	

34	
 	

Licensing Cooperation	
 	

 
	

35	
 	

Mutual Support	
 	

 
	

36	
 	

Dispute Resolution	
 	

 

3

 

        CERTAIN DEFINITIONS:    

        2.1    "Affiliate" means any corporation, firm, partnership or other entity, which, at the time in question, is directly or
indirectly owned by or controlled by, or under common control with, P&GP SARL or OSGP, as the case may be. For the purposes of this definition, "control" shall mean the ownership, directly or
indirectly, of 50% or more of the voting stock or stockholders' equity of a corporation or, in the case of a non-corporate entity, the right to receive 50% or more of either the profits or
the assets upon dissolution. 

        2.2    "cGMP" means current Good Manufacturing Practices as promulgated by the U.S. FDA and as detailed in Title 21, United
States Code of Federal Regulations, or when appropriate, any corresponding statutes and/or regulations of any other country's prescription pharmaceuticals regulating health authority / agency in the
Territory, as the same may be amended or re-enacted from time to time. cGMP documentation for use in the manufacture and marketing of Product will be developed and maintained by the
parties in accordance with the cGMP Guidelines. For new Product or new SKU initiatives cGMP includes reaching an acceptable readiness state in the Chemical Plant and the specific applicable production
operation(s) versus GMP regulations in time for a successful pre-approval Inspection audit by the FDA and/or other appropriate health authority in the Territory. 

        2.3    "Chemical Plant" means the pharmaceutical chemicals manufacturing operation (i.e. building and equipment) located at
Route 320, Woods Corner, Norwich, New York. 

        2.4    "Confidential Information" means all trade secrets, know how, proprietary information, technique, or technology, and data
disclosed by one party to the other party pursuant to this Agreement or generated pursuant to this Agreement, except any portion thereof which: 

        (i)    the
recipient can demonstrate by its written records was known by the recipient prior to the disclosure thereof by the disclosing party; 

        (ii)  is
disclosed to the recipient without restriction, after disclosure thereof by the disclosing party, by a third party who has the right to make such disclosure; 

        (iii)  is
or becomes part of the public domain through no breach of this Agreement by the recipient; or 

        (iv)  is
independently developed by employees of the recipient without use of any of the other party's Confidential Information. 

        2.5    "Effective Date" means the date of execution of this Agreement.

        2.6    "Environmental Law" means any law or regulation pertaining to the environment, as in effect on the date hereof, including
(i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ((42 USC 9601 et seq), as amended, including, without limitation, as amended pursuant to the Superfund
Amendments and Reauthorization Act of 1986), and regulations promulgated thereunder; (ii) the Resource Conservatory and Recovery Act of 1976 (USC 6901 et seq), as amended and regulations
promulgated thereunder; and (iii) the provisions contained in any similar state or local statutes or regulations relating to environmental matters applicable to the Chemical Plant. 

        2.7    "FDA" means the United States Food and Drug Administration. 

        2.8    "Materials" shall mean any raw, work-in-process, or packing materials or any finished product
needed to produce Product that meets the Specifications. 

        2.9    "NDA" shall mean a New Drug Application filed pursuant to the requirements of the FDA as more fully defined in 21 C.F.R.
314 as well as equivalent submissions to the appropriate health authorities in other countries in the Territory. 

4

 

        2.10    "Product(s)" means the bulk chemical Products listed in Schedule A and any other bulk chemical products,
intermediates, regulatory starting materials, or active pharmaceuticals ingredients agreed to in writing by the parties. 

        2.11    "SLEA" means a Service Level Execution Agreement as described in Article 4.4. 

        2.12    "Specification(s)" or "Release Specification(s)" means the written methods, formulae, standards, procedures, making and
packing standards, tests, test protocols, and/or test results targets for Products provided by P&GP SARL which shall at all times conform with the NDA and other health registrations, as applicable. 

        2.13    "Process" shall mean any and all steps and equipment used in the manufacture of the Product(s) from procurement /
receipt of raw materials through chemical manufacture to storage and shipments. 

        2.14    "Territory" shall mean an area that consists of a country or countries within which Product or its finished product dose
form(s) are or will be registered with a regulatory agency, distributed, or sold. 

        2.15    "Third Party" shall mean any person, corporation or unincorporated body other than OSGP and P&GP SARL and/or their
Affiliates. 

        2.16    "Unit" means a Stock Keeping Unit (SKU), Kg or other agreed-upon measure of Products for a specified country
in the Territory. 

        2.17    "Within OSGP Control" means OSGP shall be deemed to have control over (i) the timing of notifications by OSGP,
but only to the extent that no other person except Affiliates of OSGP controls the information necessary for OSGP to give such notice, and (ii) matters relating to its employees, property,
equipment, and conduct of its business, except to the extent that Section 29, Force Majeure, applies to or affects any of the foregoing. OSGP shall not be deemed to have control over any other
factors, including but not limited to: all matters described in Section 29 of this Agreement; the inability of any supplier except Affiliates of OSGP to deliver Materials as required; the
failure of any common carrier to deliver finished goods to P&GP SARL and/or P&GP SARL's customers, except to the extent that such failure results solely from untimely notice given or
delivery made by OSGP; and the failure of P&GP SARL to perform any obligation, whether or not under this Agreement, which directly or indirectly impacts OSGP's obligations under this Agreement. 

        3.    CONTRACT MANUFACTURING SERVICES:    

        3.1    Manufacturing Obligation: Pursuant to the terms and conditions of this Agreement, OSGP shall manufacture, package and
ship to P&GP SARL, and P&GP SARL shall purchase and receive from OSGP, bulk pharmaceutical chemical Products. OSGP's obligation to supply shall include the obligation to use necessary efforts
(including, but not limited to, working extra hours, shifts, or days) to supply, in any 3 month period, Products ordered by P&GP SARL up to 150% of P&GP SARL's most recent
forecast submitted for such 3 month period pursuant to Article 4.2 unless mutually agreed to plans documented in SLEA's for a specific Product(s) or Unit(s) dictate a higher percentage
number is appropriate for these Product(s) or Unit(s). All costs for such necessary effort will be at OSGP's expense. OSGP shall use its reasonable commercial efforts to satisfy orders for Product
quantities in any 3 month period in excess of 150% of P&GP SARL's most recent forecast submitted for such 3 month period pursuant to Article 4.2 unless mutually
agreed to plans documented in SLEA's for a 

5

 

specific Product(s) or Unit(s) dictate a higher or lower percentage number is appropriate for these Product(s) or Unit(s). 

        3.2    Manufacturing Standards And Warranties:

        (a)  OSGP
hereby represents and warrants to P&GP SARL that the Products supplied to P&GP SARL hereunder shall, on the date of delivery to P&GP SARL and for the shelf life of
the Products: (i) meet the requirements set forth in the Specifications and have been manufactured in accordance with cGMP's applicable to the Products and prevailing in the applicable
Territory at the time of shipment for medicinal products for human use in the Territory, as well as any applicable laws or regulations relating to the manufacture of pharmaceutical chemicals in the
Territory and ii) shall not be adulterated or misbranded within the meaning of any applicable food and/or drug law or regulation (federal, state or local) in the United States or any applicable
equivalent law, rule or regulation elsewhere; iii) shall be of merchantable quality fit for P&GP SARL's use; and iv) comply with approved regulatory authorizations (INDs,
NDAs, or local equivalents) and all applicable laws, rules and regulations
(including, but not limited to, all applicable customs, laws and regulations, the rules of Good Manufacturing Practices applicable to the Products at the prevailing time of delivery to P&GP SARL)
governing the manufacture, packaging, storage, transportation, delivery and/or testing of the Products. The warranty set forth in the preceding sentence shall not extend to any Product sold and
purchased hereunder (or any product made with or from any such Product) which has been resold, treated, misused or improperly stored unless and to the extent such Product did not meet the requirements
of the preceding sentence on the date of delivery to Buyer. 

        (b)  OSGP
warranties shall not extend to, and hereby specifically exclude, any misbranding or failure to meet Specifications resulting from any work done, or activities
undertaken, by P&GP SARL or its subcontractors, distributors, wholesalers and others receiving the Product directly or indirectly from P&GP SARL after shipment by OSGP of Product. 

        (c)  OSGP
has been provided by P&GP SARL with all necessary processes, trade secrets, manufacturing know-how, and trademark rights to manufacture the Products
(herein collectively referred to as "Intellectual Property") for use in the Territory in accordance with the Sale Agreement and this Agreement, and the Chemical Plant, the buildings and equipment used
by OSGP to manufacture the Products are licensed and/or qualified under cGMP's. 

        3.3    Exclusivity: OSGP's right and obligation in Article 3 to manufacture Products shall be exclusively for P&GP SARL
unless otherwise mutually agreed upon in writing by the parties. P&GP SARL hereby covenants that during the term of this Agreement it shall not institute any action or suit at law or equity against
OSGP alleging the infringement of any of P&GP SARL's Intellectual Property by OSGP in its making of Product for P&GP SARL. Any improvements made by OSGP to Products (i.e. improved
process for making a Product) whether or not patentable shall be owned by P&GP SARL. 

        3.4    Labeling and Packaging of Products: P&GP SARL shall, at its own cost and expense, supply OSGP manufacturing standards
which shall state the package to be used for each Product and a technical standards document which will be used to state the requirements for shipper case labels. The mechanical design for shipper
case labels will be the responsibility of OSGP. Each set of such technical standards, and each partial set and/or alteration or amendment thereto, for each shipper case label shall be identified by a
unique item control number or code which is consistent with P&GP SARL's control numbering system and quality control requirements. P&GP SARL shall specify the code for each shipper case
label to be supplied with each order for Products. Such code shall be specified on the purchase order for such Products. 

        3.5    Maintenance of Equipment: All equipment and tooling required to manufacture P&GP SARL's Products will be
maintained in good operating condition by OSGP. OSGP agrees to assume 

6

 

complete responsibility for all maintenance. This includes (but not limited to) preventive and predictive maintenance; and replacement of worn or broken parts and tooling for all equipment and
facilities, including major components, utilized in the contract manufacturing of P&GP SARL's Products. OSGP
further agrees to maintain adequate insurance coverage and to replace said equipment should equipment for any reason be destroyed by fire, vandalism or perils otherwise covered by an extended coverage
endorsement or otherwise rendered unusable for the purpose intended by this Agreement. OSGP agrees that in the event of P&GP SARL's termination of this Agreement, or OSGP's default, or
in the event of OSGP's insolvency, or the appointment of a receiver to oversee OSGP's assets or the filing by or against OSGP of a petition under Federal bankruptcy laws, OSGP will make available for
P&GP SARL's removal any property of P&GP SARL then under OSGP's control. 

        4.    FORECASTS AND ORDERING:    

        4.1    Firm Orders: fn> P&GP SARL shall give OSGP a firm order of its requirements of the Products at least ninety
(90) days before it requires shipment of such Products.. Such orders shall be in minimum order quantities, as set forth in Schedule B.    OSGP shall use necessary efforts to
fulfill orders for Products prior to the date specified on the order as received. A process for handling firm order changes shall be developed and agreed between the parties promptly after execution
of this Agreement and documented in SLEA's. 

        4.2    Forecasting: Within thirty (30) days of completion of this Agreement and then, at least one (1) month prior
to the start of each calendar quarter during the Term, P&GP SARL shall give to OSGP a rolling forecast of P&GP SARL's estimated requirements of Products starting with the start of such
quarter (or the start of the Term). Each such forecast shall be broken down by SKU by month in respect of the first three quarters and by SKU by quarter in respect of the remaining period. 

        4.3    Customer Service: OSGP shall maintain systems, staffing, and procedures in place to consistently maintain "excellent"
customer service to P&GP SARL, as defined herein. "Excellent" customer service shall be measured by the following P&GP SARL defined measure: Supplier Delivery Performance. The defined level for
"excellence" in customer service is Supplier Delivery Performance greater than 95%, (the "Monthly Target"). 

        OSGP
will track their actual monthly performance versus the Monthly Target; and report this result to P&GP SARL monthly. If in any one month actual customer service is below the Monthly
Target, then within two weeks OSGP will develop and implement an action plan for items Within OSGP Control, (the "Action Plan"), agreed to by P&GP SARL which in P&GP SARL's reasonable
assessment is feasible to improve performance to meet or exceed the Monthly Target. All costs associated with any such action plan will be the responsibility of OSGP. 

        OSGP
shall be construed to have failed to perform, as described in Article 8, its customer service obligations to P&GP SARL if any of the following events occur: 

        (a.)  OSGP
fails to meet the Monthly Target for three (3) consecutive months. 

        (b.)  OSGP's
actual performance in any two (2) consecutive months falls below two-thirds (2/3) of the Monthly Target. 

        4.4    Service Level Execution Agreement (SLEA) between the Parties: As soon as practicable after execution of this Agreement,
the parties shall develop Service Level Execution Agreement(s) (SLEA's) covering the details of production planning, customer service, quality assurance, cGMP, problem solving procedures, and similar
activities as between the OSGP Chemical Plant and P&GP SARL. 

        4.5    Losses and Scrap: Any Product losses or scrap and related expenses, which are the result of negligence by OSGP or its
employees, whether incurred during the handling or inspection of said Product, will be for OSGP's account. OSGP is responsible to inspect, test, analyze, or otherwise ensure that all Materials and
processes used in the manufacture of P&G's Product(s) meet P&G's 

7

 

Specifications, standards, and cGMP's. OSGP is responsible for losses caused by operation outside of cGMP's where such operation is Within OSGP Control. P&G and OSGP shall mutually agree to and
document Product loss and scrap targets in SLEA's. 

        5    QUALITY CONTROL AND TESTING:    

        5.1    Testing and Certificate of Analysis: Before releasing Material or Product, OSGP shall test for the compliance of such
batch with all Release Specifications and cGMP's. OSGP's Quality Assurance department shall perform this testing. Copies of raw material, manufacturing, and inspection records will be made available
for review by P&GP SARL representatives. Copies of manufacturing records and certificates of analysis incorporating such certification, in the form attached hereto as Schedule C, shall be
provided to P&GP SARL with each shipment of Product(s) for each batch and/or partial batch contained in the shipment. All such copies shall be sent to the addressees specified by P&GP SARL. 

        5.2    Preservation Samples and Retained Samples: OSGP shall take from each batch of the Products pursuant to this Agreement
preservation samples/retained samples which OSGP shall retain for the shelf life of the particular Product batch plus the shelf life of the finished product dosage forms of the Products plus one year
or longer as required by relevant regulations. For the avoidance of doubt, preservation samples/retained samples, as referred to herein, do not include samples retained for purposes of stability
testing. OSGP shall take preservation samples of raw materials and work-in-process materials as designated in writing by P&GP SARL. OSGP shall maintain these samples under cGMP
conditions and review samples annually according to applicable regulations. 

        5.3    Stability Testing: OSGP shall conduct a stability-testing study for the agreed Products, which includes new studies
annually to meet all applicable standards, package, and product changes for current marketed Products in the Territory and any stability studies required as a result of
manufacturing deviation(s). The results of these testing studies shall be available to P&GP SARL, without charge, upon request. 

        5.4    P&GP SARL Testing Rights: fn> P&GP SARL shall have the right (but not the obligation) to perform analytical testing on
the Products manufactured by OSGP pursuant to this Agreement. 

        5.5    Quality Disputes: Any claim by P&GP SARL that any of the Products at the time of delivery or release to P&GP SARL did not
meet the Release Specifications or during their shelf life did not meet the Specifications must be made in writing to OSGP within thirty (30) days after discovery by P&GP SARL of the problem.
In the event that P&GP SARL claims that any of the Products failed to meet the Release Specifications or the Specifications and OSGP disagrees with P&GP SARL's findings, OSGP shall test
a retained sample from the same batch as the contested Product. P&GP SARL may, at its option and cost, have one of its personnel present for and actively participate in such testing. At P&GP
SARL's discretion the testing may be done at a third party laboratory mutually agreed upon by the parties. The results of such third party testing shall be accepted by the two parties
as final and binding. The cost of such analysis, and the cost of testing, shipment, replacement or disposal of disputed Product, shall be borne by the party whose position is not substantiated by the
testing. 

        5.6    Customer Complaints: Each party shall, without delay, inform the other party of any customer complaints of which it
becomes aware which may relate to the manufacturing of the Products. OSGP shall provide P&GP SARL, at OSGP's expense, with all reasonable assistance in investigating complaints that are alleged to
have arisen from manufacture of the Products hereunder. 

8

           5.7    Health Authority Inquiries: OSGP shall be responsible for responding to any inquiry from any
legally competent health
authority in the Territory regarding the OSGP Chemical Plant. For any such responses regarding or related to the Products, P&GP SARL shall review and approve the response prior to filing. OSGP shall
without delay, at its own expense, make available to P&GP SARL a copy of pertinent sections of any inspection report resulting from any inspection of the Chemical Plant by such health authority to the
extent such report relates to the Products, the manufacture of the Products, or the Chemical Plant used to manufacture the Products as well as a copy of any response(s) thereto. P&GP SARL shall
provide OSGP with all reasonable assistance in responding to such inquiries and in handling inspections of the Chemical Plant for the Products by such authorities. OSGP shall without delay inform P&GP
SARL of any such inquiries and any requests for inspections of which it becomes aware. 

        5.8    Quality Assurance Key Elements: OSGP acknowledges and guarantees that it will operate in strict compliance with the
applicable cGMP's. In addition, OSGP agrees to comply with P&GP SARL Quality Standards as described in P&GP SARL's Quality Assurance Key Elements (QAKE) Assessment and all future
revisions thereto. P&GP SARL shall use said QAKE Assessment periodically to audit OSGP's Norwich Plant and shall provide OSGP a written report following said audit. For all Products that OSGP produces
for P&GP SARL and all facilities and systems supporting such production, should OSGP's audit result in a score less than 100%, OSGP shall develop and implement, and P&GP SARL shall approve in writing,
a detailed plan to improve OSGP's systems. P&GP SARL will provide a copy of the QAKE manual to OSGP, which shall be incorporated as appropriate into OSGP's operating procedures used for production of
Products covered by this Agreement. Should OSGP fail to meet the agreed-upon success criteria on a mutually acceptable time schedule, or fall below a QAKE score of 85%, P&GP SARL shall
have the right to notify OSGP of their failure to perform per Article 8. 

        6    INVENTORY CONTROL:    P&GP SARL will furnish manufacturing and shipping instructions during the term of this
Agreement in accordance with its established ordering procedures.    Overruns or under runs are permitted only as authorized by P&GP SARL. 

        7    CHANGE MANAGEMENT    

        7.1    Non-Discretionary Changes: With respect to changes to the Process and/or Specifications which are required by
applicable law, rule or regulation (including but not limited to changes required by the FDA or other legally competent authority) (collectively, "Non-Discretionary Changes"), the parties
shall co-operate in making such changes promptly and, unless otherwise agreed, the costs of making and/or implementing such changes and the costs of the scrapping of materials and Product
necessitated by any
such changes shall be the responsibility of P&GP SARL. Any such changes shall be evaluated using P&GP SARL's Change Control process for conformance to cGMP, Product license
registrations, and other applicable health authority regulations. OSGP may not implement any Non-Discretionary Change without receiving written agreement in advance from P&GP SARL. 

        7.2    Discretionary Changes: With respect to changes to the Process and/or Specifications which are not required by applicable
law, rule or regulation (including but not limited to changes not initially proposed or required by the FDA or other legally competent authority) (collectively, "Discretionary Changes"), the parties
shall, to the extent commercially reasonable under the circumstances, cooperate in making such changes and the party initiating such change(s) shall bear the costs of making and/or implementing such
changes and the costs of the scrapping of materials (including but not limited to raw and packaging materials, work in process, inventory and labeling materials) necessitated by any such changes. OSGP
shall notify P&GP SARL prior to making any changes to raw material feed stocks, the production process, production equipment or equipment location(s) involved in the fulfillment of this Agreement. Any
such changes shall be evaluated using P&GP SARL's Change Control process for conformance to Specifications, cGMP, Product license registrations, and other applicable health 

9

 

authority regulations. OSGP may not implement any Discretionary Change without receiving written agreement in advance from P&GP SARL. Costs associated with complying with applicable cGMP and/or
Product license registrations shall be the responsibility of OSGP. Cost reduction savings that result from Discretionary Changes shall be shared to the extent that the total costs to develop and
implement the changes are shared. 

        7.3    Disclaimer of Incidental Damages: Notwithstanding anything herein to the contrary, neither party shall be liable to the
other for any consequential or special damages and/or lost profits resulting from a change to the Specifications and/or to the printed matter as a result of any change thereto pursuant to this
Article 7. 

        7.4    Authorizations: During the Term of this Agreement OSGP shall obtain and maintain in force all licenses and authorizations
necessary for OSGP to Contract Manufacture Product as contemplated herein. OSGP shall bear the full cost and expense of so obtaining and maintaining such licenses and authorizations. P&GP SARL shall
give OSGP all help reasonably necessary to assist OSGP in so obtaining and maintaining such licenses and authorizations and shall bear the full cost and expense of so assisting OSGP. 

        8    FAILURE TO PERFORM:    In the event P&GP SARL orders Product hereunder and OSGP is unable or unwilling to
manufacture such Product for any reason, or should OSGP consistently and continually fail to meet P&GP SARL's quantity requirements, or OSGP consistently fails to meet P&GP
SARL's Product Specifications, manufacturing standards, standards for quality assurance or release procedures, or OSGP experiences a significant quality systems failure including but
not limited to receipt of an FDA warning letter or its equivalent elsewhere in the Territory, P&GP SARL has the unequivocal right, upon notice, to enter OSGP's Chemical Plant for the sole purpose of
assuring P&GP SARL's continued supply of Products. OSGP agrees to cooperate with P&GP SARL in this event by making personnel, equipment, facilities and production capability available
to P&GP SARL and its personnel
to perform activities required to produce Products. In addition, P&GP SARL shall be free to purchase all or any portion of its requirements for Products from any available source, or to move
production into another of P&GP SARL's facilities or to an alternate contract manufacturer should OSGP fail to supply ordered Product or should P&GP SARL reasonably anticipate a failure
to supply ordered Product. P&GP SARL will provide OSGP with a ten (10) business day notice of such anticipated failure to perform and the opportunity to avoid or correct in a manner acceptable
to P&GP SARL such anticipated failure to perform. Any such purchases or manufacturing will reduce P&GP SARL's obligation to purchase Products from OSGP under this Agreement accordingly,
without prejudice to any remedy available in herein. 

        P&GP
SARL's rights in the circumstances described in this Article shall include the right to sub-lease up to all portions of the Chemical Plant used in
performance of this Agreement and to lease any and all equipment and employees, and purchase any Material inventory necessary to fulfill the purpose of producing Product by or on behalf of P&GP SARL.
If P&GP SARL elects this option the amount payable to OSGP by P&GP SARL for this sub-lease, lease, and Materials purchase shall not exceed amounts payable under Article 12.1. The
term of any such sub-lease or lease shall not exceed three (3) years. 

        9    INITIATIVES AND PROJECTS:    P&GP SARL will communicate to OSGP any Product initiatives or projects that
P&GP
SARL desires to conduct at OSGP's Chemical Plant. Planning for implementation of such project activity will be included as part of production planning for P&GP SARL requirements at OSGP's Chemical
Plant. P&GP SARL may require the participation of other outside contractors in initiatives or project work conducted at OSGP's Chemical Plant. Access to the Chemical Plant and participation by such
contractors will not be prohibited by OSGP subject to P&GP SARL providing reasonable notice of such contractor(s). 

10

 

        10    SERVICES PROVIDED BY P&GP SARL TO OSGP:    P&GP SARL will make arrangements for the following services to
be
provided to OSGP's Chemical Plant. P&GP SARL will invoice OSGP for these services monthly at the cost to provide these services; 

        a.    Site
Security—fixed percentage of building security costs 

        b.    Utilities
(fuel oil, natural gas, water, & electricity)—variable to usage 

        c.    Purified
Water—variable to usage 

        d.    Waste
Treatment—variable to usage 

        Promptly
after execution of this Agreement specific details associated with providing the above rights and services including any forecasting, scheduling, delivery, testing, prices,
billing, and payment for these other services will be documented in the appropriate SLEA. Responsibility for any testing and release associated with such rights and services provided by P&GP SARL to
OSGP rests with OSGP. 

        11    TERM    

        11.1    Initial Term: The initial term of this Agreement, "Initial Term", begins July 1, 2001, and ends June 30,
2004, unless terminated earlier by ninety (90) days advanced written notice from P&GP SARL to OSGP, or unless terminated earlier pursuant to terms contained in this Agreement. 

        11.2    Extension: This Agreement may be extended for successive periods of one year each up to a maximum period of two
(2) years upon mutual written agreement of the parties at least one hundred and twenty (120) days prior to the expiration of the Initial Term or its extension there-of, (the
Initial Term plus any such extensions, the "Term"). 

        11.3    Termination: Upon termination of this Agreement OSGP shall cease all and any use of Intellectual Property acquired from
P&GP SARL, and within a reasonable period acceptable to P&GP SARL shall return to P&G SARL or at P&G SARL's written request destroy all Intellectual Property. Within a period of time
acceptable to P&G SARL after termination of this Agreement OSGP shall demolish and site clear OSGP's Chemical Plant buildings and site clear all Chemical Plant equipment. OSGP shall use commercially
reasonable efforts to ensure that this demolition and site clearance shall be performed in a manner that results in no adverse safety or environmental effects. P&GP SARL shall provide all funds
necessary for Chemical Plant and Chemical Plant equipment demolition and site clearance costs net of any recoverable costs, (e.g. used equipment sales). 

        12    PRICE:    

        12.1    Charges And Prices: OSGP will bill P&GP SARL no less than weekly, consistent with volume forecast for Product, on a cost
plus basis as listed in Schedule D. P&GP SARL and OSGP will review Chemical Plant costs on an annual basis, including raw material, packing material, manufacturing operating expense, and
freight costs. An annual standard P&GP SARL billing price per Unit for all Products will be included in the Chemical Plant annual budget. On a monthly and quarterly basis, a true-up will
occur to identify differences between amounts billed to P&GP SARL using standard prices versus actual costs incurred by OSGP plus mark-up, as listed in Schedule D. OSGP will invoice
P&GP SARL for a mutually agreed shortage identified by this true-up process. OSGP will credit P&GP SARL for a mutually agreed over payment made by P&GP SARL identified by this
true-up process. 

        12.2    Extra Charges: Any charges that OSGP proposes to charge P&GP SARL beyond those included in the prices agreed to in this
Agreement, its extensions, or amendments, or related purchase orders, must be approved in writing by P&GP SARL prior to OSGP incurring or accepting such charges. 

11

 

        13    DELIVERY:    Delivery terms shall be Delivered Duty Unpaid (DDU per INCOTERMS, 2000 version) the P&GP SARL
designated destination. All such Products sold hereunder shall have at least eighty percent (80%) of their original expiration period remaining at the time of delivery to the designated P&GP SARL
destination unless mutually agreed to plans documented in appropriate SLEA's for specific Product(s) or Unit(s) indicate a different minimum percentage of expiration dating is acceptable. 

        14    PAYMENT TERMS:    Net ten (10) days from receipt by P&GP SARL of a complete and correct invoice.

        15    INVOICING:    OSGP shall invoice P&GP SARL no less than weekly for expenses incurred per Article 12.1 to
provide P&GP SARL with its requirements for Products. OSGP shall include with each invoice the required information as agreed and documented in the Service Level Execution Agreements (SLEA's). P&GP
SARL may withhold payment of OSGP's invoices until the provisions of this paragraph have been fulfilled. Payment to OSGP shall be in United States dollars. 

        16    COMPLIANCE WITH LAWS AND SAFETY MEASURES:    OSGP represents and warrants that it is and will, and that the
Products (including after being incorporated into any finished products) are and will, at all times, be in full compliance with all applicable laws, regulations, rules, judgments, orders and decrees,
including, without limitation, those related to intellectual property, customs, labor, employment, working conditions, board of health, environmental matters and where applicable cGMP's. OSGP also
represents and warrants that it has obtained and will maintain all licenses, consents and permits required to perform lawfully this Agreement. OSGP assumes sole responsibility for taking all necessary
health and safety precautions for producing products on behalf of P&GP SARL pursuant to this Agreement. These precautions include, without limitation, such things as proper control of ventilation, the
wearing of adequate protective clothing, installation, and proper utilization of appropriate environmental control equipment. OSGP will inform P&GP SARL of any regulatory agency inspection, such as an
OSHA inspection, which involves P&GP SARL Process(es) or Product(s). OSGP is responsible for any audit follow-up or response. P&GP SARL will provide OSGP information P&GP SARL possesses
where needed to respond to such audits. 

        17    ACCEPTANCE AND RETURN:    Any Products manufactured by OSGP on behalf of P&GP SARL that do not comply with
the
representations and warranties set forth in this Agreement may, at P&GP SARL's option, be (i) returned to OSGP at OSGP's expense for credit to P&GP SARL at the full price plus
expenses associated with such return, including, without limitation payment or reimbursement of customs duties and freight charges, (ii) scrapped by P&GP SARL, at OSGP's expense, in which case
P&GP SARL will be relieved of any payment obligations with respect thereto. Additionally, when numbers ii) or iii) above are applicable, the expenses for which OSGP will be responsible
include, without limitation, P&GP SARL'S cost of inspecting, recovering, and sorting the Products produced hereunder and P&GP SARL'S cost of obtaining replacement
Products (including raw and packaging materials, scrapping Products produced for P&GP SARL, and manufacturing additional Products on behalf of P&GP SARL). The rights and remedies set forth in this
Agreement are not exclusive and nothing herein will be interpreted to limit in any manner the rights and remedies the parties will have available to them pursuant to the relevant governing law. 

        18    ACCESS FOR P&GP SARL'S REPRESENTATIVES:    OSGP will permit P&GP SARL's
representatives access to any area of OSGP's facilities and records having to do with the fulfillment of this Agreement upon reasonable notice by P&GP SARL. Should security requirements of other
customers of OSGP create conflict with this right, P&GP SARL shall be so informed and compatible scheduling arranged. 

        19    SECURITY PRECAUTIONS:    OSGP agrees to take appropriate security precautions requested by P&GP SARL
including,
but not limited to, prohibiting Third Parties from being present 

12

 

during production of Products for P&GP SARL's unless authorized in writing by P&G SARL. P&GP SARL reserves the right to reduce or discontinue its purchases under this Agreement, its
extensions or related purchase orders, without further obligation, for violations of security practices agreed to by P&GP SARL and OSGP. 

        20    CONFIDENTIALITY:    Neither party will use (other than for the performance of this Agreement) or disclose to any
third party any Confidential Information. This obligation shall survive the expiration or termination of this agreement. 

        21    INTELLECTUAL PROPERTY:    All right, title and interest in the Intellectual Property and other proprietary
information to be used in connection with the Products are owned by P&GP and shall remain so at all times. P&GP has the right at all reasonable times to inspect the services and goods sold or
otherwise provided by OSGP using any of the Intellectual Property, as well as the facilities and methods of production and delivery of such goods and services. 

        By
acceptance of this Agreement and in consideration thereof, OSGP warrants and agrees that with respect to any article(s), chemical component(s) or composition(s) furnished by OSGP to
any Third Party (excluding the Contract Manufacturing Services provided to or on behalf of P&G), OSGP will not use any P&G patents, copyrights, or similar intellectual property rights without P&G's
prior written consent and will not infringe on any such P&G patents, copyrights or similar intellectual property rights. 

        If
P&G is unknowingly benefiting from a Third Party's patent, copyrights or similar intellectual property, OSGP will indemnify and save P&G harmless from and against claims by a Third
Party that P&G is infringing on such Third Party's patents, copyrights or intellectual property with respect to products manufactured for a Third Party by OSGP. 

        P&G
agrees to hold OSGP harmless with respect to liability for infringement, which OSGP may incur because of any allegations that the Products produced hereunder, the formula(e) or the
specifications of P&G violate or infringe any patents. OSGP agrees that P&G or P&G's other suppliers (with respect to their activities on behalf of P&G) shall have immunity from suit by OSGP under any
patents arising out of the performance of this Agreement. 

        22    OSGP'S INDEMNIFICATION OF P&GP SARL:    OSGP will indemnify, defend and hold P&GP SARL harmless from and
against
all claims, losses, damages, costs and expenses (including without limitation reasonable fees and expenses of attorneys incurred in investigation or defense of any third-party claim or action,
(collectively "Damages") arising out of or related to (i) OSGP's breach of any representation, warranty, covenant or other obligation pursuant to this Agreement, including, without limitation,
the failure of any Product or Process to be in compliance with the Specifications where such failure was Within OSGP Control, (ii) any manufacturing defect of Products produced hereunder,
(iii) liability for violations of any Environmental Law incurred by OSGP in the performance of this Agreement or arising out of ownership, demolition, or site clearance of Chemical Plant
buildings and equipment, where such liability is the result of the negligence, gross negligence, bad faith or willful misconduct on the part of OSGP, its employees or other representatives or
(iv) the negligence, gross negligence, bad faith or willful misconduct of OSGP, its employees or other representatives. OSGP agrees to provide at least $5,000,000 of commercial liability
insurance in support of this indemnity with companies reasonably acceptable to P&GP SARL, which insurance will carry an endorsement naming P&GP SARL and its affiliates as co-insured. 

        23    P&GP SARL's INDEMNIFICATION OF OSGP:    P&GP SARL will indemnify, defend and hold OSG harmless
from and against all claims, losses, damages, costs and expenses, including without limitation reasonable fees and expenses of attorneys incurred in investigation or defense of any third-party claim
or action, arising out of or related to any liability for violations of any Environmental Law incurred by OSGP in the performance of this Agreement or arising out of ownership, demolition, or 

13

 

site clearance of Chemical Plant buildings and equipment, except where such liability is the result of the negligence, gross negligence, bad faith or willful misconduct on the part of OSGP, its
employees or other representatives. 

        24    CHANGE IN OSGP'S OWNERSHIP:    If for any reason OSGP decides to sell or transfer voluntarily any or all of the
Chemical Plant used in the fulfillment of this Agreement to any Third Party, OSGP will provide P&GP SARL with at least six (6) months prior written notice of its intent to transfer or sell such
operation and will extend to P&GP SARL an option exercisable within ninety (90) days after the date of such notice to sublease the portions of the facility and purchase Materials inventory used
in performance of this Agreement, and to lease any and all equipment and employees for the purpose of producing Product by or on behalf of P&GP SARL. The cost of this lease, sub-lease, and
Materials
purchases shall not exceed costs payable under Article 12.1. The term of any such lease or sub-lease shall not exceed three (3) years. It is understood that this option does
not in any way limit the other rights and obligations of the parties set forth in this Agreement. P&GP SARL reserves the right to reduce or discontinue purchases under this Agreement, or terminate
this Agreement, without obligation, if any new entity or person obtains whole or greater than 50% corporate ownership of OSGP. However, P&GP SARL will not unreasonably withhold its consent and will
base its assessment on an objective evaluation of and/or actual experience with the new entity's capability and qualification to fulfill this Agreement prior to exercising any right to reduce or
discontinue purchases under this Agreement. The provisions of this Article 24 shall also apply to an involuntary transfer of the assets of OSGP to a Third Party, except for the requirement that
OSGP provide six (6) months written notice to P&G of such transfer. In this instance OSGP shall provide P&G SARL with as much notice as legally possible. 

        25    TERMINATION FOR CAUSE:    In the event (I) a party (the "Defaulting Party") breaches any representation,
warranty, covenant or other obligation of this Agreement, or ii) the Defaulting Party becomes unable to pay its bills as they become due in the ordinary course, a trustee or receiver of such
party's property is appointed, the Defaulting Party makes an assignment for the benefit of creditors, a petition in bankruptcy is filed by or against the Defaulting Party or the Defaulting Party
terminates or liquidates its business, the other party (the "Non-Defaulting Party") will have the option to terminate this Agreement, without further obligation, immediately upon notice of
such termination to the Defaulting Party. Termination or expiration of this Agreement will not relieve either party of any liability it may have to the other arising out of or related to acts or
omissions prior to such termination or expiration. 

        26    ASSIGNMENT:    Neither OSGP nor P&GP SARL may assign its rights or delegate or subcontract this Agreement or
its
obligations pursuant hereto to any Third Party without the prior written consent of the other; provided, however, P&GP SARL may so assign or delegate to any of its Affiliates without OSGP'S prior
consent. 

        27    CONTRACTOR STATUS:    OSGP is an independent contractor and nothing herein contained and no course of dealing
between the parties will create or be deemed to create an agency, partnership, joint venture or any other relationship, fiduciary or otherwise between the parties hereto. OSGP assumes sole
responsibility for the direction and control of its employees involved in manufacturing Products and such employees shall for all purposes remain employees of OSGP. Except as otherwise expressly
indicated herein, OSGP is not granted any right or authority to assume or to create an obligation or responsibility, express or implied, on behalf of or in the name of P&GP SARL or bind P&GP SARL in
any manner whatsoever. 

        28    REPORTING REQUIREMENTS:    OSGP agrees to provide to P&GP SARL information and reports, in a format and on a
frequency requested by P&GP SARL and agreed to by OSGP. Costs for such services will be included in OSGP's price as referenced in Article 12.1. P&GP SARL shall have the right to withhold
payment if OSGP fails to provide information or reports as mutually agreed. 

14

 

P&GP SARL reserves the right to reduce or discontinue its purchases under this Agreement, its extensions or related purchase orders, if OSGP fails to meet information or reporting requirements on a
recurring basis. 

        29    FORCE MAJEURE:    

        29.1    Force Majeure: P&GP SARL or OSGP shall not be deemed to be in breach hereof on account of any delay in delivery or other
performance caused in whole or in part by, or otherwise materially related to, the occurrence of any contingency beyond P&GP SARL's or OSGP's control, including but not limited to: war
or hostility; failure or delay on land, water or air transportation; act of any government or agency, subdivision or branch thereof; judicial action; strikes or other labor disputes; accident, fire,
explosion, flood, epidemic, storm or other acts of God; shortage fuel or power, delay or failure to perform by any supplier; or, in general, any other contingency whatsoever (whether similar or
dissimilar to those set forth herein) where P&GP SARL or OSGP has exercised ordinary care in the prevention thereof. 

        29.2    Effects of Force Majeure: In the event of any contingency as described hereunder, P&GP SARL or OSGP shall give immediate
notice thereof to the other party. P&GP SARL or OSGP shall render the delayed performance in the manner as practicable as possible after such event of force majeure has ceased or otherwise abated
sufficiently in order to permit it to do so without incurring any material additional expense which it would not have had in the absence of such event of force majeure. 

        30    GOVERNING LAW AND LANGUAGE:    This Agreement shall be governed by and interpreted for any and all purposes in
accordance with the laws of Ohio and Ohio Courts shall have jurisdiction of any disputes hereunder. The parties agree that the United Nations Convention on International Sale of Goods will have no
force or effect on transactions relating to this Agreement. The parties understand the English language and are fully aware of all terms and conditions contained herein. If any translation of this
Agreement is made into any language other than English, the English language version will continue to govern. 

        31    HIRING EMPLOYEES:    For a period of two years from the effective date of this Agreement neither party will, and
neither party's Affiliates will, without prior mutual written agreement, directly or indirectly solicit for employment or hire any employees of the other party, or their Affiliates, who have worked in
connection with the performance of this Agreement. 

        32    HEADINGS AND REFERENCES:    All section headings contained in this Agreement are for convenience of reference
only and shall not affect the meaning or interpretation of this Agreement. 

        33    AGREEMENT PRECEDENCE:    Other agreements may be executed between P&GP SARL and OSGP as appropriate,
including
but not limited to information technology, supply of P&GP SARL's external customers, other joint support by the parties, product stability testing, other quality assurance support,
product development activity, contract manufacturing services, and facilities maintenance. In the event of any conflict between this Agreement and any purchase order form, service level execution
agreements or other agreements which may be entered into by the parties and/or their affiliates governing the same matters set forth herein, this Agreement will take precedence and its terms shall
govern, unless such subsequent agreement specifically refers to this Agreement and indicates that such subsequent agreement will take precedence over this Agreement. 

        34    LICENSING COOPERATION:    To allow for the smooth transfer of Products shipment responsibilities to OSGP under
applicable state licensing laws which regulate the distribution of pharmaceutical products, including but not limited to the licensing laws of the State of New York, P&GP SARL agrees to cooperate with
and to assist OSGP in obtaining such licenses and with OSGP's distribution of Products until such time as OSGP obtains the necessary and appropriate licenses. 

15

 

        35    MUTUAL SUPPORT:    During the Term of this Agreement one party may desire the support of resources of the other
party to conduct work not expressly covered by this Agreement but needed to further the aims of both parties under this Agreement. Both parties desire to cooperate in a reasonable manner to the extent
possible to provide requested support at a reasonable cost. Such requests for support shall normally be made at least 30 days in advance of the date needed. The party providing the requested
support shall invoice the other party for any agreed charges and expenses on a no less than weekly basis. Such invoices shall be paid within 10 days. Neither party nor their Affiliates have
liability under this Agreement due to damage or loss of any type suffered as a result of performance or non-performance of the support requested and provided by one party to the other.
Details of support resource request agreements shall be documented in letters of agreement. 

        36    DISPUTE RESOLUTION:    Any action or claim asserted by either party against the other party (a "Claim") arising
out of or related to this Agreement, including without limitation any Claim for indemnification pursuant to this Agreement or any issue as to whether or not a Claim is arbitrable, shall be resolved
pursuant to the procedures set forth in Section 9.03 of the Sale Agreement. 

        P&GP
SARL and OSGP have caused their respective duly authorized representatives to execute this Agreement, acting as agent(s) as set forth herein. 

	For:	 	Procter & Gamble Pharmaceuticals, Inc.
 (P&GP SARL)	 	For:	 	OSG Norwich Pharmaceuticals, Inc.
 (OSGP)
	

By	
 	

/s/ J.E. Haas
 (Signature)	
 	

By	
 	

/s/ Joseph M. Healy
 (Signature)
	

 	
 	

J.E. Haas
 (Name Typed)	
 	

 	
 	

Joseph M. Healy
 (Name Typed)
	

As	
 	

Vice President—Europe
 (Title)	
 	

As	
 	

President and CEO
 (Title)
	

Date	
 	

20/6/01
	
 	

Date	
 	

6/29/01

16

 

        SCHEDULES:    

A.
Products—Stock Keeping Units (SKU's) 

B.
Minimum Order Quantities 

C.
Example Certificate Of Analysis (COA) 

D.
Pricing 

17

 

 Schedule C—Example Certificates Of Analysis  

	

	GCAS #1091495:	 	OSG Pharmaceuticals	 	Issue Date: 9/03/98
	

	 	 	ETIDRONATE DISODIUM, BULK	 	Version #
	

	

	Requirements	 	Method #	 	Specifications	 	Results	 	Lab Notebook reference	 	Initials & Date
	

	DESCRIPTION	 	Visual	 	A white powder which may contain some lumps, with a characteristic odor.	 	 	 	 	 	 
	

	USP/NF

IDENTIFICATION A	 	A830.27N	 	Meets	 	 	 	 	 	 
	

	USP/NF IDENTIFICATION B	 	USP	 	Meets	 	 	 	 	 	 
	

	USP/NF <921> WATER DETERMINATION	 	A830.22N, R1	 	5.0% maximum	 	 	 	 	 	 
	

	Checked by & Date:	 	Release by & Date:
	

	

	GCAS # 15109654	 	OSG Pharmaceuticals	 	Issue Date: 5/29/98
	

	 	 	Semicarbazidoacetic Acid Blend	 	Version # 1
	

	

	Requirements	 	Method #	 	Specifications	 	Results	 	Lab Notebook Reference	 	Initials & Date
	

	DESCRIPTION	 	Visual	 	A white, powdery material with a characteristic odor	 	 	 	 	 	 
	

	IDENTIFICATION (IR)	 	Prepare a mineral oil dispersion	 	Matches RS-258.	 	 	 	 	 	 
	

	ASSAY (%)

[RR, SL]	 	SR31808	 	85.0% to 102.0%	 	 	 	 	 	 
	

	BLEND)

Standard Value: 100.0%	 	SR31808	 	85% to 103%	 	 	 	 	 	 
	

	Checked by & Date:	 	Release by & Date:
	

18

QuickLinks

Exhibit 10.35

CHEMICAL MANUFACTURING SUPPLY AGREEMENT

TABLE OF CONTENTSQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.36    
  

 
 

ASSET PURCHASE AGREEMENT    
  

By and Among  

 CRAIG J. BERRY,  

 KIM R. BERRY,  

 DERMAL SCIENCES, INC.  

 and  

 ACUPAC PACKAGING, INC.  

 September 6, 2001  

 
  
 

    TABLE OF CONTENTS    
  

	 
	 
	 	Page

	ARTICLE I GENERAL	 	1
	 	1.1	Purchase of Assets	 	1
	 	1.2	Excluded Assets.	 	2
	 	1.3	Liabilities Assumed by Purchaser	 	2
	 	1.4	Excluded Liabilities	 	3
	 	1.5	Purchase Price and Payment Terms	 	3
	 	1.6	Allocation of Purchase Price	 	3
	 	1.7	Adjustments to Purchase Prices	 	4
	 	1.8	Earn-Out payment	 	5
	 	1.9	Set-off and Escrow	 	5
	 	1.10	Taxes	 	6
	

ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY	
 	

6
	 	2.1	Organization	 	6
	 	2.2	Authorization	 	6
	 	2.3	No Conflict.	 	6
	 	2.4	Financial Statements.	 	7
	 	2.5	Absence of Certain Facts or Events.	 	7
	 	2.6	Property, Leases and Liens.	 	8
	 	2.7	Contracts and Commitments.	 	8
	 	2.8	Permits and Authorizations.	 	9
	 	2.9	No Violations.	 	9
	 	2.10	Proceedings.	 	10
	 	2.11	Insurance.	 	10
	 	2.12	Proprietary Information and Rights.	 	10
	 	2.13	Employee Benefits.	 	10
	 	2.14	Employment Laws.	 	11
	 	2.15	Environmental Laws.	 	11
	 	2.16	Taxes.	 	12
	 	2.17	Accounts Receivable.	 	13
	 	2.18	Customers and Suppliers.	 	13
	 	2.19	Inventories.	 	13
	 	2.20	Warranties.	 	13
	 	2.21	Delivery of Documents.	 	13
	 	2.22	No Finders or Brokers.	 	13
	

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER	
 	

14
	 	3.1	Organization.	 	14
	 	3.2	Authorization.	 	14
	 	3.3	No Conflict.	 	14
	 	3.4	No Finders or Brokers.	 	14
	

ARTICLE IV COVENANTS	
 	

14
	 	4.1	Confidentiality.	 	14
	 	4.2	Fulfillment of Conditions.	 	15
	 	4.3	Post-Closing Access by Seller.	 	15
	 	4.4	Transition Period.	 	15
	 	4.5	Retained Employees.	 	15
	 	4.6	Amendment to Certificate of Incorporation of Company.	 	16

ii

 

	 	4.7	Further Assurances.	 	16
	 	4.8	Management Equity Purchase.	 	16
	 	4.9	Reimbursement for Facility Lease.	 	16
	

ARTICLE V CONDITIONS OF CLOSING	
 	

16
	 	5.1	Conditions of Obligations of Purchaser.	 	16
	 	 	(a)    Representations and Warranties; Performance of Obligations.	 	16
	 	(b)    Certificate and Deliveries by Seller.	 	17
	 	(c)    No Injunction.	 	17
	 	(d)    Financing.	 	17
	 	(e)    Other Consents.	 	17
	 	(f)    Instruments of Transfer.	 	17
	 	(g)    Employment and Non-Competition Agreement.	 	17
	 	(h)    Opinion of Counsel to Seller and Company.	 	17
	 	(i)    Due Diligence.	 	17
	 	(j)    No Material Adverse Change.	 	17
	 	(k)    Schedules.	 	17
	 	(l)    Escrow.	 	17
	 	5.2	Conditions of Obligations of Seller.	 	17
	 	(a)    Representations and Warranties; Performance of Obligations.	 	17
	 	(b)    Certification by Purchaser.	 	18
	 	(c)    No Injunction.	 	18
	 	(d)    Ancillary Documents.	 	18
	 	(e)    Opinion of Counsel to Purchaser.	 	18
	 	(f)    Purchase Price.	 	18
	

ARTICLE VI CLOSING DATE AND TERMINATION OF AGREEMENT	
 	

18
	 	6.1	Closing Date	 	18
	 	6.2	Termination of Agreement	 	18
	 	6.3	Effect of Termination	 	18
	

ARTICLE VII INDEMNIFICATION	
 	

19
	 	7.1	Indemnification by Seller.	 	19
	 	7.2	Indemnification by Purchaser.	 	20
	 	7.3	Indemnity for Taxes, Environmental Matters, and Patent Infringement Claims.	 	20
	 	7.4	Survival of Representations and Warranties; Reliance.	 	21
	 	7.5	Payments from Escrow.	 	21
	 	7.6	Indemnification Exclusive.	 	21
	

ARTICLE VIII MISCELLANEOUS	
 	

21
	 	8.1	Further Actions.	 	21
	 	8.2	Expenses.	 	22
	 	8.3	Entire Agreement.	 	22
	 	8.4	Descriptive Headings.	 	22
	 	8.5	Notices.	 	22
	 	8.6	Governing Law.	 	22
	 	8.7	Assignability.	 	23
	 	8.8	Waivers and Amendments.	 	23
	 	8.9	Third Party Rights.	 	23
	 	8.10	Public Announcements.	 	23
	 	8.11	Counterparts.	 	23

iii

 

	APPENDIX A—Definitions	 	 
	Affiliate	 	1
	Business Day	 	1
	Affiliate	 	1
	Encumbrance	 	1
	Funded debt	 	1
	GAAP	 	1
	Governmental Entity	 	1
	Indebtedness	 	1
	Independent accountants	 	1
	Knowledge	 	1
	Material Adverse Effect	 	1
	Person	 	1
	Purchaser's Accountants	 	1
	Seller's Accountants	 	1
	Subsidiary	 	2
	Tax	 	2
	Other Definitions	 	2

iv

 
 

ASSET PURCHASE AGREEMENT    
  

        THIS ASSET PURCHASE AGREEMENT is dated as of September 6, 2001 (this "Agreement") by and among ACUPAC PACKAGING, INC., a New Jersey corporation
("Purchaser"), CRAIG J. BERRY, KIM R. BERRY, and DERMAL SCIENCES, INC., a Delaware corporation ("Company"; collectively with Kim and Craig Berry, the "Sellers"). Capitalized terms not otherwise
defined in this Agreement are used as defined in Appendix A hereto. 

W I T N E S S E T H:  

        WHEREAS, Company is engaged in the business of providing manufacturing and packaging services with respect to certain cosmetic and pharmaceutical patches, and
other related services (the "Business"); 

        WHEREAS,
Company and Purchaser have previously entered into a separate joint marketing arrangement in April 2001 (the "Marketing Agreement"), pursuant to which Purchaser gave
Company a deposit of Five Hundred Thousand Dollars ($500,000)(the "Marketing Deposit"); 

        WHEREAS,
the Marketing Agreement provides that the Marketing Deposit shall be credited against the purchase price paid by Purchaser at the closing of the transactions contemplated by
this Agreement, at which time the Marketing Agreement shall terminate; 

        WHEREAS,
Sellers desire to sell to Purchaser, and Purchaser desires to acquire from Sellers, substantially all of the assets of the Business, including assets of Company and certain
assets owned by Craig and Kim Berry for the benefit of Company in connection with the Business, upon the terms and conditions set forth below; 

        WHEREAS,
Sellers expect to benefit from the consummation of the transactions contemplated hereby and, to induce Purchaser to enter into this Agreement, and hereby agrees to be bound by
the terms and provisions in this Agreement. 

        NOW,
THEREFORE, in consideration of the mutual benefits to be derived, and the representations, warranties, conditions and promises herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: 

 
 

ARTICLE I    
    
    GENERAL    
  

        1.1    Purchase of Assets.    On the Closing Date (as defined below), subject to and upon the terms and conditions
contained herein, Sellers shall sell, transfer, convey, assign and deliver to Purchaser and Purchaser shall purchase and acquire from Sellers, free and clear of all Encumbrances (except those assets
which are encumbered pursuant to a lease), good, valid and marketable title in and to all of the assets of the Business (except for the Excluded Assets (as hereinafter defined)), including without
limitation, the assets, properties and rights used in or for the Business or necessary to operate the Business, wherever located and whether or not reflected on Company's books and records, including
without limitation the assets described below (collectively, the "Purchased Assets"): 

        (a)  All
customer, supplier and mailing lists, files, correspondence, databases and similar information relating to the Business, and the customers of the Business
(collectively, the "Customers"), including but not limited to all related information stored on Sellers' computer systems and diskettes relating thereto; 

        (b)  All
of Company's rights and interests under any manufacturing and/or supply contracts, guaranties, instruments, commitments, or other understandings or arrangements,
whether written or oral, attributable or relating to the Business which are to be assumed by Purchaser (collectively, the "Assumed Contracts"), as more specifically described in the General Bill of
Sale and 

 

Assignment and Assumption Agreement of even date herewith, a form of which is attached hereto as Exhibit 1 (the "Bill of Sale"); 

        (c)  All
of Company's licenses, permits, approvals, orders, authorizations, rights or privileges of any nature granted, issued, approved or allowed by any federal, foreign,
state, or local governmental body, administrative agency or regulatory authority, relating to or for the benefit of the Business, which may be transferred to Purchaser, as described on
Schedule 2.8; 

        (d)  All
goodwill and general intangibles relating to the Business, including without limitation Company's internet domain name, as more fully described on
Schedule 2.12; 

        (e)  All
of Company's inventory, raw materials, work in process, finished goods, and supplies, as more fully described on Schedule 2.19
hereto; 

        (f)    Originals
or, at Sellers' option, true and correct copies of all business and financial records, Tax information, files, books and form contracts specifically relating
to the Purchased Assets described in the other clauses of this Section 1.1 or to the Assumed Liabilities, including, but not limited to, books and records which reflect the principal terms of
each Assumed Contract; 

        (g)  All
items of furniture, fixtures, leasehold improvements, equipment, computers, computer software, photocopy machines and office supplies, whether owned or leased by
Sellers, and used in connection with the Business, all of which are listed on Schedule 2.6 (the "Furniture & Equipment"); 

        (h)  All
trade accounts receivable due to Company relating to the Business existing on 11:59 p.m., New York time, on the day prior to the Closing Date (the "Accounts
Receivable"); 

        (i)    All
payments received by Dermal from Fleet Capital Corporation ("Fleet") in respect of the equipment being manufactured in England for Line #3 for the Fleet Lease
(defined below), which payments will be remitted to the manufacturer according to Dermal's payment schedule; and 

        (j)    All
other items of personal property, other than the Excluded Assets, which are used by Sellers in connection with the Business, to the extent that Sellers have any
rights or interests therein. 

        1.2    Excluded Assets.    Sellers are not selling, assigning, transferring or conveying to Purchaser and Purchaser is
not purchasing the cash of the Business, shareholder or employee receivables, or any other asset set forth on Schedule 1.2 (the "Excluded Assets"). 

        1.3    Liabilities Assumed by Purchaser.    Upon the terms and subject to the conditions of this Agreement, and in
reliance on the representations, warranties, covenants and agreements made by Sellers herein,
effective as of the Closing Date, Purchaser shall assume and be obligated pursuant to this Agreement to pay when due, perform, or discharge only the debts, claims, liabilities, obligations, and
expenses described on Schedule 1.3, including the following (collectively, the "Assumed Liabilities"): 

        (i)    (a)
trade accounts payable and accrued expenses of the Business that are in existence as of 11:59 p.m. New York time on the day prior to the Closing Date and are
either reflected on the Financial Statements or, if incurred after the date of the Financial Statements, are incurred in compliance with this Agreement (except for the payables which are specifically
excluded, as further described on Schedule 1.4) (the "Accounts Payable"); and (b) executory obligations arising from the Business which are not included in
the financial statements of the Business and which (A) are incurred under an Assumed Contract for the sale or purchase of goods or services related to the Business, (B) are to be
performed after the Closing Date, or (C) if incurred after the date of this Agreement, are incurred in compliance with this Agreement; provided, however, that Purchaser shall not assume any
(x) accrued legal costs or expenses related to any Excluded Liabilities, 

2

 

(y) obligations arising from any contracts, instruments, agreements, commitments or other understandings or arrangements attributable or relating to the Business, the rights to which are not,
for any reason, assigned to Purchaser as required pursuant to the terms of this Agreement, and (z) obligations which arise as a result of or in connection with a breach or default by Sellers
under any of the Assumed Contracts or a violation of any law, rule or public policy which occurred on or prior to the Closing Date; 

        (ii)  all
Taxes accrued after the Closing Date in connection with the ownership of the Purchased Assets and the operation of the Business after the Closing Date; 

        (iii)  all
obligations of Sellers arising after the Closing Date under that certain Lease Agreement with Fleet relating to the Line #3 equipment for use in the Business (the
"Fleet Lease"); and 

        (iv)  all
obligations of the Business arising after the Closing Date in connection with the Assumed Contracts, Purchaser's ownership of the Purchased Assets and operation of
the Business after the Closing Date, except to the extent that such obligations arose out of the failure of Sellers to comply with, or any violations of, any laws or regulations, of any nature or
kind, prior to the Closing. 

        1.4    Excluded Liabilities.    Except as set forth in Section 1.3 or any other express provision of this
Agreement, Purchaser shall not assume or otherwise become obligated pursuant to this Agreement to pay when due, perform or discharge any debts claims, liabilities, obligations, damages or expenses of
the Sellers or the Business, whether known or unknown, contingent or absolute, arising on or prior to the Closing Date, including but not limited to (i) liability for any Taxes of the Business
relating to periods ended on or prior to the Closing Date, including without limitation withholding taxes; (ii) liabilities arising out of or relating to the Assumed Contracts relating to
periods ended on or prior to the Closing Date; (iii) product liability or warranty claims relating to products sold on or prior to the Closing Date; (iv) accrued liabilities of Company
relating to its employees, including but not limited to
accrued salaries and vacation pay; (v) liabilities arising out of or relating to Company's employment practices; (vi) the trade payables specifically described on
Schedule 1.4; and (vii) any other obligation relating to or arising out of the operation of the Business, or the Purchased Assets, on or prior to the Closing
Date (the "Excluded Liabilities"). 

        1.5    Purchase Price and Payment Terms.    

        (a)  For
the Purchased Assets, Purchaser shall (i) assume the Assumed Liabilities, (ii) pay to Sellers Three Million Five Hundred Thousand Dollars ($3,500,000),
adjusted pursuant to Section 1.7 below, in cash (the "Cash Purchase Price"), (iii) pay the Earn-Out Payment (described in Section 1.8, if applicable). The Cash
Purchase Price shall be estimated at the Closing (as described, in Section 1.7(b)), and, less the Marketing Deposit and the Escrow Deposit, paid at Closing (the "Closing Date Payment"). 

        (b)  Purchaser
shall also pay to Sellers on the Closing Date (i) One Thousand Dollars ($1,000) as a prepayment on all lease payments remaining under the current term
of the lease by and between Company and Campus Office Park Associates LLC (the "Campus Lease Payment"), and (ii) Twenty Thousand Dollars ($20,000.00) (the "Facility Payment") as a prepayment
against lease payments remaining under the current term of the lease by and between Company and CT Associates, LLC, for the real property located at 1525 Kings Highway East, Fairfield, Connecticut
(the "Facility Lease"; the "Premises"). 

        1.6    Allocation of Purchase Price.    The Purchase Price shall be allocated among the Purchased Assets as set forth
on Schedule 1.6 hereto. Each party agrees that it will not in its tax returns or elsewhere take a position inconsistent with the purchase price allocations provided
for in this Section (the "Allocations"). 

3

 

        1.7    Adjustments to Purchase Price.    

(a)
(i) The Company's total net assets at Closing (the "Total Net Assets") shall be computed on the basis that all Funded Debt and all cash are excluded and that all Inventory which is more than
60 days old has been written off, except for any such Inventory that is subject to a valid customer order requiring delivery within 90 days following the Closing. If the Total Net Assets
at Closing are greater than $426,798.00 the Purchase Price shall be increased by the amount of such excess; if the Total Net Assets are less than $426,798.00, the Purchase Price shall be reduced by
the amount of the shortfall (the "Net Assets Adjustment"). 

        (ii)  The
Purchase Price shall be further decreased by the amount of Funded Debt to be paid or assumed by Purchaser on the Closing Date, (except that the Purchase Price shall
not be adjusted for the Fleet Lease) (the "Working Capital Adjustment"). 

        (iii)  The
total net adjustment to the Purchase Price after both the Net Assets Adjustment and the Working Capital Adjustment shall be referred to as the "Adjustment Amount". 

        (b)  Sellers
shall, in good faith, prepare and deliver to Purchaser at least three (3) Business Days prior to the Closing an estimated unaudited balance sheet of
Company as of the Closing Date adjusted to exclude all Funded Debt (the "Closing Balance Sheet") and a computation of the estimated Adjustment Amount. The Closing Balance Sheet and the computation of
the estimated Adjustment Amount shall be prepared from the Company's books and records in accordance with GAAP applied on a basis consistent with the Company's May 31, 2001 balance sheet,
adjusted to exclude Funded Debt, and shall fairly present the Company's total net assets after repayment of all Funded Debt. This estimated Adjustment Amount shall be used to compute the Closing Date
Payment. 

        (c)  Purchaser's
Accountants shall, at Purchaser's expense, review the Closing Balance Sheet and the estimated Adjustment Amount and shall, within forty-five
(45) days after the Closing Date, deliver to Purchaser a final Closing Balance Sheet (the "Final Balance Sheet"), along with a report concerning the computation of the final Adjustment Amount.
The Final Balance Sheet shall be prepared from, and the computation of the final Adjustment Amount shall be based on, the books and records of Company in accordance with GAAP applied on a basis
consistent with the Company's May 31, 2001 balance sheet. All parties shall cooperate fully and completely in responding to questions and requests for information submitted by Purchaser's
Accountants in connection with the preparation of the Final Balance Sheet and the report concerning the computation of the final Adjustment Amount and, with reasonable prior notice, provide them with
full access to all books and records of Company to the extent related to the preparation of the Final Balance Sheet or the computation of the final Adjustment Amount. 

        (d)  Sellers'
Accountants shall have the longer of thirty (30) days following the delivery of the Final Balance Sheet or forty-five (45) days
following the Closing in which to review such Final Balance Sheet and the computation of the final Adjustment Amount at Sellers' expense, and if, in Sellers' Accountants' reasonable judgment, the
Final Balance Sheet does not fairly present the Company's financial position as of the Closing Date or the computation of the final Adjustment Amount is not correct, then Seller shall, within such
30-day period or 45-day period, as the case may be, deliver to Purchaser and Purchaser's Accountants a proposed modification to the Final Balance Sheet, or the final Adjustment
Amount in writing (the "Seller Adjustment Request") setting forth (i) the amount of the proposed modification (ii) the item or items to which such proposed modification relates, and
(iii) the facts and circumstances supporting the reasonableness and propriety of such modification provided, however, that no proposed modification shall be
delivered to Purchaser or Purchaser's Accountants under this Section 1.7(d) unless, and then only to the extent that, the aggregate of all modifications proposed under this
Section 1.7(d) exceed $10,000 on a net basis. Purchaser shall cause Purchaser's Accountants and Seller shall cause 

4

 

Sellers' Accountants to use their best efforts for fifteen (15) days after any proposed modifications to agree upon the Final Balance Sheet or the Adjustment Amount. Upon the expiration of
such 15-day period, any party may submit in writing for resolution to an independent accounting firm, jointly selected by Sellers' Accountants and Purchaser's Accountants (the "Independent
Accountants"), any dispute with respect to the Final Balance Sheet, or the computation of the Adjustment Amount which has not been resolved. As promptly as practicable, but in no event later than
30 days, after such submission, the parties shall cause their accountants to deliver to the Independent Accountants written submissions in support of their respective positions with respect to
such dispute and shall direct the Independent Accountants to resolve such dispute based solely on such written submissions without any independent investigation of Company's books and records. The
costs of the Independent Accountants with respect to the Final Balance Sheet or the computation of the Adjustment Amount shall be divided equally between Purchaser, on the one hand, and Sellers, on
the other hand. The decision of the Independent Accountants with respect to the Final Balance Sheet or the computation of the Adjustment Amount shall be final and binding on each of the parties
hereto. 

        (e)  If
the final adjusted Purchase Price is greater than the estimated Purchase Price paid at Closing, then Purchaser shall, within five (5) Business Days following
the final determination of the Purchase Price, pay by wire transfer of immediately available funds to such account as will have been designated by Sellers in writing an amount equal to the difference
between the final adjusted Purchase Price and the estimated Purchase Price. If the final adjusted Purchase Price is less than the estimated Purchase Price paid at Closing, then Sellers shall, within
five (5) Business Days following the final adjustment of the audited Closing Balance Sheet, pay by wire transfer of immediately available funds to such account as will have been designated by
Purchaser in writing an amount equal to the difference between the estimated adjusted Purchase Price and the final adjusted Purchase Price. If Sellers do not remit any funds due Purchaser in
accordance with this Section 1.7(e), Purchaser shall be entitled to payment of such funds from the Escrow Deposit, in accordance with the terms of the Escrow Agreement (as defined in
Section 1.9, below). 

        1.8    Earn-Out Payment.    Sellers shall be entitled to an additional payment (the "Earn-Out
Payment") of up to $750,000 based upon Fill Fees and the Gross Profit Ratio for the years 2002, 2003 and 2004. The Earn-Out Payment shall be computed and paid as described on
Exhibit 2. Within thirty (30) days of the delivery of audited financial statements for Purchaser and its subsidiaries for each of the years ended
December 31, 2002, 2003 and 2004, Purchaser shall deliver to Sellers a computation of the Earn-Out Payment. If Sellers accept such computation, they shall notify Purchaser in
writing and Purchaser shall pay the Earn-Out Payment within five (5) Business Days of receipt of Sellers' acceptance, by wire transfer to such account(s) as Sellers shall identify
in the notice of acceptance. If Sellers dispute such computation, they shall notify Purchaser in writing and the procedures in Section 1.7(d) shall be followed. Purchaser shall pay the
Earn-Out Payments, if any, upon final determination of the Earn-out Payments. Any date on which Purchaser shall pay Sellers an Earn-Out Payment, as determined in
accordance with this Section 1.8, shall be a "Payment Date". 

        1.9    Set-off and Escrow.    Purchaser may set off against the Earn-Out Payment, if any, any
unpaid amounts due Purchaser pursuant to Section 1.7 or any amounts due pursuant to Article 7. In addition, on the Closing Date, Purchaser shall be held to pay to Robert W. Baird and Co.
(the "Escrow Agent") the sum of Four Hundred Thousand Dollars ($400,000) (the "Escrow Deposit") which shall secure the payment by Sellers of any adjustments due Purchaser under Section 1.7 and
the indemnity obligations of Sellers under Article 7 and shall be held and released as provided in an escrow agreement, a form of which is attached hereto as
Exhibit 3 (the "Escrow Agreement"). The Escrow Agreement shall provide,
among other things, that amounts held in escrow shall be released on the second anniversary of the Closing Date to the extent not needed to satisfy claims pending on such date. 

5

 

        1.10    Taxes.    Purchaser will pay all sales and use taxes and transfer taxes, if any, applicable to the transfer of
the Purchased Assets and the assumption of the Assumed Liabilities provided for by this Agreement. Purchaser, on the one hand, and Sellers, on the other hand, shall each pay their respective portions,
prorated as of the Closing Date, of state and local real and personal property taxes with respect to the Purchased Assets. 

 
 

ARTICLE II    
    
    REPRESENTATIONS AND WARRANTIES OF SELLERS    
  

        Sellers, other than Kim Berry, hereby jointly and severally represent and warrant to Purchaser as follows (provided that Kim Berry shall also make the
representations and warranties in Sections 2.2, 2.3, individually and with respect to herself only, and in 2.12, jointly and severally with the other Sellers, only with respect to the patent
application that she jointly owns with Craig Berry): 

        2.1    Organization.    Company is a corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to conduct its business as it is presently being conducted and to own and lease its properties and assets. Company has made a valid
election under Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code"). Company is duly qualified to do business as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is necessary under the applicable law as a result of its conduct of its business, and where the failure to be so qualified would have a Material Adverse
Effect. Company has no Subsidiaries. 

        2.2    Authorization.    The execution and delivery of this Agreement by Company and the performance of its
obligations hereunder have been duly authorized by the directors and the stockholder of Company and no other corporate action or approval by Company is necessary for the execution, delivery or
performance of this Agreement by Company. This Agreement has been duly executed and delivered by Sellers and is a valid and binding obligation of Sellers, enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to
or limiting creditors' rights generally and (b) general principles of equity (whether considered in an action in equity or at law). 

        2.3    No Conflict.    Neither the execution and delivery of this Agreement by any Seller nor the consummation of the
transactions contemplated hereunder nor the fulfillment by any Seller of any of its terms will, except as described on Schedule 2.3: 

        (a)  conflict
with or result in a breach by any Seller of, or constitute default by it under, or create an event that, with the giving of notice or the lapse of time, or
both, would be a default under or breach of, any of the terms, conditions or provisions of any indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement involving $25,000 or more, or
any other material contract, arrangement or agreement to which any Seller is a party or to which any material portion of the assets of Company is subject, the Certificate of Incorporation or Bylaws of
Company, or any judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects any Seller, or materially affects the ability of Company to conduct its
business, or of any Seller to own or convey its assets; 

        (b)  result
in the creation or imposition of any lien, charge or Encumbrance of any nature whatsoever upon any material portion of the assets of Company or which materially
affects the Company's ability to conduct its business as conducted prior to the date of this Agreement; or 

        (c)  cause
a loss or adverse modification of any permit, license, or other authorization granted by a Governmental Entity to or otherwise held by Company which is necessary
or materially useful to Company's business. 

6

 

Except
for this Agreement, no Seller has any legal obligation, absolute or contingent, to any other Person to sell any capital stock, the business, or substantially all of the assets of Company or to
effect any merger, consolidation or other reorganization of Company or to enter into any agreement with respect thereto. 

        2.4    Financial Statements.    

        (a)  Sellers
have delivered to Purchaser the compiled balance sheets of Company as for the years ended December 31, 1997, 1998, 1999, and 2000, and the related
statements of income and retained earnings and cash flows for the fiscal years then ended, and the compiled balance sheets and related statements of income and retained earnings and cash flow for the
six-month period ended June 30, 2001 (the "Financial Statements"). Except as set forth in Schedule 2.4, the Financial Statements are prepared in
accordance with GAAP consistently applied as at the dates and for the periods covered thereby (except that the May 31, 2001 statements are subject to year-end adjustments and are
not accompanied by footnote disclosures), present fairly in all material respects the financial position and results of operations and cash flows of Company as of the dates and for the periods then
ended, are in
agreement with the books and records of Company in all material respects, and contain and reflect adequate reserves, in accordance with GAAP, for all reasonably anticipated losses, costs and expenses. 

        (b)  Except
as set forth in Schedule 2.4 hereto, Company has no liabilities or obligations, either accrued, contingent or otherwise,
which, individually or in the aggregate, are material to Company, and which have not been reflected in the Financial Statements. Except as set forth in the Financial Statements or
Schedule 2.4 hereto, there are no facts known to any Seller or any other reasonable legal basis known to the Company or any Seller which any Seller has recognized
as reasonably likely to give rise to any material claims against or liabilities or obligations of Company. 

        (c)  Company
has, in accordance with good business practices, maintained complete and accurate books and records, including financial records which fairly present its
financial condition in all material respects and correct records of all its material corporate proceedings. 

        2.5    Absence of Certain Facts or Events.    Except as listed on Schedule 2.5,
since December 31, 2000 there has not been: 

        (a)  any
material damage, destruction or loss to the assets or business of Company, whether covered by insurance or not; 

        (b)  any
increase in the compensation payable or to become payable by Company to any employee, officer or director whose year 2000 annual remuneration exceeded $40,000, or in
the coverage or benefits under any bonus, insurance, pension or other Benefit Plan (excluding annual length-of-service and similar adjustments to the benefits of individual
participants); 

        (c)  any
sale, assignment or transfer of any contractual rights, claims or other assets of Company valued at more than $5,000 individually, or more than $25,000 in the
aggregate, other than in the ordinary course of business consistent with past practice; 

        (d)  any
mortgage, pledge, or other lien placed on Company assets to secure debt, or Encumbrance placed on assets of the Company which would prevent or materially limit the
use, modification or sale of an asset valued at $25,000 or more; 

        (e)  the
incurrence of any obligation or liability of Company as a result of borrowed money (except pursuant to existing credit agreements) or any capital expenditure in
either case, in excess of $25,000 and not described as planned or contemplated on Schedule 2.5, or, any commitment to borrow money entered into by Company, or any
increase in any loans made or agreed to be made by Company; 

7

 

        (f)    any
failure to pay or perform any obligation of Company involving more than $25,000 as, when and to the extent due other than pursuant to a good faith defense or right
of setoff; 

        (g)  any
intentional or, to the knowledge of any Seller, other waiver of any rights of substantial value to Company or any amendment or termination of any agreement to which
Company is a party which materially adversely affects, or is reasonably likely to materially adversely affect, the Company's results of operations or its financial condition; 

        (h)  any
material transaction entered into or consummated by Company, except in the ordinary course of business consistent with past practice; 

        (i)    any
material addition to or modification of the Benefit Plans of Company or other arrangements or practices affecting personnel of Company (other than extensions of
coverage thereunder to employees of Company who became eligible after December 31, 2000 in accordance with the terms of such Benefit Plans); 

        (j)    any
notice, from any customer of Company identified on Schedule 2.18, that such customer anticipates its annual purchases from
Company to decrease in any material respect as compared to year 2000 purchases; or 

        (k)  any
material adverse change or material casualty loss affecting the Business, Purchased Assets, Company or its financial condition, or any material adverse change in the
financial performance of Company. 

        2.6    Property, Leases and Liens.    

        (a)  Schedule 2.6
hereto accurately sets forth as of August 31, 2001, all owned or leased real properties and all items of
Furniture & Equipment, and other personal property of Company having an individual book value in excess of $5,000 which are used or necessary for the conduct of the Business in accordance with
past practice (the "Properties") and contains with respect to each of the Properties a list of all leases, franchises and similar agreements creating, or materially modifying or altering rights to
such Property, including zoning or use restrictions, and all Indebtedness secured by any Encumbrance on any such Property, specifying the nature thereof and the holder of such Indebtedness. The
agreements, contracts and commitments listed in Schedule 2.6 are in full force and effect without any material default, waiver or indulgence thereunder by Company
or by any other party thereto. Except as noted on Schedule 2.6, Company and/or Sellers have good and marketable title to all Properties and other assets of Company
used in the Business, in each case, free and clear of all Encumbrances of any nature whatsoever. 

        (b)  Except
as noted on Schedule 2.6, all Properties are in good condition (subject to ordinary wear and tear), have been maintained in
accordance with good industry practice and are suitable for the uses for which they are presently being used in the Business. 

        2.7    Contracts and Commitments.    

        (a)  Except
as set forth in Schedule 2.7, Company has no collective bargaining agreements, or any agreements that contain any severance
pay liabilities or obligations; employment, consulting or similar agreement, contract or commitment which is not terminable without penalty or cost by Company on notice of thirty (30) days or
less, or contains an obligation of Company to pay and/or accrue more than $5,000 individually, or $25,000 in the aggregate, per year; lease of real or personal property having a term in excess of one
year or remaining payments of $25,000 or more (as lessor or lessee); note or other evidence of Indebtedness for borrowed money or the deferred Purchase Price of property or services which involves a
liability of more than $25,000; agreement of guaranty or indemnification (other than rights of indemnification to which officers, directors, employees and agents of Company may be entitled by reason
of the laws of any state, or by the Bylaws or the Articles of Incorporation of Company); agreement, contract or commitment limiting 

8

 

the freedom of Company to engage in any line of business or compete with any Person; agreement, contract or commitment relating to expenditures in excess of $25,000; agreement, contract or commitment
relating to the acquisition of assets of, or any interest in, any business enterprise involving individual or aggregate payments in excess of $25,000; or other agreement, contract or commitment (with
customers or other Persons) which involves $25,000 or more and is not cancelable without penalty or cost within sixty (60) days. Company has delivered or made available to Purchaser all
documents required to be listed on Schedule 2.7. 

        (b)  Except
as set forth in Schedule 2.7: Company is not in violation of, nor has Company received any claim that it has breached, any of
the terms or conditions of any Assumed Contract in such manner as would permit any other party thereto to cancel or terminate the same or impose a fee or charge as a result of such breach, if any such
breach or breaches singly or in the aggregate is reasonably likely to have a Material Adverse Effect; each Assumed Contract is in full force and effect in the form delivered to Purchaser and there is
no material breach or default by any party thereto; and to the knowledge of Sellers, there are no facts or conditions which have occurred or are, based on facts presently known to exist, anticipated
which, through the passage of time or the giving of notice, or both, would constitute a default under any Assumed Contract giving rise to a right to cancel or a claim for damages in excess of $25,000,
or would cause the acceleration of any obligation of any party thereto or the creation of an Encumbrance which is reasonably likely to materially limit the use, modification or sale of any asset of
Company and/or the Business valued at more than $25,000. 

        2.8    Permits and Authorizations.    

        (a)  Schedule 2.8
lists each consent, license, permit, grant or other authorization of a Governmental Entity pursuant to which Company
conducts all or a material part of its business or holds any of its material assets (herein collectively called "Authorizations"). All Authorizations are in full force and effect and constitute all
Authorizations required to permit Company to operate its assets and conduct its business as such assets and business are presently operated and conducted. The consummation of the transactions
contemplated by this Agreement will not, except as disclosed on Schedule 2.8, require any transfer, renewal or notice with respect to any Authorizations. Where
permitted, the Sellers will cooperate with Purchaser to cause the Authorizations to be transferred to Purchaser. 

        (b)  Schedule 2.8
identifies all Authorizations which materially restrict the present output of Company, which limit the term of
possession or operation of any material assets of the Company, or which pertain to environmental discharge. 

        (c)  Except
as shown on Schedule 2.8, Company has not received in writing, or to the knowledge of any Seller, otherwise, any claim or
assertion that it has breached any of the terms or conditions of any Authorizations in such manner as would permit any other Person to cancel, terminate or materially amend any Authorization necessary
to permit the continued operation of Company as presently conducted or that any such breach or breaches singly or in the aggregate is reasonably likely to result in a penalty, fine or fee of more than
$25,000. 

        2.9    No Violations.    

        (a)  Except
as described on Schedule 2.9 hereto, Company is not in violation of any applicable law, statute, order, rule or regulation
promulgated or judgment entered (or, with respect to rules and regulations of administrative agencies, known by any Seller to be proposed) by any Governmental Entity in a manner which is reasonably
likely to have a Material Adverse Effect. 

        (b)  Except
for those filings listed on Schedule 2.9 hereto, no consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Entity is required to be made or obtained by Seller or Company in connection with the execution, delivery and 

9

 

performance by Seller and Company of this Agreement and the consummation of the transactions contemplated hereby, or the continued operation of Company's business. 

        2.10    Proceedings.    

        (a)  Schedule 2.10
lists all suits, actions and other legal proceedings and all other controversies, and, to Seller's or Company's
Knowledge, governmental investigations, pending against any Seller or as to which any Seller has received any claim or assertion. Except as set forth on
Schedule 2.10 hereto, there are no facts which any Seller has recognized as reasonably likely to lead to any additional investigation being conducted or to any
other suit, action or legal proceeding. 

        (b)  Except
as set forth in Schedule 2.10, there is no pending or, to the knowledge of any Seller, threatened claim, action, suit,
inquiry, proceeding or investigation by any individual or Governmental Entity in which a product of Company is alleged to have a defect and which is reasonably likely to result in a material claim. As
used in this Section 2.10, the term "product" shall mean any product designed, manufactured, shipped, sold, marketed, distributed and/or otherwise introduced into the stream of commerce by or
on behalf of Company, including, without limitation, any product sold in the United States by Company as the distributor, agent, or pursuant to any other contractual relationship with a manufacturer,
and the term "defect" shall mean a defect or impurity of any kind, whether in design, manufacture, processing, or otherwise, including, without limitation, any dangerous propensity associated with any
reasonably foreseeable use of a product, or the failure to warn of the existence of any defect, impurity, or dangerous propensity. 

        2.11    Insurance.    Schedule 2.11 lists all insurance policies owned or
maintained by Company, or by any Seller for the benefit of Company, and relating to the Business or the Purchased Assets. Such policies are not Purchased Assets. Each such insurance policy is or was
in full force and effect during the period(s) of coverage indicated on Schedule 2.11. 

        2.12    Proprietary Information and Rights.    Schedule 2.12 hereto accurately
lists all patents, patent applications, patent and know-how licenses, proprietary formulae, trademarks, service marks, trademark registrations and applications, trade names, fictitious
business names, computer software, internet domain names, and other intellectual property rights (collectively, "Business Rights") used, or intended for use, by Company in connection with the
Business. Schedule 2.12 discloses the identity of each other person which, owns any right, title or interest in and to the Business Rights. No Business Rights
conflict with, infringe on or otherwise violate any rights of others, or require payments to be made to any Person, or are subject to any pending or overtly threatened litigation or other adverse
claims or infringement by other Persons, except as set forth in Schedule 2.10 or Schedule 2.12. There has been no written, or to
the knowledge of any Seller, other claim of infringement by Company of any domestic or foreign patents, trademarks, service marks or copyrights of any other Person. 

        2.13    Employee Benefits.    

        (a)  Schedule 2.13
sets forth a list of all "employee benefit plans" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all other profit-sharing, deferred compensation, bonus, stock option, stock purchase, vacation pay, holiday pay, pension,
retirement plans, medical and other compensation or benefit arrangements maintained or contributed to or required to be contributed to by Company for the benefit of its employees (or former employees)
and/or their beneficiaries (collectively, "Benefit Plans"). 

        (b)  Each
Benefit Plan has been maintained and administered in all material respects in accordance with its terms and any related agreements, and with all applicable laws,
and Sellers have made all payments and contributions required to be made thereunder 

10

 

        (c)  All
vacation pay, bonuses, commissions, and other emoluments for employees of Company are reflected and have been properly accrued in the financial information provided
by Sellers to Purchaser and such accruals are adequate to meet the bona fide claims of employees. 

        (d)  There
is no contract, agreement or benefit arrangement covering any employee of Company which, individually or collectively, could give rise to the payment of any amount
which would constitute an "excess parachute payment" (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended). 

        (e)  Company
does not maintain any Benefit Plan that provides severance pay or medical benefits to one or more former employees (including retirees), or provides for
post-retirement benefits to present or former employees, other than benefits that are required to be provided pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985,
commonly known as "COBRA", or state law conversion rights. 

        2.14    Employment Laws.    Except as shown on Schedule 2.14: 

        (a)  Sellers
have taken (or will take prior to the Closing Date) all lawful steps necessary on the part of Sellers to cause the employees of Company listed on
Schedule 2.14 (the "Retained Employees") to become employees of Purchaser, effective as of the Closing Date. Sellers have paid or made adequate provision to pay all
wages and other compensation due through the Closing Date for all employees of Company, including accrued but unused vacation. 

        (b)  In
the conduct of the affairs of the Business, Sellers have complied in all material respects with all applicable laws, rules, and regulations relating to the employment
of labor and employment practices, including those relating to terms and conditions of employment, wages, hours, and collective bargaining. Company has made all required payments of social security,
unemployment and similar taxes. 

        (c)  Except
to the extent expressly provided herein, there are no, and in the past three years there have been no, material claims, grievances or arbitration proceedings,
workers' compensation proceedings, labor disputes (including charges of violations of any federal, state or local laws or regulations relating to current or former employees (including retirees) or
current or former applicants for employment), governmental investigations, or administrative proceedings of any kind pending or, to the best knowledge of any Seller, threatened against or relating to
Company, its employees or employment practices, or operations as they pertain to conditions of employment; nor is any Seller, subject to any order, judgment, decree, award, or administrative ruling
arising from any such matter. 

        (d)  No
collective bargaining agreement is currently in existence or is being negotiated by Company. 

        (e)  Company's
contracts, if any, with temporary personnel agencies represent bona-fide, arms-length agreements and the personnel provided by such
agencies are not Company's employees for purposes of any federal, state or local laws, including laws pertaining to tax withholding, provision of benefits or union representation, except as disclosed
on Schedule 2.14. 

        2.15    Environmental Laws.    

        (a)  Except
as disclosed on Schedule 2.15, (i) the Purchased Assets have been operated in compliance in all material respects with
all applicable Environmental Laws, (ii) there has been no production, storage, Release, or disposal of any Hazardous Materials in any material quantity at, in, on under, about or from any of
the Properties by or on behalf of Company or to Company's knowledge by any previous owner or tenant of the Properties, (iii) there has been no production, storage, Release or disposal of any
Hazardous Materials in any material quantity by or on behalf of Company at any other site, (iv) there are no underground storage tanks or electrical equipment 

11

 

containing PCB's on the Properties, or any asbestos-containing materials on the Properties, and (v) no Governmental Entity or any other Person has issued to Company or commenced any notice of
violation, notice to comply, compliance schedule, administrative or judicial complaint, enforcement action or lien with respect to alleged violations of Environmental Laws by or on behalf of Company
or relating to the Properties, or any proceeding or inquiry with respect to any actual or alleged violation of any Environmental Law or any release or alleged release of a Hazardous Material by or on
behalf of Company or relating to the Properties. 

        (b)  "Environmental
Law" shall mean all laws, federal, state or local, including statutes, regulations, rules, ordinances and orders which purport to regulate the Release of
Hazardous Materials to the environment, or impose requirements relating to environmental protection or public or employee health and safety, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act of
1976, as amended, 42 U.S.C. Section 6901 et seq., the Emergency Planning and Community
Right-to-Know Act, as amended, 42 U.S.C. Section 11001 et seq., the Clean Air Act, as amended, 42 U.S.C.
Section 7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et
seq., the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 300f et seq., the Federal Insecticide, Fungicide & Rodenticide Act, as amended, 7 U.S.C. Section 136  et seq.,
the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq., and
the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651 et seq.

        (c)  "Hazardous
Material(s)" shall mean any substance which is defined as a hazardous substance, hazardous material, hazardous waste, pollutant, contaminant or words of
similar import under any Environmental Law, a petroleum hydrocarbon, including crude oil or any fraction thereof, hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive,
carcinogenic or a reproductive toxicant, or regulated pursuant to any Environmental Law. 

        (d)  "Release"
shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment
(including the abandonment or discarding of barrels, containers, and other receptacles containing any Hazardous Material). 

        (e)  The
Company does not ship to, or distribute its products in, any country outside the United States except pursuant to arrangements in which the Company's customers
assume responsibility to comply with the environmental and safety laws of such country. 

        (f)    No
modification, revocation, reissuance, alteration, transfer or amendment of any environmental permits, or any review by, or approval of, any third party under any
environmental permits is required in connection with the execution or delivery of this Agreement or the consummation of the transactions contemplated hereby or the continuation of the business of
Company as currently conducted; and 

        (g)  Company
has not assumed, contractually or by operation of law, any liabilities or obligations under any Environmental laws except, in the case of those assumed by
operation of law, those assumed which in and of themselves (and irrespective of any contribution or indemnification rights) could not reasonably be expected to expose Company to liability in excess of
$50,000. 

        2.16    Taxes.    Except as set forth in Schedule 2.16 hereto, all federal, state,
foreign and local tax returns and tax reports (including information returns) required to be filed by Company have been filed with the appropriate Governmental Entities in all jurisdictions in which
such returns and reports are required to be filed, and all such returns and reports are, in all material respects, complete, 

12

 

accurate and in accordance with all legal requirements applicable thereto; all federal, state, foreign and material local income, profits, franchise, sales, use, occupation, property, excise,
withholding and other taxes, duties, charges and assessments (including interest and penalties) due from Company, have been
fully paid or adequately provided for on the books and financial statements of Company in accordance with GAAP or are disclosed on Schedule 2.16 and are being
contested in good faith by appropriate proceedings; the Company has not received any written notice or inquiry from the Internal Revenue Service or any other taxing authority in connection with any of
the returns and reports referred to in the foregoing clause (i) of any pending or threatened examination or audit which, individually or in the aggregate, if adversely decided against Company
would reasonably be likely to have a Material Adverse Effect; no waivers of statutes of limitation have been given or requested with respect to Company, the federal and state tax returns of Company
have been examined (or are no longer subject to examination) by the appropriate agency for all periods prior to and including the dates set forth on Schedule 2.16
for each category of tax return, and deficiencies asserted or assessments made as a result of examination by any taxing authorities have been fully paid or fully reflected on the books of Company.
Company has not made an election under Section 341(f) of the Code. 

        2.17    Accounts Receivable.    The Accounts Receivable were earned by performance in the ordinary course of business
and, except as set forth on Schedule 2.17, are not subject to any material dispute. 

        2.18    Customers and Suppliers.    Schedule 2.18 discloses, as of
December 31, 1999, and December 31, 2000 the identity of each of Company's ten (10) largest Customers for the fiscal years then ended, and the amounts receivable from each such
customer at the respective dates, and also discloses, as of August 15, 2001, the year-to-date sales for each Customer identified on
Schedule 2.18, and the amount owing from such customer on such date. Except as disclosed on Schedule 2.18, Company has not
received any written or, to the best knowledge of any Seller, any other notice that any Customer identified on Schedule 2.18 expects or intends that its future
purchases from Company, as compared to its purchases in the year ended December 31, 2000, will decrease in any material respects. 

        2.19    Inventories.    The inventories reflected on the Financial Statements, and thereafter acquired by Company
through the Closing Date, taken as a whole, are in all material respects of a quality and quantity usable in the normal course of the business of Company. The values at which such inventories are
carried on the Financial Statements reflect the normal inventory valuation policy of Company stating inventories at the lower of cost (on a first-in, first-out basis) or
market. Schedule 2.19 lists all inventories of raw materials, finished goods, packaging supplies or ingredients owned or in the custody of Company ("Inventory")
and, with respect to Inventory owned by or held for the account of a customer, identifies such customer and Inventory in reasonable detail, and specifies the location of such Inventory.
Schedule 2.19 also identifies all Inventory that as of August 31, 2001 is more than 60 days old and is not allocated to an existing customer order
requiring delivery within 90 days. 

        2.20    Warranties.    Schedule 2.20 contains a copy of the Company's written
warranty terms to its customers. Except as set forth on Schedule 2.20, Company has not given or made any other written or, to the knowledge of Sellers, oral
warranties to any Person with respect to any products sold or services performed. Sellers have no written or, to their knowledge, other notice of a claim against Company, whether or not fully covered
by insurance, for liability on account of products liability or on account of any express or implied warranty, except for warranty obligations and returns in the ordinary course of business consistent
with past practice for which appropriate reserves have been reflected in the Financial Statements. 

        2.21    Delivery of Documents.    Sellers have delivered to Purchaser true and correct copies of all documents, and
any and all amendments to any such documents, referred to in this Agreement or in any Schedule delivered to Purchaser pursuant to this Agreement. 

        2.22    No Finders or Brokers.    No Seller nor any of their respective Affiliates has entered into any agreement,
arrangement or understanding with any Person which could result in the obligation to pay any finder's fee, brokerage commission, advisory fee or similar payment in connection with the transactions
contemplated hereby. 

13

  

 
 

ARTICLE III    
    
    REPRESENTATIONS AND WARRANTIES OF PURCHASER    
  

        Purchaser hereby represents and warrants to Sellers as follows: 

        3.1    Organization.    Purchaser is a corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey, and has full corporate power and authority to perform this Agreement. 

        3.2    Authorization.    The execution and delivery of this Agreement by Purchaser and the performance of its
obligations hereunder have been duly authorized by the directors of Purchaser and no other corporate action or approval by Purchaser is necessary for the execution, delivery or performance of this
Agreement by Purchaser. This Agreement has been duly executed and delivered by Purchaser, and is a valid and binding obligation of Purchaser, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or limiting creditors' rights
generally, and general principles of equity (whether considered in an action in equity or at law). 

        3.3    No Conflict.    Neither the execution and delivery of this Agreement by Purchaser nor the consummation of the
transactions contemplated hereunder nor the fulfillment by Purchaser of any of its terms will, except as described in Schedule 3.3: 

        (a)  conflict
with or result in a breach by Purchaser of, or constitute a default by it under, or create an event that, with the giving of notice or the lapse of time, or
both, would be a default under or breach of, any of the terms, conditions or provisions of (i) any indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement or any other
material contract, arrangement or agreement to which Purchaser is a party or to which a material portion of its assets is subject, (ii) Certificate of Incorporation or Bylaws of Purchaser, or
(iii) any judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects Purchaser or which materially affects the Purchaser's ability to conduct its
business; 

        (b)  result
in the creation or imposition of any lien, charge or Encumbrance of any nature whatsoever upon any material portion of the assets of Purchaser or which materially
affects the Purchaser's ability to conduct its business as conducted prior to the date of this Agreement; or 

        (c)  cause
a loss or adverse modification of any permit, license, or other authorization granted by any Governmental Entity to or otherwise necessary or materially useful to
Purchaser's business. 

        3.4    No Finders or Brokers.    Purchaser has not entered into any agreement, arrangement or understanding with any
Person which could result in the obligation to pay any finder's fee, brokerage commission, advisory fee or similar payment in connection with this Agreement or the transactions contemplated hereby,
except Stone Creek Capital and HarbourVest Partners, whose fees and expenses will be paid by Purchaser or its Affiliates. 

 
 

ARTICLE IV    
    
    COVENANTS    
  

        4.1    Confidentiality.    

        (a)  Until
the Closing, Purchaser shall treat in confidence all non-public documents, materials and other information which Purchaser shall have obtained
regarding Company during the course of the negotiations leading to the transactions contemplated hereby, the investigation of Company and the preparation of this Agreement, and in the event the sale
and purchase hereunder shall not be consummated, Purchaser shall return all copies of non-public documents and materials which 

14

 

have been furnished in connection therewith. However, nothing contained herein shall prohibit Purchaser hereto from: 

        (i)    using
such documents, materials and other information in connection with any action or proceeding brought or any claim asserted by Seller or Company hereto in respect of
any breach of any representation, warranty or covenant made in or pursuant to this Agreement, or 

        (ii)  supplying
or filing such documents, materials or other information to or with any Governmental Entity or other Person which Purchaser and Seller deem reasonably
necessary in connection with the obtaining of any consent, waiver, amendment, modification, approval, authorization, permit or license which may be necessary to effectuate this Agreement and to
consummate the transactions contemplated hereby. 

        (b)  From
and after the date hereof, each Seller shall treat, and shall cause each of its Affiliates to treat, in confidence all documents, materials and other information
regarding Purchaser or Company or their respective Affiliates which are in his or its possession or control. 

        4.2    Fulfillment of Conditions.    

        (a)  Sellers
will use all reasonable efforts to perform, comply with and fulfill all obligations, covenants and conditions required by this Agreement to be performed,
complied with or fulfilled by Sellers prior to or as of the Closing Date. Purchaser will use all reasonable efforts to perform, comply with and fulfill all obligations, covenants and conditions
required by this Agreement to be performed, complied with or fulfilled by Purchaser prior to or as of the Closing Date. 

        (b)  Sellers
will use all reasonable efforts to secure all necessary consents, waivers, permits, approvals, licenses and authorizations and will make all necessary filings in
order to enable Sellers to consummate the transactions contemplated hereby. Purchaser will use all reasonable efforts to secure all necessary consents, waivers, permits, approvals, licenses and
authorizations and will make all necessary filings in order to enable Purchaser to consummate the transactions contemplated hereby. 

        4.3    Post-Closing Access by Sellers.    After the Closing, Purchaser shall cooperate with Sellers to the
extent reasonably requested by Sellers, and shall make available to Sellers all financial, insurance, tax and other information of Purchaser (including reasonable access to books and records)
regarding the Purchased Assets with respect to any fiscal period ending on or prior to the Closing Date to the extent reasonably required by Sellers in connection with (a) any audit or other
investigation by any taxing authority, (b) the prosecution or defense of any claims or related litigation that might give rise to indemnification payments hereunder or (c) the
preparation by Sellers of tax returns or any other reports or submissions to any Governmental Entity required to be made by Sellers; provided that such cooperation and availability of information do
not unreasonably interfere with the normal business of Purchaser and provided, further, that Seller reimburses Purchaser for any necessary third-party expenses reasonably incurred to provide such
information. 

        4.4    Transition Period.    Sellers will cooperate with Purchaser in all reasonable respects to relocate the
Purchased Assets from Company's facility in Connecticut to Purchaser's facility in New Jersey as promptly as possibly following the Closing. Such cooperation will include assisting Purchaser with
proper installation of all machinery and equipment constituting Purchased Assets. Purchaser shall pay
all costs associated with the removal and installation of the Purchased Assets, including expenses incurred in transporting the Purchased Assets. 

        4.5    Retained Employees.    On the Closing Date, Purchaser shall offer employment to all of the Retained Employees
in accordance with Purchaser's standard hiring practices, which includes verification by Purchaser of each Retained Employee's legal authority to work in the United States in accordance with all
applicable federal, state and local laws, rules and regulations, and successful 

15

 

completion by each Retained Employee of a pre-employment physical and drug and alcohol screening. Purchaser's obligations under this Section 4.5 are conditioned upon Purchaser
being satisfied, in its sole and absolute discretion, that all Retained Employees have satisfied Purchaser's hiring requirements as described above. Sellers shall retain all liabilities for payroll,
withholding taxes, and all other obligations relating to employees of Company who are not hired by Purchaser following the Closing, and all liabilities and obligations relating to Retained Employees
which arose out of or related to periods ending on or prior to the Closing Date. 

        4.6    Amendment to Certificate of Incorporation of Company.    Promptly following the Closing, Sellers shall take all
actions required to amend the Certificate of Incorporation of Company to change the corporate name of Company from "Dermal Sciences, Inc." to another available corporate name. 

        4.7    Further Assurances.    Each of the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper or advisable to consummate and carry out the intent and the purposes of this Agreement, including executing and
delivering all documents reasonably requested by Purchaser and its counsel for the purpose of transferring to Purchaser title to all of the Purchased Assets. 

        4.8    Management Equity Purchase.    Following the Closing, but in any event no later than December 31, 2001,
Outsourcing Services Group, Inc., parent company of Purchaser ("Parent"), will offer for purchase to Craig Berry shares of common stock, par value $0.001, of Parent at the
then-current fair market value for such shares. 

        4.9    Reimbursement for Facility Lease.    After Sellers have exhausted the Facility Payment through payment of all
regular monthly expenses (including rent and other apportioned expenses as set forth in the Facility Lease) properly incurred by Sellers after the Closing Date in connection with the Facility Lease,
Purchaser will reimburse Sellers for all additional regular monthly expenses properly incurred by Sellers with respect to the Facility Lease through June 30, 2002, the expiration date of the
Facility Lease. Purchaser shall reimburse Sellers for such expenses within two (2) Business Days after Purchaser receives from Craig Berry proof of payment of such expenses. Notwithstanding the
foregoing, Purchaser shall have no obligation to reimburse Sellers for expenses incurred under the Lease which arise out of the negligent or intentional wrongful acts of Sellers or any of their
licensees and/or invitees on the Premises. 

 
 

ARTICLE V    
    
    CONDITIONS OF CLOSING    
  

        5.1    Conditions of Obligations of Purchaser.    The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following conditions, any of which may be waived by Purchaser. 

        (a)    Representations and Warranties; Performance of Obligations.    The representations and warranties of Sellers
set forth in Article II hereof and in all agreements, documents and instruments executed and delivered pursuant hereto or in connection with the Closing shall be true and correct in all
material respects as of the Closing Date. Sellers shall have performed in all material respects the agreements and obligations necessary to be performed by him or it under this Agreement prior to the
Closing Date. This condition shall not be deemed unsatisfied if Seller delivers new, revised or updated Schedules to this Agreement; provided that no information on such Schedules is, in Purchaser's
reasonable judgment, adverse to Company's or Purchaser's ability to operate its business following the Closing, or Company's financial condition or prospects, or to Purchaser's financing. 

16

 

        (b)    Certificate and Deliveries by Seller.    Purchaser shall have received a certificate, dated the Closing Date,
signed by Seller and by an officer of Company, certifying that the conditions specified in Section 5.1(a) have been fulfilled. 

        (c)    No Injunction.    No preliminary or permanent injunction or order that would prohibit or restrain the
consummation of the transactions contemplated hereunder shall be in effect and no Governmental Entity or other Person shall have commenced or threatened to commence an action or proceeding seeking to
enjoin the consummation of such transactions or to impose liability on the parties hereto in connection therewith. 

        (d)    Financing.    Purchaser shall not have received from Purchaser's lenders any notice or claim that to consummate
the transactions hereunder or to pay the Purchase Price, will constitute or result in a default under Purchaser's lending arrangements. 

        (e)    Other Consents.    Purchaser and Sellers shall have received all other consents required to be obtained in
connection with the consummation of the transactions contemplated hereunder. 

        (f)    Instruments of Transfer.    Sellers shall have delivered to Purchaser possession of all Purchased Assets, and
executed and delivered all documents purporting to transfer the Purchased Assets, including the Patent Assignment executed by Craig Berry and Kim Berry, a form of which is attached hereto as
Exhibit 4; the Trademark Assignment, executed by Company, a form of which is attached hereto as Exhibit 5; the Bill of Sale; and
all documents required to properly transfer Company's internet domain name to Purchaser. All certificates, instruments and documents delivered by Sellers in connection with the transactions
contemplated hereby and necessary to evidence such transactions shall be in form and substance reasonably satisfactory to Purchaser and its counsel. 

        (g)    Employment and Non-Competition Agreement.    Purchaser shall have received an original Employment
and Non-Competition Agreement, between Purchaser and Craig Berry, substantially in the form of Exhibit 6 hereto (the "Employment Agreement"). 

        (h)    Opinion of Counsel to Seller and Company.    Purchaser shall have received the opinion of Moshe Katlowitz,
counsel to Sellers, dated the Closing Date, substantially in the form of Exhibit 7 hereto. 

        (i)    Due Diligence.    Purchaser and its lenders shall have completed prior to Closing a due diligence investigation
of the business, operations, condition (financial and otherwise) and prospects of Company, and the results of such investigation shall be satisfactory to Purchaser in its sole discretion and to its
lenders. Unless Purchaser notifies Sellers, on or before the execution of this Agreement, that Purchaser is not satisfied, this condition shall be regarded as satisfied. 

        (j)    No Material Adverse Change.    Purchaser shall be satisfied in its reasonable discretion that there has been no
material adverse change after the date hereof in the business, operations, condition (financial or otherwise) or prospects of Company since December 31, 2000. 

        (k)    Schedules.    All required Schedules shall have been delivered to Purchaser and its lenders, and shall have
been acceptable to Purchaser in its sole reasonable discretion. 

        (l)    Escrow.    The Escrow Agreement shall have been executed and delivered. 

        5.2    Conditions of Obligations of Sellers.    The obligations of Sellers to consummate the transactions contemplated
by this Agreement are subject to the satisfaction of the following conditions, each of which may be waived by Sellers: 

        (a)    Representations and Warranties; Performance of Obligations.    The representations and warranties of Purchaser
set forth in Article III hereof and in all agreements, documents and instruments executed and delivered pursuant hereto or in connection with the Closing shall be true 

17

 

and correct in all material respects as of the Closing Date. Purchaser shall have performed in all material respects the agreements and obligations necessary to be performed by it under this
Agreement prior to the Closing Date. 

        (b)    Certification by Purchaser.    Sellers shall have received a certificate, dated the Closing Date, signed by an
officer of Purchaser, certifying that the conditions specified in Section 5.2(a) have been fulfilled. 

        (c)    No Injunction.    No preliminary or permanent injunction or order that would prohibit or restrain the
consummation of the transactions contemplated hereunder shall be in effect and no Governmental Entity or other Person shall have commenced or threatened to commence an action or proceeding seeking to
enjoin the consummation of such transactions or to impose liability on the parties hereto in connection therewith. 

        (d)    Ancillary Documents.    Craig Berry shall have received an original Employment Agreement, duly executed by
Purchaser, and Sellers shall have received the Bill of Sale and Escrow Agreement executed by Purchaser. 

        (e)    Opinion of Counsel to Purchaser.    Sellers shall have received the opinion of Paul, Hastings,
Janofsky & Walker, counsel to Purchaser, dated the Closing Date, substantially in the form of Exhibit 8 hereto. 

        (f)    Purchase Price.    Sellers shall have received (i) the Closing Date Payment, (ii) the Campus
Lease Payment, and (iii) the Facility Lease Payment, as provided in Section 1.5. 

 
 

ARTICLE VI    
    
    CLOSING DATE AND TERMINATION OF AGREEMENT    
  

        6.1    Closing Date.    The closing for the consummation of the purchase and sale contemplated by this Agreement (the
"Closing") shall, unless another date or place is agreed to in writing by Seller and Purchaser, take place at the New York offices of Paul, Hastings Janofsky & Walker LLP, on the date (the
"Closing Date") on which each condition set forth in Article V is satisfied or waived. 

        6.2    Termination of Agreement.    This Agreement may be terminated and abandoned at any time prior to the Closing
Date: 

        (a)  by
Purchaser or Sellers if, without fault of such terminating party, the Closing shall not have been consummated on or before November 15, 2001; 

        (b)  By
Purchaser if there has been a material breach by any Sellers of the representations, warranties or covenants contained in this Agreement, which breach either cannot
be cured or is not being cured to the satisfaction of Purchaser; or 

        (c)  By
Sellers if there has been a material breach by Purchaser of the representations and warranties contained in this Agreement, which breach either cannot be cured or is
not being cured to the satisfaction of Sellers. 

        6.3    Effect of Termination.    In the event of termination of this Agreement as provided in Section 6.2,
notice thereof shall be promptly given by the terminating party to the other parties and thereafter this Agreement shall forthwith become void, and there shall be no liability or obligation on the
part of Purchaser or Sellers or any of their respective Affiliates (a) except that Section 4.1 shall remain in full force and effect, and (b) nothing herein will relieve any party
from liability for any breach of any representation, warranty, agreement or covenant herein or damages resulting therefrom. 

18

 
 
 

ARTICLE VII    
    
    INDEMNIFICATION    
  

        7.1    Indemnification by Sellers.    

        (a)  Subject
to the provisions of Sections 7.1(b) and 7.3 below, Sellers shall indemnify Purchaser and its Affiliates including, without limitation, Company, and each of
their respective stockholders, officers, directors, employees and representatives (each, a "Purchaser Indemnitee") against, and hold each Purchaser Indemnitee harmless from, any and all loss, damage,
liability, payment, and obligation, and all expenses, including without limitation reasonable legal fees (collectively "Losses"), incurred, suffered, sustained or required to be paid, directly or
indirectly, by, or sought to be imposed upon, such Purchaser Indemnitee after the Closing Date resulting from, related to or arising out of (i) any inaccuracy in or breach of any of the
representations, warranties or covenants made by any Seller in or pursuant to this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with
the Closing of the transactions contemplated hereunder; (ii) the operation of the Purchased Assets through the Closing Date; (iii) the Excluded Assets or Excluded Liabilities; and
(iv) all other obligations or liabilities based upon or arising out of the conduct of the Business by Sellers prior to the Closing. The obligations of Sellers under this Article VII
shall be joint and several, with the exception of Kim Berry whose obligations shall be limited to her interest in the Escrow Deposit. 

        (b)  No
Purchaser Indemnitee shall be entitled to indemnification pursuant to this Section 7.1 in respect of an inaccuracy in or breach of any representation or
warranty (other than with respect to the representations and warranties in Sections 2.2 (Authorization) and Section 2.6 (Property, Leases and Liens), and with respect to any breach or
inaccuracy of any representation or warranty actually known or intended by any Seller prior to Closing, which shall not be subject to the Selllers' Basket or the Sellers' Cap), until such time as the
Losses of all Purchaser Indemnitees exceed Fifty Thousand Dollars ($50,000) ("Sellers' Basket") in the aggregate; provided that all claims by Purchaser Indemnitees for
indemnification shall accrue in the aggregate until the Losses of all Purchaser Indemnitees exceed the Sellers' Basket and thereupon Sellers shall become obligated to indemnify the Purchaser
Indemnitees only for the amount by which all such claims exceed Sellers' Basket. In no event shall Sellers' indemnification obligations in this Section 7.1 exceed an aggregate of Five Hundred
Thousand Dollars ($500,000) ("Sellers' Cap"). 

        (c)  Each
Purchaser Indemnitee shall promptly give written notice to Sellers of the assertion by any Person of any claim, action, suit or proceeding with respect to which
Sellers is obligated to provide indemnification hereunder; provided, however, that the rights of a Purchaser Indemnitee to be indemnified
hereunder shall only be affected by the failure to give such notice if and to the extent such failure prejudices Sellers in the defense of such third party claim. Amounts due with respect to Losses
covered by this Section 7.1 shall be paid promptly after delivery of reasonably documented written notice of the amount of Losses incurred, subject to the provisions of Section 7.1(b).
Sellers shall have the right, but not the obligation, to contest, defend or litigate, and to retain counsel of their choice in connection with, any claim, action, suit or proceeding by any third party
alleged or asserted against a Purchaser Indemnitee that is subject to indemnification by Sellers hereunder, and the cost and expense thereof shall be subject to the indemnification obligations of
Sellers hereunder; provided, that each Purchaser Indemnitee shall have the right and option to participate in, but not control, the defense of such action at its own
expense; and provided, further, that, (i) if Sellers elect not to defend any such
action or (ii) if a Purchaser Indemnitee shall have defenses not available to Sellers and if counsel to Purchaser shall advise in a written opinion that common representation is not
appropriate, then such Purchaser Indemnitee shall be entitled, at its option through counsel of its choice, but at Sellers' expense, to assume and control the defense of such action. Neither Sellers,
on the one hand, nor any Purchaser 

19

 

Indemnitee, on the other hand, shall be entitled to settle or compromise any such claim, action, suit or proceeding without the prior written consent of such Purchaser Indemnitee or Sellers, as the
case may be, which consent shall not be unreasonably withheld. 

        7.2    Indemnification by Purchaser.    

        (a)  Subject
to the provisions of Sections 7.2(b) and 7.4 below, Purchaser shall indemnify Sellers and their Affiliates and each of their respective stockholders, officers,
directors, employees and representatives (each a "Seller Indemnitee") against, and hold each Seller Indemnitee harmless from, any and all Losses incurred, suffered, sustained or required to be paid,
directly or indirectly, by or sought to be imposed upon, such Seller Indemnitee resulting from, related to or arising out of (i) any inaccuracy in or breach of any of the representations,
warranties or covenants made by Purchaser in or pursuant to this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the Closing of the
transactions contemplated hereunder, and (ii) operation of the Business following the Closing Date, including assumption of the Assumed Liabilities and operation of the Purchased Assets. 

        (b)  No
Seller Indemnitee shall be entitled to indemnification pursuant to this Section 7.2 in respect of an inaccuracy in or breach of any representation or warranty,
until such time as the Losses of all Seller Indemnitees exceed Fifty Thousand Dollars ($50,000) ("Purchaser's Basket") in the aggregate; provided that all claims by Seller
Indemnitees for indemnification shall accrue in the aggregate until the Losses of all Seller Indemnitees exceed the Purchaser's Basket and thereupon Purchaser shall become obligated to indemnify the
Seller Indemnitees only for the amount by which all such claims exceed Purchaser's Basket. In no event shall Purchaser's indemnification obligations in this Section 7.2 in the aggregate exceed
Five Hundred Thousand Dollars ($500,000) ("Purchaser's Cap"). 

        (c)  Each
Seller Indemnitee shall promptly give written notice to Purchaser of the assertion by any Person of any claim, action, suit or proceeding with respect to which
Purchaser is obligated to provide indemnification hereunder; provided, however, that the rights of a Seller Indemnitee to be indemnified
hereunder shall only be affected by the failure to give such notice if and to the extent such failure prejudices Purchaser in the defense of such third party claim. Amounts due with respect to Losses
covered by this Section 7.2 shall be paid promptly after delivery of reasonably documented written notice of the amount of Losses incurred, subject to the provisions of Section 7.2(b),
if applicable. Purchaser shall have the right, but not the obligation, to contest, defend or litigate, and to retain counsel of its choice in connection with, any claim, action, suit or proceeding by
any third party alleged or asserted against a Seller Indemnitee that is subject to indemnification by Purchaser hereunder, and the cost and expense thereof shall be subject to the indemnification
obligations of Purchaser hereunder; provided, that each Seller Indemnitee shall have the right and option to participate in, but not control,
the defense of such action at its own expense; and provided, further, that if Purchaser elects not to defend any such action or if a Seller
Indemnitee shall have defenses not available to Purchaser and if counsel to Seller shall in a written opinion advise that common representation is not appropriate, then such Seller Indemnitee shall be
entitled, at its option through counsel of its choice, but at Purchaser's expense, to assume and control the defense of such action. Neither any Seller Indemnitee, on one hand, nor Purchaser, on the
other hand, shall be entitled to settle or compromise any such claim, action, suit or proceeding without the prior written consent of such Seller Indemnitee or Purchaser, as the case may be, which
consent shall not be unreasonably withheld. 

        7.3    Indemnity for Taxes, Environmental Matters, and Patent Infringement Claims.    

        (a)  Notwithstanding
Section 7.1, there shall be no minimum amount, and no maximum liability, with respect to indemnification for Taxes. Sellers shall indemnify the
Purchaser Indemnitees from and against any liability for Taxes relating to the Business based upon or arising 

20

 

out of matters prior to the Closing. Purchaser shall indemnify Sellers from and against all Tax liability relating to the Purchased Assets based upon or arising from matters following the Closing. 

        (b)  Notwithstanding
Section 7.1, there shall be no minimum amount, and no maximum liability, with respect to indemnification for environmental matters. Sellers shall
indemnify the Purchaser Indemnitees from and against any liabilities arising out of, based upon or relating to environmental matters or conditions which first existed or occurred prior to the Closing.
The provisions of this Section 7.3(b) shall apply regardless of whether such matters were disclosed to Purchaser prior to the Closing Date. Purchaser shall indemnify Seller Indemnitees from and
against any liabilities arising out of, based upon or relating to environmental matters or conditions which first exist or occur following the Closing Date. 

        (c)  Notwithstanding
any limitations of or exceptions stated in this Article 7, Sellers shall indemnify the Purchaser Indemnitees from and against any and all Losses
related to, and Purchaser shall not assume any liability for, any claims by third parties, whether pending or threatened, that the patents held by the Sellers on the Closing Date which constitute part
of the Purchased Assets infringe upon, or violate in any manner, such third party's intellectual property rights (even if such claims are disclosed). The obligations of the Sellers under this
Section 7.3(c) shall survive the Closing for a period of five (5) years. 

        7.4    Survival of Representations and Warranties; Reliance.    

        (a)  All
representations and warranties contained herein or made pursuant hereto shall survive the Closing hereunder until the second anniversary thereof, except that the
representations and warranties in Section 2.2 (Authorization) shall never expire and that the representations and warranties in Section 2.12 (Proprietary Information and Rights),
Section 2.13 (Employee Benefits), Section 2.15 (Environmental Laws) and Section 2.16 (Taxes) shall survive the Closing until the expiration of the
applicable statute of limitations; provided however, that the representations and warranties in Section 2.12 (Proprietary Information and Rights) applicable to
patents and patent applications shall survive the Closing until the expiration of the life of such patent or the life of any patent issued on such patent application. The expiration of any
representation and warranty shall not affect any claim for indemnification made prior to the date of such expiration. 

        (b)  The
representations and warranties made by any party in this Agreement or in any agreement, certificate, schedule or exhibit delivered in connection with this Agreement
may be fully and completely relied upon by each other party unless the party seeking to avoid such representation or warranty can demonstrate that the investigation made by or on behalf of such other
party actually revealed or disclosed the inaccuracy in question. 

        7.5    Payments from Escrow.    Any amount due from Sellers pursuant to Sections 7.1 or 7.3 may be claimed by
Purchaser pursuant to the Escrow Agreement, but the amounts held in escrow shall not be the exclusive source of indemnification. 

        7.6    Indemnification Exclusive.    Absent common law fraud or intentional misrepresentation, the indemnification
provisions of this Article 7 shall be the exclusive remedy for breach of any representation or warranty contained in this Agreement. 

 
 

ARTICLE VIII    
    
    MISCELLANEOUS    
  

        8.1    Further Actions.    From time to time, as and when requested by Purchaser, Sellers shall execute and deliver,
or cause to be executed and delivered, such documents and instruments and shall take, or cause to be taken, such further or other actions as Purchaser may reasonably deem necessary or desirable to
carry out the intent and purposes of this Agreement, to transfer, assign and deliver to 

21

 

Purchaser, and its successors and assigns, effective as of the Closing, possession of and all rights to the Purchased Assets (or to evidence the foregoing) and to consummate and give effect to the
other terms and conditions of this Agreement and all other documents executed simultaneously herewith. 

        8.2    Expenses.    Except as otherwise specifically provided herein, Sellers, on the one hand, and Purchaser, on the
other hand, shall each bear their own legal fees and other costs and expenses with respect to
the negotiation, execution and delivery of this Agreement and the consummation of the transactions hereunder. Nothing in this Section 8.2 shall prohibit either party from recovering expenses as
part of the damages for a breach of this Agreement 

        8.3    Entire Agreement.    This Agreement, which includes the Appendix, the Schedules and the Exhibits hereto and the
other documents, agreements and instruments executed and delivered pursuant to this Agreement, contain the entire agreement between the parties hereto with respect to the transactions described in
this Agreement and supersedes all prior arrangements, agreements and understandings, whether oral or in writing, with respect thereto. 

        8.4    Descriptive Headings.    The descriptive headings of this Agreement are for convenience only and shall not
control or affect the meaning or construction of any provision of this Agreement. 

        8.5    Notices.    All notices or other communications which are required or permitted hereunder shall be in writing
and sufficient if (a) delivered personally or (b) sent by registered or certified mail, postage prepaid, return receipt requested, or (c) sent by overnight courier with a
nationally recognized courier, or (d) via facsimile with a confirmation sent in any of the manners set forth in (a)-(c) of this Section, as follows: 

	If to Sellers:	 	Craig Berry

2 Taylor Lane

Westport, Connecticut 06880

Facsimile: (    )      -        
	

with a copy to:	
 	

Law Offices of Moshe Katlowitz

Attention: Moshe Katlowitz

342 Madison Avenue, Suite 1820

New York, NY 10173

Facsimile: (212) 271-7601
	

If to Purchaser:	
 	

Acupac Packaging, Inc.

Attention: Ken Beck

25 Commerce Drive

Allendale, NJ 07401

Facsimile: (201) 785-9635
	

with a copy to:	
 	

Paul, Hastings, Janofsky & Walker LLP

Attention: Peter J. Tennyson

695 Town Center Drive, Seventeenth Floor

Costa Mesa, CA 92626

Facsimile: (714) 979-1921

If
sent by mail, notice shall be considered delivered five (5) Business Days after the date of mailing, and if sent by any other means set forth above, notice shall be considered delivered upon
receipt thereof. Any party may by notice to the other parties change the address to which notice or other communications to it are to be delivered or mailed. 

        8.6    Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of
Delaware (other than the choice of law principles thereof). Any action, suit or 

22

 

other proceeding initiated by Sellers or Purchaser against any other party under or in connection with this Agreement may be brought in any Federal or state court in the State of New York, as the
party bringing such action, suit or proceeding shall elect, having jurisdiction over the subject matter thereof. Sellers and Purchaser hereby submit themselves to the jurisdiction of any such court
and agree that service of process on them in any such action, suit or proceeding may be effected by the means by which notices are to be given to it under this Agreement. 

        8.7    Assignability.    This Agreement shall not be assignable by any party without the written consent of the other
parties and any such purported assignment by any party without such consent shall be void, except that: 

        (a)  any
or all rights of Purchaser to receive the performance of the obligations of Sellers hereunder (but not the obligations of Purchaser to Sellers hereunder) and rights
to assert claims against Sellers in respect of any inaccuracy in or breach of any representations, warranties or covenants of Sellers hereunder, may be assigned by Purchaser to a direct or indirect
subsidiary of Purchaser, and 

        (b)  Purchaser
may assign to any bank, insurance company or other financial institution providing financing or extending credit to Purchaser or Company any or all of its
rights to assert claims against any Seller in respect of any inaccuracy in or breach of representations, warranties or covenants under this Agreement, but any assignee of such rights under
clause (a) or clause (b) shall take such rights subject to any defenses, counterclaims and rights of set-off to which any Seller might be entitled under this Agreement. This
Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. 

        8.8    Waivers and Amendments.    Any waiver of any term or condition of this Agreement, or any amendment or
supplementation of this Agreement, shall be effective only if in writing. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect,
limit or waive a party's rights hereunder at any time to enforce strict compliance thereafter with every term or condition of this Agreement. 

        8.9    Third Party Rights.    Notwithstanding any other provision of this Agreement, and except as expressly provided
in Sections 7.1 or 7.2 hereof or as permitted pursuant to Section 8.7 hereof, this Agreement shall not create benefits on behalf of any shareholder or employee of Purchaser or Company, or any
other Person (including without limitation any broker or finder), and this Agreement shall be effective only as between the parties hereto, their successors and permitted assigns. 

        8.10    Public Announcements.    Purchaser and Sellers will consult with each other before issuing any press release
or otherwise making any public statements with respect to the transactions contemplated by this Agreement and neither Purchaser, nor any Seller shall issue any such press release or make any such
public statement without the prior approval of the other parties both as to the making of such release or statement and as to the form and content thereof, except to the extent that such party is
advised by counsel, in good faith, that such release or statement is required as a matter of law. 

        8.11    Counterparts.    This Agreement may be executed in any number of counterparts, and each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. The parties hereto agree that for purposes of this section, facsimile
signatures shall be accepted as if they were originals. 

[SIGNATURE
PAGE FOLLOWS] 

23

 
[SIGNATURE
PAGE TO ASSET PURCHASE AGREEMENT] 

        IN
WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as of the date first above written. 

	 	 	"Purchaser"
	

 	
 	

ACUPAC PACKAGING, INC.
	

 	
 	

By:	

/s/  PERRY MORGAN      
 Name: Perry Morgan

Title: Chief Financial Officer
	

 	
 	

"Company"
	

 	
 	

By:	

/s/  CRAIG J. BERRY      
 Name: Craig J. Berry

Title: President
	

 	
 	

"Sellers"
	

 	
 	

/s/  CRAIG J BERRY      
 Craig J. Berry
	

 	
 	

/s/  KIM R. BERRY      
 Kim R. Berry

24

 
 

APPENDIX A    
    
    Definitions    
  

        Capitalized terms in this Agreement shall have the meanings ascribed to them in this Appendix A unless such terms are defined elsewhere in this Agreement: 

        Affiliate:
With respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition, "control" means the power to direct the management and policies of another Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 

        Business
Day: Any day that is not a Saturday, Sunday, or a day on which commercial banks in New York, New York are permitted or required by law to be closed. 

        Encumbrance:
Any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and, with respect to capital stock, any option or other right to purchase or
any restriction on voting or other rights. 

        Funded
Debt: Bank loans and any other interest bearing debt obligation, capital leases, outstanding letters of credit, bankers acceptances, past due trade
payables, customer deposits and deferred revenue. 

        GAAP:
Generally accepted accounting principles as set forth in statements from Auditing Standards No. 69 entitled "The Meaning of `Present Fairly in
Conformance with Generally Accepted Accounting Principles in the Independent Auditors Reports"'issued by the Auditing Standards Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination. 

        Governmental
Entity: Any nation or any state, commonwealth, territory, possession or tribe and any political subdivision, courts, departments, commissions,
boards, bureaus, agencies or other instrumentalities of any of the foregoing. 

        Indebtedness:
With respect to any Person (a) all indebtedness for borrowed money; (b) that portion of obligations with respect to capital
leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (c) notes payable and drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of the deferred Purchase Price of property or services if the Purchase Price is due more than six months from the
date the obligation is incurred or is evidenced by a note or similar written instrument; and (e) all indebtedness secured by any Encumbrance on any property or asset owned or held by that
Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person. 

        "Knowledge"
of the Company or statements about facts or circumstances recognized by the Company shall refer to the actual knowledge, after such inquiry of
Company personnel and review of Company records (but without independent inquiry) as they deem appropriate, of Craig Berry and Christopher Smith. 

        Material
Adverse Effect: A material adverse effect on the business, operations, condition (financial or otherwise) or prospects of Company. 

        Person:
An individual, corporation, partnership, joint venture, trust or unincorporated organization or association or other form of business enterprise or a
Governmental Entity. 

        Purchaser's
Accountants: Deloitte & Touche, LLP 

        Sellers'
Accountants: Gelfand and Solek 

 

        Subsidiary:
With respect to any Person, any other Person whose voting securities or other ownership interests directly or indirectly are owned by such
Person. 

        Tax:
Any and all license and registration fees, taxes (including, without limitation, income, minimum or alternative minimum tax, gross receipts, ad valorem,
value added, environmental tax, turnover, sales, use, personal property (tangible and intangible), stamp, leasing, lease, user, leasing use, excise, payroll, franchise, transfer, fuel, excess profits,
occupational, interest equalization and other taxes), levies, imposts, duties, charges or withholdings of any nature whatsoever, imposed by any Governmental Entity, together with any and all
penalties, fines, additions to tax and interest thereon, whether or not such Tax shall be existing or hereafter adopted. 

        Other
Definitions: The following terms have the meanings ascribed to them in the Sections noted: 

	 
	 	Section

	Accounts Receivable	 	1.1(h)
	

Adjustment Amount	
 	

1.3(a)(iii)
	

Agreement	
 	

Recitals
	

Allocations	
 	

1.6
	

Assumed Contracts	
 	

1.1(b)
	

Assumed Liabilities	
 	

1.3
	

Authorizations	
 	

2.8(a)
	

Benefit Plans	
 	

2.13(a)
	

Bill of Sale	
 	

1.1(b)
	

Business	
 	

Recitals
	

Business Rights	
 	

2.12
	

Campus Lease Payment	
 	

1.5(b)
	

Closing	
 	

6.1
	

Closing Date	
 	

6.1
	

Closing Date Payment	
 	

1.2
	

COBRA	
 	

2.13(e)
	

Company	
 	

Recitals
	

Customers	
 	

1.1(a)
	

Earn-Out Payment	
 	

1.8
	

Escrow Agreement	
 	

1.9
	

Employment Agreement	
 	

5.1(i)
	

Environmental Law	
 	

2.15(b)
	

ERISA	
 	

2.13(a)
	

Excluded Assets	
 	

1.2
	

Excluded Liabilities	
 	

1.4
	
 	
 	

 

2

 

	

Facility Lease	
 	

1.5(b)
	

Facility Payment	
 	

1.5(b)
	

Fleet Lease	
 	

1.3(iii)
	

Financial Statements	
 	

2.4(a)
	

Furniture & Equipment	
 	

1.1(g)
	

Hazardous Materials	
 	

2.15(c)
	

Independent Accountants	
 	

1.7(d)
	

Inventory	
 	

2.19
	

Losses	
 	

7.1(a)
	

Marketing Agreement	
 	

Recitals
	

Marketing Deposit	
 	

Recitals
	

Net Assets Adjustment	
 	

1.7(a)(i)
	

Parent	
 	

4.8
	

Payment Date	
 	

1.8
	

Premises	
 	

1.5(b)
	

Properties	
 	

2.6(a)
	

Purchase Price	
 	

1.2
	

Purchased Assets	
 	

1.1
	

Purchaser	
 	

Recitals
	

Purchaser Indemnitee	
 	

7.1(a)
	

Purchaser's Basket	
 	

7.2(b)
	

Purchaser's Cap	
 	

7.2(b)
	

Release	
 	

2.15(d)
	

Retained Employees	
 	

2.14(a)
	

Seller Indemnitee	
 	

7.2(a)
	

Sellers	
 	

Recitals
	

Sellers' Basket	
 	

7.1(b)
	

Sellers' Cap	
 	

7.1(b)
	

Working Capital Adjustment	
 	

1.7(a)(ii)

3

 
 

EXHIBIT 1    
    
    Bill of Sale/Assignment and Assumption    
  

 
 

EXHIBIT 2    
    
    Earn-Out Payment Model    
  

        The following outlines the formula to determine the timing and financial hurdles to be achieved to pay the Earn-Out Payment as defined in
Section 1.8 

Earn-Out Amount:    The maximum Earn-Out Payment is $750,000.00. 

Payment Date:    A date on which Purchaser must make an Earn-Out Payment to the Seller, as determined in Section 1.8. 

Timing:    The Earn-Out is intended to be paid over three years in equal annual installments of $250,000.00 subject to the
following formula. 

Basis for Earn-Out Payment:    The Earn-Out Payment model is predicated on achievement of a sustainable and growing
Fill Fee while maintaining a ratio of Gross Profit to Fill Fee of not less than 40% beginning with a basis of a projected year 2001 Fill Fee of $2,087,000.00. Fill Fee is defined as Dermal's sales
less direct cost of raw materials and components applicable to such sales (including packaging and similar materials). Gross Profit is Fill Fee less the cost of direct labor (including taxes and
fringe benefits) and all manufacturing overhead applicable to such Fill Fee. Fill Fee and Gross Profit shall be determined using generally accepted accounting principles applied consistently with
Purchaser's audit financial statements. 

Earn-Out Payment Formula:  

Year 1—Full Year Ended December, 2002—If year 1 Fill Fee = $2,400,000 ($2,087,000 times a factor of 1.15) and the ratio
of Gross Profit to Fill Fee is not less than 40%, then $250,000 shall be paid on the first Payment Date. If Fill Fee of $2,400,000 is not achieved, or if Gross Profit is less than 40% the year 1
payment is held for potential payment in year 2 subject to the formula in year 2. 

Year 2—Full Year Ended December, 2003—If year 2 Fill Fee = $2,750,000 ($2,087,000 times a factor of 1.3177), and the
ratio of Gross Profit to Fill Fee is not less than 40%, then $250,000 plus any unpaid Year 1 Earn-Out Payment is due on the second Payment Date. If Fill Fee of $2,750,000 is not achieved,
or if gross profit is less than 40%, any unpaid Earn-Out Payments for year 2 and year 1, if it remains unpaid, will be held for potential payment subject to the formula in year 3. 

Year 3—Full Year Ended December, 2004—If year 3 Fill Fee = $3,170,000 ($2,087 times a factor of 1.5189), and the ratio of
Gross Profit to Fill Fee is not less than 40%, then $250,000 plus any unpaid year 1 and year 2 Earn-Out Payment is due on the third and final Payment Date. If year 3 Fill Fee is less than
$3,170,000 or Gross Profit is less than 40%, then no further Earn-Out Payment is due or payable. 

 
 

EXHIBIT 3    
    
    Form of Escrow Agreement    
  

 
 

EXHIBIT 4    
    
    Form of Patent Assignment    
  

 
 

EXHIBIT 5    
    
    Form of Trademark Assignment    
  

 
 

EXHIBIT 6    
    
    Form of Employment Agreement    
  

 
 

EXHIBIT 7    
    
    Opinion of Counsel to Sellers    
  

 
 

EXHIBIT 8    
    
    Opinion of Counsel to Purchaser    
  

QuickLinks

Exhibit 10.36

ASSET PURCHASE AGREEMENT

TABLE OF CONTENTS

ASSET PURCHASE AGREEMENT

ARTICLE I GENERAL

ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER

ARTICLE IV COVENANTS

ARTICLE V CONDITIONS OF CLOSING

ARTICLE VI CLOSING DATE AND TERMINATION OF AGREEMENT

ARTICLE VII INDEMNIFICATION

ARTICLE VIII MISCELLANEOUS

APPENDIX A Definitions

EXHIBIT 1 Bill of Sale/Assignment and Assumption

EXHIBIT 2 Earn-Out Payment Model

EXHIBIT 3 Form of Escrow Agreement

EXHIBIT 4 Form of Patent Assignment

EXHIBIT 5 Form of Trademark Assignment

EXHIBIT 6 Form of Employment Agreement

EXHIBIT 7 Opinion of Counsel to Sellers

EXHIBIT 8 Opinion of Counsel to Purchaser

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