INDEX
TO UNAUDITED FINANCIAL STATEMENTS OF COLD-EEZE
®
BUSINESS DIVISION
COLD-EEZE
®
BUSINESS DIVISION
Unaudited
Balance Sheets
(in
thousands)
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
316
|
|
|
$
|
2
|
|
Accounts receivable, net
|
|
|
4,284
|
|
|
|
2,630
|
|
Inventory
|
|
|
1,457
|
|
|
|
3,103
|
|
Prepaid expenses and other current assets
|
|
|
398
|
|
|
|
994
|
|
Total current assets
|
|
|
6,455
|
|
|
|
6,729
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation
of $12 and $3, respectively
|
|
|
16
|
|
|
|
25
|
|
Total assets
|
|
$
|
6,471
|
|
|
$
|
6,754
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND DIVISION EQUITY
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
551
|
|
|
$
|
580
|
|
Due to Pharmaloz Manufacturing, Inc.
|
|
|
546
|
|
|
|
943
|
|
Accrued advertising and other allowances
|
|
|
2,805
|
|
|
|
2,508
|
|
Other current liabilities
|
|
|
160
|
|
|
|
237
|
|
Total current liabilities
|
|
|
4,062
|
|
|
|
4,268
|
|
|
|
|
|
|
|
|
|
|
COMMITMENT AND CONTIGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
DIVISION EQUITY
|
|
|
|
|
|
|
|
|
Division equity, net
|
|
|
2,409
|
|
|
|
2,486
|
|
Total liabilities and Division equity
|
|
$
|
6,471
|
|
|
$
|
6,754
|
|
See
accompanying notes to unaudited condensed financial statements
COLD-EEZE
®
BUSINESS DIVISION
Unaudited
Statements of Operations
(in
thousands)
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Net sales
|
|
$
|
16,874
|
|
|
$
|
18,171
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
7,524
|
|
|
|
6,332
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
9,350
|
|
|
|
11,839
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
5,381
|
|
|
|
7,336
|
|
Administrative
|
|
|
1,897
|
|
|
|
2,859
|
|
Research and development
|
|
|
229
|
|
|
|
741
|
|
|
|
|
7,507
|
|
|
|
10,936
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1,843
|
|
|
|
903
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(3
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
1,840
|
|
|
|
896
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(653
|
)
|
|
|
(318
|
)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,187
|
|
|
$
|
578
|
|
See
accompanying notes to unaudited condensed financial statements
COLD-EEZE
®
BUSINESS DIVISION
Unaudited
Statement of Divisional Equity
(in
thousands)
|
|
Division
|
|
|
|
Equity
|
|
Balance at January 1, 2015
|
|
$
|
1,730
|
|
Division net income
|
|
|
578
|
|
Contributions from ProPhase, allocated expenses
|
|
|
3,560
|
|
Distributions to ProPhase
|
|
|
(3,382
|
)
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
2,486
|
|
Division net income
|
|
|
1,187
|
|
Contributions from ProPhase, allocated expenses
|
|
|
2,082
|
|
Distributions to ProPhase
|
|
|
(3,346
|
)
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
2,409
|
|
See
accompanying notes to unaudited condensed financial statements
COLD-EEZE
®
BUSINESS DIVISION
Unaudited
Statement of Cash Flow
(in
thousands)
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net Division income
|
|
$
|
1,187
|
|
|
$
|
578
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
9
|
|
|
|
3
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,654
|
)
|
|
|
1,051
|
|
Inventory
|
|
|
1,646
|
|
|
|
(144
|
)
|
Prepaid expenses and other assets
|
|
|
596
|
|
|
|
123
|
|
Accounts payable
|
|
|
(29
|
)
|
|
|
314
|
|
Due to Pharmaloz Manufacturing, Inc.
|
|
|
(397
|
)
|
|
|
(1,049
|
)
|
Accrued advertising and other allowances
|
|
|
297
|
|
|
|
(1,177
|
)
|
Other liabilities
|
|
|
23
|
|
|
|
(292
|
)
|
Net cash provided by (used in) operating
activities
|
|
|
1,678
|
|
|
|
(593
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
-
|
|
|
|
(28
|
)
|
Net cash flows used in investing
activities
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Payment of long term obligation
|
|
|
(100
|
)
|
|
|
(100
|
)
|
Net contributions (distributions)
to ProPhase
|
|
|
(1,264
|
)
|
|
|
178
|
|
Net cash provided by (used in) financing
activities
|
|
|
(1,364
|
)
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
314
|
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
2
|
|
|
|
545
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
316
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
3
|
|
|
$
|
7
|
|
See
accompanying notes to unaudited condensed financial statements
COLD-EEZE
®
BUSINESS DIVISION
Notes
to Unaudited Financial Statements
Note
1 – Organization and Business
The
Cold-EEZE
®
Business Division (“we”, “us” or the “Division”) is a business unit
within ProPhase Labs, Inc. (“ProPhase”), our parent company. We are a marketer and distributor of a diversified range
of over the counter (“OTC”) homeopathic and health care products that are offered to consumers through national chain,
regional, specialty and local retail stores. Our brand is Cold-EEZE
®
and our principal product is Cold-EEZE
®
cold remedy zinc gluconate lozenges, proven in clinical studies to reduce the duration and severity of symptoms of the common
cold. In addition to Cold-EEZE
®
cold remedy lozenges, we market and distribute non-lozenge forms of our proprietary
zinc gluconate formulation, (i) Cold-EEZE
®
cold remedy QuickMelts
®
, (ii) Cold-EEZE
®
Gummies (see below) and (iii) Cold-EEZE
®
cold remedy Oral Spray. Each of our Cold-EEZE
®
QuickMelts
®
products are based on our proprietary zinc gluconate formulation in combination with certain (i) immune
system support, (ii) energy, (iii) sleep and relaxation, and/or (iv) cold and flu symptom relieving active ingredients.
In
fiscal 2015, we introduced three new Cold-EEZE
®
product line extensions: (i) a Cold-EEZE
®
Multi-Symptom
Relief for Cold and Flu lozenge, (ii) a Cold-EEZE
®
Daytime and Nighttime Multi-Symptom Relief in liquid form for
each of adults and children, and (iii) Cold-EEZE
®
Natural Allergy Relief caplets for indoor and outdoor allergies.
Shipments for these three new Cold-EEZE
®
product line extensions began in the third quarter of fiscal 2015. In
fiscal 2016, we expanded our Cold-EEZE
®
product line further to include (i) Cold-EEZE
®
Gummies
Multi-Symptom Relief for Cold and Flu and (ii) Cold-EEZE
®
Nighttime Multi-Symptom Relief for Cold and Flu QuickMelts
®
.
Shipments began for these two new products in the third quarter of fiscal 2016.
Note
2 – Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited financial statements have been prepared by management without audit and should be read in conjunction with
the ProPhase consolidated financial statements, including the notes thereto, appearing in the ProPhase Annual Report on Form 10-K
for the year ended December 31, 2016. In the opinion of management, all adjustments necessary for a fair presentation of the financial
position, results of operations and Division cash flows, for the periods indicated, have been made. Management believes that
the assumptions in the carve out unaudited financial statements are reasonable (see below). The results of operations for the
Division for the periods presented are not necessarily indicative of operating results that may be achieved if the Division was
a standalone company and was no longer able to benefit from the overhead and research and development support provided by ProPhase.
Division
Carve Out and ProPhase Allocations
For
the years ended December 31, 2016 and 2015, our Division’s unaudited financial statements were prepared (i) in accordance
with the Securities and Commission’s carve out rules under SAB Topic 1B1 and (ii) are derived from identifying and carving
out the specific assets, liabilities, net sales, cost of sales, operating expenses and interest expense associated with the Division’s
operations. Assets and liabilities, sales and expenses related to other business units and operations of ProPhase or its subsidiaries
are excluded from the Division’s financial statements. Furthermore, general administrative and overhead expenses, including
personnel expenses, and research and development overhead expenses incurred by ProPhase (for which the Division benefits from
such resources) are allocated to these financial statements based upon the percentage of the Division’s net sales to ProPhase
consolidated net sales. For the years ended December 31, 2016 and 2015, ProPhase allocated (i) $1.9 million and $2.9 million,
respectively, included in administrative expenses and (ii) $176,000 and $701,000, respectively, included in research and development
expenses, in the accompanying unaudited statements of operations.
COLD-EEZE
®
BUSINESS DIVISION
Notes
to Unaudited Financial Statements
Note
2 – Summary of Significant Accounting Policies – continued
Seasonality
of the Business
Our
net sales are derived principally from our OTC heath care and cold remedy products sold in the United States of America. Our sales
are influenced by and subject to fluctuations in the timing of purchase and the ultimate level of demand for our products which
are a function of the timing, length and severity of each cold season. Generally, a cold season is defined as the period of September
to March when the incidence of the common cold rises as a consequence of the change in weather and other factors. We generally
experience in the first, third and fourth quarter higher levels of net sales along with a corresponding increase in marketing
and advertising expenditures designed to promote our products during the cold season. Revenues and related marketing costs are
generally at their lowest levels in the second quarter when consumer demand generally declines.
Use
of Estimates
The
preparation of these unaudited financial statements and the accompanying notes thereto, in conformity with Generally Accepted
Accounting Principles in the United States of America, requires management to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and reported amounts of revenues and expenses during the respective reporting periods. Examples include the provision for bad
debt, sales returns and allowances, inventory obsolescence, useful lives of property and equipment, and impairment of property
and equipment, income tax valuations and assumptions related to accrued advertising. When providing for the appropriate sales
returns, allowances, cash discounts and cooperative incentive promotion costs (“Sales Allowances”), we apply a uniform
and consistent method for making certain assumptions for estimating these provisions. These estimates and assumptions are based
on historical experience, current trends and other factors that management believes to be relevant at the time the financial statements
are prepared. Management reviews the accounting policies, assumptions, estimates and judgments on a quarterly basis. Actual results
could differ from those estimates.
Our
primary product, Cold-EEZE
®
cold remedy lozenges, utilizes a proprietary zinc gluconate formulation which has
been clinically proven to reduce the severity and duration of common cold symptoms. Factors considered in estimating the appropriate
sales returns and allowances for this product include it being (i) a unique product with limited competitors, (ii) competitively
priced, (iii) promoted, (iv) unaffected for remaining shelf-life as there is no product expiration date and (v) monitored for
inventory levels at major customers and third-party consumption data. In addition to Cold-EEZE
®
cold remedy lozenges,
we market and distribute a variety of Cold-EEZE
®
cold remedy QuickMelts
®
, a Cold-EEZE
®
cold remedy Oral Spray, a Cold-EEZE
®
Natural Allergy Relief caplets, a Cold-EEZE
®
Daytime
and Nighttime Multi-Symptom Relief in a liquid form and our new Cold-EEZE
®
Gummies Multi-Symptom Relief for Cold
and Flu. Each of the Cold-EEZE
®
cold remedy Oral Spray, QuickMelts
®
and Gummies products, Cold-EEZE
®
Natural Allergy Relief caplets, and Cold-EEZE
®
liquid forms products carry shelf-life expiration dates for
which we aggregate such new product market experience data and update our sales returns and allowances estimates accordingly.
Sales allowances estimates are tracked at the specific customer and product line levels and are tested on an annual historical
basis, and reviewed quarterly. Additionally, we monitor current developments by customer, market conditions and any other occurrences
that could affect the expected provisions relative to net sales for the period presented.
Cash
Equivalents
We
consider all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.
COLD-EEZE
®
BUSINESS DIVISION
Notes
to Unaudited Financial Statements
Note
2 – Summary of Significant Accounting Policies – continued
Inventory
Valuation
Inventory
is valued at the lower of cost, determined on a first-in, first-out basis (FIFO), or market. Inventory items are analyzed to determine
cost and the market value and appropriate valuation adjustments are established. At December 31, 2016 and 2015, the financial
statements include adjustments to reduce inventory for excess or obsolete inventory of $1.1 million and $477,000, respectively.
The components of inventory are as follows (in thousands):
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Raw materials
|
|
$
|
567
|
|
|
$
|
562
|
|
Work in process
|
|
|
46
|
|
|
|
126
|
|
Finished goods
|
|
|
844
|
|
|
|
2,415
|
|
|
|
$
|
1,457
|
|
|
$
|
3,103
|
|
Property,
Plant and Equipment
Property,
plant and equipment are recorded at cost and is comprised principally of production tools and dies. We use the straight-line method
in computing depreciation for financial reporting purposes over three years.
Due
to Pharmaloz Manufacturing, Inc.
Pharmaloz
Manufacturing, Inc. (“PMI”), a wholly owned subsidiary of ProPhase and as such a related party, provides us with lozenge
manufacturing services, and product warehousing and distribution services. For the years ended December 31, 2016 and 2015, PMI
charged us $2.5 million and $2.5 million for these services which are a component of our cost of sales when inventory manufactured
by PMI is shipped by us to our customers. Management believes that the intercompany charges between PMI and us are at commercially
reasonable rates that other third parties would charge for such services. At December 31, 2016 and 2015, amounts due to PMI for
its services were $546,000 and $943,000, respectively.
Concentration
of Risks
Our
business is subject to federal and state laws and regulations adopted for the health and safety of users of our products. Our
OTC health care and cold remedy products are subject to regulations by various federal, state and local agencies, including the
Food and Drug Administration (“FDA”) and, as applicable, the Homeopathic Pharmacopoeia of the United States.
Financial
instruments that potentially subject us to significant concentrations of credit risk consist principally of trade accounts receivable.
Trade accounts receivable potentially subject us to credit concentrations from time-to-time as a consequence of the timing, payment
pattern and ultimate purchase volumes or shipping schedules with our customers. We extend credit to our customers based upon an
evaluation of the customer’s financial condition and credit history and generally we do not require collateral. Our broad
range of customers includes many large national chain, regional, specialty and local retail stores. These credit concentrations
may impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected
by changes in economic, regulatory or other conditions that may impact the timing and collectability of amounts due to us. As
a consequence of an evaluation of our customer’s financial condition, payment patterns, balance due to us and other factors,
we did not offset our account receivable with an allowance for bad debt at December 31, 2016 and 2015.
Fair
Value of Financial Instruments
Cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses and other obligations are reflected in the unaudited
financial statements at carrying value which approximates fair value.
COLD-EEZE
®
BUSINESS DIVISION
Notes
to Unaudited Financial Statements
Note
2 – Summary of Significant Accounting Policies – continued
Revenue
Recognition
Sales
are recognized at the time ownership is transferred to the customer. Revenue is reduced for trade promotions, estimated sales
returns, cash discounts and other allowances in the same period as the related sales are recorded. We make estimates of potential
future product returns and other allowances related to current period revenue. We analyze historical returns, current trends,
and changes in customer and consumer demand when evaluating the adequacy of the sales returns and other allowances.
Our
return policy accommodates returns for (i) discontinued products, (ii) store closings and (iii) products that have reached or
exceeded their designated expiration date. We do not impose a period of time within which product may be returned. All requests
for product returns must be submitted to us for pre-approval. The main components of our returns policy are: (i) we will accept
returns that are due to damaged product that is un-saleable and such return request activity falls within an acceptable range,
(ii) we will accept returns for products that have reached or exceeded designated expiration dates and (iii) we will accept returns
in the event that we discontinue a product provided that the customer will have the right to return only such items that it purchased
directly from us. We will not accept return requests pertaining to customer inventory “Overstocking” or “Resets”.
We will only accept return requests for product in its intended package configuration. We reserve the right to terminate shipment
of product to customers who have made unauthorized deductions contrary to our return policy or pursue other methods of reimbursement.
We compensate the customer for authorized returns by means of a credit applied to amounts owed or to be owed and in the case of
discontinued product only, also by way of an exchange. We do not have any significant product exchange history.
As
of December 31, 2016 and 2015, we included a provision for sales allowances of $107,000 and $83,000, respectively. Additionally,
accrued advertising and other allowances as of December 31, 2016 included (i) $1.2 million for estimated future sales returns
and (ii) $1.6 million for cooperative incentive promotion costs. As of December 31, 2015, accrued advertising and other allowances
included (i) $1.4 million for estimated future sales returns and (ii) $786,000 for cooperative incentive promotion costs.
Advertising
and Incentive Promotions
Advertising
and incentive promotion costs are expensed within the period in which they are utilized. Advertising and incentive promotion expense
is comprised of (i) media advertising, presented as part of sales and marketing expense, (ii) cooperative incentive promotions
and coupon program expenses, which are accounted for as part of net sales, and (iii) free product, which is accounted for as part
of cost of sales. Advertising and incentive promotion expenses incurred for the years ended December 31, 2016 and 2015 were $8.4
million and $8.5 million, respectively. Included in prepaid expenses and other current assets was $263,000 and $854,000 at December
31, 2016 and 2015, respectively, relating to prepaid advertising and promotion expenses.
Shipping
and Handling
Product
sales carry shipping and handling charges to the purchaser, included as part of the invoiced price, which is classified as revenue.
In all cases, costs related to this revenue are recorded in cost of sales.
Research
and Development
Research
and development costs are charged to operations in the period incurred. Research and development costs for the years ended December
31, 2016 and 2015, inclusive of the ProPhase allocation, were $229,000 and $741,000, respectively. Research and development costs
are related to new product development initiatives.
COLD-EEZE
®
BUSINESS DIVISION
Notes
to Unaudited Financial Statements
Note
2 – Summary of Significant Accounting Policies – continued
Income
Taxes
We
utilize the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the future
tax consequences of events that have been recognized in our financial statements or tax returns. In estimating future tax consequences,
we generally consider all expected future events other than enactments of changes in the tax law or rates.
We
utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position
will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure
the tax benefit as the largest amount which is more than fifty percent likely of being realized upon ultimate settlement. Any
interest or penalties related to income taxes will be recorded as interest or administrative expense, respectively.
Our
unaudited financial statements have been prepared on a standalone basis, including its income tax calculations for years ended
December 31, 2015 and 2014. The provision for income tax for the years ended December 31, 2015 and 2014 are based upon the statutory
federal rate of 35% and various state income tax rates. The following is a reconciliation of the income tax expense:
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Income before income taxes and
|
|
$
|
1,840
|
|
|
$
|
896
|
|
State income tax expense
|
|
|
(14
|
)
|
|
|
(7
|
)
|
Income subject to federal taxes
|
|
|
1,826
|
|
|
|
889
|
|
Federal income tax expense at statutory rate of 35%
|
|
|
(639
|
)
|
|
|
(311
|
)
|
|
|
$
|
1,187
|
|
|
$
|
578
|
|
|
|
|
|
|
|
|
|
|
State income tax expense
|
|
|
14
|
|
|
|
7
|
|
Federal income tax expense
|
|
|
639
|
|
|
|
311
|
|
Total income tax expense
|
|
$
|
653
|
|
|
$
|
318
|
|
We
are part of a consolidated return of ProPhase whereby the taxable income generated from our operations are not paid to ProPhase
but are treated as a capital contribution via our Division equity account each period. ProPhase maintains net deferred tax assets
As
of December 31, 2016, ProPhase maintains a full valuation allowance for its net deferred tax assets due principally to its net
operating loss carryforwards of approximately $47.1 million for federal purposes that will expire beginning in Fiscal 2020 through
2036. Additionally, there are net operating loss carryforwards of $22.1 million for state purposes that will expire beginning
in Fiscal 2020 through 2036.
Note
3 – Other Obligations
Godfrey
Settlement Agreement
In
November 2004, we commenced an action against John C. Godfrey, Nancy Jane Godfrey, and Godfrey Science and Design, Inc. (together
the “Godfreys”) for injunctive relief regarding the ownership of the Cold-EEZE
®
trademark. The Godfreys
subsequently asserted against us counterclaims and sought monetary damages and injunctive and declaratory relief relative to the
Cold-EEZE
®
trademark and other intellectual property.
COLD-EEZE
®
BUSINESS DIVISION
Notes
to Unaudited Financial Statements
Note
3 – Other Obligations – continued
On
December 20, 2012, we and the Godfreys, including the Estate of Nancy Jane Godfrey, entered into a Settlement Agreement and Mutual
General Release (the “Godfrey Settlement Agreement”), pursuant to which we resolved all disputes, including claims
asserted by us and counterclaims asserted against us in the action. Pursuant to the terms of the Godfrey Settlement Agreement,
we paid the Godfreys $2.1 million in December 2012 and we paid four additional annual payments of $100,000 due in each of December
2013 through 2016. Each annual payment in the amount of $100,000 accrued interest at the per annum rate of 3.25%. The final two
annual installments of $103,000 and $107,000, inclusive of accrued interest, were paid in December 2016 and 2015, respectively.
Under the Godfrey Settlement Agreement, the Godfreys assigned, transferred and conveyed to us all of their right, title, and interest
in U.S. Trademark Registration No. 1,838,542 for the trademark Cold-EEZE
®
, among other intellectual property associated
with such trademark.
At
December 31, 2015, other current liabilities include $100,000, inclusive of accrued interest at the annual rate of 3.25%, for
final installment payment due in December 2016 (which was paid in full in December 2016, inclusive of accrued interest) pursuant
to the terms of the Godfrey Settlement Agreement. For the years ended December 31, 2016 and 2015, we charged to operations $3,000
and $7,000, respectively, for interest expense pursuant to the terms of the Godfrey Settlement Agreement.
Note
4 – Commitments and Contingencies
Other
Litigation
In
the normal course of our business, we are named as defendant in legal proceedings. It is our policy to vigorously defend litigation
and/or enter into settlements of claims where management deems appropriate.
Note
5 – Division Equity
We
are a business unit within ProPhase, our parent company. The Division’s daily cash flow needs and/or surpluses, including
its net income after taxes are either distributed to or contributed from ProPhase to support ProPhase’s net administrative
overhead, including personnel, research and development, and other costs of its operations.
Note
6 – Significant Customers
Our
products are distributed through national chain, regional, specialty and local retail stores throughout the United States. Revenues
for the years ended December 31, 2016 and 2015 were $16.9 million and $18.2 million, respectively.
We
are subject to account receivable credit concentrations from time-to-time as a consequence of the timing, payment pattern and
ultimate purchase volumes or shipping schedules with our customers. These concentrations may impact our overall exposure to credit
risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, regulatory or other
conditions that may impact the timing and collectability of amounts due to us. Customers comprising the five largest accounts
receivable balances represented 71% and 60% of total trade receivable balances at December 31, 2016 and 2015, respectively. Management
believes that the provision for possible losses on uncollectible accounts receivable is adequate for our credit loss exposure.
The allowance for doubtful accounts was zero as of December 31, 2016 and 2015.
COLD-EEZE
®
BUSINESS DIVISION
Notes
to Unaudited Financial Statements
Note
7 – Subsequent Event
On
January 9, 2017, ProPhase announced that it signed an asset purchase agreement, pursuant to which ProPhase has agreed to sell
the Cold-EEZE
®
Division to a wholly owned subsidiary of Mylan N.V. (“Mylan”) for $50 million before
taking into account taxes, transaction costs and related deal expenses, restructuring costs and post-closing escrow requirements.
Under
the terms of the asset purchase agreement, Mylan will purchase substantially all of ProPhase’s assets and other rights relating
to the Cold-EEZE
®
Division. The closing of the proposed sale, which is currently expected to occur in the first
quarter of 2017, is subject to approval of the stockholders of ProPhase and other customary conditions of closing. In connection
with the execution of the asset purchase agreement, ProPhase’s executive officers and directors executed voting agreements.
The voting agreements provide, among other things, for ProPhase’s executive officers and directors to vote all of the shares
owned by them in favor of the adoption of the transaction. The shares subject to the voting agreements represent approximately
24.1% of the outstanding common stock of ProPhase.
APPENDIX
A
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
ASSET
PURCHASE AGREEMENT
(AS
AMENDED)
BY
AND BETWEEN
ProPhase
Labs, Inc.,
Meda
Consumer Healthcare Inc.
AND
Mylan
Inc.,
as
BUYER Guarantor
DATED
AS OF JANUARY 6, 2017
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
TABLE
OF CONTENTS
|
Page
|
|
|
ARTICLE
1 DEFINITIONS
|
1
|
|
1.1
|
Definitions
|
1
|
|
1.2
|
Interpretive
Provisions
|
10
|
|
|
|
|
ARTICLE
2 PURCHASE PRICE AND PAYMENT; PURCHASE AND SALE OF THE BUSINESS
|
11
|
|
2.1
|
Purchase
Price
|
11
|
|
2.2
|
Sale
of the Business Assets; Assumption of the Assumed Liabilities
|
11
|
|
2.3
|
Transactions
to be Effected at the Closing
|
15
|
|
2.4
|
Purchase
Price Allocation
|
16
|
|
|
|
|
ARTICLE
3 THE CLOSING
|
17
|
|
3.1
|
Closing;
Closing Date
|
17
|
|
|
|
|
ARTICLE
4 REPRESENTATIONS AND WARRANTIES OF THE SELLER
|
17
|
|
4.1
|
Organization
and Qualification
|
17
|
|
4.2
|
Binding
Obligations
|
17
|
|
4.3
|
No
Defaults or Conflicts; Consents
|
18
|
|
4.4
|
No
Governmental Authorization Required
|
18
|
|
4.5
|
Financial
Statements
|
18
|
|
4.6
|
Intellectual
Property
|
18
|
|
4.7
|
Contracts
|
19
|
|
4.8
|
Taxes
|
20
|
|
4.9
|
Reserved
|
21
|
|
4.10
|
Litigation
|
21
|
|
4.11
|
Title
to Business Assets
|
21
|
|
4.12
|
Brokers
|
21
|
|
4.13
|
Compliance
With Laws
|
21
|
|
4.14
|
Exclusivity
of Representations
|
21
|
|
4.15
|
Solvency
|
21
|
|
4.16
|
Vote
Required
|
22
|
|
4.17
|
No
Channel Stuffing
|
22
|
|
4.18
|
Seller
Board Recommendation
|
22
|
|
4.19
|
Permits
|
22
|
|
4.20
|
Regulatory
Compliance
|
22
|
|
4.21
|
Administrative/Enforcement
Action
|
23
|
|
4.22
|
Proxy
Statement
|
24
|
|
4.23
|
Rights
Agreement and Rights Agreement Amendment
|
24
|
|
|
|
24
|
ARTICLE
5 REPRESENTATIONS AND WARRANTIES OF THE BUYER
|
24
|
|
5.1
|
Organization
|
24
|
|
5.2
|
Binding
Obligations
|
25
|
|
5.3
|
No
Defaults or Conflicts
|
25
|
|
5.4
|
No
Governmental Authorization Required
|
25
|
|
5.5
|
Brokers
|
25
|
|
5.6
|
Litigation
|
25
|
|
5.7
|
Sufficient
Funds
|
25
|
|
5.8
|
Buyer’s
Reliance
|
26
|
|
5.9
|
Ownership
of Seller’s Common Stock
|
26
|
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
|
Page
|
ARTICLE
6 COVENANTS
|
26
|
|
6.1
|
Conduct
of Business Prior to the Closing
|
26
|
|
6.2
|
Confidentiality;
Public Announcements
|
27
|
|
6.3
|
Books
and Records; Litigation Matters
|
28
|
|
6.4
|
Non-Compete;
Non-Solicitation
|
29
|
|
6.5
|
Cooperation
|
30
|
|
6.6
|
Further
Assurances
|
31
|
|
6.7
|
Transfer
of Know-How
|
31
|
|
6.8
|
Tax
Matters
|
31
|
|
6.9
|
No
Channel Stuffing
|
33
|
|
6.10
|
Non-Solicitation
by the Seller
|
33
|
|
6.11
|
Preparation
and Mailing of the Proxy Statement
|
35
|
|
6.12
|
Seller
Stockholders Meeting; Seller Board Recommendation
|
36
|
|
6.13
|
Material
Contracts; Required Consents
|
36
|
|
6.14
|
Use
of the Acquired Intellectual Property and Non-US IP
|
37
|
|
6.15
|
Communications
with Customers
|
37
|
|
6.16
|
Communications
with Suppliers
|
37
|
|
6.17
|
Rights
Agreement
|
37
|
|
6.18
|
Past
Cold-EEZE Products
|
37
|
|
|
|
|
ARTICLE
7 CONDITIONS TO CLOSING; TERMINATION
|
38
|
|
7.1
|
Conditions
to the Parties’ Obligations
|
38
|
|
7.2
|
Conditions
to the Obligations of the Buyer
|
38
|
|
7.3
|
Conditions
to the Obligations of the Seller
|
39
|
|
7.4
|
Termination
|
39
|
|
7.5
|
Termination
Fee
|
41
|
|
7.6
|
Effect
of Termination
|
42
|
|
|
|
|
ARTICLE
8 INDEMNIFICATION
|
42
|
|
8.1
|
Survival
|
42
|
|
8.2
|
Indemnification
by the Seller; Indemnification by the Buyer
|
42
|
|
8.3
|
Limitations
on Indemnification
|
44
|
|
8.4
|
Indemnification
Claim Process
|
45
|
|
8.5
|
Indemnification
Procedures for Non-Third Party Claims
|
47
|
|
8.6
|
Indemnification
Procedures for Channel Stuffing Claims
|
47
|
|
8.7
|
Exclusive
Remedy
|
48
|
|
8.8
|
Disbursements
from the Escrow Account
|
48
|
|
8.9
|
Tax
Treatment of Indemnity Payments
|
49
|
|
|
|
|
ARTICLE
9 MISCELLANEOUS
|
49
|
|
9.1
|
Expenses
|
49
|
|
9.2
|
Amendment
|
49
|
|
9.3
|
Entire
Agreement
|
49
|
|
9.4
|
Headings
|
50
|
|
9.5
|
Notices
|
50
|
|
9.6
|
Exhibits
and Schedules
|
51
|
|
9.7
|
Waiver
|
51
|
|
9.8
|
Binding
Effect; Assignment
|
52
|
|
9.9
|
No
Third Party Beneficiary
|
52
|
|
9.10
|
Counterparts
|
52
|
|
9.11
|
Release
|
52
|
|
9.12
|
Governing
Law and Jurisdiction
|
52
|
|
9.13
|
Consent
to Jurisdiction and Service of Process
|
53
|
|
9.14
|
Conveyance
Taxes; Bulk Sales Laws
|
53
|
|
9.15
|
Specific
Performance
|
53
|
|
9.16
|
Severability
|
53
|
|
9.17
|
Undertaking
by Buyer Guarantor
|
54
|
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
Exhibits
Exhibit
A
|
|
Form
of Manufacturing Agreement
|
|
|
|
Exhibit
B
|
|
Form
of Trademark Assignment Agreement*
|
|
|
|
Exhibit
C
|
|
Accounts
Payable*
|
|
|
|
Exhibit
D
|
|
Accounts
Receivable*
|
|
|
|
Exhibit
E
|
|
Form
of Transition Services Agreement*
|
|
|
|
Exhibit
F
|
|
Rights
Agreement Amendment
|
|
|
|
Exhibit
G
|
|
Form
of Escrow Agreement*
|
|
|
|
Exhibit
H
|
|
Products*
|
|
|
|
Exhibit
I
|
|
Form
of Voting Agreement
|
|
|
|
Exhibit
J
|
|
Purchase
Price Allocation*
|
|
|
|
Exhibit
K
|
|
Execution
Press Release
|
|
|
|
Exhibit
L
|
|
Trademark
Consent Letter*
|
*
Exhibit has been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of
any omitted exhibit to the Securities and Exchange Commission upon request.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
Schedules
Schedule
2.2(a) – Business Assets
Schedule
4.4 – No Governmental Authorization Required
Schedule
4.5 – Financial Statements
Schedule
4.6 – Intellectual Property
Schedule
4.6(d) – Non-US IP
Schedule
4.7 – Business Contracts
Schedule
4.10 – Litigation
Schedule
4.12 – Brokers
Schedule
4.17 – [****]
Schedule
4.19 – Permits
Schedule
4.21(a) – Administrative/Enforcement Action
Schedule
6.4 – [****]
The
Schedules listed above have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally
a copy of any omitted schedule to the Securities and Exchange Commission upon request.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
ASSET
PURCHASE AGREEMENT
ASSET
PURCHASE AGREEMENT (this “
Agreement
”), dated as of January 6, 2017, by and between ProPhase Labs, Inc., a Delaware
corporation (the “
Seller
”), Meda Consumer Healthcare Inc., a Delaware corporation (the “
Buyer
”),
and Mylan Inc., a Pennsylvania corporation (the “
Buyer Guarantor
”).
RECITALS
WHEREAS,
the Seller is in the business, among other things, of manufacturing, promoting and distributing the Products (collectively, the
“
Business
”;
provided
,
however
, that, for the purposes of clarity, the term “Business”
shall not include the conduct by the Seller and its Affiliates with relation to (a) the manufacturing facility for Cold-EEZE located
in Lebanon, Pennsylvania or (b) any other products or lines of business).
WHEREAS,
the Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, the Business by means of (a) the sale
and transfer of all of the Business Assets to the Buyer, (b) the assumption of all of the Assumed Liabilities by the Buyer and
(c) assignment to the Buyer and assumption by the Buyer of certain agreements, in each case upon the terms and subject to the
conditions set forth in this Agreement.
NOW
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties
to this Agreement agree as follows:
ARTICLE
1
DEFINITIONS
1.1
Definitions
.
The following terms, whenever used herein, shall have the following meanings for all purposes of this Agreement.
“
1999
Consent Order
” means the FTC Agreement containing Consent Order in the matter of the Quigley Corporation, dated July
9, 1999.
“
Accounting
Firm
” has the meaning set forth in
Section 8.6(b)
.
“
Accounts
Payable
” means all accounts payable owed by the Seller relating to the Business Assets as of November 30, 2016; a copy
of such Accounts Payable are included on
Exhibit C
attached hereto, which the Seller shall later amend to encompass the
Accounts Payable as of the Closing Date.
“
Accounts
Receivable
” means all accounts receivable invoiced by the Seller relating to the Business Assets as of November 30,
2016; a copy of such Accounts Receivable are included on
Exhibit D
attached hereto, which the Seller shall later amend
to encompass the Accounts Receivable as of the Closing Date.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Acquired
Intellectual Property
” has the meaning set forth in
Section 4.6(a)
.
“
Affiliate
”
means, as to any Person, (a) any Person which directly or indirectly controls, is controlled by, or is under common control with
such Person, and (b) any Person who is a director, officer, partner or principal of such Person or of any Person which directly
or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, “
control
”
of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person
whether by ownership of voting stock, by contract or otherwise.
“
Agreement
”
has the meaning set forth in the introductory paragraph of this Agreement.
“
Assets
and Properties
” of any Person means all assets and properties of every kind, nature, character and description (whether
real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever
situated), including the goodwill related thereto, owned or leased by such Person, including Equity Interests, accounts and notes
receivable, chattel paper, documents, instruments, contracts, general intangibles, real estate, equipment, inventory, goods and
Intellectual Property.
“
Assumed
Liabilities
” has the meaning set forth in
Section 2.2(c)
.
“
Basket
Amount
” has the meaning set forth in
Section 8.3(e)
.
“
Bill
of Sale and Assignment Agreement
” means the Bill of Sale and Assignment and Assumption Agreement, dated as of the Closing
Date, between the Buyer and the Seller, with respect to the transfer and assignment of the Business Assets by the Seller and the
assumption of the Assumed Liabilities by the Buyer.
“
Board
Change of Recommendation
” has the meaning set forth in
Section 6.10(d)
.
“
Books
and Records
” means all books, records, files, designs, specifications, customer lists, supplier lists, information,
reports, correspondence, literature and other sales material, computer software, magnetic media, and other data and similar materials
related to or used in the Business or the Business Assets.
“
Business
”
has the meaning set forth in the Recitals.
“
Business
Assets
” has the meaning set forth in
Section 2.2(a)
.
“
Business
Contracts
” has the meaning set forth in
Section 4.7
.
“
Business
Day
” means any day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York are
authorized or required by law or executive order to close.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Buyer
”
has the meaning set forth in the introductory paragraph of this Agreement.
“
Buyer
Guaranteed Obligations
” has the meaning set forth in
Section 9.17
.
“
Buyer
Guarantor
” has the meaning set forth in the introductory paragraph of this Agreement.
“
Buyer
Indemnitee
” has the meaning set forth in
Section 8.2(a)
.
“
Buyer
Termination Fee
” has the meaning set forth in
Section 7.5(b)
.
“
Cap
Amount
” has the meaning set forth in
Section 8.3(a)
.
“
Channel
Stuffing Representation
” has the meaning set forth in
Section 8.3(a)
.
“
Claims
Notice
” has the meaning set forth in
Section 8.4(b)
.
“
Closing
”
has the meaning set forth in
Section 3.1
.
“
Closing
Date
” has the meaning set forth in
Section 3.1
.
“
Code
”
means the Internal Revenue Code of 1986, as amended.
“
Confidentiality
Agreement
” means the confidentiality letter agreement, dated as of August 12, 2016, by and between the Seller and Mylan
N.V.
“
Contract
”
means any legally binding written agreement, contract, lease, license, instrument, commitment or arrangement.
“[****]”
means the products set forth on
Schedule 6.4
.
“
Cut-Off
Date
” has the meaning set forth in
Section 8.1
.
“
Disclosure
Schedules
” means the Schedules delivered by the Seller which are numbered to correspond to the representations and warranties
contained in
ARTICLE 4
.
“
Effective
Time
” has the meaning set forth in
Section 3.1
.
“
Encumbrance
”
means any and all liens, encumbrances, charges, mortgages, options, pledges, restrictions on transfer, security interests, hypothecations,
easements, rights-of-way or encroachments of any nature whatsoever.
“
Equitable
Exceptions
” has the meaning set forth in
Section 4.2
.
“
Equity
Interests
” means (a) any shares, interests, participations or other equivalents (however designated) of capital stock
of a corporation, (b) any ownership interests in a Person other than a corporation, including membership interests, partnership
interests, joint venture interests and beneficial interests, and (c) any warrants, options, convertible or exchangeable securities,
subscriptions, rights (including any preemptive or similar rights), calls or other rights to purchase or acquire any of the foregoing.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Escrow
Account
” means the account established by the Escrow Agent pursuant to the Escrow Agreement.
“
Escrow
Agent
” means Citibank, N.A.
“
Escrow
Agreement
” means the Escrow Agreement, dated as of the Closing Date, substantially in the form attached hereto as
Exhibit
G
.
“
Escrow
Amount
” means five million dollars ($5,000,000).
“
Escrow
Reduction Date
” has the meaning set forth in
Section 8.8(b)
.
“
Escrow
Termination Date
” has the meaning set forth in
Section 8.8(c)
.
“
Exchange
Act
” means the United States Securities Exchange Act of 1934, as amended.
“
Excluded
Assets
” has the meaning set forth in
Section 2.2(b)
.
“
FDA
”
means the United States Food and Drug Administration.
“
Financial
Information
” has the meaning set forth in
Section 4.5
.
“
FTC
”
has the meaning set forth in
Section 4.20
.
“
Fundamental
IP
” means the Intellectual Property listed in
Schedule 4.6(a)
marked as “Fundamental IP”.
“
Fundamental
Representations
” means the representations and warranties contained in
Sections 4.1
,
4.2
,
4.6(b)
(solely as it relates to Fundamental IP),
4.11
,
4.12
,
4.20(a)
and
4.21(a)
.
“
GAAP
”
means United States generally accepted accounting principles.
“
Governmental
Authority
” means any nation or government (including any national or supra-national government), any federal, state,
municipal, provincial or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory
or administration functions of or pertaining to government, or any government authority, agency, department, board, tribunal,
commission or instrumentality of the United States, any state of the United States or any municipality or other political subdivision
thereof, or any other government in any jurisdiction, and any court, tribunal or arbitrator(s) of competent jurisdiction, and
any governmental or non-governmental self-regulatory organization, agency or authority in any jurisdiction.
“
Indemnitee
”
has the meaning set forth in
Section 8.2(b)
.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Indemnitor
”
means any party hereto from which any Indemnitee is seeking indemnification pursuant to the provisions of this Agreement.
“
Intellectual
Property
” means all registered or unregistered patents, trademarks and service marks, trade names, brands, trade dress,
logos, URLs and Internet domain names, packaging artwork, copyrights, computer software programs, industrial designs, inventions,
proprietary know-how, trade secrets and other intellectual property.
“
IP
Infringement Representation
” has the meaning set forth in
Section 8.3(a)
.
“
IP
License
” has the meaning set forth in
Section 4.6(a)
.
“
Know-How
”
means all existing and available technical information, know-how and data, including inventions (whether patentable or not), discoveries,
trade secrets, specifications, instructions, processes, formulae, materials, drawings and other technology related to the Business
or to the manufacture, registration, use or commercialization of the Products, including all biological, chemical, pharmacological,
biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data and studies relevant
to the manufacture, registration, use or commercialization of the Products, in each case that are in existence, reasonably accessible,
owned by and available to the Seller and/or its Affiliates on the Closing Date.
“
knowledge
of the Seller
” or any similar phrase means the actual knowledge of Mr. Ted Karkus, Chairman and Chief Executive Officer,
Mr. Robert V. Cuddihy, Jr., Chief Operating Officer and Chief Financial Officer and Raouf Ghaderi, Ph.D., Vice President of Research
and Development, after reasonable investigation or inquiry into the Business.
“
Law
”
means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation, order or other
requirement of a Governmental Authority.
“
Liabilities
”
means liabilities, debts or obligations of any nature, whether known or unknown, absolute, accrued, contingent, liquidated, unliquidated,
due or to become due or otherwise and whether or not required to be reflected on a balance sheet prepared in accordance with GAAP.
“
Losses
”
has the meaning set forth in
Section 8.2(a)
.
“
Manufacturing
Agreement
” means the Manufacturing Agreement, dated as of the Closing Date, in the form attached hereto as
Exhibit
A
.
“
Material
Adverse Effect
” means a material adverse effect, event, development or change on the results of operations of the Business
or the Business Assets, taken as a whole;
provided
,
however
, that “Material Adverse Effect” shall not
include the impact on such results of operations of the Business arising out of or attributable to (a) conditions or effects that
generally affect the industries and classes of trade in which the Business operates (including legal and regulatory changes),
(b) general economic conditions, (c) effects resulting from changes affecting equity or debt market conditions (including in each
of clauses (a), (b) and (c) above, any effects or conditions resulting from an outbreak or escalation of hostilities, acts of
terrorism, political instability or other national or international calamity, crisis or emergency, or any governmental or other
response to any of the foregoing, in each case whether or not involving the United States or any other country in which the Business
operates), (d) acts of God (including earthquakes, storms, fires, floods and natural catastrophes), (e) effects arising from changes
in Laws or accounting principles, (f) effects relating to or arising from the announcement of the execution of this Agreement
or the transactions contemplated hereby or the identity of the Buyer or its Affiliates, including the loss of any customers, suppliers
or employees directly thereto, (g) effects resulting from compliance with the terms and conditions of this Agreement by the Seller
or consented to in writing by the Buyer, (h) the seasonal nature of the Business or the relative incidence of cold or influenza
in any given year, or (i) any act or omission of the Buyer; except, in the case of clauses (a)-(e), to the extent that such effects
have a materially disproportionate impact on the Business relative to other participants in the industry. For the avoidance of
doubt, a Material Adverse Effect shall be measured only against past performance of the Business, taken as a whole, and not against
any forward-looking statements, financial projections or forecasts of the Business.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Material
Contracts
” has the meaning set forth in
Section 6.13(a)
.
“
Non-Assignable
Contract
” has the meaning set forth in
Section 2.2(e)
.
“
Non-US
IP
” means the Intellectual Property set forth on
Schedule 4.6(d)
.
“
Notice
Period
” has the meaning set forth in
Section 6.10(e)
.
“
Permits
”
has the meaning set forth in
Section 4.19
.
“
Permitted
Encumbrances
” means (a) Encumbrances disclosed in the Schedules to this Agreement, (b) Encumbrances for Taxes, assessments
and other government charges not yet due and payable or which are being contested in good faith by appropriate proceedings, (c)
mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like Encumbrances (including
Encumbrances created by operation of laws), and (d) Encumbrances in respect of pledges or deposits under workers’ compensation
laws or similar legislation, unemployment insurance or other types of social security or to secure government Contracts and similar
obligations.
“
Person
”
means any individual, corporation (including any not for profit corporation), general or limited partnership, limited liability
partnership, joint venture, estate, trust, firm, company (including any limited liability company or joint stock company), association,
organization, entity or Governmental Authority.
“
Pre-Closing
Period
” means any taxable period ending on or before the Closing Date and that portion of any Straddle Period ending
on the Closing Date.
“
Product
Advertising
” means any statement or claim made by the Seller with respect to the therapeutic use, indication, safety
or efficacy of the Products in connection with the promotion, marketing, or branding of the Products through any media, including
but not limited to print, radio, or television advertising, social media or other internet-based platform or made on Product packaging
and displays.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Products
”
means all the current and pipeline over-the-counter allergy, cold, flu and multi-symptom relief and immune support treatments
and supplements for adults and children to the extent each is, or is intended to be, branded “Cold-EEZE”, and all
private label versions thereof, including all formulations and derivations thereof, including those listed on
Exhibit H
.
“
Proxy
Statement
” has the meaning set forth in
Section 6.11(a)
.
“
Purchase
Price
” has the meaning set forth in
Section 2.1
.
“
Purchase
Price Allocation
” has the meaning set forth in
Section 2.4
.
“
Reduced
Escrow Amount
” has the meaning set forth in
Section 8.8(b)
.
“
Representatives
”
means, with respect to any Person, any director, officer, agent, employee, general partner, member, stockholder, advisor or other
authorized representative of such Person.
“
Required
Stockholder Vote
” has the meaning set forth in
Section 4.16
.
“
Restricted
Party
” has the meaning set forth in
Section 6.4(e)
.
“
Retained
Liabilities
” has the meaning set forth in
Section 2.2(d)
.
“
Rights
Agreement
” means the Amended and Restated Rights Agreement, dated as of June 18, 2014, between the Seller and American
Stock Transfer and Trust Company.
“
Rights
Agreement Amendment
” means an amendment to the Rights Agreement, dated as of the date hereof, in the form attached hereto
as
Exhibit F
.
“
Schedule
”
means each schedule to this Agreement delivered by any party hereto, including the Disclosure Schedules.
“
SEC
”
means the United States Securities and Exchange Commission.
“
Secured
Parties
” means John E. Ligums, Jr. and Justin J. Leonard.
“
Secured
Promissory Notes
” means the 12% Secured Promissory Notes – Series A, dated December 11, 2015, issued by the Seller,
Pharmaloz Manufacturing, Inc. and Quigley Pharma Inc. in favor of the Secured Parties.
“
Security
Agreement
” means the Security Agreement, dated December 11, 2015, by and among Seller, Pharmaloz Manufacturing, Inc.,
Quigley Pharma Inc. and John E. Ligums, Jr., as collateral agent on behalf of the Secured Parties.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Seller
”
has the meaning set forth in the introductory paragraph of this Agreement.
“
Seller
Acquisition Proposal
” means any offer, proposal or indication of interest received from a third party (other than a
party to this Agreement) providing for any Seller Acquisition Transaction, including any renewal or revision to such a previously
made offer, proposal or indication of interest.
“
Seller
Acquisition Transaction
” means any transaction or series of transactions after the date hereof involving: (a) any merger,
consolidation, share exchange, recapitalization, business combination or similar transaction involving the Seller or any of its
Subsidiaries; (b) any direct or indirect acquisition of securities, tender offer, exchange offer or other similar transaction
in which a Person or “group” (as defined in the Exchange Act) of Persons directly or indirectly acquires beneficial
or record ownership of securities representing twenty percent (20%) or more of the voting power of the Seller; (c) any direct
or indirect acquisition of any business or businesses or of assets that constitute or account for twenty percent (20%) or more
of the consolidated net sales, net income or assets of the Seller and its Subsidiaries, taken as a whole (based on the fair market
value thereof); (d) any liquidation or dissolution of the Seller or any material Subsidiary of the Seller; or (e) any combination
of the foregoing (in each case, other than any of the transactions contemplated by this Agreement or the Transaction Documents).
“
Seller
Board Recommendation
” has the meaning set forth in
Section 4.18
.
“
Seller
Indemnitee
” has the meaning set forth in
Section 8.2(b)
.
“
Seller
Stockholders Meeting
” has the meaning set forth in
Section 6.12(a)
.
“
Seller
Superior Offer
” means a
bona fide
written Seller Acquisition Proposal (for purposes of this definition, replacing
all references in such definition to twenty percent (20%) with fifty percent (50%)) that the board of directors of the Seller
or any committee thereof determines, in good faith, after consultation with outside legal counsel and a financial advisor (i)
is on terms that are more favorable from a financial point of view to the Seller’s stockholders than the transactions contemplated
by this Agreement or the Transaction Documents (including any proposal by the Buyer to amend the terms of this Agreement) after
taking into account all of the terms and conditions of such proposal and (ii) is likely to be completed (without material modification
of its terms), in each of the cases of clause (i) and (ii) taking into account all financial, regulatory, legal and other aspects
of such Seller Acquisition Proposal (including the timing and likelihood of consummation thereof) and the payment of the Buyer
Termination Fee.
“
Seller
Termination Fee
” has the meaning set forth in
Section 7.5(a)
.
“
Seller’s
Common Stock
” means the common stock, par value $0.0005 per share, of the Seller.
“
Straddle
Period
” means any taxable period which begins before the Closing Date and ends after the Closing Date.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
“
Subsidiary
”
means, of a specified Person, any corporation, partnership, limited liability company, limited liability partnership, joint venture,
or other legal entity of which the specified Person (either alone or through or together with any other Affiliate) owns, directly
or indirectly, more than 50% of the voting stock or other Equity Interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body, of such legal entity or of which the specified Person controls
the management.
“
Tax
”
or “
Taxes
” means any and all federal, state, county, local, municipal, foreign and other taxes, assessments,
duties or similar charges of any kind whatsoever, including all interest, penalties and additions imposed with respect to such
amounts, imposed by any Governmental Authority, and including any Liability for the payment of amounts as a result of being a
transferee of, or a successor in interest to, any Person or as a result of an express or implied obligation to indemnify any Person.
“
Tax
Returns
” means any report, declaration, return, information return, claim for refund, election, disclosure, estimate
or statement supplied to a Governmental Authority in connection with Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
“
Termination
Date
” has the meaning set forth in
Section 7.4(b)
.
“
Third
Party Claim
” means any claim or demand for which an Indemnitor may be liable to an Indemnitee hereunder which is asserted
by a third party.
“
Trademark
Assignment Agreement
” means the Trademark Assignment Agreement, dated as of the Closing Date, substantially in the form
attached hereto as
Exhibit B
.
“
Trademark
Consent Letter
” means the Trademark Consent Letter, dated as of the Closing Date, between the Buyer and the Seller,
in the form attached hereto as
Exhibit L
.
“
Transaction
Documents
” means this Agreement, the Escrow Agreement, the Manufacturing Agreement, the Transition Services Agreement,
the Trademark Assignment Agreement, the Bill of Sale and Assignment Agreement, the Trademark Consent Letter and any other document,
instrument or agreement delivered in connection herewith or therewith.
“
Transition
Services Agreement
” means the Transition Services Agreement, dated as of the Closing Date, in the form attached hereto
as
Exhibit E
.
“
Treasury
Regulations
” mean the Treasury regulations promulgated under the Code.
“
Voting
Agreement
” means a voting agreement, dated as of the date hereof, stating, among other things, that the signatory agrees
to vote in favor of the transactions contemplated by this Agreement in its capacity as a stockholder, in the form attached hereto
as
Exhibit I
.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
1.2
Interpretive
Provisions
. Unless the express context otherwise requires:
(a) the
words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this Agreement,
shall refer to this Agreement as a whole and not to any particular provision of this Agreement;
(b) terms
defined in the singular shall have a comparable meaning when used in the plural, and vice versa;
(c) the
terms “Dollars” and “$” mean United States Dollars;
(d) references
herein to a specific Section, Subsection, Recital, Schedule or Exhibit shall refer, respectively, to Sections, Subsections, Recitals,
Schedules or Exhibits of this Agreement;
(e) wherever
the word “include,” “includes,” or “including” is used in this Agreement, it shall be deemed
to be followed by the words “without limitation”;
(f) references
herein to any gender shall include each other gender;
(g) references
herein to any Person shall include such Person’s heirs, executors, personal representatives, administrators, successors
and assigns;
provided
,
however
, that nothing contained in this clause (g) is intended to authorize any assignment
or transfer not otherwise permitted by this Agreement;
(h) references
herein to a Person in a particular capacity or capacities shall exclude such Person in any other capacity;
(i) references
herein to any Contract (including this Agreement) mean such Contract as amended, supplemented or modified from time to time in
accordance with the terms thereof;
(j) with
respect to the determination of any period of time, the word “from” means “from and including” and the
words “to” and “until” each means “to but excluding”;
(k) when
calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this
Agreement, if the last day of such period is not a Business Day, the period shall end on the next succeeding Business Day;
(l) references
herein to any Law or any license mean such Law or license as amended, modified, codified, reenacted, supplemented or superseded
in whole or in part, and in effect from time to time; and
(m) references
herein to any Law shall be deemed also to refer to all rules and regulations promulgated thereunder.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
ARTICLE
2
PURCHASE
PRICE AND PAYMENT; PURCHASE AND SALE OF THE BUSINESS
2.1
Purchase
Price
. The aggregate purchase price for the Business Assets shall be fifty million dollars ($50,000,000) (the “
Purchase
Price
”), plus the assumption of the Assumed Liabilities. The Purchase Price
less
the Escrow Amount shall be paid
by wire transfer of immediately available funds to an account designated in writing by Seller to Buyer, such account designation
to be provided no later than two (2) Business Days prior to the Closing Date.
2.2
Sale
of the Business Assets; Assumption of the Assumed Liabilities
.
(a)
Business
Assets
. At the Closing provided for in
ARTICLE 3
, upon the terms and subject to the conditions of this Agreement, the
Seller shall sell, transfer, convey, assign and deliver to the Buyer or its designated Affiliate, and the Buyer or its designated
Affiliate shall purchase from the Seller, the Business Assets, free and clear of all Encumbrances, other than Permitted Encumbrances,
for an amount equal to the Purchase Price. The term “
Business Assets
” means all of the Seller’s right,
title and interest in and to the Assets and Properties set forth below, but not including in any event the Excluded Assets:
(i) Material
Contracts;
(ii) Books
and Records;
provided
, that Seller shall have no obligation to provide board minutes and stockholder minutes;
(iii) Acquired
Intellectual Property;
(iv) Non-US
IP;
(v) all
advertising, marketing and promotional materials used in the marketing of the Products;
(vi) Know-How;
(vii) the
license of certain trademarks pursuant to the Trademark Consent Letter;
(viii) all
tools, dies, cuts, stamps and other machinery used in the Business or containing the term “Cold-EEZE” listed on
Schedule
2.2(a)
;
provided
, that such list shall not contain items that can be used for other products or that have a use outside
of the Cold-EEZE branded products; and
(ix) those
Assets and Properties described on
Schedule 2.2(a)
attached hereto;
provided
, that, with respect to Permits,
Schedule
2.2(a)
shall only include such Permits that are freely transferrable by the Seller.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b)
Excluded
Assets
. Notwithstanding anything in this Agreement to the contrary, the following Assets and Properties of the Seller and
its Affiliates (collectively, the “
Excluded Assets
”) shall be excluded from and shall not constitute Business
Assets:
(i) the
corporate seals, charter documents, minute books, books of account or other records having to do with the corporate organization
of the Seller;
(ii) the
Tax Returns and books of account or other records with respect to Taxes of the Seller;
(iii) all
Accounts Receivable;
(iv) all
cash and cash equivalents;
(v) all
rights which accrue or will accrue to the Seller under this Agreement;
(vi) the
Seller’s personnel records and copies of any other records that the Seller and its Affiliates are required by Law to retain
in its possession;
(vii) all
known or unknown, liquidated or unliquidated, contingent or fixed, rights, claims or causes of action, choses in action, rights
of recovery and rights of set-off of any kind, and indemnities against any Person that the Seller may have against any Person
but only to the extent related to the Excluded Assets or the Retained Liabilities;
(viii) all
claims for refunds of Taxes and other governmental charges of whatever nature with respect to the Business Assets for Pre-Closing
Periods;
(ix) all
rights of the Seller under Contracts related to the Business that are not assigned to the Buyer after the Seller has complied
with
Section 2.2(e)
;
(x) all
causes of action (including counterclaims) whether known or unknown, absolute, contingent (or based on a contingency) or otherwise,
and defenses (A) to the extent not arising from or relating to the Business Assets or Assumed Liabilities as well as any books,
records and privileged information relating thereto or (B) relating to any period through the Closing to the extent that the assertion
of such cause of action or defense is necessary or useful in defending any claim that may be asserted against the Seller;
(xi) all
insurance policies and related Contracts and all rights thereunder (including the right to make claims thereunder and to the proceeds
thereof);
(xii) all
claims and rights against any officer, director, member, manager, or employee of the Seller (in their capacity as an employee
but not in any other capacity) following the Closing;
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(xiii) all
benefit plans and all trust agreements, insurance policies and administrative service and other Contracts relating to such;
(xiv) all
records and reports prepared or received by the Seller or any of its Affiliates in connection with the sale of the Business Assets
and the transactions contemplated hereby, including all analyses relating to the Business Assets or the Buyer so prepared or received;
(xv) all
vendor numbers associated with the Business Assets or Business;
(xvi) all
plants, real property and equipment, other than such equipment or other Assets and Properties as set forth on
Schedule 2.2(a)
;
(xvii) all
brands that are not related to or used in the Business;
(xviii) all
confidentiality agreements with prospective purchasers of the Business Assets or any portion thereof, and all bids and expressions
of interest received from third parties with respect to the Business Assets;
(xix) all
privileged materials, documents and records of the Seller or the Seller’s Affiliates that are not related to the Business
or the Business Assets; and
(xx) inventory,
finished goods, bulk, raw materials, packaging, supplies, parts and other inventories of the Business.
(c)
Assumed
Liabilities
. In connection with the sale, transfer, conveyance, assignment and delivery of the Business Assets pursuant to
this Agreement, at the Closing provided for in
ARTICLE 3
, upon the terms and subject to the conditions of this Agreement,
the Buyer will assume and agree to pay, perform and discharge the Assumed Liabilities and no others. The term “
Assumed
Liabilities
” means, collectively, all Liabilities arising out of the ownership and operation of the Business Assets
on or after the Closing Date, whether absolute, accrued, contingent, known or unknown, asserted or unasserted, fixed or otherwise,
or whether due or to become due;
provided
, that Assumed Liabilities shall not include any Retained Liabilities.
(d)
Retained
Liabilities
. Notwithstanding anything in this Agreement to the contrary, the Buyer shall not assume or be deemed to assume
any Liabilities of the Seller except for the Assumed Liabilities. Without limiting the generality of the foregoing, the Buyer
shall not assume, and the Seller shall continue to bear sole responsibility for all Liabilities arising out of (i) claims related
to the Business Assets regarding adulterated products manufactured by the Seller, (ii) the Accounts Payable, (iii) all indebtedness
of the Seller and all other Liabilities arising out of the Business Assets prior to the Closing Date, whether absolute, accrued,
contingent, known or unknown, asserted or unasserted, fixed or otherwise, or whether due or to become due, including without limitation
any and all Liabilities for any rebates, promotions, charge-backs or other changes in pricing with respect to sales of the Products
for the period prior to the Closing; (iv) claims or Liabilities arising out of or associated with the Rights Agreement; (v)(A)
all Taxes of the Seller (1) unrelated to the ownership or operation of the Business Assets and the Business or (2) related to
the direct or indirect ownership or operation of the Business Assets and the Business for all periods prior to the Closing; (B)
all Taxes, if any, imposed on the Seller and any consolidated, combined, or unitary group of which the Seller is a member as a
result of the sale or transfer of the Business Assets and the Business pursuant to this Agreement; and (C) any liability of the
Seller for the unpaid Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or non-U.S. law), as a transferee or successor, by contract, or otherwise; (vi) credits and payments for any returns of non-conforming
Products sold by the Seller on or before the Closing Date; and (vii) the business and operations of the Seller or any of its Affiliates
at any time, other than the Assumed Liabilities (collectively, the “
Retained Liabilities
”).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(e)
Consent
of Third Parties
. Nothing in this Agreement shall be construed as an attempt by the Seller to novate or assign to the Buyer
pursuant to this Agreement any Contract, permit, franchise, claim or other Assets and Properties included in the Business Assets
that is by its terms or by law nonassignable without the consent of any other party or parties, unless such consent or approval
shall have been given, or as to which all the remedies for the enforcement thereof available to the Seller would not by law pass
to the Buyer as an incident of the assignments provided for by this Agreement (a “
Non-Assignable Contract
”).
To the extent that any consent in respect of, or a novation of, a Non-Assignable Contract shall not have been obtained on or before
the Closing Date, the Seller shall, for a period not to exceed one hundred eighty (180) days following the Closing Date, continue
to use commercially reasonable efforts to obtain any such consent or novation after the Closing Date until the end of such one
hundred eighty (180) day period following the Closing Date, and the Seller shall cooperate with the Buyer in any reasonable, economically
feasible arrangement to provide that the Buyer shall receive the interest of the Seller in the benefits under such Non-Assignable
Contract;
provided
, that such cooperation shall not require the Seller to pay any consideration, incur any costs or expenses
or grant any financial accommodation or other benefit. The parties expressly intend and agree that, as between the Buyer and the
Seller, the beneficial interest in and to and benefits of the Business Assets pass to the Buyer. The parties further expressly
intend and agree that the Buyer, to the extent it receives the benefits referred to in the preceding sentence, shall assume and
agree to perform and discharge all Liabilities under any such Business Asset as of the Closing, whether or not an assignment or
transfer can be made, to the extent such Liabilities constitute Assumed Liabilities under this Agreement.
(f)
Return
of Excluded Assets
. In the event, through inadvertence, mistake or otherwise, (i) any Excluded Assets are transferred to the
Buyer, the Buyer agrees to promptly transfer and deliver the same to the Seller or (ii) any Business Assets are retained by the
Seller, the Seller agrees to promptly transfer and deliver the same to the Buyer. The parties shall cooperate to effect any transfer
of assets required by the previous sentence in the most Tax efficient manner to both parties.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
2.3
Transactions
to be Effected at the Closing
. At or prior to the Closing, the following transactions shall be effected by the parties:
(a) The
Seller shall deliver or cause to be delivered to the Buyer:
(i) a
certificate or certificates in compliance with Treasury Regulation Section 1.1445-2, certifying that the transactions contemplated
by this Agreement are exempt from withholding under Section 1445 of the Code;
provided
, that, notwithstanding anything
in this Agreement to the contrary, the Buyer’s sole right if the Seller cannot make such certification shall be to make
an appropriate withholding under Sections 897 and 1445 of the Code;
(ii) the
Bill of Sale and Assignment Agreement, duly executed by the Seller;
(iii) the
Manufacturing Agreement, duly executed by the Seller;
(iv) the
Transition Services Agreement, duly executed by the Seller;
(v) the
Trademark Assignment Agreement, duly executed by the Seller;
(vi) the
Escrow Agreement, duly executed by the Seller;
(vii) a
pay-off letter, in form and substance acceptable to the Buyer, from the Secured Parties stating that, as of the Effective Time,
(A) the Secured Promissory Notes have been repaid in full, (B) the Secured Promissory Notes are extinguished and all Encumbrances
in favor of the Secured Parties on the Business Assets pursuant to the Security Agreement have been terminated, released and discharged
and that the Secured Parties have delivered to the Buyer all instruments, certificates, statements and other documents necessary
to evidence such termination, release and discharge and (C) the Buyer is authorized to make all filings necessary or desirable
to terminate any financing statement or other notice or evidence of any such Encumbrance;
(viii) the
Rights Agreement Amendment, duly executed by the Seller and American Stock Transfer and Trust Company;
(ix) the
Voting Agreements, duly executed by each director and executive officer of the Seller;
(x) an
electronic copy of the virtual data room hosted by Merrill Corporation under the name “Zeta – VDR”;
(xi) the
Trademark Consent Letter, duly executed by the Seller; and
(xii) such
other agreements, consents, documents, instruments and writings as are reasonably required to be delivered by the Seller pursuant
to this Agreement or otherwise reasonably required to consummate the transactions contemplated hereby (but in no event shall the
Seller be required to deliver an opinion of counsel in connection with the transactions contemplated by this Agreement).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b) The
Buyer shall deliver or cause to be delivered to the Seller:
(i) an
amount equal to the Purchase Price less the Escrow Amount, by wire transfer of immediately available funds to the bank account
or accounts as are designated in writing by the Seller no later than two (2) Business Days prior to the Closing;
(ii) a
counterpart signature page to the Bill of Sale and Assignment Agreement, duly executed by the Buyer;
(iii) a
counterpart signature page to the Manufacturing Agreement, duly executed by the Buyer;
(iv) a
counterpart signature page to the Transition Services Agreement, duly executed by the Buyer;
(v) a
counterpart signature page to the Trademark Assignment Agreement, duly executed by the Buyer;
(vi) counterpart
signature pages to the Escrow Agreement, duly executed by the Buyer and the Escrow Agent;
(vii) counterpart
signature pages to the Voting Agreements;
(viii) counterpart
signature page to the Trademark Consent Letter, duly executed by the Buyer; and
(ix) such
other agreements, consents, documents, instruments and writings as are reasonably required to be delivered by the Buyer pursuant
to this Agreement or otherwise reasonably required to consummate the transactions contemplated hereby (but in no event shall the
Buyer be required to deliver an opinion of counsel in connection with the transactions contemplated by this Agreement).
(c) The
Buyer shall deliver or cause to be delivered to the Escrow Agent an amount equal to the Escrow Amount, by wire transfer of immediately
available funds to the Escrow Account.
2.4
Purchase
Price Allocation
. The Seller and the Buyer shall allocate the Purchase Price and the amount of the Assumed Liabilities (to
the extent required by applicable Law) among the Business Assets and the restrictive covenants set forth in
Section 6.4
in accordance with the principles of Section 1060 of the Code for Tax purposes as set forth in
Exhibit J
(the “
Purchase
Price Allocation
”). The parties shall (i) be bound by the Purchase Price Allocation and act in accordance with the Purchase
Price Allocation in the filing of all Tax Returns (including filing Form 8594 with the United States federal Tax Return for the
taxable year that includes the Closing Date) and in the course of any Tax audit, Tax review or Tax litigation relating thereto,
and (ii) take no position and to cause their Affiliates to take no position inconsistent with the Purchase Price Allocation for
Tax purposes unless required to do so by applicable Law.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
ARTICLE
3
THE
CLOSING
3.1
Closing;
Closing Date
. The closing of the sale and purchase of the Business Assets and the assumption of the Assumed Liabilities as
contemplated hereby (the “
Closing
”) shall take place at the offices of Reed Smith LLP, 599 Lexington Avenue,
New York, NY 10022, at 10:00 a.m. local time, promptly, but not later than three (3) Business Days, after all of the conditions
to Closing set forth in
ARTICLE 7
are either satisfied or waived (other than conditions which, by their nature, are to
be satisfied on the Closing Date), or at such other time, date or place as the Seller and the Buyer may mutually agree upon in
writing (the “
Closing Date
”). The Closing shall be effective for all purposes as of 12:01 a.m. local time on
the Closing Date at the place of the Closing (the “
Effective Time
”).
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
Except
as set forth in the Disclosure Schedules, the Seller represents and warrants to the Buyer as follows:
4.1
Organization
and Qualification
. The Seller is duly formed, validly existing and in good standing under the laws of the jurisdiction in
which it is organized. Solely with respect to the Business, the Seller has all requisite organizational power and authority to
own, lease and operate its properties and carry on its business as presently owned or conducted. Solely with respect to the Business,
the Seller has been qualified, licensed or registered to transact business as a foreign entity and is in good standing (or the
equivalent thereof) in each jurisdiction in which the ownership or lease of property or the conduct of its business requires such
qualification, license or registration.
4.2
Binding
Obligations
. Subject to obtaining the Required Stockholder Vote, the Seller has all requisite organizational authority and
power to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby and the execution,
delivery and performance by the Seller of this Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action on the part of the Seller and no other proceedings on the part of the Seller
are necessary to authorize the execution and delivery and performance of this Agreement and the transactions contemplated by this
Agreement by the Seller. This Agreement has been duly executed and delivered by the Seller, and assuming that this Agreement constitutes
the legal, valid and binding obligations of the Buyer, this Agreement constitutes the legal, valid and binding obligations of
the Seller, enforceable against the Seller in accordance with its terms, except to the extent that the enforceability thereof
may be limited by: (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws from
time to time in effect affecting generally the enforcement of creditors’ rights and remedies, and (b) general principles
of equity (collectively, the “
Equitable Exceptions
”).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
4.3
No
Defaults or Conflicts; Consents
. The due execution, delivery and performance by the Seller of this Agreement and the consummation
by the Seller of the transactions contemplated hereby (a) do not result in any violation of the certificate of incorporation or
bylaws (or equivalent constituent documents) of the Seller or any resolution adopted by the board of directors (or similar governing
body) of the Seller, (b) do not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default
under any Business Contract and (c) do not violate in any material respect any existing applicable Law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over the Seller with respect to the Business.
4.4
No
Governmental Authorization Required
. Except as set forth on
Schedule 4.4
, no authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority will be required to be obtained or made by the Seller in connection
with the due execution, delivery and performance by the Seller of this Agreement and the consummation by the Seller of the transactions
contemplated hereby;
provided
,
however
, that no representation or warranty is made with respect to authorizations,
approvals, notices or filings with any Governmental Authority that, if not obtained or made, would not, individually or in the
aggregate, reasonably be expected to be material to the Buyer’s ownership, use or operation of the Business Assets after
the Closing.
4.5
Financial
Statements
.
Schedule 4.5
contains true, correct and complete copies of the monthly gross sales, net sales, gross-to-net
adjustments, cost of goods sold, selling expenses, advertising, marketing and promotional costs, and volumes for the Products
for the period beginning January 1, 2014 and ending November 30, 2016 (the “
Financial Information
”). The Financial
Information is unaudited and was derived from the financial statements of the Seller, which were compiled by the Seller in accordance
with GAAP as consistently applied by the Seller, and is complete and accurate in all material respects.
4.6
Intellectual
Property
.
(a)
Schedule
4.6(a)
sets forth a list or description, as applicable, of all (i) Intellectual Property owned by the Seller and included
in the Business Assets, including, for all Intellectual Property that is registered, issued or subject to a pending application
for registration or issuance, the record owner(s) and application, issuance or registration numbers and dates, including without
limitation all abandoned trademark applications and applications which have been filed but for which the mark is no longer in
use, and (ii) written license agreements relating to Intellectual Property to which the Seller is a party and which are included
in the Business Assets (in each case other than license agreements for “off-the-shelf” or other software widely available
on generally standard terms and conditions or agreements that are not substantially focused on the license of Intellectual Property,
such as service, lease, sales or nondisclosure agreements in which the license of Intellectual Property is incidental to the primary
purposes of such agreement) (each such license agreement, an “
IP License
”) (collectively, the Intellectual
Property listed on
Schedule 4.6(a)
is referred to herein as the “
Acquired Intellectual Property
”). The
Acquired Intellectual Property constitutes all Intellectual Property necessary for operation of the Business, as of the date hereof.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b) The
Seller owns or is licensed to use through an IP License, practice and otherwise exploit all Acquired Intellectual Property, taken
as a whole, as of the date hereof, free and clear of any Encumbrances other than Permitted Encumbrances. Each IP License (i) is
a legal and binding obligation of the Seller and, to the knowledge of the Seller, the other relevant parties thereto and (ii)
is in full force and effect and enforceable against the Seller in accordance with the terms thereof in all material respects,
except to the extent that the enforceability thereof may be limited by the Equitable Exceptions.
(c) To
the knowledge of the Seller, during the five (5) year period prior to the date hereof, no Person has materially infringed or violated,
and to the knowledge of the Seller no Person is materially infringing or violating, any of the Intellectual Property which is
owned by the Seller and included in the Business Assets, and to the knowledge of the Seller, the marketing, license, distribution,
sale and use of the products and services currently sold by the Seller in connection with the Business Assets, as applicable,
does not infringe or violate in any material respect the proprietary rights of any third party. There are no royalty or license
payments due to any third parties on any of the Business Assets.
(d) To
the knowledge of the Seller, during the five (5) year period prior to the date hereof, no Person (i) has infringed or violated
in any material respect, or (ii) is infringing or violating in any material respect, any of the Non-US IP which is included in
the Business Assets, and the Seller has not received notice of any such alleged infringement. Notwithstanding the foregoing, and
regardless of any other provision of this Agreement, the Seller has advised the Buyer, and the Buyer acknowledges, that the Seller
has not maintained or utilized the Non-US IP or any filings or registrations related thereto. Accordingly, and regardless of any
other provision of this Agreement except for the first sentence of this
Section 4.6(d)
, the Seller makes no representations,
promises or warranties with respect to the Non-US IP, and the Buyer has not relied on any such representations, promises or warranties
in entering into and performing this Agreement.
4.7
Contracts
.
For the purposes of this Agreement, “
Business Contracts
” means all active Contracts with respect to the Business
since January 1, 2016 related to customers, suppliers, vendors, and service providers but does not include: (i) any non-customer
Contracts relating to legal representation, items other than the Products, employees, office supplies, freight companies, accountants,
overhead, ingredient suppliers, the operation of Seller’s facilities, the manufacturing of the Products, (ii) with respect
to vendors and service providers, any Contract that has an annual value or cost in the year 2016 less than [****] dollars ($[****]),
or (iii) any purchase order or series of purchase orders. The Seller represents it has made commercially reasonable efforts to
populate
Schedule 4.7
with the Business Contracts as of the date hereof. No less than ten (10) days prior to the Closing,
the Seller will provide a true, complete and correct list of Business Contracts on
Schedule 4.7
. Each Business Contract
constitutes a legal, valid, and binding obligation of the Seller and, to the knowledge of the Seller, of the other parties thereto,
subject to the Equitable Exceptions. With respect to each of the Business Contracts, neither the Seller nor, to the knowledge
of the Seller, any other party to any such Business Contract is in breach thereof or default thereunder, in any material respect.
The Seller has not received or given written notice of termination of any Business Contract.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
4.8
Taxes
.
(a) The
Seller has paid or will pay in a timely manner (i) all Taxes that are shown to be due with respect to the Business or the Business
Assets on any Tax Returns filed or to be filed by the Seller or pursuant to any assessment received by the Seller from any Governmental
Authority for any period preceding the Closing Date, and (ii) all other Taxes with respect to the Business or the Business Assets
due on or before the Closing Date (whether or not shown on a Tax Return).
(b) The
Seller has filed or will file in a timely manner with the appropriate Governmental Authority all Tax Returns required to be filed
with respect to the Business or the Business Assets prior to or on the Closing Date and each such Tax Return has been prepared
in all material respects in compliance with all applicable Laws and is true, accurate and complete in all material respects.
(c) There
are no pending, proposed, or to the knowledge of the Seller, threatened examinations, audits, actions, proceedings, investigations,
disputes, assessments or claims with respect to any Taxes payable by or asserted against the Seller with respect to the Business
or the Business Assets, and to the knowledge of the Seller, there is no basis for such claims or assessments.
(d) There
are no outstanding agreements or waivers that would extend the statutory period in which a Governmental Authority may assess or
collect a Tax against the Seller with respect to the Business or the Business Assets.
(e) There
are no Encumbrances with respect to Taxes (other than for current Taxes not yet due and payable) upon the Business Assets.
(f) None
of the Business Assets constitute a “United States real property interest” within the meaning of Section 897(c) of
the Code.
(g) Except
as may be the case with Non-US IP, none of the Business Assets, and no portion of the Business, (i) constitutes a permanent establishment
in any country other than the United States, or (ii) is the subject of Taxation in any jurisdictions outside the United States.
(h) No
claim has been made in writing by any Governmental Authority in the past five (5) years in a jurisdiction where the Seller does
not file Tax Returns that the Seller is or may be subject to Taxation by that jurisdiction with respect to the Business or the
Business Assets and, to the knowledge of the Seller, there is no basis for such claim.
(i) Except
for Non-US IP, none of the Business Assets are located outside of the United States.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(j) The
Seller has collected or self-assessed and remitted to the appropriate Governmental Authority all sales and use or similar Taxes
required to have been collected or self-assessed with respect to the Business, including any interest and any penalty, addition
to Tax or additional amount unpaid, and has been furnished properly completed exemption certificates for all exempt transactions.
The Seller has collected and/or remitted to the appropriate Governmental Authority all Taxes, customs duties, fees, and assessments
with respect to the Business which are other than in the nature of income Taxes or charge of any kind whatsoever, including any
interest and any penalty, addition to Tax or additional amount unpaid.
4.9
Reserved
.
4.10
Litigation
.
Except as set forth on
Schedule 4.10
, as of the date hereof, there are no, and during the five (5) year period prior to
the date of this Agreement, there have not been any, claims, actions or legal proceedings pending, or to the knowledge of the
Seller, threatened against the Seller (a) relating to the transactions contemplated by this Agreement, (b) with respect to the
Business Assets, before any Governmental Authority, or (c) with respect to Product Advertising.
4.11
Title
to Business Assets
. The Seller has (in the case of owned personal property) good, valid and marketable title to, or (in the
case of leased personal property) a valid leasehold interest in or license to all of the Business Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances. The representations and warranties made in this
Section 4.11
do not apply
to matters covered by
Section 4.6
(Intellectual Property).
4.12
Brokers
.
Except as set forth on
Schedule 4.12
, no broker, finder or similar intermediary has acted for or on behalf of the Seller
in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary
is entitled to any broker’s, finder’s or similar fee or other commission in connection therewith based on any agreement
with the Seller or any action taken by the Seller.
4.13
Compliance
With Laws
. Since January 1, 2014, solely with respect to the Business, Seller and its Affiliates have complied in all material
respects with all applicable Laws.
4.14
Exclusivity
of Representations
. The representations and warranties made by the Seller in this Agreement or in any other document delivered
pursuant to the terms of this Agreement are the exclusive representations and warranties made by the Seller. The Seller hereby
disclaims any other express or implied representations or warranties. The Seller is not, directly or indirectly, making any representations
or warranties regarding pro-forma financial information, financial projections or other forward-looking statements of the Business.
4.15
Solvency
.
Immediately after giving effect to the transactions contemplated hereby, each of the Seller and any of its Subsidiaries shall
be solvent and shall (a) be able to pay their debts as they become due, (b) own property that has a fair saleable value greater
than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities), and
(c) have adequate capital to carry on their business. No transfer of property is being made and no obligation is being incurred
in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present
or future creditors of any of the Seller and any of its Subsidiaries. In connection with the transactions contemplated hereby,
the Seller has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
4.16
Vote
Required
. The affirmative votes, at a duly called and held meeting of the stockholders, of the holders of a majority of the
outstanding shares of the Seller’s Common Stock entitled to vote thereon (the “
Required Stockholder Vote
”)
are the only votes of the holders of any class or series of shares of capital stock of the Seller necessary to adopt this Agreement,
the Transaction Documents and approve the transactions contemplated hereby or thereby.
4.17
No
Channel Stuffing
. Since January 1, 2015, neither the Seller nor any of its Affiliates has (i) conducted sales of any Products
outside of the ordinary course of business in any material respect, (ii) shipped or sold any Products in quantities that were
not materially consistent with demand and the ordinary shipment and sales practices of the Business or (iii) engaged in “channel
stuffing” of any Products, [****].
4.18
Seller
Board Recommendation
. The board of directors of the Seller, at a duly held meeting or by written consent, has, by the requisite
vote of the members of the Seller’s board of directors voting, (i) determined that the terms of this Agreement, the Transaction
Documents and the transactions contemplated hereby and thereby are advisable to and in the best interests of the holders of Seller’s
Common Stock, (ii) directed that this Agreement, the Transaction Documents and the other transactions contemplated hereby and
thereby be submitted for consideration at a duly called and held meeting of the stockholders, and (iii) resolved to recommend
that the Seller’s stockholders vote in favor of the adoption of this Agreement, the Transaction Documents and approval of
the other transactions contemplated hereby and thereby (in each case, in this clause (iii), the “
Seller Board Recommendation
”)
and to include such recommendation in the Proxy Statement, subject to
Section 6.10(e)
.
4.19
Permits
.
Schedule 4.19
lists those material permits that have been filed or obtained by the Seller with respect to the Products
that, to the knowledge of the Seller, are required in order to develop, manufacture, package, supply, promote, distribute and
sell the Products in the United States (collectively, the “
Permits
”). The Seller possesses (and since January
1, 2014 has possessed) and is in compliance (and since January 1, 2014 has complied) in all material respects with all Permits
material to the conduct of the Businesses. All such Permits are valid and in full force and effect. To the knowledge of the Seller,
no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation,
suspension, lapse or limitation of any such Permit.
4.20
Regulatory
Compliance
.
(a) The
manufacture, sale and marketing of the Products by the Seller in the locations where Products have been manufactured, sold or
marketed by or on behalf of the Seller, is and has been conducted in compliance in all material respects with all applicable Laws
which, if not complied with, would materially restrict, bar or prohibit the manufacture, sale or marketing of any of the Products.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b) The
Products are and have been developed, tested, manufactured, handled, labeled, packaged, stored, supplied, promoted, distributed,
marketed, commercialized, imported, exported, and sold by or on behalf of the Seller, as applicable, in material compliance with
all applicable Laws. All manufacturing operations for the Products conducted by or on behalf of the Seller have been and are being
conducted in compliance with current Good Manufacturing Practice under Section 501(a)(2)(B) of the Food, Drug, and Cosmetic Act
and 21 CFR Part 211, as applicable to homeopathic products, consistent with FDA Compliance Policy Guidance Section 400.400. The
Products have not been voluntarily recalled, suspended, or discontinued by the Seller at the request of the FDA or any other Governmental
Authority, nor has the Seller received any notice from FDA or any other Governmental Authority that it has commenced or threatened
to initiate any action to restrict the sales or marketing, request the recall of, or enjoin or restrict the production of the
Products. The Products have been promoted by or on behalf of the Seller in compliance with all applicable Laws, including but
not limited to those Laws administered and enforced by the FDA and the United States Federal Trade Commission (“
FTC
”)
and the 1999 Consent Order. Neither the Seller nor any of its Representatives is subject to any notice, civil, criminal or administrative
action, suit, demand, claim, complaint, hearing, investigation, demand letter, warning letter, untitled letter, proceeding or
request for information from the FDA, FTC, or any other Governmental Authority regarding promotion of the Products, including
but not limited to with regard to compliance with the 1999 Consent Order. The Seller has maintained records relating to the development,
testing, manufacture, handling, labeling, packaging, storage, supply, promotion, distribution, marketing, commercialization, import,
export, and sale of the Products in compliance with applicable Laws, and the Seller has submitted to the FDA and other Governmental
Authorities in a timely manner any required notices or other reports, including but not limited to adverse experience reports
related to the Products.
4.21
Administrative/Enforcement
Action
.
(a) Except
as set forth on
Schedule 4.21(a)
, there is no material award, decision, injunction, judgment, order, ruling, subpoena,
or verdict entered, issued, made, or rendered by any Governmental Authority to which the Business is subject.
(b) Neither
the Seller nor any of its Representatives has received any notice or communication from the FDA or other Governmental Authority
requiring, recommending, or threatening to initiate any action to terminate, suspend, or materially limit the sale of the Products
or alleging noncompliance with applicable Laws with regard to the Products or the Business. There has not been and is not now
any material observation, civil, criminal or administrative action, suit, demand, claim, complaint, hearing, investigation, demand
letter, warning letter, untitled letter, proceeding or request for information pending or in effect against the Seller or any
of its officers and employees with respect to the Business, and the Seller has no liability (whether actual or contingent) with
respect to the Business for failure to comply with applicable Laws. To the knowledge of the Seller, there is no act, omission,
event, or circumstance that would reasonably be expected to give rise to or form the basis for any civil, criminal or administrative
action, suit, demand, claim, complaint, hearing, investigation, demand letter, warning letter, untitled letter, proceeding or
request for information or any liability (whether actual or contingent) related to the Business for failure to comply with applicable
Laws.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
4.22
Proxy
Statement
.
The Proxy Statement will not, at the time such document is mailed to the
stockholders of the Seller, and at the time any amendment or supplement thereto is filed with the SEC, contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not misleading (other than information supplied by a third
party in writing expressly for inclusion therein). The Proxy Statement will, at the time it is mailed to the stockholders of the
Seller, and at the time any amendment or supplement thereto is filed with the SEC, comply as to form in all material respects
with the applicable provisions of the Exchange Act, as amended and the rules and regulations promulgated thereunder.
4.23
Rights
Agreement and Rights Agreement Amendment
. As of the date hereof, to the knowledge of the Seller, no holder of Seller’s
Common Stock has become an “Acquiring Person” (as defined in Section 1(a) of the Rights Agreement) and no Section
11(a)(ii) or Section 13(i) triggering event under the Rights Agreement has occurred. No material action that has not been taken
in accordance with the terms of the Rights Agreement is necessary (i) to render the Rights Agreement inapplicable to this Agreement
and the transactions contemplated hereby, (ii) to ensure that (A) the Buyer is not deemed to be an Acquiring Person (as defined
in the Rights Agreement) pursuant to the Rights Agreement as a result of the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby and (B) no Distribution Date (as defined in the Rights Agreement) will occur by reason
of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, and (iii) so that
the Seller will have no obligations under the Rights (as defined in the Rights Agreement) issued pursuant to or under the Rights
Agreement in connection with the transactions contemplated hereby and the holders of Seller’s Common Stock will have no
rights under the Rights or the Rights Agreement in connection with the transactions contemplated hereby. The Seller is not a party
to any other stockholder rights agreement, rights plan, anti-takeover plan, “poison pill” or other similar agreement
or plan. The execution and delivery of the Rights Agreement Amendment have been duly authorized by all necessary corporate action
on the part of the Seller, and the Rights Agreement Amendment constitutes the valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, subject to the Equitable Exceptions.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
Except
as set forth in the Schedules delivered by the Buyer which are numbered to correspond with the sections of this
ARTICLE 5
,
the Buyer represents and warrants to the Seller as follows:
5.1
Organization
.
The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it
is organized, and has the requisite power and authority to own its properties and carry on its business in all material respects
as presently owned or conducted.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
5.2
Binding
Obligations
. The Buyer has all requisite authority and power to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. This Agreement and the consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary action on the part of the Buyer and no other proceedings on the part of the Buyer are
necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated
hereby by the Buyer. This Agreement has been duly executed and delivered by the Buyer and, assuming that this Agreement constitutes
the legal, valid and binding obligations of the Seller, constitutes the legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with its terms, except to the extent that the enforceability thereof may be limited by the Equitable
Exceptions.
5.3
No
Defaults or Conflicts
. The due execution, delivery and performance by the Buyer of this Agreement and the consummation by
the Buyer of the transactions contemplated hereby (a) do not result in any violation of the charter or bylaws or other constituent
documents of the Buyer, (b) do not conflict with, or result in a breach of any of the terms or provisions of, or constitute a
default under any indenture, mortgage or loan or any other agreement or instrument to which the Buyer is a party or by which it
is bound or to which its properties may be subject, and (c) do not violate any existing applicable Law, rule, regulation, judgment,
order or decree or any Governmental Authority having jurisdiction over the Buyer or any of its properties.
5.4
No
Governmental Authorization Required
. No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority will be required to be obtained or made by the Buyer in connection with the due execution, delivery and
performance by the Buyer of this Agreement and the consummation by the Buyer of the transactions contemplated hereby.
5.5
Brokers
.
No broker, finder or similar intermediary has acted for or on behalf of the Buyer in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker’s, finder’s or
similar fee or other commission in connection therewith based on any agreement with the Buyer or any action taken by the Buyer.
5.6
Litigation
.
There is no claim, action, suit or legal proceeding pending or to the knowledge of the Buyer, threatened against the Buyer or
any material portion of its Assets and Properties with respect to which there is a possibility of a determination which questions
the validity or legality of this Agreement or the transactions contemplated hereby or which seeks to prevent the transactions
contemplated hereby or otherwise would reasonably be expected, individually or in the aggregate, to materially impair the Buyer’s
ability to effect the transactions contemplated hereby.
5.7
Sufficient
Funds
. The Buyer has (a) sufficient immediately available funds available and the financial ability to pay all amounts payable
pursuant to
ARTICLE 2
and any fees and expenses incurred by the Buyer in connection with the transactions contemplated
by this Agreement and (b) the resources and capabilities (financial and otherwise) to perform its obligations hereunder. The Buyer
has not incurred any obligation, commitment, restriction or liability of any kind, and is not contemplating or aware of any obligation,
commitment, restriction or liability of any kind, in either case which would impair or adversely affect such resources and capabilities.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
5.8
Buyer’s
Reliance
. The Buyer acknowledges that neither the Seller nor any other Person has made any representation or warranty, expressed
or implied, as to the Business Assets, the Assumed Liabilities, or the Business, and the Buyer has not relied on any other express
or implied representation, warranty or other statement by or on behalf of the Seller except as expressly set forth in this Agreement
and the Transaction Documents.
5.9
Ownership
of Seller’s Common Stock
. Except as may be provided in the Voting Agreements, as of the date hereof, neither the Buyer
nor any of its Affiliates beneficially owns, directly or indirectly (including pursuant to a derivatives contract), any shares
of Seller’s Common Stock or other securities convertible into, exchangeable for or exercisable for shares of Seller’s
Common Stock and neither the Buyer nor any of its Affiliates has any rights to acquire, directly or indirectly, any shares of
Seller’s Common Stock; except in any case, shares of Seller’s Common Stock (if any) owned in a mutual fund, pension
plan or other similar fund to which Buyer or any of its Affiliates have an interest.
ARTICLE
6
COVENANTS
6.1
Conduct
of Business Prior to the Closing
. From the date hereof until the Closing, except as otherwise provided in this Agreement or
consented to in writing by the Buyer (which consent shall not be unreasonably withheld or delayed), the Seller shall (a) conduct
the Business in the ordinary course consistent with past practice and in compliance in all material respects with applicable Law;
(b) use commercially reasonable efforts to maintain and preserve intact the Business Assets, relationships with third parties
and goodwill; and (c) notify the Buyer of the occurrence of any material event with respect to the Business as soon as reasonably
practicable. Without limiting the foregoing, from the date hereof until the Closing Date, the Seller shall:
(i) not
sell, assign or encumber any of the Business Assets;
(ii) not
modify, amend or terminate any Business Contract that during the twelve (12) month period prior to the date of this Agreement
involved, or during the twelve (12) month period following the date of this Agreement is reasonably expected to involve, payments
by or to the Seller aggregating in excess of $[****] during such twelve (12) month period;
(iii) not
change or modify the pricing of any of the Products;
(iv) not
change any promotional allowances, discounts or other coupons offered to its customers related to the Products;
(v) not
change any advertising, marketing or promotional materials related to the Products;
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(vi) pay
the debts, Taxes and other obligations of the Business when due, including payment of any royalty or license payments due to any
third parties;
(vii) maintain
the properties and assets included in the Business Assets in the same condition as they were on the date of this Agreement, subject
to reasonable wear and tear;
(viii) preserve
and maintain all of the Acquired Intellectual Property;
(ix) preserve
and maintain all of the Non-US IP consistent with past practice;
(x) continue
in full force and effect without modification all insurance policies, except as required by applicable Law;
(xi) defend
and protect the properties and assets included in the Business Assets from infringement or usurpation;
(xii) perform
all of its obligations under all Business Contracts;
(xiii) comply
in all material respects with all Laws applicable to the conduct of the Business or the ownership and use of the Business Assets;
and
(xiv) not
take or permit any action that would cause any of the changes, events or conditions described in this
Section 6.1
to occur.
6.2
Confidentiality;
Public Announcements
.
(a)
Confidentiality
.
(i) The
Buyer and the Seller shall each maintain in confidence, and shall cause their respective Representatives to maintain in confidence,
any written, oral, or other information obtained in confidence from the other party hereto in connection with this Agreement,
the Transaction Documents or the transactions contemplated hereby or thereby, unless such information (A) is now, or hereafter
becomes, through no act or failure to act on the part of the receiving party (or its Affiliates) in breach of this Agreement,
generally known or available to the public, (B) is known by the receiving party at the time of receiving such information,
provided
the receiving party can demonstrate such knowledge with written evidence, (C) is hereafter furnished to the receiving party
by a third party that is under no continuing obligations as a matter of right and without restriction on disclosure as proven
by written evidence, (D) is independently developed by or on behalf of the receiving party without any breach of this Agreement
as proven by written evidence, (E) is the subject of a written permission to disclose provided by the disclosing party, or (F)
is required to be furnished or disclosed by applicable Law (including information required to be disclosed in SEC filings);
provided
,
that the receiving party gives the providing party written notice of the information to be disclosed as far in advance of its
disclosure as practicable and uses its commercially reasonable efforts to obtain assurances that confidential treatment will be
accorded to such information;
provided
,
further
, that nothing in this
Section 6.2
will in any way restrict
or limit the use of any information acquired by the Buyer as part of the transactions contemplated by this Agreement directly
relating to the Business Assets.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(ii) The
Seller shall not, and shall cause its Affiliates not to, at any time, disclose to any Person other than the Buyer any confidential
or proprietary information, knowledge or data which directly relates to the Business Assets, whether or not marked or otherwise
identified as confidential, proprietary or secret, unless such information (A) is now, or hereafter becomes, through no act or
failure to act on the part of the Seller (or their respective Affiliates) in breach of this Agreement, generally known or available
to the public, (B) is furnished to the Seller by a third party that is under no continuing obligation as a matter of right and
without restriction on disclosure, (C) is the subject of a written permission to disclose provided by the Buyer, or (D) is required
to be furnished or disclosed by applicable Law (including information required to be disclosed in SEC filings);
provided
that the Seller gives the Buyer written notice of the information to be disclosed as far in advance of its disclosure as practicable
and uses its commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to such information.
(iii) The
covenants contained in paragraphs (i) and (ii) of this
Section 6.2(a)
will continue to be applicable until the second (2
nd
)
anniversary of the Effective Time;
provided
,
however
, that the Seller’s obligation set forth in paragraph
(ii) of this
Section 6.2(a)
shall be perpetual as it relates to the Acquired Intellectual Property and Non-US IP.
(b)
Public
Announcements
. No party will issue or cause the publication of any press release or other public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior written consent of the other parties hereto (not to
be unreasonably withheld);
provided
,
however
, that nothing herein will prohibit any party from issuing or causing
publication of any such press release or public announcement to the extent that such disclosure is required by Law (including
securities Laws) or stock exchange requirements, in which case the party making such determination will use commercially reasonable
efforts to allow the other party reasonable time to comment on such release or announcement in advance of its issuance. Notwithstanding
the foregoing, the Buyer consents to the Seller’s publication of a press release upon the execution of this Agreement, in
the form attached hereto as
Exhibit K
, and upon the Closing, in form and substance reasonably acceptable to the Buyer.
6.3
Books
and Records; Litigation Matters
.
(a)
Books
and Records.
The Seller and its Affiliates shall have the right to retain copies of all books and records of the Business
relating to periods ending on or prior to the Closing Date. Following the Closing Date, the Buyer shall retain the Books and Records
in a manner consistent with applicable Law and the Buyer’s document retention policies in effect from time to time. After
the Closing, the Buyer shall allow the counsel, accountants, and other Representatives of the Seller and its Affiliates access
to such Books and Records (with the related right of examination and duplication) upon reasonable request by the Seller and during
normal business hours, subject to the confidentiality restrictions contained herein.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b)
Litigation
Matters
. Following the Closing, in the event that, and so long as, the Seller or any of its Affiliates is actively contesting,
defending or investigating any charge, audit, complaint, action, suit, proceeding, hearing, threat, investigation, grievance,
arbitration, allegation, claim, pre-claim, legal proceeding or demand in connection with (i) any transaction contemplated by this
Agreement, or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction relating to periods prior to the Closing and involving the Business, at the Seller’s
sole cost and expense, the Buyer and its Affiliates will reasonably cooperate with such contesting, defending or investigating
party and its counsel in the contest, defense or investigation, including by making available their personnel so as to assist
with the contest, defense or investigation, by executing a joint defense agreement with such contesting, defending or investigating
party, by agreeing to preserve the attorney-client privilege, work product doctrine or other privilege that may attach to any
privileged communications or information with respect thereto, by providing such Intellectual Property rights or otherwise by
participating as a party to the extent reasonably requested to pursue or defend any such contest, defense or investigation.
6.4
Non-Compete;
Non-Solicitation
.
(a) The
Seller shall not, and shall cause Seller’s Subsidiaries not to, directly or indirectly, for the period beginning on the
Closing Date and ending on the [****] anniversary of the Closing Date, develop, manufacture, sell, promote or distribute, including
as a partner, stockholder, member, employee, principal, agent, trustee or consultant, any product in the United States that is
used or indicated for cough, cold or flu; provided that the Seller may (A) continue to develop, manufacture, sell, promote or
distribute the [****] as are marketed by the Seller as of the Closing Date, provided that such products shall not include [****];
and (B) contract manufacture any product for a third party, provided that such products referenced in clause (B) shall not include
any products [****].
(b) Mr.
Ted Karkus shall not, directly or indirectly, for the period beginning on the Closing Date and ending on the [****] anniversary
of the Closing Date, develop, manufacture, sell, promote or distribute, including as a partner, stockholder, member, employee,
principal, agent, trustee or consultant, any product in the United States that is used or indicated for cough, cold or flu; provided
that Mr. Ted Karkus may (A) continue to develop, manufacture, sell, promote or distribute the [****] as are marketed by the Seller
as of the Closing Date, provided that such products shall not include [****]; and (B) contract manufacture any product for a third
party, provided that such products referenced in clause (B) shall not include any products [****].
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(c) Mr.
Robert V. Cuddihy, Jr. shall not, directly or indirectly, develop, manufacture, sell, promote or distribute, including as a partner,
stockholder, member, employee, principal, agent, trustee or consultant, any product in the United States that is used or indicated
for (i) cough, cold or flu for the period beginning on the Closing Date and ending on the [****] anniversary of the Closing Date,
or (ii) cough, cold or flu with zinc as the primary active ingredient for the period beginning on the Closing Date and ending
on the [****] anniversary of the Closing Date; provided that Mr. Robert V. Cuddihy, Jr. may (A) continue to develop, manufacture,
sell, promote or distribute the [****] as are marketed by the Seller as of the Closing Date, provided that such products shall
not include [****]; and (B) contract manufacture any product for a third party, provided that such products referenced in clause
(B) shall not include any products [****].
(d) Dr.
Raouf Ghaderi shall not, directly or indirectly, develop, manufacture, sell, promote or distribute, including as a partner, stockholder,
member, employee, principal, agent, trustee or consultant, any product in the United States that is used or indicated for cough,
cold or flu with zinc as the primary active ingredient for the period beginning on the Closing Date and ending on the [****] anniversary
of the Closing Date; provided that Dr. Raouf Ghaderi may (A) continue to develop, manufacture, sell, promote or distribute the
[****] as are marketed by the Seller as of the Closing Date, provided that such products shall not include [****]; and (B) contract
manufacture any product for a third party, provided that such products referenced in clause (B) shall not include any products
[****].
(e) For
[****] years after the Closing Date, the Seller, Mr. Ted Karkus, Mr. Robert V. Cuddihy, Jr. and Dr. Raouf Ghaderi (each, a “
Restricted
Party
”) shall not, and shall cause the Seller’s Subsidiaries not to, solicit, offer employment to or hire any
Person that is employed by the Buyer in connection with the Business;
provided
,
however
, that such Restricted Party
shall not be prohibited from (i) initiating searches for employees or contractors through the use of non-directed general advertisement
or through the engagement of firms to conduct searches that are not targeted or focused on persons employed by the Buyer or (ii)
soliciting, offering employment to or hiring a former employee of the Buyer, whose employment has been terminated by the Buyer.
For [****] years after the Closing Date, the Buyer shall not solicit, offer employment to or hire any Person that is employed
by the Seller;
provided
,
however
, that the Buyer shall not be prohibited from (i) initiating searches for employees
or contractors through the use of non-directed general advertisement or through the engagement of firms to conduct searches that
are not targeted or focused on persons employed by the Seller or (ii) soliciting, offering employment to or hiring a former employee
of the Seller, whose employment has been terminated by the Seller.
6.5
Cooperation
.
From and after the Closing, if the Seller or any of its Affiliates receive any funds or notices relating to any Business Assets,
the Seller or its Affiliates shall remit such funds or notices to the Buyer within five (5) Business Days after its receipt thereof.
From and after the Closing, if the Buyer or its Affiliates receive any funds or notices not relating to the Business Assets, the
Buyer or its Affiliates shall remit any such funds or notices to the Seller within five (5) Business Days after its receipt thereof.
From the date hereof, the Buyer shall take any and all reasonable action requested by the Seller in connection with the Seller
obtaining the consents set forth in
Section 7.3(f)
and
7.3(g)
and shall not, by act or omission, impede or negatively
affect the Seller’s efforts related to obtaining such consents.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
6.6
Further
Assurances
. At any time or from time to time after the Closing, at the Seller’s request and without further consideration,
the Buyer shall, and shall cause its Affiliates to, execute and deliver to the Seller such other reasonable instruments of assumption,
provide such reasonable materials and information and take such other reasonable actions as the Seller may reasonably deem necessary
or desirable in order more effectively to transfer, convey and assign to the Buyer, and for the Buyer to assume and agree to pay,
perform and discharge, all of the Assumed Liabilities. At any time or from time to time after the Closing, at the Buyer’s
reasonable request and without further consideration, the Seller shall (a) execute and deliver to the Buyer such other reasonable
instruments of sale, transfer, conveyance, assignment and confirmation, provide such reasonable materials and information and
take such other reasonable actions as the Buyer may reasonably deem necessary or desirable in order more effectively to transfer,
convey and assign to the Buyer, and to confirm the Buyer’s title to, all of the Business Assets and (b) make available,
during normal business hours, any employee of the Seller with knowledge of the Business to the extent such availability is reasonably
required by the Buyer in connection with the use or operation of the Business Assets.
6.7
Transfer
of Know-How
. At or prior to the Closing, the Seller shall disclose (and provide copies or provide reasonable access to make
copies, as applicable) to the Buyer all Know-How that is necessary or reasonably useful in the manufacturing (including quality
assurance and control testing, filling, labeling, packaging, finishing, storage and shipping, as applicable) of the Products.
In connection with the foregoing, the Seller shall make available to the Buyer, at the Seller’s expense, such advice of
its technical personnel as may reasonably be requested by the Buyer in connection with such transfer, understanding and implementation
of such manufacturing related Know-How.
6.8
Tax
Matters
.
(a) The
Seller will prepare and timely file all Tax Returns and pay all Taxes owed in respect of the Business Assets and the Business
for all Tax periods ending on or prior to the Closing Date, including any
Tax
preparation
fees. The Buyer will prepare and timely file all other Tax Returns that are required to be filed in respect of the Business Assets
and the Business and the Buyer will be responsible for paying all Taxes with respect to periods beginning after the Closing Date.
The Seller shall be responsible for any and all Taxes owed with respect to taxable periods ending on or before the Closing Date,
and shall be responsible for any
Tax
preparation fees incurred related thereto. With
respect to Taxes owed for a Straddle Period, the Seller will be responsible for the amount apportioned (pursuant to
Section
6.8(b)
) to days on or before the Closing Date and the Buyer will be responsible for amounts apportioned to days after the
Closing Date. The Seller will pay such apportioned Taxes that are due and payable on or prior to the Closing Date (including any
Tax
preparation fees), and bill the Buyer for any part of that amount apportioned to
the Buyer. The Buyer will pay such apportioned Taxes that are due and payable after the Closing Date and bill the Seller for any
part of that amount apportioned to the Seller. Notwithstanding the foregoing, the Seller shall bear and be solely responsible
for the payment of all Taxes which are or become payable by the Seller prior to, at, or after the Closing Date, in connection
with the transactions contemplated hereby, regardless of when an assessment in respect of any such matter occurs, whether before
or after the Closing Date.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b) For
any Taxes that are payable with respect to a Straddle Period, (i) in the case of Taxes such as property Taxes, ad valorem Taxes,
and similar Taxes imposed on a periodic basis, the portion of any such Tax that is attributable to the portion of the period ending
on the Closing Date shall be considered to equal the amount of such Taxes for such taxable period, multiplied by a fraction, the
numerator of which is the number of days in the portion of such taxable period that ends on the Closing Date and the denominator
of which is the number of days in the entire taxable period and (ii) in the case of Taxes that are imposed on, or are based in
whole or in part on, the income, gross receipts, operations or payroll of the Seller (such as sales and use, value added, and
goods and services Taxes), the portion of such Taxes which is attributable to the portion of such taxable period ending on the
Closing Date shall be determined by closing the books of the Seller as of the end of the day on the Closing Date. For purposes
hereof, Taxes attributable to any period or portion thereof ending on or prior to the Closing Date shall include sales, use, value
added, goods and services and similar Taxes imposed on sales or gross receipts that accrue or are received on or prior to the
Closing Date, and Taxes attributable to the ownership of property during periods on or prior to the Closing Date.
(c) After
the Closing Date, the Seller, and the Buyer shall:
(i) use
commercially reasonable efforts to cooperate fully in preparing for any audits of, or disputes with Governmental Authorities regarding,
any Tax Returns relating to the Business Assets or the Business and make available to the other and to any Governmental Authority
as reasonably requested all information, records, and documents relating to liabilities for Taxes associated with the Business
or the Business Assets as set forth in this Agreement;
(ii) make
available to the other, as reasonably requested and available, personnel responsible for preparing or maintaining information,
records and documents in connection with Taxes as well as any related litigation;
(iii) preserve
all such information, records, and documents until the expiration of any applicable statutes of limitation or extensions thereof
and as otherwise required by Law; and
(iv) provide
timely notice to the other in writing of any pending or threatened Tax audits or assessments related to the Business Assets and
the Business for periods beginning prior to the Closing Date and furnish the other with copies of all correspondence received
from any Governmental Authority in connection with any Tax audit or information request with respect to any such period.
(d) The
Buyer shall be authorized to withhold from the amounts payable hereunder any Taxes that are required to be withheld from such
amounts under applicable Law. For all purposes, such Taxes withheld and paid to the applicable Tax authorities will be treated
as having been paid by the Buyer to the applicable payee under the terms of this Agreement.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
6.9
No
Channel Stuffing
. The Seller shall not, and shall cause its Affiliates not to (i) conduct sales of any Products outside of
the ordinary course of business in any material respect, (ii) ship or sell any Products in quantities that are not materially
consistent with demand and the ordinary shipment and sales practices of the Business or (iii) engage in “channel stuffing”
of any Products, [****].
6.10
Non-Solicitation
by the Seller
.
(a) The
Seller agrees that neither it nor any of its Subsidiaries, nor any of their respective officers, directors or employees, shall,
and that it shall use its commercially reasonable efforts to cause its and their respective Representatives not to (and shall
not authorize or give permission to its and their respective Representatives to), directly or indirectly: (i) solicit, initiate,
seek or knowingly encourage the making, submission or announcement of any Seller Acquisition Proposal, (ii) furnish any nonpublic
information regarding the Seller or any of its Subsidiaries to any Person in connection with or in response to a Seller Acquisition
Proposal, (iii) continue or otherwise engage or participate in any discussions or negotiations with any Person with respect to
any Seller Acquisition Proposal, (iv) except in connection with a Board Change of Recommendation pursuant to
Section 6.10(e)
,
approve, endorse or recommend any Seller Acquisition Proposal, or (v) except in connection with a Board Change of Recommendation
pursuant to
Section 6.10(e)
, enter into any letter of intent, arrangement, agreement or understanding relating to any Seller
Acquisition Transaction; provided
,
however, that this
Section 6.10
shall not prohibit (A) the board of directors
of the Seller or any committee thereof, directly or indirectly through any officer, employee or Representative, prior to the earlier
of the Effective Time or the receipt of the Required Stockholder Vote, from furnishing nonpublic information regarding the Seller
or any of its Subsidiaries to, or entering into or participating in discussions or negotiations with, any Person in response to
an unsolicited,
bona fide
Seller Acquisition Proposal that the board of directors of the Seller or any committee thereof
concludes in good faith, after consultation with outside legal counsel and a financial advisor, constitutes or would reasonably
be expected to result in a Seller Superior Offer if (1) the board of directors of the Seller or any committee thereof concludes
in good faith, after consultation with its outside legal counsel, that the failure to take such action with respect to such Seller
Acquisition Proposal would be reasonably likely to result in a breach of its fiduciary duties under applicable Law, (2) such Seller
Acquisition Proposal did not result from a material breach of this
Section 6.10
, (3) prior thereto the Seller has given
the Buyer the notice required by
Section 6.10(b)
, and (4) the Seller furnishes any nonpublic information provided to the
maker of the Seller Acquisition Proposal only pursuant to a confidentiality agreement between the Seller and such Person containing
customary terms and conditions that in the aggregate are not materially less restrictive than those contained in the Confidentiality
Agreement; or (B) the Seller from complying with Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act with regard to any
Seller Acquisition Proposal, including any so called “stop, look and listen” communications, or making any other statement
or disclosure that the Seller determines in good faith, after consultation with its outside legal counsel, that the failure of
the Seller to make such statement or disclosure would reasonably be expected to be a violation of applicable Law; provided that
the board of directors of the Seller may make a Board Change of Recommendation only in accordance with
Section 6.10(e)
.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b) The
Seller shall promptly, and in no event later than twenty-four (24) hours after its receipt of any Seller Acquisition Proposal,
or any request for nonpublic information relating to the Seller or any of its Subsidiaries in connection with a Seller Acquisition
Proposal, advise the Buyer orally and in writing of such Seller Acquisition Proposal or request (including, subject to the terms
of any applicable confidentiality agreement, providing the identity of the Person making or submitting such Seller Acquisition
Proposal or request, and, (i) if it is in writing, a copy of such Seller Acquisition Proposal and any related draft agreements
and (ii) if oral, a reasonably detailed summary thereof that is made or submitted by any Person during the period between the
date hereof and the Closing Date). The Seller shall keep the Buyer informed on a prompt basis with respect to any change to the
material terms of any such Seller Acquisition Proposal (and in no event later than one (1) Business Day following any such change),
including, subject to the terms of any applicable confidentiality agreement, providing the Buyer with a copy of any draft agreements
and modifications thereof.
(c) Upon
the execution of this Agreement, the Seller shall, and shall cause its Subsidiaries and its and their respective officers, directors
and employees, and shall use its commercially reasonable efforts to cause its and their respective Representatives to, immediately
cease and terminate any existing activities, discussions or negotiations between the Seller or any of its Subsidiaries or any
of their respective officers, directors, employees or Representatives and any Person that relate to any Seller Acquisition Proposal
and shall use commercially reasonable efforts to obtain the prompt return or destruction of any confidential information previously
furnished to such Persons with respect thereto within six (6) months prior to the date hereof.
(d) Except
as otherwise provided in
Section 6.10(e)
, the board of directors of the Seller (or any committee thereof) may not (i) withhold,
withdraw or modify, or publicly propose to withhold, withdraw or modify, the Seller Board Recommendation in a manner adverse to
the Buyer or make any statement, filing or release, in connection with obtaining the Required Stockholder Vote or otherwise, inconsistent
with the Seller Board Recommendation, (ii) approve, endorse or recommend any Seller Acquisition Proposal (any of the foregoing
set forth in clauses (i) and (ii), a “
Board Change of Recommendation
”), or (iii) enter into a written definitive
agreement providing for a Seller Acquisition Transaction.
(e) The
board of directors of the Seller or any committee thereof may at any time prior to the earlier of the Effective Time or receipt
of the Required Stockholder Vote (i) effect a Board Change of Recommendation in respect of a Seller Acquisition Proposal, and/or
(ii) if it elects to do so in connection with or following a Board Change of Recommendation, terminate this Agreement pursuant
to
Section 7.4(d)(ii)
in order to enter into a written definitive agreement providing for a Seller Acquisition Transaction,
if (and only if): (A) a Seller Acquisition Proposal is made to the Seller by a third party, and such offer is not withdrawn; (B)
the board of directors of the Seller or such committee thereof determines in good faith after consultation with outside legal
counsel and a financial advisor that such offer constitutes a Seller Superior Offer; (C) following consultation with outside legal
counsel, the board of directors of the Seller or such committee thereof determines that failure to take such action would be reasonably
likely to result in a breach of its fiduciary duties under applicable Law; (D) the Seller provides the Buyer three (3) Business
Days’ prior written notice of its intention to take such action (such three (3)-Business Day period, the “
Notice
Period
”), which notice shall include the information with respect to such Seller Superior Offer that is specified in
Section 6.10(b)
(it being understood that any material revision or amendment to the terms of such Seller Superior Offer
shall require a new notice and, in such case, all references to three (3) Business Days in this
Section 6.10(e)
shall be
deemed to be one (1) Business Day); and (E) at the end of the Notice Period described in clause (D), the board of directors of
the Seller or such committee thereof again makes the determination in good faith after consultation with outside legal counsel
and a financial advisor (after negotiating in good faith with the Buyer and its Representatives if requested by the Buyer during
the Notice Period regarding any adjustments or modifications to the terms of this Agreement proposed by the Buyer and taking into
account any such adjustments or modifications) that the Seller Acquisition Proposal continues to be a Seller Superior Offer and,
after consultation with outside legal counsel, that the failure to take such action would be reasonably likely to result in a
breach of its fiduciary duties under applicable Law.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(f) During
the period from the date of this Agreement through the Effective Time, neither the Seller nor any of its Subsidiaries shall terminate,
amend, modify or waive any provision of any confidentiality agreement to which it is a party relating to a proposed business combination
involving the Seller or any standstill agreement to which it is a party; during such period, the Seller or its Subsidiaries, as
the case may be, shall enforce, to the fullest extent permitted under applicable Law, the provisions of any such agreement, including
by obtaining injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof.
6.11
Preparation
and Mailing of the Proxy Statement
.
(a) The
Seller shall use its commercially reasonable efforts to prepare and file within twenty (20) days following the full execution
and delivery of this Agreement with the SEC proxy materials that shall constitute the proxy statement relating to the matters
to be submitted to the stockholders of the Seller at the Seller Stockholders Meeting (such proxy statement, and any amendments
or supplements thereto, the “
Proxy Statement
”) and Buyer shall provide to the Seller all information concerning
the Buyer and its Affiliates as may be reasonably requested by the Seller in connection with the Proxy Statement. The Proxy Statement
shall comply as to form in all material respects with applicable provisions of the Exchange Act and the rules and regulations
thereunder. The Seller shall provide the Buyer and its counsel with a reasonable opportunity to review and comment on the Proxy
Statement prior to the initial filing with the SEC. The Seller shall use commercially reasonable efforts to cause the Proxy Statement
to be mailed to the Seller’s stockholders as promptly as reasonably practicable following the date the Proxy Statement has
been cleared for mailing by the SEC.
(b) The
Seller shall, as promptly as reasonably practicable after receipt thereof, provide the Buyer copies of any written comments and
advise the Buyer of any oral comments, with respect to the Proxy Statement received from the SEC. The Seller shall provide the
Buyer with a reasonable opportunity to review and comment on any amendment or supplement to the Proxy Statement and any communications
prior to filing such with the SEC and shall promptly provide the Buyer with a copy of all such filings and communications made
with the SEC.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(c) If
at any time prior to the Effective Time, any information relating to the parties, or any of their respective Affiliates, officers
or directors, should be discovered by any of the parties which should be set forth in an amendment or a supplement to the Proxy
Statement so that the Proxy Statement would not include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Seller
shall file as promptly as reasonably practicable with the SEC an amendment of, or a supplement to, the Proxy Statement and, to
the extent required by Law, disseminate the information contained in such amendment or supplement to the stockholders of the Seller.
6.12
Seller
Stockholders Meeting; Seller Board Recommendation
.
(a) As
promptly as reasonably practicable after the Proxy Statement has been cleared for mailing by the SEC, the Seller shall take all
necessary actions to duly call, give notice of, convene and hold a meeting of the stockholders of the Seller (such meeting, or
any adjournments or postponements thereof, the “
Seller Stockholders Meeting
”) for the purpose of obtaining
the Required Stockholder Vote and shall use commercially reasonable efforts to solicit its stockholders to obtain the Required
Stockholder Vote.
(b) The
board of directors of the Seller shall, subject to
Section 6.10(e)
, make the Seller Board Recommendation to the stockholders
of the Seller and include the Seller Board Recommendation in the Proxy Statement.
(c) Following
the receipt of the Required Stockholder Vote, if applicable, the Buyer and the Seller shall effect the Closing as promptly as
reasonably practicable.
6.13
Material
Contracts; Required Consents
.
(a) Prior
to the Closing Date, the Buyer shall provide to the Seller a list of Business Contracts to be acquired in connection with the
transactions contemplated hereby (the “
Material Contracts
”);
provided
, that the Material Contracts shall
not include any employment agreement or other Contract that relates to the Seller’s broader business or solely to the manufacture
of the Products. For any Material Contract that is freely assignable, then the Seller shall assign such Contract to the Buyer
and the Buyer shall assume such Contract at the Closing pursuant to
Section 2.2(a)(i)
. For any Material Contract that is
freely assignable and pertains to multiple products, then the Seller and the Buyer shall use commercially reasonable efforts to
cooperate with one another in order to enter into new agreements with the other parties to such Contract in order to apportion
the products appropriately;
provided
, that such cooperation shall not require the Seller to pay any consideration, incur
any costs or expenses or grant any financial accommodation or other benefit. For any Material Contract that is a Non-Assignable
Contract, the Seller and the Buyer shall use commercially reasonable efforts to cooperate with one another as set forth in
Section
2.2(e)
.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(b) Prior
to the Closing, the Seller shall use commercially reasonable efforts to obtain the consents required from any third parties and
to deliver all notices required to be delivered under any Material Contracts in connection with the transactions contemplated
by this Agreement.
6.14
Use
of the Acquired Intellectual Property and Non-US IP
. Except as set forth in the Manufacturing Agreement, Transition Services
Agreement and Trademark Consent Letter, from and after the Closing Date, the Seller shall cease all use of the Intellectual Property
set forth on
Schedule 2.2(a)
, the Acquired Intellectual Property and Non-US IP.
6.15
Communications
with Customers
. From and after the date hereof, the Buyer and the Seller shall jointly provide written notice of this Agreement,
the Transaction Documents and the transactions contemplated hereby and thereby to each of the customers that Seller has engaged
with in the twelve (12) months prior to the Closing Date in connection with the Business. The Seller shall use commercially reasonable
efforts to facilitate an ongoing relationship between such customers and the Buyer or its third-party designee on terms and conditions
substantially the same as those between the Seller and such customers. Notwithstanding anything to the contrary in this Agreement,
the Seller shall not be required to pay any consideration, incur any costs or expenses or grant any financial accommodation or
other benefit in connection with this
Section 6.15
.
6.16
Communications
with Suppliers
. From and after the date hereof, the Buyer and the Seller shall jointly provide written notice of this Agreement,
the Transaction Documents and the transactions contemplated hereby and thereby to each of the suppliers that Seller has engaged
with in the twelve (12) months prior to the Closing Date in connection with the Business. The Seller shall use commercially reasonable
efforts to facilitate an ongoing relationship between such suppliers and the Buyer or its third-party designee on terms and conditions
substantially the same as those between the Seller and such suppliers. Notwithstanding anything to the contrary in this Agreement,
the Seller shall not be required to pay any consideration, incur any costs or expenses or grant any financial accommodation or
other benefit in connection with this
Section 6.16
.
6.17
Rights
Agreement
. In the event that disclosure is publicly made that a person other than Buyer or an Affiliate of the Buyer had become
an “Acquiring Person” prior to the date of this Agreement, and the Rights (as defined in the Rights Agreement) would
be exercisable for shares of the Buyer or an Affiliate of the Buyer, then the Seller shall take all actions necessary to amend
the Rights Agreement to accelerate the termination thereof such that the Rights Agreement terminates prior to a Distribution Date
(as defined in Section 3(a) of the Rights Agreement).
6.18
Past
Cold-EEZE Products
. To the extent the Seller discovers any additional rights relating to solely Cold-EEZE products that were
marketed in the past, that were not transferred at the Closing, the Seller will promptly notify the Buyer and transfer, convey
and assign such rights to the Buyer without further consideration, but, notwithstanding anything to the contrary in this Agreement
or otherwise, the Seller has advised the Buyer, and the Buyer acknowledges, that the Seller makes no representations or warranties
with respect thereto. In the event such additionally discovered rights relate to Cold-EEZE but also relate to other products,
Seller will grant Buyer a perpetual, non-exclusive, royalty-free, fully paid-up license to such rights for use solely in connection
with Cold-EEZE branded products.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
ARTICLE
7
CONDITIONS
TO CLOSING; TERMINATION
7.1
Conditions
to the Parties’ Obligations
. The obligations of the parties to consummate the transactions contemplated by this Agreement
are subject to the absence of an injunction, writ, temporary restraining order or other order or Law in effect which restrains
or prohibits the transactions contemplated by this Agreement.
7.2
Conditions
to the Obligations of the Buyer
. The obligations of the Buyer to consummate the transactions contemplated by this Agreement
are subject to the fulfillment or satisfaction (or waiver by the Buyer), prior to or at the Closing, of each of the following:
(a) The
representations and warranties of the Seller contained in
ARTICLE 4
shall be true and correct in all material respects
as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties
that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date).
(b) The
Seller shall have duly performed and complied in all material respects with all agreements, covenants and conditions required
by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing
Date.
(c) The
Seller shall have delivered to the Buyer the deliveries set forth in
Section 2.3(a)
.
(d) The
Buyer shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of the Seller, that each
of the conditions set forth in
Section 7.2(a)
and
Section 7.2(b)
have been satisfied.
(e) The
Buyer shall have received a certificate of the Secretary (or equivalent officer) of the Seller certifying that attached thereto
are true and complete copies of all resolutions adopted by the board of directors and stockholders of the Seller authorizing the
execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted
in connection with the transactions contemplated hereby and thereby.
(f) All
authorizations, orders and consents from any Governmental Authorities set forth on
Schedule 4.4
shall have been obtained
in form and substance reasonably satisfactory to the Buyer.
(g) The
Buyer shall have received a certificate of the Chief Financial Officer of the Seller certifying that attached thereto is a true
and complete report reflecting quantities of the Products sold, broken down by SKU, location, date and quantity sold, on a month-by-month
basis during the twelve (12)-month period immediately prior to the Closing, which report shall, to the satisfaction of the Buyer,
in its reasonable judgment, evidence no “channel stuffing” or similar practice by or on behalf of the Seller.
(h) The
Seller shall have obtained the Required Stockholder Vote.
(i) No
Material Adverse Effect shall have occurred.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
7.3
Conditions
to the Obligations of the Seller
. The obligations of the Seller to consummate the transactions contemplated by this Agreement
are subject to the fulfillment or satisfaction (or waiver by the Seller), prior to or at the Closing, of each of the following:
(a) The
representations and warranties of the Buyer contained in
ARTICLE 5
shall be true and correct in all material respects as
of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that
address matters only as of a specified date, which shall be true and correct in all respects as of that specified date).
(b) The
Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by
this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date.
(c) The
Buyer shall have delivered to the Seller the deliveries set forth in
Section 2.3(b)
.
(d) The
Buyer shall have delivered to the Escrow Agent the deliveries set forth in
Section 2.3(c)
.
(e) The
Seller shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of the Buyer, that each
of the conditions set forth in
Section 7.3(a)
and
Section 7.3(b)
have been satisfied.
(f) All
authorizations, orders and consents from any Governmental Authorities set forth on
Schedule 4.4
shall have been obtained
in form and substance reasonably satisfactory to the Seller.
(g) The
Seller shall have obtained the Required Stockholder Vote.
7.4
Termination
.
This Agreement may be terminated at any time prior to the Closing by written notice of termination only as follows:
(a) by
mutual written consent of the Buyer and the Seller;
(b) by
either the Buyer or the Seller if:
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(i) the
Closing shall not have occurred on or before March 31, 2017 or such other date as the parties may agree in writing (the “
Termination
Date
”);
provided
, that the Buyer in its sole discretion may upon written notice to the Seller extend the Termination
Date for up to 30 days;
provided
,
further
, that the right to terminate this Agreement pursuant to this
Section
7.4(b)(i)
shall not be available to any party that is (A) in material breach of any representation, warranty, covenants or
other agreement contained herein on the Termination Date, or (B) responsible for a breach of its obligations under this Agreement
in any manner that shall have proximately caused the failure of a condition to the consummation of the transactions contemplated
by this Agreement on or prior to the Termination Date;
(ii) (A)
any Law, decree, judgment, injunction or other order permanently restraining, enjoining or otherwise prohibiting consummation
of the transactions contemplated by this Agreement shall become final and non-appealable or (B) any decree, judgment, injunction
or other order permanently restraining, enjoining or otherwise prohibiting the Buyer from consummating the transactions contemplated
by this Agreement shall become final and non-appealable; or
(iii) if
the Required Stockholder Vote shall not have been obtained at the Seller Stockholders Meeting or at any adjournment or postponement
thereof;
provided
that the right to terminate this Agreement pursuant to this
Section 7.4(b)(iii)
shall not be available
to any party whose failure to perform any of its obligations under this Agreement shall have directly or indirectly caused the
failure of the Seller to obtain the Required Stockholder Vote; or
(c) by
the Buyer upon written notice to the Seller:
(i) if
there has been a material violation, breach or inaccuracy of any representation, warranty, covenant or agreement of the Seller
contained in this Agreement, which violation, breach or inaccuracy would cause any of the conditions set forth in
Section 7.2(a)
and
Section 7.2(b)
not to be satisfied, and such violation, breach or inaccuracy has not been waived by the Buyer or
cured by the Seller within fifteen (15) Business Days after receipt by the Seller of written notice thereof from the Buyer or
is not reasonably capable of being cured prior to the expiration of such fifteen (15) day period;
provided
,
however
,
the Buyer shall not have the right to terminate this Agreement pursuant to this
Section 7.4(c)(i)
if it is in material
breach of its representations, warranties, covenants or agreements under this Agreement so as to cause any of the conditions set
forth in
Section 7.3(a)
and
Section 7.3(b)
not to be satisfied;
(ii) if
(A) a Board Change of Recommendation, whether or not permitted by the terms hereof, shall have occurred; (B) the Seller shall
have delivered a notice to the Buyer of its intent to effect a Board Change of Recommendation in accordance with
Section 6.10(e)
;
(C) following the request in writing by the Buyer, the board of directors of the Seller shall have failed to reaffirm publicly
the Seller Board Recommendation within five (5) Business Days after the Buyer requests in writing that such recommendation be
reaffirmed publicly; or (D) the Seller shall have breached, in any material respect, the provisions of
Section 6.10
; or
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(iii) if
the management of Seller or its board of directors, for any reason, (i) fails to call and hold within sixty (60) days of the filing
of the Proxy Statement the Seller Stockholders Meeting to consider and approve this Agreement and the transactions contemplated
hereby;
provided
, that such sixty (60) day period shall be automatically extended to one hundred twenty (120) days in the
event the Seller is working in good faith to reconcile any outstanding claims, causes of action or SEC comments, or (ii) fails
to include the Seller Board Recommendation in the Proxy Statement; or
(d) by
the Seller, upon written notice to the Buyer:
(i) if
there has been a material violation, breach or inaccuracy of any representation, warranty, agreement or covenant of the Buyer
contained in this Agreement, which violation, breach or inaccuracy would cause any of the conditions set forth in
Section 7.3(a)
and
Section 7.3(b)
not to be satisfied, and such violation, breach or inaccuracy has not been waived by the Seller
or cured by the Buyer within fifteen (15) Business Days after receipt by the Buyer of written notice thereof from the Seller or
is not reasonably capable of being cured prior to the expiration of such fifteen (15) day period;
provided
,
however
,
the Seller shall not have the right to terminate this Agreement pursuant to this
Section 7.4(d)(i)
if it is in material
breach of its representations, warranties, covenants or agreements under this Agreement so as to cause any of the conditions set
forth in
Section 7.2(a)
and
Section 7.2(b)
not to be satisfied; or
(ii) if
(A) the board of directors of the Seller authorizes the Seller to enter into an agreement with respect to a Seller Superior Offer
in accordance with the terms of
Section 6.10
and (B) substantially concurrent with the termination of this Agreement, the
Seller enters into an agreement with respect to a Seller Superior Offer that did not result from a material breach of this Agreement.
7.5
Termination
Fee
.
(a) If
Seller terminates this Agreement pursuant to
Sections 7.4(b)(ii)(B)
or
7.4(d)(i)
, the parties agree that Seller
shall have suffered a loss and value to the Seller and the Business Assets of an incalculable nature and amount, unrecoverable
in law, and Buyer shall pay to Seller a fee equal to five million dollars ($5,000,000) (the “
Seller Termination Fee
”),
it being understood that in no event shall Buyer be required to pay the Seller Termination Fee on more than one occasion.
(b) If
Buyer terminates this Agreement pursuant to
Sections 7.4(c)(i)
,
7.4(c)(ii)
or
7.4(c)(iii)
or Seller terminates
pursuant to
Section 7.4(d)(ii)
, the parties agree that Buyer shall have suffered a loss and value to the Buyer and the
Business Assets of an incalculable nature and amount, unrecoverable in law, and Seller shall pay to Buyer a fee equal to one million
five hundred thousand dollars ($1,500,000) (the “
Buyer Termination Fee
”), it being understood that in no event
shall Seller be required to pay the Buyer Termination Fee on more than one occasion. The Buyer Termination Fee shall be paid upon
the earlier of (i) ninety (90) days after termination pursuant to
Sections 7.4(c)(i)
,
7.4(c)(ii)
,
7.4(c)(iii)
or
7.4(d)(ii)
and (ii) the closing of transaction with respect to a Seller Superior Offer.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(c) Notwithstanding
anything to the contrary in this Agreement, Seller’s right to receive payment of the Seller Termination Fee and Buyer’s
right to receive payment of the Buyer Termination Fee shall be the sole and exclusive remedy of such party or any of its respective
Affiliates against the other party or any of its Affiliates or any of their respective stockholders, partners, members, or the
like for any and all losses that may be suffered based upon, resulting from or arising out of the circumstances giving rise to
such termination, and upon payment of the applicable termination fee, neither the party that pays the applicable termination fee,
its Affiliates nor any of their respective stockholders, partners, members or the like shall have any further liability or obligation
relating to or arising out of this Agreement to the other party.
7.6
Effect
of Termination
. In the event of the termination of this Agreement in accordance with this
ARTICLE 7
, this Agreement
shall forthwith become void and there shall be no liability on the part of any party hereto except (a) as set forth in
Section
6.2
,
Section 6.4
,
ARTICLE 7
and
ARTICLE 9
, and (b) that nothing herein shall relieve any party hereto
from liability for any intentional breach of any provision in this Agreement.
ARTICLE
8
INDEMNIFICATION
8.1
Survival
.
Subject to the limitations and other provisions in this Agreement, the representations and warranties contained herein other than
the Fundamental Representations shall survive the Closing until the twenty-four (24) month anniversary of the Closing Date. The
Fundamental Representations shall survive the Closing until the expiration of the applicable statute of limitations. The liability
for Losses related to [****] set forth in (i)
Section 8.2(a)(ii)
shall survive for [****] following the Closing Date, and
(ii)
Section 8.2(a)(iii)
shall survive until the [****] anniversary of the Closing Date. The covenants and agreements contained
herein requiring performance after the Closing Date shall survive in accordance with their respective terms. If any Claims Notice
is given in good faith in accordance with the terms of
Section 8.4
within the applicable survival period provided above
(as applicable, the “
Cut-Off Date
”), the claims specifically set forth in such Claims Notice shall survive
until such time as such claims are finally resolved.
8.2
Indemnification
by the Seller; Indemnification by the Buyer
.
(a) Subject
to the limitations set forth herein, the Seller agrees to indemnify, defend and hold harmless the Buyer and its officers, directors
and employees (each, a “
Buyer Indemnitee
”) from and against any and all losses, Liabilities, expenses (including
reasonable attorneys’ fees), claims, suits, actions and damages (collectively, “
Losses
”) actually incurred
by such Buyer Indemnitee to the extent directly or proximately caused by or arising from:
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(i) any
breach of any of the representations and warranties of the Seller contained in
ARTICLE 4
,
(ii) any
claim made by [****] related to [****] at any time prior to the [****] following the Closing Date;
provided
that the Buyer
has not, as of the date of any such claim, made any material changes to such [****] which is the subject of such claim [****],
(iii) any
claim made by [****] related to [****] at any time from the [****] following the Closing Date up to and including the [****] anniversary
of the Closing Date;
provided
that the Buyer has not, as of the date of any such claim, made any material changes to such
[****] which is the subject of such claim [****],
(iv) any
breach of any covenant or agreement made by the Seller in this Agreement, or
(v) the
Retained Liabilities.
(b) Subject
to the limitations set forth herein, the Buyer hereby agrees to indemnify, defend and hold harmless the Seller, its officers,
directors and employees (each, a “
Seller Indemnitee
,” and together with the Buyer Indemnitees, the “
Indemnitees
”
and each an “
Indemnitee
”), from and against any Losses arising from or in connection with:
(i) any
breach of any of the representations and warranties of the Buyer contained in
ARTICLE 5
,
(ii) any
breach of any covenant or agreement made by the Buyer in this Agreement,
(iii) any
claim made by [****] related to [****] at any time after the [****] anniversary of the Closing Date,
(iv) any
claim made by [****] related to [****] to the extent the Buyer has made any material changes to such [****] which is the subject
of such claim [****],
(v) the
Assumed Liabilities,
(vi) any
claim arising out of or related to [****] within the [****] prior to the Closing Date, or
(vii) any
claim made by [****] related to [****];
provided
that Buyer shall have no obligation to indemnify Seller Indemnitees for
any claims made by current or former stockholders of Seller related to [****] where such claim is based on the claimant’s
status as a current or former stockholder of Seller.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
8.3
Limitations
on Indemnification
.
(a) Notwithstanding
anything in this Agreement to the contrary, but subject to this
Section 8.3
, in no event shall the cumulative indemnification
obligations of the (i) Seller under
Section 8.2(a)(i)
(except for Fundamental Representations and the representations and
warranties set forth in
Section 4.17
(No Channel Stuffing) (the “
Channel Stuffing Representation
”) and
Section 4.6(c)
(Intellectual Property) (the “
IP Infringement Representation
”)) and
Section 8.2(a)(iii)
or (ii) Buyer under
Section 8.2(b)(i)
, each in the aggregate exceed an amount equal to [****] dollars ($[****]) (the
“
Cap Amount
”);
provided
, that, notwithstanding anything to the contrary, the Cap Amount shall not, nor
shall any other limitation set forth in this
Section 8.3
, apply to any indemnification obligations arising under
Sections
8.2(a)(i)
,
8.2(a)(iii)
or
8.2(b)(i)
in the event of actual fraud or under
Sections 8.2(a)(ii)
or
8.2(a)(v)
or
Sections 8.2(b)(iii)
through
8.2(b)(vii)
(as applicable).
[****]
(b) In
no event shall the cumulative indemnification obligations of the Seller with respect to any breach of the IP Infringement Representation
exceed the sum of [****] dollars ($[****]) and the Cap Amount. In the event that any Buyer Indemnitee is entitled to indemnification
pursuant to this
ARTICLE 8
for breach of the IP Infringement Representation, such Buyer Indemnitee shall be entitled to
recover directly from the Seller up to [****] dollars ($[****]) in respect of such claims before seeking any disbursement from
the Escrow Account pursuant to
Section 8.8
.
(c) In
no event shall the cumulative indemnification obligations of the Seller with respect to any breach of the Channel Stuffing Representation
or
Section 6.9
asserted prior to the first anniversary of the Closing Date exceed the sum of [****] dollars ($[****]) and
the Cap Amount;
provided however
, that commencing as of the first anniversary of the Closing Date, any Losses incurred
by any Buyer Indemnitee arising from a breach of the Channel Stuffing Representation or
Section 6.9
shall be subject to
the Cap Amount. In the event that any Buyer Indemnitee is entitled to indemnification pursuant to this
ARTICLE 8
prior
to the first anniversary of the Closing Date for breach of the Channel Stuffing Representation or
Section 6.9
, such Buyer
Indemnitee shall be entitled to recover directly from the Seller up to [****] dollars ($[****]) in respect of such claims before
seeking any disbursement from the Escrow Account pursuant to
Section 8.8
.
(d) In
no event shall the cumulative indemnification obligations of the Seller with respect to any Losses incurred by any Buyer Indemnitee
arising from a breach of the Fundamental Representations or
Section 8.2(a)(iv)
(except for a breach of
Section 6.9
)
and of the Buyer with respect to
Section 8.2(b)(ii)
exceed the Purchase Price. The parties acknowledge and agree that claims
by [****] shall be covered by
Sections 4.20(a)
(Regulatory Compliance) and
4.21(a)
(Administrative/Enforcement Action)
hereof.
(e) Notwithstanding
anything in this Agreement to the contrary, the Seller shall not have any obligation to indemnify any Buyer Indemnitee under
Sections
8.2(a)(i)
or
8.2(a)(iii)
until the aggregate amount of Losses that would otherwise be subject to indemnification pursuant
to
Sections 8.2(a)(i)
or
8.2(a)(iii)
exceeds an amount equal to [****] dollars ($[****]) (the “
Basket Amount
”),
whereupon the Buyer Indemnitee shall be entitled to receive only amounts for Losses in excess of the Basket Amount;
provided
,
however
, that the limitations set forth in this
Section 8.3(e)
shall not apply to breaches of the Fundamental Representations,
the Channel Stuffing Representation for claims asserted prior to the first anniversary of the Closing Date, the IP Infringement
Representation or any indemnification obligations arising under
Sections 8.2(a)(i)
or
8.2(a)(iii)
in the event of
actual fraud or under
Sections 8.2(a)(ii)
,
8.2(a)(iv)
or
8.2(a)(v)
, or
Sections 8.2(b)(ii)
through
8.2(b)(vii)
.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(f) Notwithstanding
anything contained herein to the contrary, under no circumstances shall any Indemnitee be entitled to be indemnified for special,
consequential, indirect, punitive, exemplary or other similar damages, or damages based upon lost profits, lost revenues, diminution
in value, business interruptions, multiples of earnings, multiples of cash flows, or loss of business opportunity or reputation,
except to the extent such Losses are paid by an Indemnitee in connection with a Third Party Claim. The Indemnitee shall use its
commercially reasonable efforts to mitigate any Losses which form the basis of an indemnification claim hereunder.
(g) No
party hereto shall be obligated to indemnify any other Person with respect to (i) any representation, warranty, covenant or condition
specifically waived in writing by the other party on or prior to the Closing, or (ii) any Losses for which a Claims Notice was
not duly delivered prior to the applicable Cut-Off Date.
(h) The
Buyer Indemnitees shall not be entitled to recover any Losses relating to any matter arising under one provision of this Agreement
to the extent that the Buyer Indemnitees have already recovered Losses with respect to such matter pursuant to other provisions
of this Agreement;
provided
that the parties acknowledge and agree that if any claim may be asserted either as a breach
of a Fundamental Representation or a breach of a non-Fundamental Representation, it is in the Buyer Indemnitees’ discretion
as to how such claim is asserted.
8.4
Indemnification
Claim Process
.
(a) All
claims for indemnification by either a Seller Indemnitee or a Buyer Indemnitee under this
ARTICLE 8
shall be asserted and
resolved in accordance with
Section 8.4
and
Section 8.5
;
provided
,
however
, that claims for breach
of the Channel Stuffing Representation or
Section 6.9
shall be asserted and resolved in accordance with
Section 8.6
.
(b) If
a Buyer Indemnitee intends to seek indemnification pursuant to this
ARTICLE 8
, the Buyer Indemnitee shall promptly, but
in no event more than fifteen (15) days following such Buyer Indemnitee’s knowledge of such claim, notify the Seller in
writing of such claim, describing such claim in reasonable detail and the amount or estimated amount of such Losses (the “
Claims
Notice
”).
(c) If
a Seller Indemnitee intends to seek indemnification pursuant to this
ARTICLE 8
, the Seller Indemnitee shall promptly, but
in no event more than fifteen (15) days following such Seller Indemnitee’s knowledge of such claim, deliver a Claims Notice
to the Buyer. The failure of an Indemnitee to give reasonably prompt notice of any Third Party Claim shall not release, waive
or otherwise affect the Indemnitor’s obligations with respect thereto except and only to the extent that such failure to
notify results in a loss and material prejudice to the Indemnitor.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(d) The
Indemnitor shall have thirty (30) days from the date on which the Indemnitor received the Claims Notice to notify the Indemnitee
that the Indemnitor desires to assume the defense or prosecution of the Third Party Claim and any litigation resulting therefrom
with counsel of its choice. If the Indemnitor assumes the defense of such claim in accordance herewith: (i) the Indemnitee may
retain separate co-counsel at its sole cost and expense and participate in the defense of such Third Party Claim, but the Indemnitor
shall control the investigation, defense and settlement thereof, (ii) the Indemnitee shall not file any papers or consent to the
entry of any judgment or enter into any settlement with respect to such Third Party Claim without the prior written consent of
the Indemnitor (which such consent shall not be unreasonably withheld or delayed), and (iii) the Indemnitor shall not consent
to the entry of any judgment or enter into any settlement with respect to such Third Party Claim without the prior written consent
of the Indemnitee unless the judgment or settlement provides solely for the payment of money, the Indemnitor makes such payment
(subject to the applicable limitations contained herein) and the Indemnitee receives an unconditional release. The parties shall
act in good faith in responding to, defending against, settling or otherwise dealing with Third Party Claims, and cooperate in
any such defense and give each other reasonable access to all information relevant thereto. Whether or not the Indemnitor has
assumed the defense of such Third Party Claim, the Indemnitor will not be obligated to indemnify the Indemnitee hereunder with
respect to any settlement entered into or any judgment consented to without the Indemnitor’s prior written consent.
(e) If
the Indemnitor does not assume the defense of such Third Party Claim within thirty (30) days of receipt of the Claims Notice,
then the Indemnitee will be entitled to assume such defense, at its sole cost and expense (or, if the Indemnitee incurs a Loss
with respect to the matter in question for which the Indemnitee is entitled to indemnification pursuant to this
ARTICLE 8
,
at the expense of the Indemnitor), upon delivery of notice to such effect to the Indemnitor;
provided
,
however
,
that the Indemnitor (i) shall have the right to participate in the defense of the Third Party Claim at its sole cost and expense,
(ii) may at any time thereafter assume defense of the Third Party Claim, in which event the Indemnitor shall bear the reasonable
fees, costs and expenses of the Indemnitee’s counsel incurred prior to the assumption by the Indemnitor of defense of the
Third Party Claim, and (iii) shall not be obligated to indemnify the Indemnitee hereunder for any settlement entered into or any
judgment consented to without the Indemnitor’s prior written consent.
(f) The
Buyer Indemnitee shall, and shall cause the Buyer’s Affiliates to, provide reasonable cooperation with the Seller in all
aspects of any investigation, defense, pretrial activities, trial, compromise, settlement or discharge of any claim in respect
of which a Buyer Indemnitee is seeking indemnification pursuant to this
ARTICLE 8
that the Seller has elected to control,
including, but not limited to, by providing the Seller with reasonable access to applicable books, records, employees and officers
(including as witnesses).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
8.5
Indemnification
Procedures for Non-Third Party Claims
. The Indemnitee will deliver a Claims Notice to the Indemnitor promptly upon its discovery
of any matter for which the Indemnitor may be liable to the Indemnitee hereunder that does not involve a Third Party Claim, which
Claims Notice shall also (a) state that the Indemnitee has paid or properly accrued Losses or anticipates that it will incur liability
for Losses for which such Indemnitee is entitled to indemnification pursuant to this Agreement, and (b) the date such item was
paid or accrued. The Indemnitee shall reasonably cooperate and assist the Indemnitor in determining the validity of any claim
for indemnity by the Indemnitee and in otherwise resolving such matters. Such assistance and cooperation shall include providing
reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist
in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such
matters.
8.6
Indemnification
Procedures for Channel Stuffing Claims
.
(a) If
a Buyer Indemnitee intends to seek indemnification pursuant to this
ARTICLE 8
for breach of the Channel Stuffing Representation
or
Section 6.9
, the Buyer Indemnitee shall promptly, but in no event more than thirty (30) days following such Buyer Indemnitee’s
knowledge of such claim, deliver a Claims Notice to the Seller.
(b) Upon
receipt of a Claims Notice relating to a breach of the Channel Stuffing Representation or
Section 6.9
, the Buyer and Seller
shall work in good faith to resolve any allegations of “channel stuffing.” If the Buyer and the Seller are unable
to resolve all allegations within ninety (90) days following the receipt of such Claims Notice by the Seller, any unresolved disputes
shall be submitted to an independent accounting firm (the “
Accounting Firm
”) for arbitration, in accordance
with the standards set forth in this
Section 8.6(b)
. The Accounting Firm shall be a nationally recognized independent public
accounting firm as shall be agreed upon by the Seller and the Buyer in writing;
provided
, that if the Seller and Buyer
cannot agree upon an Accounting Firm, one shall be chosen by a single arbitrator in accordance with the American Arbitration Association’s
Commercial Arbitration Rules and Mediation Procedures. The terms of engagement of the Accounting Firm shall be as mutually agreed
upon between the Seller and the Buyer. The Seller and the Buyer shall enter into an engagement letter with the Accounting Firm
promptly after its retention, which shall include customary indemnification and other provisions. The Seller and the Buyer shall
cooperate with the Accounting Firm in all reasonable respects, but no party will have
ex parte
meetings, teleconferences
or other correspondence with the Accounting Firm. As promptly as practicable thereafter, the Buyer and the Seller shall each prepare
and submit a presentation to the Accounting Firm. Upon the Accounting Firm’s receipt of each party’s submission, the
Accounting Firm shall circulate each party’s submission to the other party. Thereafter, each party shall have thirty (30)
days to submit a response to the other party’s submission to the Accounting Firm. The Seller and the Buyer shall use commercially
reasonable efforts to cause the Accounting Firm to render a written decision resolving the matters submitted to the Accounting
Firm within thirty (30) days of the receipt of the final submission. The Accounting Firm’s decision shall be (i) based solely
on written submissions by the Seller and the Buyer and their respective Representatives (and it shall not permit or authorize
discovery or hear testimony) and not by independent review, (ii) made strictly in accordance with the accounting principles and
procedures set forth in this Agreement and (iii) final and binding on all of the parties hereto absent manifest error. The fees
and expenses of the Accounting Firm incurred pursuant to this
Section 8.6(b)
shall be borne by the non-prevailing party.
Any determinations by the Accounting Firm, and any work or analyses performed by the Accounting Firm, in connection with its resolution
of any dispute under this
Section 8.6(b)
shall not be admissible in evidence in any suit, action or proceeding between
the parties other than to the extent necessary to enforce payment obligations under this
Section 8.6(b)
.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
8.7
Exclusive
Remedy
. Except (a) in the case where a party seeks to obtain specific performance pursuant to
Section 9.15
, (b) the
Seller Termination Fee in
Section 7.5(a)
, (c) the Buyer Termination Fee in
Section 7.5(b)
, and (d) for claims arising
out of or in connection with fraud, from and after the Closing the rights of the parties to indemnification pursuant to the provisions
of this
ARTICLE 8
shall be the sole and exclusive remedy for the parties hereto with respect to any matter in any way arising
from or relating to (i) this Agreement or its subject matter or (ii) any other matter relating to the Business Assets prior to
the Closing, or any other transaction or state of facts relating to the Business Assets prior to the Closing, in each case regardless
of the legal theory under which such liability or obligation may be sought to be imposed, whether sounding in contract or tort,
or whether at law or in equity, or otherwise, and the parties hereby agree that the Buyer Indemnitees shall have no remedy or
recourse with respect to any of the foregoing other than pursuant to, and subject to the terms and conditions of, this
ARTICLE
8
. The Buyer acknowledges and agrees that the Buyer Indemnitees may not avoid such limitation on liability by (1) seeking
damages for breach of contract, tort or pursuant to any other theory of liability, all of which are hereby waived or (2) asserting
or threatening any claim against any Person that is not a party hereto (or a successor or assign to a party hereto) for breaches
of the representations, warranties and covenants contained in this Agreement. The parties agree that the provisions in this Agreement
relating to indemnification, and the limits imposed on the Buyer’s and the Buyer Indemnitees’ and the Seller’s
and the Seller Indemnitees’ remedies with respect to this Agreement and the transactions contemplated hereby were specifically
bargained for between sophisticated parties and were specifically taken into account in the determination of the amounts to be
paid to the Seller hereunder. Subject to the foregoing and the additional procedures for bringing or resolving disputes as specifically
provided in this Agreement, to the maximum extent permitted by Law, the parties hereby waive all other rights and remedies with
respect to any matter in any way relating to this Agreement or arising in connection herewith, whether under any laws at common
law, in equity or otherwise.
8.8
Disbursements
from the Escrow Account
.
(a) If
any Buyer Indemnitee shall be entitled to recover any amounts from the Escrow Account pursuant to this Agreement and funds then
remain on deposit in the Escrow Account, the Buyer and the Seller shall promptly provide a joint written instruction to the Escrow
Agent (but in any event within three (3) Business Days) to deliver such amounts to such Buyer Indemnitee (or any Person designated
by such Buyer Indemnitee);
provided
, that if no such funds remain, then Buyer Indemnitee shall be entitled to recover directly
from the Seller.
(b) If,
on the eighteen (18) month anniversary of the Closing Date (the “
Escrow Reduction Date
”), there are funds remaining
in the Escrow Account, then the Escrow Account shall be reduced by the difference, if a positive number, of (i) two million five
hundred thousand dollars ($2,500,000) MINUS (ii) the aggregate value of all claims for Losses asserted by the Buyer under
ARTICLE
8
that have either been paid out of the Escrow Account or are pending as of the Escrow Reduction Date (the “
Reduced
Escrow Amount
”).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(c) If,
on the twenty-four (24) month anniversary of the Closing Date (the “
Escrow Termination Date
”), there are funds
remaining in the Escrow Account, then the Seller shall be entitled to receive the balance of the funds remaining in the Escrow
Account, subject to the provisions set forth in
Section 8.8(d)
.
(d) If
the Seller shall be entitled to receive the balance of the funds remaining in the Escrow Account pursuant to this
Section 8.8
,
then the Seller shall promptly provide a written instruction to the Escrow Agent (but in any event within three (3) Business Days)
to deliver such funds, by wire transfer of immediately available funds to accounts and in the amount designated in writing by
the Seller in accordance with the other provisions of this
Section 8.8(d)
;
provided
,
however
, that if prior
to the Escrow Termination Date, the Seller has received one or more Claims Notices properly made under this Agreement that are
unresolved on the Escrow Termination Date, then an amount equal to the lesser of (i) the amount of the aggregate Losses claimed
in, and reasonably expected to be incurred in connection with, each such unresolved claim, or (ii) the amount remaining in the
Escrow Account, shall continue to be held by the Escrow Agent in the Escrow Account to satisfy such claims and any other amounts
associated therewith that are payable pursuant to this
ARTICLE 8
; and,
provided
,
further
, promptly after
final resolution of each such claim, the Seller shall authorize the Escrow Agent to disburse all amounts remaining in the Escrow
Account to the Seller in the same manner described in this
Section 8.8(d)
.
8.9
Tax
Treatment of Indemnity Payments
. Unless otherwise required by applicable Law, any indemnity payment made under this Agreement
shall be treated by all parties as an adjustment to the purchase price for all federal, state, local and foreign Tax purposes,
and the parties shall file their Tax Returns accordingly.
ARTICLE
9
MISCELLANEOUS
9.1
Expenses
.
Except as expressly provided herein, all costs and expenses incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
9.2
Amendment
.
This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.
9.3
Entire
Agreement
. This Agreement, including the Schedules and Exhibits attached hereto which are deemed for all purposes to be part
of this Agreement, and the other documents delivered pursuant to this Agreement, contain all of the terms, conditions and representations
and warranties agreed upon or made by the parties relating to the subject matter of this Agreement and the Business Assets, and
supersede all prior and contemporaneous agreements, negotiations, correspondence, undertakings and communications of the parties
or their Representatives, oral or written, respecting such subject matter.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
9.4
Headings
.
The headings contained in this Agreement are intended solely for convenience and shall not affect the rights of the parties to
this Agreement.
9.5
Notices
.
Any notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been
duly given and made if (i) served by personal delivery upon the party for whom it is intended, (ii) delivered by facsimile with
receipt confirmed, or (iii) delivered by certified mail, registered mail, or courier service, return-receipt received to the party
at the address or addresses set forth below, with copies sent to the Persons indicated:
If
to the Seller:
ProPhase
Labs, Inc.
621 N. Shady Retreat Road
Doylestown, PA 18901
Attention: Bob Cuddihy
Facsimile: (215) 345-5920
With
a copy to (which copy shall not constitute notice):
Reed
Smith LLP
599 Lexington Avenue
New York, NY 10022
Attention: Herbert F. Kozlov, Esq.
Facsimile: (212) 521-5450
If
to the Buyer:
Meda
Consumer Healthcare Inc.
781 Chestnut Ridge Road
EOB 245
Morgantown, WV 26505
Attention: Joseph Duda
Facsimile: (304) 554-4342
With
copies to (which copies shall not constitute notice):
Mylan
Inc.
1000 Mylan Boulevard
Canonsburg, Pennsylvania 15317
Attention: Global General Counsel
Facsimile: (724) 485-6358
Hogan
Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004
Attention: Daniel Keating, Esq.
Facsimile: (202) 637-5910
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
If
to the Buyer Guarantor:
Mylan
Inc.
1000 Mylan Boulevard
Canonsburg, Pennsylvania 15317
Attention: Global General Counsel
Facsimile: (724) 485-6358
Such
addresses may be changed, from time to time, by means of a notice given in the manner provided in this
Section 9.5
.
9.6
Exhibits
and Schedules
.
(a) Any
matter, information or item disclosed in the Disclosure Schedules (including any Schedule supplements) delivered under any specific
representation or warranty hereof, shall be deemed to have been disclosed for all purposes of this Agreement in response to every
representation or warranty in this Agreement in respect of which such disclosure is reasonably apparent on its face notwithstanding
the omission of an appropriate cross-reference. Any item of information, matter or document disclosed or referenced in, or attached
to, the Schedules hereto shall not (i) be used as a basis for interpreting the terms “material”, “Material Adverse
Effect” or other similar terms in this Agreement or to establish a standard of materiality, (ii) represent a determination
that such item or matter did not arise in the ordinary course of business, (iii) be deemed or interpreted to expand the scope
of the Seller’s representations and warranties, obligations, covenants, conditions or agreements contained herein, (iv)
constitute, or be deemed to constitute, an admission of liability or obligation regarding such matter, (v) represent a determination
that the consummation of the transactions contemplated by this Agreement requires the consent of any third party, (vi) constitute,
or be deemed to constitute, an admission to any third party concerning such item or matter, or (vii) constitute, or be deemed
to constitute, an admission or indication by the Seller that such item meets any or all of the criteria set forth in this Agreement
for inclusion in the Schedules. No disclosure in the Schedules relating to any possible breach or violation of any agreement or
Law shall be construed as an admission or indication that any such breach or violation exists or has actually occurred.
(b) The
Schedules and Exhibits hereto are hereby incorporated into this Agreement and are hereby made a part hereof as if set out in full
in this Agreement.
9.7
Waiver
.
Waiver of any term or condition of this Agreement by any party shall only be effective if in writing and shall not be construed
as a waiver of any subsequent breach or failure of the same term or condition, or a waiver of any other term or condition of this
Agreement.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
9.8
Binding
Effect; Assignment
. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted
successors and assigns. No party to this Agreement may assign or delegate, by operation of law or otherwise, all or any portion
of its rights, obligations or liabilities under this Agreement without the prior written consent of the other parties to this
Agreement, which any such party may withhold in its absolute discretion. Any purported assignment without the prior written consents
required by, or as otherwise permitted under, this
Section 9.8
, shall be void.
9.9
No
Third Party Beneficiary
. Nothing in this Agreement shall confer any rights, remedies or claims upon any Person or entity not
a party or a permitted assignee of a party to this Agreement, except for the Persons set forth in
Section 9.11
, who are
intended third party beneficiaries of such provisions.
9.10
Counterparts
.
This Agreement may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were
upon a single instrument, and all such counterparts together shall be deemed an original of this Agreement. The parties hereto
agree and acknowledge that delivery of a signature by facsimile or in .pdf form shall constitute execution by such signatory.
9.11
Release
.
Except in the case of fraud, the Seller and the Buyer agree that none of the current or former officers, directors, or employees
of the Seller or its Affiliates as of or prior to the Closing Date shall have any liability or responsibility to the Buyer for
(and the Seller and the Buyer hereby unconditionally release such officers, directors and employees from) any obligations or liability:
(a) arising
out of, or relating to, the organization, management, operation of the Business relating to any matter, occurrence, action, omission
or activity on or prior to the Closing Date;
(b) relating
to this Agreement and the transactions contemplated hereby;
(c) arising
out of or due to any inaccuracy or breach of any representation or warranty or the breach of any covenant, undertaking or other
agreement contained in this Agreement, the Schedules and Exhibits hereto or in any certificate contemplated hereby and delivered
in connection herewith; or
(d) relating
to any information (whether written or oral), documents or materials furnished by or on behalf of the Seller, except as specifically
provided in this Agreement.
9.12
Governing
Law and Jurisdiction
. This Agreement and any claim or controversy hereunder shall be governed by and construed in accordance
with the Laws of the State of New York without giving effect to the principles of conflict of laws thereof.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
9.13
Consent
to Jurisdiction and Service of Process
. Any legal action, suit or proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby may only be instituted in any state or federal court in New York, New York, and each party
waives any objection which such party may now or hereafter have to the laying of the venue of any such action, suit or proceeding,
and irrevocably submits to the exclusive jurisdiction of any such court in any such action, suit or proceeding.
9.14
Conveyance
Taxes; Bulk Sales Laws
.
(a) The
Buyer on the one hand and the Seller on the other hand shall share equally any sales, use, value added, transfer, stamp, registration,
documentary, excise, real property transfer or gains, or similar Taxes incurred as a result of the transactions contemplated by
this Agreement and the Seller and the Buyer agree to jointly file all required change of ownership and similar statements.
(b) The
parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that
may otherwise be applicable with respect to the sale of any or all of the Business Assets to the Buyer.
9.15
Specific
Performance
. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed by them in accordance with the terms hereof or were otherwise breached and that each party hereto
shall be entitled to seek an injunction or injunctions to prevent breaches of the provisions hereof and to specific performance
of the terms hereof, in addition to any other remedy at law or in equity.
9.16
Severability
.
If any term, provision, agreement, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions, agreements, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such
a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a reasonably acceptable manner so that the transactions contemplated hereby may be consummated
as originally contemplated to the fullest extent possible.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
9.17
Undertaking
by Buyer Guarantor
. In consideration of, and as an inducement to the Seller entering into this Agreement and performing its
respective obligations hereunder, the Buyer Guarantor hereby irrevocably, absolutely and unconditionally guarantees to the Seller
the full performance and payment by the Buyer of the covenants, obligations, monetary or otherwise, and undertakings of the Buyer
pursuant to or otherwise in connection with this Agreement and the Transaction Documents, and the consummation of the transactions
contemplated hereby or thereby (the “
Buyer Guaranteed Obligations
”). Any breach of, or other failure to perform,
any representation, warranty, covenant, obligation, agreement or undertaking of the Buyer shall also be deemed to be a breach
or failure to perform by the Buyer Guarantor, and the Seller shall have the right, exercisable in its sole discretion, to pursue
any and all available remedies it may have arising out of any such breach or non-performance directly against either or both of
the Buyer and the Buyer Guarantor in the first instance. This guarantee is a guarantee of performance and not exclusively of collection.
To the fullest extent permitted by Law, the Buyer Guarantor hereby expressly waives any and all rights or defenses arising by
reason of any Law that would otherwise require any election of remedies by the Seller and the Buyer Guarantor waives promptness,
diligence, notice of the acceptance of this guaranty and of the Buyer Guaranteed Obligations, presentment, demand for payment,
notice of non-performance, default, dishonor and protest, notice of any Buyer Guaranteed Obligations incurred and all other notices
of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of the Buyer, and all suretyship defenses generally;
provided
,
however
, that notwithstanding the foregoing or anything to the contrary set forth herein, the Buyer Guarantor shall have
all of the same rights and defenses (whether pursuant to limitations on liability, notice requirements or otherwise) as the Buyer
may have pursuant to the terms of this Agreement, the Transaction Documents and the consummation of the transactions contemplated
hereby or thereby. The Buyer Guarantor acknowledges that it will receive substantial direct and indirect benefits from the transactions
contemplated hereby and that the waivers set forth in this
Section 9.17
are knowingly made in contemplation of such benefits.
[Remainder
of page intentionally left blank]
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
|
BUYER:
|
|
|
|
|
Meda
Consumer Healthcare Inc.
|
|
|
|
|
By:
|
/s/
Jeffery N. Hostler
|
|
Name:
|
Jeffery
N. Hostler
|
|
Title:
|
Chief
Financial Officer
|
|
|
|
|
BUYER
GUARANTOR:
|
|
|
|
|
MYLAN
Inc. (
solely with respect to
Section 9.17
)
|
|
|
|
|
By:
|
/s/
Colleen Ostrowski
|
|
Name:
|
Colleen
Ostrowski
|
|
Title:
|
Head
of Global Treasury in Finance
|
[Signature Page to Asset Purchase Agreement]
|
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
|
SELLER:
|
|
|
|
|
ProPhase
Labs, Inc.
|
|
|
|
|
By:
|
/s/
Ted Karkus
|
|
Name:
|
Ted
Karkus
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
|
Solely
with respect to
Section 6.4
hereof:
|
|
|
|
|
Ted
Karkus
|
|
|
|
/
s/
Ted Karkus
|
|
|
|
|
Robert
V. Cuddihy, Jr.
|
|
|
|
/
s/
Robert V. Cuddihy, Jr.
|
|
|
|
|
Raouf
Ghaderi
|
|
|
|
/s/
Raouf Ghaderi
|
[Signature Page to Asset Purchase Agreement]
|
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
EXHIBIT
A
Form
of Manufacturing Agreement
MANUFACTURING
AGREEMENT
This
MANUFACTURING AGREEMENT
(this “
Manufacturing Agreement
”) is made as of _______________, 2017 (the “
Effective
Date
”) by and between Meda Consumer Healthcare Inc., a Delaware corporation having principal offices at 781 Chestnut
Ridge Road, EOB 245, Morgantown, WV 26505 (“
Buyer
”), Pharmaloz Manufacturing, Inc., a Delaware corporation,
having principal offices at 500 N. 15
th
Avenue, Lebanon, PA 17046 (“
Supplier
”), and ProPhase Labs,
Inc. (“
ProPhase
”), the parent of Supplier, solely with respect to
Section 15.16
. Buyer and Supplier
may be referred to herein by name or individually, as a “
Party
” and collectively, as the “
Parties
.”
BACKGROUND
WHEREAS
,
Buyer and ProPhase have entered into an Asset Purchase Agreement, dated as of January 6, 2017 (hereinafter the “
Purchase
Agreement
”), whereby ProPhase has agreed to sell to Buyer the Business Assets. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Purchase Agreement;
WHEREAS
,
the Purchase Agreement provides that the Parties hereto shall enter into this Manufacturing Agreement at the Closing; and
WHEREAS
,
Buyer desires to purchase from Supplier, and Supplier desires to supply to Buyer, the Products (as defined below) upon the terms
and subject to the conditions set forth herein.
NOW
,
THEREFORE
, in consideration of the covenants, conditions and undertakings hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
AGREEMENT
Article
1
DEFINITIONS / INTERPRETATION
For
the purposes of this Manufacturing Agreement, the following capitalized words and phrases shall have the following meanings:
1.1
“
Adverse
Drug Experience
” means any adverse event associated with the use of the Product in humans, whether or not considered
drug-related, including the following: an adverse event occurring in the course of the use of such Product (as defined below)
in professional practice; an adverse event occurring from drug overdose whether accidental or intentional; an adverse event occurring
from drug abuse; an adverse event occurring from drug withdrawal; any failure of expected pharmacological action; or any other
adverse event associated with the use of the Product that is reportable to Regulatory Authorities in accordance with any applicable
Law in the Territory.
1.2
“
AI
”
means zinc as the primary active ingredient.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
1.3
“
Bankruptcy
Event
” means, with respect to a Party, (a) the making by it of a general assignment for the benefit of creditors, (b)
the commencement by it of any voluntary petition in bankruptcy or suffering by it of the filing of an involuntary petition of
its creditors, (c) the suffering by it of the appointment of a receiver to take possession of all, or substantially all, of its
assets, (d) the suffering by it of the attachment or other judicial seizure of all, or substantially all, of its assets, (e) the
admission by it in writing of its inability to pay its debts as they come due, or (f) the making by it of an offer of settlement,
extension or composition to its creditors generally.
1.4
“
cGMPs
”
means current good manufacturing practices and standards under Section 501(a)(2)(B) of the Food, Drug, and Cosmetic Act and 21
CFR Part 211, as applicable to homeopathic products, consistent with FDA Compliance Policy Guidance Section 400.400, and any corresponding
practices and standards under applicable Law in the Territory, or the country in which the Product is Manufactured hereunder,
subject to any arrangements, additions or clarifications, and the respective roles and responsibilities, agreed from time to time
between the Parties.
1.5
“
Components
”
means the AI, excipients, and any other product or material used in the Manufacture of the Products including the packaging materials.
1.6
“
[****]
”
means the products set forth on
Schedule 5
.
1.7
“
Facility
”
means the manufacturing facility for the Products located at 500 N. 15
th
Avenue, Lebanon, PA 17046.
1.8
“
Inventory
”
means all finished goods, bulk, Components and other inventories of the Business that satisfies all applicable Law and the Specifications
(as defined below) as more fully set forth on
Schedule 3
.
1.9
“
Manufacture
”
or “
Manufacturing
” means the processes and procedures for the supply of the Products, including, (a) the supply
and quality control of the Components; (b) the manufacture of the Products in bulk; (c) the bulk Packaging, and subsequent final
Packaging and labeling of the Products; (d) the quality control of the finished version of the Products; and (e) the storage of
the Products until shipment.
1.10
“
Package
” or “
Packaging
” means packaging finished Product(s) in accordance with applicable
Specifications (as defined below).
1.11
“
Price
”
means the price paid by Buyer for each Product as set forth on
Schedule 1
of this Manufacturing Agreement and as may be
modified from time to time in accordance with
Section 3.2
.
1.12
“
Product(s)
”
means the product(s) identified on
Schedule 1
to this Manufacturing Agreement, and any and all formulations, forms and
dosage strengths thereof. Product shall include where applicable packaging required for effective use of the Product.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
1.13
“
Product
Validation Batches
” shall mean the first three (3) batches of a formulation for a new Product that are manufactured
at full commercial scale and intended for commercial sale.
1.14
“
Regulatory
Approval
” means, with respect to a Product, all approvals, licenses, registrations or authorizations necessary to market
and sell such Product in a particular jurisdiction in the Territory (including applicable approvals of labeling, price and reimbursement
for such Product in such jurisdiction).
1.15
“
Regulatory
Authority
” means any federal, national, state, provincial or local regulatory agency, department, bureau or other governmental
entity, including the FDA, with authority over the development, Manufacture or commercialization (including approval of Regulatory
Approvals) of any Product(s) in any jurisdiction in the Territory.
1.16
“
Required
Standards
” means applicable Law, the Specifications, the Quality Agreement, the General Lead Time and Purchase Interval
Guidance (attached hereto as
Schedule 2
), where applicable, and the warranties given by Supplier in
Section 9.6
.
1.17
“
Specifications
”
means, with respect to a Product or applicable Component thereof, all written product, regulatory, Manufacturing, quality control
and quality assurance procedures, processes, practices, standards, instructions and specifications applicable to the Manufacture
of such Product or Component, as set forth in the Regulatory Approval for the Product and as otherwise provided by Buyer or its
Affiliates to Supplier in writing from time to time.
1.18
“
Territory
”
means the United States of America.
1.19
“
Third
Party
” means any Person other than Buyer, Supplier, or their respective Affiliates.
1.20 Additional
Definitions
. Each of the following terms shall have the meaning described in the corresponding Section of this Manufacturing
Agreement indicated below:
Term
|
Section
Defined
|
|
Term
|
Section
Defined
|
Anti-Corruption
Laws
|
9.3.1
|
|
Laboratory
|
5.3
|
Buyer
|
Preamble
|
|
Liabilities
|
11.1.1
|
Buyer
Indemnitees
|
11.1.1
|
|
Manufacturing
Agreement
|
Preamble
|
Buyer
Inventions
|
8.1
|
|
MSDS
|
5.1
|
COA/COC
|
5.1
|
|
Overpayment
|
3.2.3(b)
|
Confidential
Information
|
10.1
|
|
Party
or Parties
|
Preamble
|
Conforming
Inventory
|
3.2.3(a)
|
|
Pharmacovigilance
Agreement
|
7.2
|
Conforming
Inventory Price
|
3.2.3(a)
|
|
ProPhase
Guaranteed Obligations
|
15.16
|
Delivery
Time Period
|
2.7.3
|
|
Quality
Agreement
|
7.8
|
Disclosing
Party
|
10.1
|
|
Receiving
Party
|
10.1
|
Dispute
|
14.1
|
|
Recipients
|
10.2
|
Effective
Date
|
Preamble
|
|
Required
Changes
|
7.6
|
Failure
to Supply
|
2.7.2(a)
|
|
Seller
Cap
|
11.1.1
|
Facility
Sale Notice
|
13.1.1
|
|
Short
Dated Product
|
2.9
|
Follow-Up
Initial Facility Audit
|
6.1
|
|
Supplier
|
Preamble
|
Force
Majeure
|
15.4
|
|
Supplier
Indemnitees
|
11.1.2
|
Forecast
|
2.2
|
|
Technology
Transfer Plan
|
12.3
|
Indemnify
|
11.1.1
|
|
Term
|
12.1
|
Initial
Facility Audit
|
6.1
|
|
Third-Party
Claim
|
11.1.1
|
Initial
Term
|
12.1
|
|
Trade
Control Laws
|
9.4.1
|
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
1.21 Interpretation
.
The captions and headings to this Manufacturing Agreement are for convenience only, and are to be of no force or effect in construing
or interpreting any of the provisions of this Manufacturing Agreement. Unless specified to the contrary, references to Articles,
Sections, Schedules or Exhibits mean the particular Articles, Sections, Schedules or Exhibits to this Manufacturing Agreement
and references to this Manufacturing Agreement include all Schedules and Exhibits hereto. Unless context clearly requires otherwise,
whenever used in this Manufacturing Agreement: (i) the words “include” or “including” shall be construed
as incorporating, also, “but not limited to” or “without limitation;” (ii) the word “or” shall
have its inclusive meaning of “and/or;” (iii) the word “notice” shall require notice in writing (whether
or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under
this Manufacturing Agreement; (iv) the words “hereof,” “herein,” “hereunder,” “hereby”
and derivative or similar words refer to this Manufacturing Agreement (including any Schedules and Exhibits); (v) provisions that
require that a Party or the Parties “agree,” “consent” or “approve” or the like shall require
that such agreement, consent or approval be specific and in writing; (vi) words of any gender include the other gender; (vii)
words using the singular or plural number also include the plural or singular number, respectively; (viii) references to any specific
law, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement
thereof; and (ix) provisions that refer to Persons acting “under the authority of Buyer” shall include Buyer’s
Affiliates and those Persons acting “under the authority of Supplier” shall include Supplier’s Affiliates; conversely,
those Persons acting “under the authority of Buyer” shall exclude Supplier and its Affiliates and those Persons acting
“under the authority of Supplier” shall exclude Buyer and its Affiliates.
Article
2
SUPPLY
2.1 Transfer
of Inventory; Supply
.
2.1.1
Purchase
of Inventory
. On the Effective Date, Buyer shall purchase all of the Inventory that, as of the Effective Date, is not already
sold to a Third Party, and which is, at the time of delivery to Buyer, saleable in the ordinary course of business. Supplier shall
invoice Buyer at the time such Inventory is transferred, which shall reflect the prices set forth in
Schedule 3
.
2.1.2
Supply
.
Pursuant to the terms and conditions of this Manufacturing Agreement, Supplier agrees that it will Manufacture the Product(s)
at the Facility exclusively for Buyer and shall supply the Product(s) exclusively to Buyer and its Affiliates for sale in the
Territory. During the term of this Manufacturing Agreement, Supplier agrees that it will not, directly or indirectly (through
any other persons, entity or otherwise), develop, manufacture, sell, promote or distribute, including as a partner, stockholder,
member, employee, principal, agent, trustee or consultant, any product in the Territory that is used or indicated for cough, cold
or flu; provided that the Supplier may (1) continue to develop, manufacture, sell, promote or distribute [****] as are marketed
by ProPhase as of the Effective Date, provided that such products shall not include [****]; and (2) contract manufacture any product
for a Third Party, provided that such products referenced in clause (2) shall not include any products [****].[****].
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
2.2 Forecasts
.
Schedule 4
sets forth an initial forecast of the quantities of each Product estimated to be required for the Territory
during the twelve (12) month period beginning [•], 2017. Hereafter, during the Term, on the tenth (10
th
) Business
Day of every month, Buyer shall prepare and deliver to Supplier a forecast of the quantities of each Product estimated to be required
for each month during the next twelve (12) month period, which shall generally be consistent with the initial forecast set forth
on
Schedule 4
(each, a “
Forecast
”). Forecasts shall not include any Product Validation Batches required
under
Section 6.4
. For each Forecast, the forecasted quantities for the first four (4) months following the date of such
Forecast shall be binding on the Parties and the forecasted quantities for months five (5) through twelve (12) following the date
of such Forecast shall be non-binding on the Parties. Supplier shall notify Buyer as soon as possible, but in any event within
five (5) Business Days of receipt of a Forecast, if Supplier believes it will be unable to deliver Product in accordance with
such Forecast. Except as otherwise set forth in this Manufacturing Agreement, Supplier’s providing of such notification
shall not relieve Supplier of its obligations under this Manufacturing Agreement, nor shall it prevent Buyer from pursuing any
and all rights and remedies Buyer may have based on Supplier’s failure to be able to deliver any Product in accordance with
the terms of this Manufacturing Agreement.
2.3 Orders
.
2.3.1
Purchase
Orders
. Together with each Forecast provided under
Section 2.2
, Buyer shall place purchase orders for the binding portion
of the Forecast. Such purchase order will specify the quantity of Product, destination(s) and delivery dates in accordance with
reasonable delivery schedules and lead times as may be agreed upon from time to time by the Parties in accordance with
Schedule
2
; provided, however, that the required lead time shall not exceed one hundred twenty (120) days unless otherwise mutually
agreed. Supplier shall accept all purchase orders submitted by Buyer in accordance with this
Article 2
within five (5)
business days from receipt of the order. In the event that Buyer receives no response from Supplier regarding a purchase order
within the five (5) business day period, the purchase order shall be deemed to have been confirmed by Supplier on the terms defined
by Buyer on the purchase order. Accepted and deemed accepted purchase orders may not be cancelled without the prior written agreement
of both Parties except as set forth in
Sections 2.7.2
and
12.2.5
. Unless otherwise directed by Buyer, Supplier shall
fill all purchase orders for Product in accordance with the requested due dates as set forth in further detail in
Section 2.7.3
.
Notwithstanding anything to the contrary in this Manufacturing Agreement, Supplier and Buyer acknowledge that the prices set forth
on
Schedule 1
are for purchase orders that comply with the terms of
Schedule 2
and are for a quantity of Product
equal to greater than the applicable “Minimum Batch Size” set forth on
Schedule 2
. In the event that the specifications
of a purchase order do not comply with the terms of
Schedule 2
or are for a quantity less than the applicable “Minimum
Batch Size” set forth on
Schedule 2
, the Parties shall negotiate in good faith and agree upon revised pricing for
such purchase order.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
2.3.2
No
Conflicting Terms
. The terms and conditions of this Manufacturing Agreement shall be controlling over any conflicting terms
and conditions stated in Buyer’s purchase order or Supplier’s invoice, confirmation or other standardized document.
Any purchase order, order acknowledgement, invoice, proposal or other document which conflicts with or adds to the terms and conditions
of this Manufacturing Agreement with respect to the Manufacture and supply of Product for the Territory is hereby rejected, unless
the Parties mutually agree to the contrary in writing.
2.4 Delivery
and Risk of Loss
. Supplier shall make deliveries of Product(s) to the delivery destination(s) specified by Buyer. Unless otherwise
specified by Buyer, all shipments of Product(s) shall be Free On Board (Incoterms 2010) at the Facility. Title and risk of loss
and damage to the Product(s) shall remain with Supplier until the Product(s) are shipped to Buyer in accordance with the foregoing.
At the time of shipment, Supplier shall, to the extent applicable, provide to Buyer all necessary shipping and import/export documentation.
In the event that Buyer’s requested shipping and import/export documentation necessitates a change from the Supplier’s
current practices (or the terms set forth on
Schedule 2
), Supplier and Buyer shall negotiate in good faith and agree upon
revised pricing for such matters.
2.5 Packaging
.
2.5.1
Packaging
.
Supplier shall provide the Product to Buyer in finished Packaged form in accordance with all reasonable instructions (including
artwork, packaging and mechanicals) provided by Buyer, which instructions shall be delivered in December of each year for inventory
build-up commencing the following May. Product(s) shall be shipped to Buyer, or its designee, and shall be Packaged in accordance
with the Required Standards. In the event that the Product is to be shipped with data loggers, Buyer shall supply such data loggers
and Supplier will include the same in the shipment.
2.5.2
Artwork
and Tooling
. Buyer shall provide and support, at Buyer’s expense, all artwork required in the Manufacturing of the Product,
including labeling, art and mechanicals, digital files, color separations and Packaging. Supplier shall transfer or return to
Buyer all artwork and tooling supplied or paid for by or on behalf Buyer upon the termination or expiration of this Manufacturing
Agreement.
2.6 Conformance
to Required Standards
. Supplier shall Manufacture the Product(s) in accordance with the Required Standards, as the same may
be mutually amended or supplemented from time to time. Each Party shall keep the other Party promptly and fully advised of any
new instructions or Specifications required by the applicable Regulatory Authority or applicable Law of which it becomes aware.
The Parties shall confer with respect to the best mode of compliance with such requirements, and Supplier shall promptly implement
such requirements as requested by Buyer.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
2.7 Supply
and Delivery
.
2.7.1
Alternative
Sources of Supply
. The Parties will discuss appropriate methods to ensure consistency of supply of the Product for the Territory,
including qualifying alternate sources of supply. Buyer shall have the right to qualify an alternate source of the Product at
any time during the Term, and Supplier will assist Buyer in qualifying such alternate source as commercially reasonably requested
by Buyer, including by granting any necessary licenses and conducting technology transfer as reasonably necessary to enable such
alternate supplier to Manufacture the Product at Buyer’s request and expense. In the event that Buyer has minimum purchase
obligations, then if there is a Failure to Supply as set forth in
Section 2.7.2
below or if Buyer incurs Liabilities pursuant
to this Manufacturing Agreement in excess of the Seller Cap, Buyer shall have the right to purchase Product from any such alternate
supplier without being in breach of such obligations.
2.7.2
Failure
to Supply/Notification of Capacity and Capacity Restrictions
.
(a) Supplier
and Buyer will provide each other with monthly statements of their respective finished goods inventory of the Product and cooperate
with each other in good faith to develop Forecasts pursuant to
Section 2.2
. Supplier will promptly notify Buyer in writing
in the event that Supplier is unable or anticipates that it will be unable to supply compliant Product in accordance with the
requirements of this Manufacturing Agreement (1) in the quantities and during the Delivery Time Period set forth in any purchase
order accepted in accordance with
Section 2.3.1
; or (2) within sixty (60) days of the Delivery Time Period in any purchase
order accepted in accordance with
Section 2.3.1
(each a “
Failure to Supply
”).
(b) Without
limiting the foregoing, Supplier shall immediately notify Buyer in writing in the event that its available Manufacturing capacity
may, during any four (4) quarter period, be less than [****] percent ([****]%) of its maximum Manufacturing capacity for the Product(s)
and products equivalent to the Products. Within ten (10) days of receipt of said notification, the Parties agree to meet to discuss
and evaluate Supplier’s remaining capacity in relation to Buyer’s Manufacturing requirements for the Product(s). Any
allocation of supply shall be carried out in accordance with
Section 2.7.4
.
(c) In
the event of a Failure to Supply, in addition to any other rights or remedies available to Buyer, Buyer shall have the right to
take any measures available to it to mitigate any of its resulting losses, including using an alternate supplier of the Product
during the period affected by such Failure to Supply and for a period of twelve (12) months thereafter. Buyer shall also have
the right to terminate this Manufacturing Agreement in its entirety immediately upon written notice to Supplier in the event a
Failure to Supply continues for more than one hundred eighty (180) days. Buyer shall also have the right to cancel orders for
any quantities of Product affected by such Failure to Supply effective upon notice to Supplier, and Buyer shall have no further
obligations to purchase any such cancelled quantities of Product. Supplier will, at Supplier’s cost and expense, provide
such assistance as is commercially reasonably requested by Buyer to assist the alternate supplier in meeting Buyer’s requirements
for the Product until Supplier has remedied the cause of such Failure to Supply and is able to supply Product to Buyer in its
requested quantities. Such assistance shall include (a) granting such alternate supplier any necessary licenses on a temporary
basis to the extent such licenses are readily able to be transferred by Supplier in such manner and (b) transferring the Acquired
Intellectual Property, Know-How and any other Business Assets used in the Manufacturing processes for the Product. [****].
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
2.7.3
Delivery
Delays
. Supplier shall schedule shipments of Products that shall arrive to the delivery destination(s) specified by Buyer,
no more than twenty-one (21) days before or seven (7) days after the delivery dates specified by Buyer in the relevant purchase
order (the “
Delivery Time Period
”). Subject to the Seller Cap,
Section 15.4
and the last sentence of
Section 2.7.2(c)
, for any Failure to Supply compliant Product(s) in the Delivery Time Period, Supplier shall be liable
for: (a) the cost of delivery to Buyer; and (b) any reasonable penalties, costs and expenses incurred by Buyer, whether due to
Third Party claims, lost profits or otherwise, as a result of Supplier’s Failure to Supply compliant Product(s) during the
Delivery Time Period, subject to receipt by Supplier of appropriate evidence of such penalties, costs and expenses to the extent
such evidence of such amounts may be provided by Buyer without breaching Buyer’s duties of confidentiality to its customers;
provided, however, that it shall not be deemed a Failure to Supply if Supplier shipped Products that comply with all Specifications
in accordance with the first sentence of this
Section 2.7.3
. The rights of Buyer set forth in this paragraph are in addition
to any other rights set forth in this Manufacturing Agreement.
2.7.4
Allocation
.
Without limiting any other rights or remedies available to Buyer, if the demand for a Product in aggregate exceeds available supply
or Supplier otherwise concludes that it may be unable to supply a Product in accordance with the requirements of this Manufacturing
Agreement in the quantities and within the time periods specified in the then-current Forecast or purchase orders provided by
Buyer, Supplier shall immediately notify Buyer of such shortfall (or anticipated shortfall), shall use its best efforts to procure
supplies adequate to meet the binding portion of Buyer’s Forecasts and accepted purchase orders. Supplier shall prioritize
supply of such Product to Buyer and allocate its available manufacturing capacity to provide Buyer with quantities of such Product
at least equal to [****] percent ([****]%) of Buyer’s previously forecasted requirements of such Product, as evidenced by
the Forecasts Buyer has submitted.
2.8 Priority
.
Supplier shall meet all of Buyer’s Manufacturing and Packaging requirements as set forth in this Manufacturing Agreement
and use its best effort to provide Buyer with such Product requirements in priority compared to the manufacturing or packaging
of any product(s) for any Third Party.
2.9 Short
Dated Product
. Supplier agrees to ship all Product(s) so that they are received and released by Buyer with not less than [****]
percent ([****]%) of shelf life remaining at the time of dispatch, which shelf life will be calculated from the date of Manufacture
of the Product. Product with less than [****] percent ([****]%) shelf life remaining shall be considered “
Short Dated
Product
.” At the discretion of Buyer, Short Dated Product(s) may be accepted on a case-by-case basis in individual purchase
situations. Short Dated Product not accepted shall be deemed non-conforming and rejected for all purposes of this Manufacturing
Agreement, and Buyer shall be entitled to the remedies set forth in
Article 5
with respect to non-conforming product. Each
Party acknowledges and agrees that the Products set forth on
Schedule 1
as of the Effective Date do not carry an expiration
date.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
2.10 Subcontracting
by Supplier
. Without Buyer’s prior written approval, not to be unreasonably withheld, Supplier may not subcontract or
otherwise delegate all or any portion of its obligations under this Manufacturing Agreement to the extent the subcontractor or
delegatee will have access to any Confidential Information of Buyer or the subcontractor’s or delegatee’s activities
include Product Manufacturing. Supplier shall (a) ensure that each subcontractor and delegatee has and maintains all appropriate
qualifications; (b) if applicable, enter into a quality agreement with each such subcontractor and delegatee which terms are similar
to the terms of the Quality Agreement between Buyer and Supplier; and (c) be responsible for each subcontractor’s and delegatee’s
performance hereunder (including performance or non-performance by such subcontractor or delegatee that would constitute a breach
of this Manufacturing Agreement or such quality agreement if conducted by Supplier) as if Supplier were itself performing such
activities.
2.11 Inventory
Requirements
. For each Product, Supplier shall maintain a rotating inventory of the required AI and other Components in sufficient
quantities to satisfy binding purchase orders and Forecasts. Supplier will manage the AI and Component inventory on a “First
Expiring First-Out (“
FEFO
”)” basis. Supplier shall maintain the AI and Component inventory in accordance
with the applicable Required Standards.
Article
3
PRICING AND PAYMENT
3.1 Invoices
.
Supplier shall invoice Buyer at the time of each shipment of Product(s) for the Price for such shipment. Buyer will pay such invoices
within [****] days of receipt of invoice (including all required, standard documentation) by Buyer.
3.2 Prices
.
Except as expressly set forth in this Manufacturing Agreement, the Price shall remain fixed for each calendar year during the
Term. On an annual basis, Supplier will review Prices and shall notify Buyer of any proposed revisions to the Prices no later
than ninety (90) days prior to the end of each calendar year. The Prices shall be increased or decreased to the extent necessary
to reflect any documented changes in Component cost, Product or delivery specifications, or other changes in respect of the cost
of the Manufacture of the Product, and such increase or decrease shall be made effective upon the mutual agreement of the Parties
in writing. Except for changes in the Price as a result of any decreases, changes in the Price will be effective on January 1
st
of each calendar year during the Term. Notwithstanding the foregoing, there shall be no adjustments to the Prices until
[****] other than pursuant to
Section 3.2.1
.
3.2.1
Commodity
Component
. No later than sixty (60) days prior to the end of each calendar year of the Term, Supplier shall secure a fixed
price commodity contract for sugar. If Supplier is required to purchase additional amounts of sugar at a price different from
the price set forth in the applicable fixed price commodity contract, then the Prices for Products containing sugar shall be increased
or decreased by Buyer’s proportional share of such increase or decrease, taking into account all products Supplier produces
for itself or any Third Parties incorporating sugar.
3.2.2
Increase
or Reduction in AI Price
. After [****], if at any time during the Term, the price of the AI supplied and used by Supplier
in Manufacturing any Product(s) hereunder is increased or reduced, Supplier shall notify Buyer and shall promptly increase or
reduce the Price of the Product(s) that contain such AI by an amount that reflects the increased or reduced AI price used in such
Product(s).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
3.2.3
Inspection
of Inventory; Application of Inventory Credit
.
(a) Within
thirty (30) Business Days of Buyer’s receipt of the Inventory, Buyer shall inspect the Inventory and provide a final written
report to Supplier (1) verifying whether the Inventory is in conformity with the product warranties set forth in
Section 9.6.5
,
or setting forth any deviations, to the extent discernible on visual inspection, from such warranties (conforming Inventory being
referred to as, the “
Conforming Inventory
”) and (2) calculating the inventory purchase price with respect to
such Conforming Inventory (the “
Conforming Inventory Price
”). In the event that Supplier disputes the accuracy
of the report prepared by Buyer pursuant to this
Section 3.2.3(a)
regarding the Conforming Inventory, the Parties shall
resolve such dispute in accordance with
Section 8.6(b)
of the Purchase Agreement. Notwithstanding anything to the contrary
in this Manufacturing Agreement, if Buyer instructs Supplier or ProPhase to ship any Inventory to a Third Party customer pursuant
to the Transition Services Agreement or any other agreement between the parties, the parties acknowledge and agree that such Inventory
shall be considered Conforming Inventory.
(b) In
the event the Conforming Inventory Price is less than the price paid to Supplier pursuant to
Section 2.1.1
(the difference
being referred to as, the “
Overpayment
”), Supplier shall apply the amount of the Overpayment as a credit to
the next successive invoices until such amount is exhausted.
3.3 Credit,
Return and [****]
. The Parties acknowledge and agree that Buyer shall receive a credit of [****] US Dollars ($[****]) to cover
any customer returns of conforming products sold prior to the Effective Date, which shall be applied in twenty-four (24) equal
amounts over the twenty-four (24) month period following the Effective Date. The Parties agree that the returned conforming products
referenced in the preceding sentence are the sole property of Supplier and, as such, Buyer shall use its commercially reasonable
efforts to ensure such returned conforming products are delivered to Supplier at Supplier’s expense. [****].
3.4 Recordkeeping
.
During the Term and for one (1) year thereafter, or for such longer period as may be required by applicable Law, Supplier shall
prepare and retain, and shall cause its subcontractors to prepare and retain, accurate books and records related to transactions
made pursuant to this Manufacturing Agreement and Prices. Such records shall be made available for reasonable review, audit and
inspection upon reasonable notice and with reasonable frequency, upon Buyer’s request for the purpose of verifying Supplier’s
calculations of amounts due hereunder, and the basis for such calculations or payments. Audits and inspections may be conducted
by Buyer’s own personnel or retained consultant(s) once each calendar year, subject to the confidentiality obligations set
forth in this Manufacturing Agreement. To the extent that Supplier requires any such personnel or consultant(s) to sign a separate
confidentiality agreement in connection with such audit, the Parties agree to use the form set forth in
Exhibit 3.4
.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
Article
4
AFFILIATES AND THIRD PARTY DESIGNEES
Buyer
shall have the right to have a Buyer Affiliate, or a Third Party designee, exercise certain of Buyer’s rights or perform
certain of Buyer’s responsibilities under this Manufacturing Agreement, including auditing, forecasting and ordering of
Product(s) hereunder, receipt of delivery of Product(s) so ordered, and testing and acceptance or rejection of such Product(s).
Any Buyer Affiliate or Third Party designee exercising Buyer’s rights or performing Buyer’s responsibilities under
this Manufacturing Agreement shall be responsible for complying with the terms hereof and for payment of any of its related fees
and costs. Supplier shall not bring any claim for liability under this Manufacturing Agreement against any Buyer Affiliate or
Third Party designee other than the entity exercising the rights or performing the obligations upon which such alleged liability
is based. Supplier shall not incur any cost or expense of the Buyer Affiliate or Third Party designee in the performance of the
Buyer Affiliate or Third Party designee services.
Article
5
PRODUCT TESTING
5.1 Product
Testing and Inspections
. Each shipment of Product shall be accompanied by a certificate of analysis describing all current
requirements of the Specifications and results of tests performed on such Product and a certificate of conformity certifying that
the quantities of Product supplied have been Manufactured, controlled and released according to the Required Standards (“
COA/COC
”).
Supplier will also provide Buyer with Material Safety Data Sheets (“
MSDS
”) or an equivalent instrument recognized
by the applicable Regulatory Authority as required for the Product(s), and updates of the same as necessary.
5.2 Acceptance/Rejection
of Non-Conforming Goods
. Buyer shall have a period of thirty (30) days from the date of Buyer’s receipt of the Product(s)
at the designated Buyer facility, and the COA/COCs or the equivalent instrument recognized by the applicable Regulatory Authority
for such Product(s), to inspect any shipment of Product(s) to determine whether such shipment conforms to the Required Standards.
If Buyer determines that the Product(s) do not conform to the Required Standards, it shall notify Supplier, and, if requested
by Supplier, Buyer shall ship a sample of such non-conforming Product(s) to Supplier at Supplier’s expense. Buyer’s
failure to notify Supplier of the non-conformity within the thirty (30) day period specified above will be deemed for purposes
of this Manufacturing Agreement to constitute Buyer’s acceptance of such shipment, provided, however, that such acceptance
shall be subject to Buyer’s right to reject Product(s) due to latent defects discovered by Buyer or Buyer’s customers
after such thirty (30) day period has expired by providing Supplier with written notice of such latent defect within thirty (30)
days of Buyer’s becoming aware of such defect.
5.3 Disputes
Regarding Conformance to Required Standards
. If Supplier does not agree with Buyer’s determination that Product fails
to conform to the Required Standards, then Supplier shall so notify Buyer in writing within ten (10) days of its receipt of Buyer’s
notice of non-conformity with respect to such Product and (if requested) Product sample. Supplier and Buyer shall use reasonable
efforts to resolve such disagreement as promptly as possible. Without limiting the foregoing, Supplier and Buyer shall discuss
in good faith mutually acceptable testing procedures pursuant to which both Supplier and Buyer will re-test a sample of the disputed
Product to determine whether such Product meets the Required Standards. Notwithstanding the foregoing, in the event that Supplier
and Buyer are unable to resolve such disagreement within thirty (30) days of the date of the applicable rejection notice, either
Party may submit a sample of the allegedly non-conforming Product for testing and a determination as to whether or not such Product
conforms to the Required Standards to an independent testing organization, or to a consultant of recognized repute within the
United States pharmaceutical industry, in either case mutually agreed upon by the Parties (such organization or consultant, the
“
Laboratory
”), the appointment of which shall not be unreasonably withheld or delayed by either Party. The
determination of the Laboratory with respect to all or part of any shipment of Product shall be final and binding upon the Parties.
The fees and expenses of the Laboratory making such determination shall be borne by Supplier, in the event that the Laboratory
determines that the Product was non-conforming and by Buyer, in the event that the Laboratory determines that the Product did
conform to the Required Standards.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
5.4 Return
and Replacement of Non-Conforming Goods
. Product accepted by Supplier as not meeting the Required Standards, or which are
determined by the Laboratory not to meet such Required Standards, shall be returned by Buyer to Supplier, or destroyed pursuant
to applicable Law, at Supplier’s expense. Supplier shall replace any non-conforming Product(s) within the shortest possible
time. Buyer shall have no responsibility to Supplier for the amounts invoiced for non-conforming Product(s), and shall be credited
for any amounts paid, but shall pay Supplier the applicable Price for the replacement Product(s) under the terms of
Section
3.1
.
Article
6
INSPECTION
6.1 Initial
cGMP Audit
. On November 30, 2016 and December 1, 2016, Buyer performed an initial qualifying audit of the Facility to verify
compliance with cGMPs and Buyer’s quality requirements (“
Initial Facility Audit
”). If the results of
the Initial Facility Audit are not satisfactory in the sole opinion of Buyer, Supplier shall perform, at its own expense, the
requested or appropriate modifications of the Facility reasonably necessary to cure the deficiencies identified during the Initial
Facility Audit so the Facility is cGMP and Buyer quality compliant. Supplier shall provide satisfactory evidence of these modifications
to Buyer; thereafter, Buyer shall be entitled to perform an additional Facility audit with a minimum of ten (10) days’ prior
notice to ensure that the deficiencies identified during the Initial Facility Audit have been cured (“
Follow-Up Initial
Facility Audit
”).
6.2 Ongoing
Right to Audit
. During the Term and for such period thereafter that any Product Manufactured hereunder is available for sale,
Buyer or a Buyer designee may, during normal working hours and upon not less than ten (10) days’ advance notice, inspect,
or request information relating to, the Facility or Supplier’s subcontractors’ facilities and records directly or
indirectly involved in the performance of this Manufacturing Agreement. During such an inspection or request for information the
inspectors may inquire about the progress of the work being carried out by Supplier or its subcontractor pursuant to the Products
covered by the Manufacturing Agreement and are in particular but not exclusively authorized to:
6.2.1 Inspect
the Facility, documents and equipment used, or to be used, in the Manufacture of the Products and the Components;
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
6.2.2 Verify
the qualifications of the employees and subcontractors carrying out such work and their use of the relevant equipment;
6.2.3 Evaluate
all scientific techniques used by Supplier, its subcontractors and their respective employees in the performance of this Manufacturing
Agreement and the procedures used in the creation and storage of samples of the Products; and
6.2.4 Verify
and evaluate information relating to the utilization of the Manufacturing capacity of the Facility or Supplier’s subcontractors’
facilities.
6.3 Access
.
Supplier shall provide Buyer’s inspectors with unfettered, reasonable access to its Facility, its subcontractors’
facilities, and information related to such facilities, in order that the inspectors may carry out the inspections or inquiries
referred to in the provisions of this
Article 6
. Buyer shall also have the right to observe the Manufacture of the Product,
upon reasonable notice, at any time when Product is being Manufactured, and to be present at the Facility and its subcontractors’
facilities at such times. Audits and inspections may be conducted by Buyer’s own personnel or retained consultant(s), subject
to the confidentiality obligations set forth in this Manufacturing Agreement. Notwithstanding the foregoing, Supplier shall have
no obligation to provide Buyer with the aforementioned access to any subcontractor’s facilities hereunder if Supplier does
not have such access rights to such subcontractor’s facilities. To the extent that Supplier requires any such personnel
or consultant(s) to sign a separate confidentiality agreement in connection with such audit, the Parties agree to use the form
set forth in
Exhibit 3.4
.
6.4 Product
Validation Batches
. Supplier shall produce and test Product Validation Batches for any new and/or proposed Products, which
shall include changes to formulation or ingredients or line extensions of the current Products, or upon the reasonable request
of Buyer. Supplier, for and on behalf of itself and its contractor(s), agrees that it shall permit at least two (2) personnel
from Buyer, at Buyer’s sole cost and option, to be physically present at the Facility during the Manufacturing and testing
of the Product Validation Batches for Products for the purposes of ensuring that the production of these batches is in accordance
with established Specifications and other protocols and to answer any questions which may arise during said Manufacturing. Prior
to producing and testing any Product Validation Batches, Buyer and Supplier shall negotiate in good faith costs and expenses associated
therewith.
6.5 Corrective
Action Plan
. Supplier shall use its best efforts to ensure that within thirty (30) days after receipt of an audit report signed
by an authorized representative of Buyer, Supplier or its subcontractor(s) shall respond to the audit report with a written corrective
action plan that includes a detailed timeline. Upon receipt of Buyer’s approval of the written corrective action plan, Supplier
shall, or shall cause its subcontractor to, implement such plan and remediate any and all discrepancies set forth in the audit
report. The cost of such remediation shall be borne by Supplier or its subcontractor.
6.6 Supplier
Audits
. Without limiting the foregoing, Supplier is responsible for auditing its suppliers of Components periodically, and
Supplier agrees to provide Buyer, upon Buyer’s request with a current copy of the audit report of such facilities.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
Article
7
REGULATORY AND QUALITY RESPONSIBILITIES
7.1 Regulatory
Approval Responsibilities
. As the holder of the Regulatory Approvals, Buyer, or the appropriate Buyer Affiliate, will have
sole authority to handle regulatory matters and interactions with Regulatory Authorities relating to the Product(s) in the Territory
except as otherwise specifically stated in this Manufacturing Agreement. Buyer shall maintain the Regulatory Approvals for the
Product(s), including the filing of any reports or filings required by the applicable Regulatory Authority, and all other regulatory
and governmental permits, licenses and approvals for the Product(s) that are necessary for Buyer or its Affiliates to market,
sell and distribute the Product(s) in the Territory. Supplier shall obtain and maintain any and all regulatory and governmental
permits, licenses and approvals that are necessary for Supplier to Manufacture the Product(s) for Buyer or its Affiliates in accordance
with the terms of this Manufacturing Agreement and applicable Law.
7.2 Safety
and Adverse Drug Reactions
. Within ninety (90) days after the Effective Date, the Parties shall use commercially reasonable
efforts to enter into a separate safety and pharmacovigilance agreement for the Product based on Buyer’s standard form (the
“
Pharmacovigilance Agreement
”), which shall: (a) provide detailed procedures regarding the maintenance of core
safety information; (b) require the exchange of safety information and reports of Adverse Drug Experiences for ensuring compliance
with the reporting requirements of all applicable Regulatory Authorities; and (c) provide procedures for the preparation, and
periodic review of, a common technical document for use in connection with any filing with a Regulatory Authority relating to
each Product. Until such time as the Parties have entered into such Pharmacovigilance Agreement, each Party shall inform the other
Party of any information regarding Adverse Drug Experiences or other safety issues related to the use of AI or Products of which
it becomes aware in a timely manner commensurate with the seriousness of the event to allow the other Party to comply with applicable
Law. Each Party shall ensure that its Affiliates and other Persons authorized thereby, as applicable, comply with all such reporting
obligations. Each Party shall designate by notice to the other Party a safety liaison to be responsible for communicating with
the other Party regarding the reporting of adverse events with respect to the Product(s). Supplier shall also promptly submit
to Buyer all Product(s) complaints of which it becomes aware. To the extent that any inconsistencies or conflicts exist between
the Pharmacovigilance Agreement and this Manufacturing Agreement, the provisions in this Manufacturing Agreement shall prevail,
except with respect to matters related solely to safety reporting issues, in which case the Pharmacovigilance Agreement shall
prevail.
7.3 Recalls
.
Each of Buyer and Supplier will immediately inform the other in writing if it believes one or more lots of any Product(s) should
be subject to recall from distribution, withdrawal or some other field action. Buyer shall have the final decision-making authority
as to any such recall or field action and the sole right to initiate any such recall or field action. Supplier shall cooperate
in the conduct of any recall or field action with respect to the Product as reasonably requested by Buyer. In the event it is
determined that such a recall resulted from a breach by either Party of any of its representations, warranties, duties or obligations
under this Manufacturing Agreement, such Party shall be responsible for the costs of the recall and shall reimburse the other
Party as necessary; provided that if both Parties share responsibility with respect to such recall, the costs shall be shared
in the ratio of the Parties’ contributory responsibility. The Parties shall each maintain traceability records as are sufficient
and as may be necessary to permit a recall of the Product(s).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
7.4 Retention
of Samples
. Supplier shall prepare and retain, and shall cause its subcontractors to prepare and retain, such samples and
records in respect of the Product(s) and the Manufacture thereof as are required by applicable Law (including cGMPs).
7.5 Regulatory
Authority Inspections and Correspondence
. Supplier shall permit Regulatory Authorities to conduct such inspections of its
Facility at which the Manufacturing activities relating to the Product(s) are performed, as such Regulatory Authorities may request,
including pre-approval inspections, and shall cooperate with such Regulatory Authorities with respect to such inspections and
any related matters, in each case that is related to the Manufacture of Product(s). Supplier shall give Buyer prior written notice
of any such inspections, and shall keep Buyer informed about the results and conclusions of each such regulatory inspection, including
actions taken by Supplier to remedy conditions cited in such inspections. In addition, Supplier shall allow Buyer or its representative
to assist in the preparation for and be present at, and participate in, such inspections, subject to the confidentiality obligations
set forth in this Manufacturing Agreement. To the extent that Supplier requires any such representative to sign a separate confidentiality
agreement in connection with such inspection, the Parties agree to use the form set forth in
Exhibit 3.4
. Supplier shall
provide Buyer with copies of any written inspection reports issued by any Regulatory Authority and all correspondence between
Supplier and any Regulatory Authority with respect thereto, including any notices of observation and all related correspondence,
in each case relating to the Product(s) or its Manufacture or to general manufacturing concerns (e.g., facility compliance or
the like) that may impact the Product(s). Supplier shall provide Buyer with a copy of its response to any such reports or correspondence
from the FDA for review and comment prior to submission to the applicable Regulatory Authority. In addition, Supplier shall notify
Buyer of any occurrences or information that arise out of Supplier’s Manufacturing activities that have, or could reasonably
be expected to have, adverse regulatory compliance or reporting consequences concerning any Product(s) or which might otherwise
be reasonably expected to adversely affect the supply by Supplier of Product(s) to Buyer.
7.6 Changes
or Modifications in Manufacturing Activities
. Supplier shall not make any changes to the Specifications, processes, Facility,
raw materials, raw material suppliers or any other item in any manner that would affect the Manufacturing activities related to
the Product, without Buyer’s prior written approval, which shall not be unreasonably delayed or withheld. Notwithstanding
the foregoing, Supplier shall promptly make and implement such changes as are required by applicable Law (“
Required Changes
”),
provided that, prior to implementation, all such Required Changes shall be subject to Buyer’s written approval, including
with respect to the timelines, estimated effect on Price and other issues regarding such implementation. In addition, Buyer shall
have the right to request changes in or modifications to the Specifications. All such changes or modifications shall be documented
in writing and shall be signed by an authorized representative of Buyer and Supplier. If such changes or modifications result
in a material change in Supplier’s Manufacturing costs or lead times, the Parties shall agree upon an appropriate adjustment
to the Price or in the delivery schedules, as the case may be, for Product(s) to be provided by Supplier hereunder. Supplier shall
promptly implement all such agreed upon changes to the Specifications.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
7.7 Deviations
and Investigations
. In the event that a material deviation occurs during the course of the Manufacture, including Packaging,
storage and analytical testing, of any batch of Product(s) for Buyer under this Manufacturing Agreement, Supplier shall immediately
provide Buyer with a detailed written description of any such deviation. In addition, Supplier shall undertake all reasonable
and appropriate actions to investigate the cause of such deviation and to correct the same as set forth in the Quality Agreement.
A completed written report of the results of any such investigation will be provided to Buyer along with the COA/COC for such
batch.
7.8 Quality
Agreement
. Within ninety (90) days following the Effective Date, or at such later time by mutual agreement, the Parties shall
enter into a mutually agreeable quality and technical agreement based on Buyer’s standard form, in English and in accordance
with Buyer’s and Supplier’s standard operating procedures and in conformity with any Regulatory Authority requirements
and applicable Law (the “
Quality Agreement
”). Until a Quality Agreement is entered into between the Parties,
this Manufacturing Agreement, in conjunction with all applicable Regulatory Authority requirements and applicable Law, shall govern
the Parties’ responsibilities with respect to procedures impacting the identity, strength, quality, purity and all other
aspects of the Product(s). To the extent that any inconsistencies or conflicts exist between the Quality Agreement and this Manufacturing
Agreement, the provisions in this Manufacturing Agreement shall prevail, except with respect to matters related solely to the
quality of the Product(s), in which case the Quality Agreement shall prevail. Buyer may immediately terminate this Manufacturing
Agreement upon written notice to Supplier in the event that the Quality Agreement is terminated in accordance with the respective
terms of this Manufacturing Agreement or the Quality Agreement.
Article
8
INTELLECTUAL PROPERTY
8.1 Ownership
of Inventions
. Buyer shall own all data, work product, results, reports, inventions, improvements (including any improvement
to the Acquired Intellectual Property, Know-How and any other Business Assets used in the Manufacturing process for Product),
developments, technologies and information and all intellectual property rights in any of the foregoing that: (a) are generated
solely or jointly by or on behalf of Supplier or its subcontractors or delegatees in the performance of any activities in connection
with this Manufacturing Agreement; (b) arise from, are based upon, or relate to Supplier’s use of any Confidential Information
of Buyer; or (c) otherwise relate to the Product thereof (collectively, “
Buyer Inventions
”). To the extent
that Supplier would otherwise have any interest in or to Buyer Inventions, Supplier hereby assigns to Buyer all right, title and
interest in and to such Buyer Inventions. Supplier agrees to execute such documents and take such other actions as Buyer may reasonably
request to evidence and perfect the foregoing assignment and Buyer’s rights in and to Buyer Inventions.
8.2 Trademark
License for Inventory
. Supplier hereby grants a limited license to Buyer to sell the Inventory with trade dress, packaging
and labeling bearing any of the names or trademarks of Supplier, ProPhase or their Affiliates; provided that Buyer shall discontinue
the use of such trade dress, packaging and labeling bearing the names or trademarks of Supplier, ProPhase or their Affiliates
as promptly as practicable after the Effective Date and in any event no later than the date on which all Inventory has been sold.
Buyer shall use commercially reasonable efforts to sell all Inventory before selling Products bearing the same or similar trade
dress, packaging and labeling bearing any of Buyer’s names or trademarks.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
8.3 Disclosure
.
Upon creation, Supplier shall promptly disclose Buyer Inventions to Buyer, and any other information or know-how in Supplier’s
possession or control reasonably necessary to enable Buyer to exercise the foregoing ownership rights (even if such information
is considered to be Supplier’s Confidential Information pursuant to this Manufacturing Agreement).
Article
9
REPRESENTATION AND WARRANTIES
9.1 Buyer
Warranties and Representations
. Buyer represents and warrants to Supplier the following:
9.1.1 Buyer
is a corporation duly organized, validly existing and in good standing under the laws of the Delaware.
9.1.2 Buyer
has all requisite power and authority to enter into this Manufacturing Agreement. The person signing this Manufacturing Agreement
has the necessary corporate authority to legally bind Buyer to the terms set forth herein.
9.1.3 Buyer’s
execution of this Manufacturing Agreement and performance of the terms set forth herein will not cause Buyer to be in conflict
with or constitute a breach of its organizational documents nor any other agreement, court order, consent decree or other arrangement,
whether written or oral, by which it is bound.
9.1.4 Buyer’s
execution of this Manufacturing Agreement and performance hereunder are in, and will be in, compliance with any applicable Law
in all material respects.
9.1.5 This
Manufacturing Agreement is its legal, valid and binding obligation, enforceable against Buyer in accordance with the terms and
conditions hereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.
9.1.6 Buyer
will provide Supplier with prompt written notice if any of the representations and warranties in this
Section 9.1
become
untrue.
9.2 Supplier
Warranties and Representations
. Supplier represents and warrants to Buyer the following:
9.2.1 Supplier
is a corporation duly organized, validly existing and in good standing under the laws of Delaware.
9.2.2 Supplier
has all requisite power and authority to enter into this Manufacturing Agreement and has the requisite skill, knowledge, staffing,
financial resources, capacity and ability to carry out its obligations hereunder. The person signing this Manufacturing Agreement
has the necessary authority to legally bind Supplier to the terms set forth herein.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
9.2.3 Supplier’s
execution of this Manufacturing Agreement and performance of the terms set forth herein will not cause Supplier to be in conflict
with or constitute a breach of its organizational documents nor any other agreement, court order, consent decree or other arrangement,
whether written or oral, by which it is bound.
9.2.4 To
Supplier’s knowledge and belief, there are no suits, actions, claims, proceedings, or investigations pending or threatened
by or before any court, by any Person relating to the matters set forth herein.
9.2.5 Supplier’s
execution of this Manufacturing Agreement and performance hereunder are in, and will be in, compliance with any applicable Law
in all material respects.
9.2.6 This
Manufacturing Agreement is its legal, valid and binding obligation, enforceable against Supplier in accordance with the terms
and conditions hereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.
9.2.7 As
of the Effective Date, there are no claims, judgments or settlements against or owed by Supplier or its Affiliates, or pending
or threatened claims or litigation, relating to the AI or Product(s) that would prevent Supplier from performing under this Manufacturing
Agreement.
9.2.8 Supplier
will provide Buyer with prompt written notice if any of the representations and warranties in this
Section 9.2
become untrue.
9.3 Anti-Corruption
Laws
.
9.3.1 Supplier
understands that Buyer is required to and does abide by the United States Foreign Corrupt Practices Act, and any other applicable
anti-corruption laws in the United States of America (collectively, the “
Anti-Corruption Laws
”). Supplier represents
and warrants that no one acting on its behalf will give, offer, agree or promise to give, or authorize the giving directly or
indirectly, of any money or other thing of value to anyone as an inducement or reward for favorable action or forbearance from
action or the exercise of influence (a) to any governmental official or employee (including employees of government-owned and
government-controlled corporations or agencies), (b) to any political party, official of a political party, or candidate, (c)
to an intermediary for payment to any of the foregoing, or (d) to any other Person or entity in a corrupt or improper effort to
obtain or retain business or any commercial advantage, such as receiving a permit or license.
9.3.2 Supplier
warrants that all Persons acting on its behalf will comply with all applicable Laws in connection with all work on behalf of Buyer,
including the Anti-Corruption Laws if any, prevailing in the country in which Supplier has its principal places of business or
performs work on behalf of Buyer.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
9.4 Trade
Control Laws
.
9.4.1 Each
Party will fully comply with all applicable export control, economic sanctions laws and anti-boycott regulations of the United
States of America, including the U.S. Export Administration Regulations (Title 15 of the U.S. Code of Federal Regulations Part
730 et seq.) and the economic sanctions rules and regulations implemented under statutory authority or President’s Executive
Orders and administered by the U.S. Treasury Department’s Office of Foreign Assets Control (Title 31 of the U.S. Code of
Federal Regulations Part 500 et seq.) (collectively, “
Trade Control Laws
”).
9.4.2 Each
Party acknowledges and confirms that Trade Control Laws apply to its activities, its employees and Affiliates under this Manufacturing
Agreement.
9.4.3 No
Product will be directly or indirectly shipped by the other Party to any country subject to U.S. or U.N. economic sanctions without
the necessary licenses, even for transfer to non-sanctioned countries, and only after the express written consent of Buyer, in
its sole discretion.
9.4.4 Buyer
shall not be required by the terms of this Manufacturing Agreement to be directly or indirectly involved in the provision of goods,
services or technical data that may be prohibited by applicable Trade Control Laws if performed by Buyer. It shall be in the sole
discretion of Buyer to refrain from being directly or indirectly involved in the provision of goods, services or technical data
that may be prohibited by applicable Trade Control Laws.
9.4.5 Each
Party hereby represents and warrants that it is not included on any of the restricted party lists maintained by the U.S. Government,
including the Specially Designated Nationals List administered by the U.S. Treasury Department’s Office of Foreign Assets
Control; the Denied Persons List, Unverified List or Entity List maintained by the U.S. Commerce Department’s Bureau of
Industry and Security; or the List of Statutorily Debarred Parties maintained by the U.S. State Department’s Directorate
of Defense Trade Controls.
9.4.6 Each
Party shall commit to maintaining awareness of the importance of Trade Control Laws throughout its organization. Each Party shall
take such actions as are necessary and reasonable to prevent Product from being exported or re-exported to any country, entity
or individual subject to U.S. trade sanctions, unless prior approval of the other Party, and relevant permission or license from
the U.S. government has been obtained.
9.4.7 Each
Party will keep accurate and consistent records of all transactions covered by the Trade Control Laws for a minimum of five (5)
years from the date of export or re-export; the date of expiration of any applicable license; or, other approval or reliance on
any application of license exception or exemption.
9.5
Supplier
has and will maintain throughout the Term all permits, licenses, registrations and other forms of governmental authorization and
approval as required by applicable Law in order for Supplier to execute and deliver this Manufacturing Agreement and to perform
its obligations hereunder in accordance with all applicable Law.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
9.6 Product
Warranties
. Supplier represents and warrants to Buyer that:
9.6.1 Supplier’s
Facility and all Product supplied hereunder shall comply with this Manufacturing Agreement, all applicable Law (including cGMPs)
and the Quality Agreement, be free from defects in material and workmanship, and meet all Specifications. Supplier shall perform
and document all Manufacturing activities contemplated herein in compliance with all applicable Law. Without limiting the foregoing,
at the time of shipment to Buyer, the Product shall not be adulterated or misbranded within the meaning of the U.S. Federal Food,
Drug and Cosmetic Act, or equivalent regulations promulgated by the applicable Regulatory Authority in the Territory, as amended
and in effect at the time of shipment; provided, however, that Supplier shall not be liable for any breach of this section as
a result of the, but not limited to, Packaging, product labeling, artwork, mechanicals, or consumer communication provided by
Buyer.
9.6.2 Upon
delivery, the Product(s) will be merchantable, usable and fit in accordance with ProPhase’s and Supplier’s past practices
with respect to such, will satisfy all applicable Laws and will have at least [****] percent ([****]%) of shelf life remaining.
The Product(s) will be packaged using the current labeling and packaging applicable to each Product, as supplied and/or approved
by Buyer.
9.6.3 Title
to all Product(s) provided under this Manufacturing Agreement shall pass to Buyer as set forth in
Section 2.4
, free and
clear of any security interest, lien, or other encumbrance.
9.6.4 The
Manufacture of Product(s) hereunder shall not infringe or misappropriate any intellectual property right of any Third Party; provided,
however, that Supplier shall have no responsibility under this
Section 9.6.4
to the extent such infringement or misappropriation
arises from modification to the Products or other methods of Manufacture made at the request of Buyer and such infringement would
not have existed had such modification not been made.
9.6.5 (a)
All of the Inventory shall have been stored, handled and transported on or prior to the Effective Date in compliance with the
applicable Specifications and Regulatory Approvals and in compliance in all material respects with applicable Law and (b) none
of the packaging, labeling or marking of the Inventory shall have been altered by Supplier.
9.7
Supplier
further warrants and represents that should it learn or have reason to suspect any breach of any representation or warranty in
Sections 9.3
,
9.4
,
9.5
, or
9.6
, it will immediately notify Buyer.
9.8
Disclaimer.
EACH PARTY AGREES AND ACKNOWLEDGES THAT, EXCEPT AS SET FORTH IN THIS
ARTICLE 9
AND THE PURCHASE AGREEMENT, NEITHER PARTY
MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, IMPLIED OR STATUTORY, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS
ALL REPRESENTATIONS AND WARRANTIES, IMPLIED OR STATUTORY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AGAINST NON-INFRINGEMENT OR THE LIKE, OR ARISING FROM COURSE OF PERFORMANCE.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
Article
10
CONFIDENTIALITY
10.1 Definition
.
“
Confidential Information
” means the terms and provisions of this Manufacturing Agreement (each of which shall
be the Confidential Information of both Parties) and all other non-public information and data, including all notes, books, papers,
diagrams, documents, reports, e-mail, memoranda, visual observations, oral communications and all other data or information in
whatever form, that one Party or any of its Affiliates or representatives (the “
Disclosing Party
”) has supplied
or otherwise made available to the other Party or its Affiliates or representatives (the “
Receiving Party
”)
hereunder, including those made prior to the Effective Date of this Manufacturing Agreement.
10.2 Obligations
.
The Receiving Party shall protect all Confidential Information of the Disclosing Party against unauthorized use and disclosure
to Third Parties with the same degree of care as the Receiving Party uses for its own similar information, but in no event less
than a reasonable degree of care. The Receiving Party shall be permitted to use the Confidential Information of the Disclosing
Party solely as reasonably necessary to exercise its rights and fulfill its obligations under this Manufacturing Agreement (including
any surviving rights), including (a) in prosecuting or defending litigation, (b) complying with applicable Law, or (c) otherwise
submitting information to tax or other Governmental Authorities. The Receiving Party shall not disclose the Confidential Information
of the Disclosing Party to any Third Party other than to its Affiliates, and its and their respective directors, officers, employees,
subcontractors, sublicensees, consultants, and attorneys, accountants, banks and investors (collectively, “
Recipients
”)
who have a need to know such information for purposes related to this Manufacturing Agreement and who are made aware of the confidentiality
obligations set forth in this Manufacturing Agreement or are bound by obligations of confidentiality at least as protective of
such Confidential Information as those set forth in this Manufacturing Agreement. The Receiving Party shall be responsible for
any disclosures made by its Recipients in violation of this Manufacturing Agreement.
10.3 Exceptions
.
10.3.1
Restriction
Limitations
. The restrictions related to use and disclosure under this
Article 10
shall not apply to any information
to the extent the Receiving Party can demonstrate by competent evidence that such information:
(a) is
(at the time of disclosure by the Disclosing Party) or becomes (after the time of such disclosure by the Disclosing Party) known
to the public or part of the public domain through no breach of this Manufacturing Agreement by the Receiving Party, or any Recipient
to whom the Receiving Party disclosed such information, of its confidentiality obligations to the Receiving Party;
(b) was
known to, or was otherwise in the possession of, the Receiving Party prior to the time of disclosure by the Disclosing Party;
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
(c) is
disclosed to the Receiving Party on a non-confidential basis by a Third Party who is not, to the actual knowledge of the Receiving
Party, prohibited from disclosing it without breaching any confidentiality obligation to the Disclosing Party; or
(d) is
independently developed by or on behalf of the Receiving Party or any of its Affiliates, as evidenced by its written records,
without use of or access to the Confidential Information.
10.3.2
Disclosure
Required by Law
. The restrictions set forth in this
Article 10
shall not apply to the extent that the Receiving Party
is required to disclose any Confidential Information under Law or by an order of a Governmental Authority; provided that the Receiving
Party: (a) provides the Disclosing Party with prompt written notice of such disclosure requirement if legally permitted, (b) uses
reasonable commercial efforts to afford the Disclosing Party an opportunity, and cooperates with the Disclosing Party’s
efforts, to oppose or limit, or secure confidential treatment for such required disclosure (at the Disclosing Party’s expense),
and (c) if the Disclosing Party is unsuccessful in its efforts pursuant to subsection (b), discloses only that portion of the
Confidential Information that the Receiving Party is legally required to disclose as advised by the Receiving Party’s legal
counsel.
10.3.3
Disclosure
to Potential Purchaser
. Notwithstanding anything to the contrary in this Manufacturing Agreement, Supplier may, in good faith,
provide financial, sales and forecast information with respect hereto and a summary of the material terms hereof to a potential
purchaser of a majority or controlling interest in Supplier or ProPhase or all or substantially all of Supplier’s or ProPhase’s
assets; provided, that such potential purchaser has entered into a confidentiality agreement with the Supplier that is customary
for such a transaction.
10.4 Nondisclosure
of Terms
. Except as set forth in the Purchase Agreement, each Party agrees not to issue any press releases, reports, or other
statements in connection with this Manufacturing Agreement intended for use in the public or private media or otherwise disclose
the terms of this Manufacturing Agreement to any Third Party without the prior written consent of the other Party hereto, which
consent shall not be unreasonably withheld, except to such Party’s attorneys, advisors and others on a need to know basis
in each case consistent with customary practice under circumstances that protect the confidentiality thereof; provided that Buyer
may inform its customers, suppliers and business contacts that Supplier supplies Product(s) to Buyer in the ordinary course of
business without Supplier’s consent. Notwithstanding the foregoing, each Party may make announcements concerning the subject
matter of this Manufacturing Agreement if required by applicable Law or any securities exchange or Governmental Authority or any
tax authority to which any Party is subject or submits, in which case the Party making such announcement shall provide the other
Party with a copy of such announcement at least three (3) Business Days prior to issuance, to the extent practicable under the
circumstances, and shall only disclose information required by applicable Law or such exchange or authority.
10.5 Right
to Injunctive Relief
. Each Party agrees that breaches of this
Article 10
may cause irreparable harm to the other Party
and shall entitle such other Party, in addition to any other remedies available to it (subject to the terms of this Manufacturing
Agreement), to the right to seek injunctive relief enjoining such action.
10.6 Ongoing
Obligation for Confidentiality
. The Parties’ obligations of confidentiality, non-use and non-disclosure under this
Article
10
shall survive any expiration or termination of this Manufacturing Agreement for five (5) years.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
Article
11
INDEMNIFICATION AND INSURANCE
11.1 Indemnification
.
11.1.1
Indemnification
by Supplier
. Supplier hereby agrees, at its sole cost and expense, to defend, hold harmless and indemnify, to the extent permitted
by applicable Law, (collectively, “
Indemnify
”) Buyer and its Affiliates and their respective directors, officers
and employees of such Persons and the respective successors and assigns of any of the foregoing (the “
Buyer Indemnitees
”)
from and against any and all liabilities, damages, penalties, fines, costs and actual expenses (including, reasonable attorneys’
fees and other expenses of litigation) (collectively, “
Liabilities
”) resulting from suits, claims, actions
and demands, in each case brought by a Third Party (each, a “
Third-Party Claim
”) against any Buyer Indemnitee
and arising from or occurring as a result of: (a) any material breach of any of Supplier’s obligations, representations,
warranties or covenants under this Manufacturing Agreement; or (b) the gross negligence or willful misconduct of a Supplier Indemnitee
under this Manufacturing Agreement. Supplier’s obligation to Indemnify Buyer Indemnitees pursuant to this
Section 11.1.1
shall not apply to the extent that any such Liabilities are the result of a material breach by Buyer of its obligations, representations,
warranties or covenants under this Manufacturing Agreement or any Buyer Indemnitee’s gross negligence or willful misconduct.
Notwithstanding anything to the contrary in this Manufacturing Agreement, Supplier’s liability arising from this Manufacturing
Agreement and the performance hereof shall not exceed [****] Dollars ($[****]) in the aggregate (the “
Seller Cap
”).
Additionally, Supplier’s obligation to Indemnify Buyer Indemnitees shall include lost profits and out-of-pocket costs and
expenses. The Seller Cap shall not, nor shall any other limitation set forth in this Manufacturing Agreement, apply to any indemnification
obligations where a Third-Party Claim for bodily injury or death arises from the gross negligence or willful misconduct of Supplier.
11.1.2
Indemnification
by Buyer
. Buyer hereby agrees to Indemnify Supplier and its agents, directors, officers and employees and the respective successors
and assigns of any of the foregoing (the “
Supplier Indemnitees
”) from and against any and all Liabilities resulting
from Third-Party Claims against any Supplier Indemnitee arising from or occurring as a result of: (a) any material breach of any
of Buyer’s obligations, representations, warranties or covenants under this Manufacturing Agreement; or (b) the gross negligence
or willful misconduct of a Buyer Indemnitee. Buyer’s obligation to Indemnify Supplier Indemnitees pursuant to this
Section
11.1.2
shall not apply to the extent that any such Liabilities are the result of a material breach by Supplier of its obligations,
representations, warranties or covenants under this Manufacturing Agreement or any Supplier Indemnitee’s gross negligence
or willful misconduct.
11.1.3
Procedure
.
To be eligible to be Indemnified hereunder, the indemnified Person shall provide the indemnifying Party with prompt written notice
of the Third-Party Claim giving rise to the indemnification obligation pursuant to this
Section 11.1.3
and the right to
control the defense (with the reasonable cooperation of the indemnified Person) or settlement any such claim; provided, however,
that the indemnifying Party shall not enter into any settlement that admits fault, wrongdoing or damages without the indemnified
Person’s written consent, such consent not to be unreasonably withheld or delayed. The indemnified Person shall have the
right to join, but not to control, at its own expense and with counsel of its choice, the defense of any claim or suit that has
been assumed by the indemnifying Party.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
11.1.4
Indemnification
under the Purchase Agreement
. The Parties agree that to the extent any claims for indemnification can be properly brought
under the Purchase Agreement, such claims will be brought under the Purchase Agreement and no indemnity will be available hereunder.
11.2 Product
Liability Insurance
. Each Party shall, during the Term and for one (1) year after termination or expiration of this Manufacturing
Agreement, obtain and maintain at its own cost and expense from a qualified insurance company (provided however that Buyer may
satisfy all or part of its obligation through its insurance captive or self-insurance) product liability insurance providing protection
against any and all claims, demands, and causes of action arising out of any defects, alleged or otherwise, of the Product(s)
or their use, design or Manufacture, or any material incorporated in the Product(s). The amount of coverage shall be a minimum
of [****] US Dollars ($[****] USD) combined single limit coverage for each occurrence for bodily injury or for property damage
and shall be provided from an insurance company qualified to write global product liability coverage. Each Party agrees, upon
request, to furnish the other Party with a certificate of insurance evidencing such insurance coverage (at the execution of this
Manufacturing Agreement and at each subsequent renewal) and shall provide the other Party with a thirty (30) day notice of cancellation
or non-renewal of such coverage. Supplier shall provide its current certificate of insurance evidencing such insurance coverage
as of the Effective Date. Supplier shall name Buyer as an additional insured on its insurance policies maintained pursuant to
this
Section 11.2
.
Article
12
TERM AND TERMINATION
12.1 Term
.
The term of this Manufacturing Agreement shall begin on the Effective Date first set forth above, shall remain in effect for a
period of five (5) years thereafter (the “
Initial Term
”) unless it is terminated earlier in accordance with
Section 12.2
. Thereafter, this Manufacturing Agreement may be renewed by Buyer for up to five (5) successive one (1) year
periods (the Initial Term plus any such renewal terms, the “
Term
”), by Buyer providing notice of its intent
to renew this Manufacturing Agreement not less than ninety (90) days prior to the expiration of the then-current Term.
12.2 Termination
.
Notwithstanding anything to the contrary in this Manufacturing Agreement, this Manufacturing Agreement may be terminated:
12.2.1 in
its entirety or with respect to one or more Products, on a Product-by-Product basis, by mutual written consent of Supplier and
Buyer;
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
12.2.2 in
its entirety by either Party upon written notice if any Bankruptcy Event has occurred with respect to the other Party;
12.2.3 in
its entirety by either Party upon sixty (60) days’ prior written notice to the other Party if the other Party materially
breaches any provision of this Manufacturing Agreement (including a violation of an applicable Law) and fails to cure that breach
within such sixty (60) day period;
12.2.4 by
Buyer in its entirety or with respect to one or more Products, on a Product-by-Product basis, upon (a) written notice to Supplier
if the FDA or other applicable Regulatory Authority orders a Product recall of such Product(s) or suspends or withdraws the applicable
Product Regulatory Approval therefor or Buyer reasonably believes, supported by written evidence, that the FDA will take any such
action with respect to such Product(s) or (b) after the third (3
rd
) anniversary of this Manufacturing Agreement, one
hundred eighty (180) days’ prior written notice to Supplier for any other reason;
12.2.5 by
Buyer in the event of a Failure to Supply in accordance with
Section 2.7.2
;
12.2.6 by
Buyer in the event of a Force Majeure in accordance with
Section 15.4
;
12.2.7 by
Buyer immediately upon written notice to Supplier in the event that the Quality Agreement is terminated;
12.2.8 by
Buyer immediately without notice if Supplier has violated the Anti-Corruption Laws pursuant to
Section 9.3
;
12.2.9 by
Buyer immediately upon written notice to Supplier in the event of a negative outcome of an audit under
Article 6
or
Section
7.5
of this Manufacturing Agreement;
12.2.10 by
Buyer upon one hundred twenty (120) days’ written notice to Supplier in the event Buyer incurs Liabilities above the Seller
Cap.
12.3 Effects
of Termination
. Upon termination of this Manufacturing Agreement, in its entirety or with respect to one or more Products,
this Manufacturing Agreement shall, except as otherwise provided in this
Section 12.3
or
Section 12.4
, be of no
further force or effect; provided, however, that if this Manufacturing Agreement is terminated with respect to one or more Products,
but not all Products, then this Manufacturing Agreement shall continue in full force and effect with respect to the applicable
Product(s) for which it is not terminated. Upon termination or expiration of this Manufacturing Agreement, in its entirety or
with respect to one or more Products, by Buyer in accordance with
Section 12.2
, Supplier shall disclose to Buyer and/or
Buyer’s designee all documentation and other information necessary or reasonably useful to enable Buyer, or its designee,
to manufacture the Products in accordance with a technology transfer plan and budget to be mutually agreed by the Parties (the
“
Technology Transfer Plan
”). In addition, on an ongoing basis thereafter, at Buyer’s reasonable request,
Supplier will, and will cause its Affiliates, employees, contractors and agents to, cooperate with, disclose and provide reasonable
support, expertise and assistance for Buyer or its designee to manufacture such Products. Except in the event Buyer terminates
this Manufacturing Agreement in accordance with
Sections 12.2.3
,
12.2.4(a)
,
12.2.5
,
12.2.6
,
12.2.8
or
12.2.9
, Buyer shall reimburse Supplier for time expended and expenses incurred by Supplier in providing the assistance
and support set forth in this
Section 12.3
in accordance with the budget set forth in the Technology Transfer Plan.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
12.4 Nonexclusive
Remedy
. Exercise of any right of termination afforded to either Party under this Manufacturing Agreement (i) shall not prejudice
any other legal rights or remedies either Party have against the other in respect of any breach of the terms and conditions of
this Manufacturing Agreement, and (ii) shall be without any obligation or liability arising from such termination other than such
obligations expressly arising from termination.
12.5 Survival
.
Termination of this Manufacturing Agreement (for any reason) shall not affect any accrued rights or liabilities of either Party.
Article 5
(Product Testing),
Article 6
(Inspection),
Article 7
(Regulatory and Quality Responsibilities),
Article 10
(Confidentiality),
Article 11
(Indemnification and Insurance),
Article 14
(Disputes; Governing
Law),
Article 15
(Miscellaneous), and
Sections 3.4
(Recordkeeping),
9.4.7
,
9.6
(Product Warranties),
9.8
(Disclaimer),
12.3
(Effects of Termination),
12.4
(Nonexclusive Remedy),
12.5
(Survival), and
12.6
(Right to Sell Inventory) shall survive any expiration or termination of this Manufacturing Agreement.
12.6 Right
to Sell Inventory
. Upon termination of this Manufacturing Agreement for any reason except for the withdrawal of Regulatory
Approval of the Product(s), outstanding purchase orders for, and remaining inventory of, the Product(s) subject to such termination
will be determined in good faith by the Parties hereto; provided that all payments hereunder in respect thereof are timely paid
in compliance with
Article 3
above.
Article
13
RIGHT OF FIRST OFFER
13.1 Right
of First Offer
.
13.1.1 During
the term of this Manufacturing Agreement and subject to the terms set forth in this
Section 13.1.1
, Buyer shall have a
right of first offer if Supplier proposes to sell the Facility to a Third Party. Supplier shall provide Buyer with written notice
of any such decision to sell the Facility and any and all information regarding the Facility that Supplier intends to share with
a Third Party who is interested in purchasing the Facility (collectively, the “
Facility Sale Notice
”), and
a reasonable opportunity to conduct appropriate due diligence on the Facility and associated workforce. Buyer shall notify Supplier,
within ten (10) days of receipt of the Facility Sale Notice, whether it desires to acquire the Facility on such terms and conditions.
If Buyer so notifies Supplier that it does desire to acquire the Facility, Buyer and Supplier shall negotiate any remaining terms
and conditions governing the sale of the Facility to Buyer promptly and in good faith. If (i) Buyer fails to respond within the
ten (10) day period, (ii) Buyer notifies Supplier that it does not desire to acquire the Facility on the terms and conditions
offered, or (iii) in the case that Buyer notifies Supplier that it does desire to acquire the Facility, but Buyer and Supplier,
despite using good faith efforts, fail to finalize and execute an agreement governing such acquisition by Buyer within fifty (50)
days of Supplier’s receipt of Buyer’s notice, Supplier shall have the right, within one hundred twenty (120) days,
to offer and sell the Facility to a Third Party on terms and conditions no more favorable to such Third Party than those specified
in the Facility Sale Notice; provided that such Third Party shall remain obligated to supply the products to Buyer on the terms
and conditions of this Manufacturing Agreement. In the event that Supplier does not consummate the sale of the Facility within
the one hundred twenty (120) day period, the rights provided under this
Section 13.1.1
shall be revived and the Facility
shall not be offered to any Third Party unless first re-offered to Buyer. Notwithstanding anything to the contrary, this
Section
13.1.1
shall not prevent Supplier from encumbering the Facility and shall not apply with respect to any Third Party that forecloses
upon the Facility.
13.1.2 Supplier
shall be solely responsible for all ongoing maintenance costs and capital expenditures associated with the Manufacture of the
Product(s), for so long as Supplier is Manufacturing the Product(s).
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
Article
14
DISPUTES; GOVERNING LAW
14.1 Discussion
by Executives
. Except as otherwise provided herein, any dispute, controversy or claim arising under, out of or in connection
with this Manufacturing Agreement, including any subsequent amendments, or the validity, enforceability, construction, performance
or breach hereof (and including the applicability of this
Article 14
to any such dispute, controversy or claim) (each a
“
Dispute
”) shall be first submitted to an executive officer of each of the Parties having authority to resolve
such Dispute for attempted resolution by good faith negotiations within ten (10) Business Days. In such event, each Party shall
cause its designated executive officer to meet and be available to attempt to resolve such issue. If the Parties should resolve
such Dispute, a memorandum setting forth their agreement will be prepared and signed by both Parties if requested by either Party.
The Parties shall cooperate in an effort to limit the issues for consideration in such manner as narrowly as reasonably practicable
in order to resolve the Dispute.
14.2 Governing
Law
. This Manufacturing Agreement and all rights and obligations of the Parties arising out of or relating to this Manufacturing
Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York, U.S.A. without giving
effect to conflicts of laws principles. The Parties hereby expressly agree that the U.N. Convention on Contracts for the International
Sale of Goods shall not apply.
14.3 Jurisdiction
.
The Parties agree that any Dispute that is not resolved pursuant to
Section 14.1
shall be subject to the exclusive jurisdiction
of the state and federal courts in New York City, New York, U.S.A. and each Party hereby submits to such jurisdiction.
Article
15
MISCELLANEOUS
15.1 Relationship
of the Parties
. The Parties agree that the relationship of Supplier and Buyer established by this Manufacturing Agreement
is that of independent contractors. Furthermore, the Parties agree that this Manufacturing Agreement does not, is not intended
to, and shall not be construed to, establish a partnership or joint venture, and nor shall this Manufacturing Agreement create
or establish an employment, agency or any other relationship. Except as may be specifically provided herein, neither Party shall
have any right, power or authority, nor shall they represent themselves as having any authority to assume, create or incur any
expense, liability or obligation, express or implied, on behalf of the other Party, or otherwise act as an agent for the other
Party for any purpose.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
15.2 Expenses
.
Except as otherwise expressly provided herein, each Party shall bear its own costs, fees and expenses incurred by such Party in
connection with this Manufacturing Agreement.
15.3 Licenses
and Permits
. Each Party shall, at its sole cost and expense, maintain in full force and effect all necessary licenses, permits,
and other authorizations required by applicable Law in order to carry out its duties and obligations hereunder.
15.4 Force
Majeure
. No Party shall be liable for a failure or delay in performing any of its obligations under this Manufacturing Agreement
if, but only to the extent that such failure or delay is due to causes beyond the reasonable control of the affected Party, including:
(a) acts of God; (b) fire, explosion, or unusually severe weather; (c) war, invasion, riot, terrorism, or other civil unrest;
(d) governmental laws, orders, restrictions, actions, embargo or blockages; (e) national or regional emergency; (f) strikes or
industrial disputes at a national level which directly impact the affected Party’s performance under this Manufacturing
Agreement; or (g) other similar cause outside of the reasonable control of such Party (“
Force Majeure
”); provided
that the Party affected shall promptly notify the other of the Force Majeure condition and shall use reasonable efforts to eliminate,
cure or overcome any such causes and resume performance of its obligations as soon as possible. If the performance of any such
obligation under this Manufacturing Agreement is delayed owing to such a Force Majeure for any continuous period of more than
one hundred eighty (180) days, Buyer shall have the right to terminate this Manufacturing Agreement.
15.5 Notices
.
Any notice required or permitted to be given hereunder shall be in writing and shall be delivered in person, by a nationally recognized
overnight courier, or by registered or certified airmail, postage prepaid to the addresses given below or such other addresses
as may be designated in writing by the Parties from time to time, and shall be deemed to have been given upon receipt.
In
the case of Supplier:
|
|
With
a required copy to:
|
|
|
|
ProPhase
Labs, Inc.
621
N. Shady Retreat Road
Doylestown,
PA 18901
Attention:
Robert V. Cuddihy, Jr.
|
|
Reed
Smith LLP
599
Lexington Avenue
New
York, NY 10022
Attention:
Herbert F. Kozlov, Esq.
|
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
In
the case of Buyer:
|
|
With
required copies to:
|
|
|
|
Meda
Consumer Healthcare Inc.
781
Chestnut Ridge Road
EOB
245
Morgantown,
WV 26505
Attention:
Joseph Duda
|
|
Mylan
Inc.
1000
Mylan Boulevard
Canonsburg,
Pennsylvania 15317
Attention:
Global General Counsel
Hogan
Lovells US LLP
Columbia
Square
555
Thirteenth Street, NW
Washington,
DC 20004
Attention:
Daniel Keating, Esq.
|
15.6 Assignment
.
Neither Party shall at any time, without obtaining the prior written consent of the other Party, assign or transfer this Manufacturing
Agreement or subcontract its obligations hereunder to any Person. Notwithstanding the foregoing, Buyer shall be permitted, without
the consent of Supplier, to assign this Manufacturing Agreement to its Affiliates or to perform this Manufacturing Agreement,
in whole or in part, through its Affiliates, and Buyer may also assign this Manufacturing Agreement, without the consent of Supplier,
to any successor or Third Party that acquires all or substantially all of the assets to which this Manufacturing Agreement relates
by sale, transfer, merger, reorganization, operation of law or otherwise; provided that the assignee agrees in writing to be bound
to the terms and conditions of this Manufacturing Agreement. In the event of an assignment permitted under this
Section 15.6
,
the assigning Party shall notify the other Party in writing of such assignment. This Manufacturing Agreement shall be binding
upon and shall inure to the benefit of the Parties and their successors and permitted assigns. Any assignment not in accordance
with this
Section 15.6
shall be null and void.
15.7 Entire
Agreement and Amendment
. This Manufacturing Agreement, together with its Schedules and Exhibits, constitutes and contains
the entire understanding and agreement of the Parties respecting the subject matter hereof and cancels and supersedes any and
all prior and contemporaneous negotiations, correspondence, understandings and agreements between the Parties, whether oral or
written, regarding such subject matter. Notwithstanding the foregoing, to the extent the terms and conditions of the body of this
Manufacturing Agreement conflict with the terms and conditions of any Schedule hereto, the terms and conditions of the body of
this Manufacturing Agreement shall govern. No terms or provisions of this Manufacturing Agreement will be varied or modified by
any prior or subsequent statement, conduct or act of either of the Parties, except that the Parties may amend this Manufacturing
Agreement by written instruments specifically referring to and executed in the same manner as this Manufacturing Agreement.
15.8 No
Third Party Beneficiaries
. Except for the rights to indemnification provided for under
Article 11
above, all rights,
benefits and remedies under this Manufacturing Agreement are solely intended for the benefit of Buyer and Supplier. Except for
such rights to indemnification expressly provided pursuant to
Article 11
, no Third Party shall have any rights whatsoever
to (a) enforce any obligation contained in this Manufacturing Agreement; (b) seek a benefit or remedy for any breach of this Manufacturing
Agreement; or (c) take any other action relating to this Manufacturing Agreement under any legal theory, including actions in
contract, tort (including negligence, gross negligence and strict liability), or as a defense, setoff or counterclaim to any action
or claim brought or made by the Parties.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
15.9 Severability
.
Should one or more of the provisions of this Manufacturing Agreement become void or unenforceable as a matter of law, then such
provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this
Manufacturing Agreement, and the Parties agree to negotiate in good faith a valid and enforceable provision therefor which, as
nearly as possible, achieves the desired economic effect and mutual understanding of the Parties under this Manufacturing Agreement.
15.10 No
Waiver
. A waiver by any Party of any of the terms and conditions of this Manufacturing Agreement in any instance will not
be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach hereof. All rights,
remedies, undertakings, obligations and agreements contained in this Manufacturing Agreement will be cumulative and none of them
will be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.
15.11 Compliance
with Laws
. Both Supplier and Buyer shall perform their obligations under this Manufacturing Agreement in accordance with applicable
Law and each Party shall bear its own costs in ensuring compliance therewith. No Party shall, or shall be required to, undertake
any activity under or in connection with this Manufacturing Agreement that violates, or which it reasonably believes may violate,
any applicable Law.
15.12 English
Language
. This Manufacturing Agreement shall be written and executed in the English language. Any translation into any other
language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version
and such translation, the English version shall control.
15.13 Review
by Legal Counsel
. Each Party agrees that it has read and had the opportunity to review this Manufacturing Agreement with its
legal counsel. Accordingly, the rule of construction that any ambiguity contained in this Manufacturing Agreement shall be construed
against the drafting Party shall not apply.
15.14 Further
Acts
. Each Party shall do, execute and perform and shall procure to be done and performed all such further acts, deeds, documents
and things as the other Parties may reasonably require from time to time to give full effect to the terms of this Manufacturing
Agreement.
15.15 Counterparts
.
This Manufacturing Agreement may be executed in counterparts, each of which shall be deemed an original, but which together shall
constitute one and the same document. This Manufacturing Agreement and any amendments hereto, to the extent signed and delivered
by means of electronic reproduction (
e.g
., portable document format (.pdf)), shall be treated in all manner and respects
as an original and shall be considered to have the same binding legal effects as if it were the original signed version thereof
delivered in person. At the request of a Party, the other Party shall re-execute original forms thereof and deliver them to the
Party who made said request.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
15.16 ProPhase
Guaranty
. In consideration of, and as an inducement to Buyer entering into this Manufacturing Agreement and performing its
respective obligations hereunder, ProPhase hereby irrevocably, absolutely and unconditionally guarantees to Buyer the full performance
and payment by Supplier of the covenants, obligations, monetary or otherwise, and undertakings of Supplier pursuant to or otherwise
in connection with this Manufacturing Agreement and the consummation of the transactions contemplated hereby (the “
ProPhase
Guaranteed Obligations
”). Any breach of, or other failure to perform, any representation, warranty, covenant, obligation,
agreement or undertaking of Supplier shall also be deemed to be a breach or failure to perform ProPhase, and Buyer shall have
the right, exercisable in its sole discretion, to pursue any and all available remedies it may have arising out of any such breach
or non-performance directly against either or both of Supplier and ProPhase in the first instance. This guarantee is a guarantee
of performance and not exclusively of collection. To the fullest extent permitted by Law, ProPhase hereby expressly waives any
and all rights or defenses arising by reason of any Law that would otherwise require any election of remedies by Buyer and ProPhase
waives promptness, diligence, notice of the acceptance of this guaranty and of ProPhase Guaranteed Obligations, presentment, demand
for payment, notice of non-performance, default, dishonor and protest, notice of any ProPhase Guaranteed Obligations incurred
and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other
similar law now or hereafter in effect, any right to require the marshalling of assets of Supplier, and all suretyship defenses
generally; provided, however, that notwithstanding the foregoing or anything to the contrary set forth herein, ProPhase shall
have all of the same rights and defenses (whether pursuant to limitations on liability, notice requirements or otherwise) as Supplier
may have pursuant to the terms of this Manufacturing Agreement, the Transaction Documents and the consummation of the transactions
contemplated hereby or thereby. ProPhase acknowledges that it will receive substantial direct and indirect benefits from the transactions
contemplated hereby and that the waivers set forth in this
Section 15.16
are knowingly made in contemplation of such benefits.
The
remainder of this page is left intentionally blank.
CONFIDENTIAL
TREATMENT REQUESTED
UNDER
C.F.R. SECTION 240.24b-2. [****]
INDICATES
OMITTED MATERIAL THAT IS
THE
SUBJECT OF A CONFIDENTIAL
TREATMENT
REQUEST
FILED
SEPARATELY WITH THE
COMMISSION.
THE OMITTED MATERIAL
HAS
BEEN FILED SEPARATELY WITH THE
COMMISSION.
IN
WITNESS WHEREOF
, the parties have caused this Manufacturing Agreement to be executed by their respective duly authorized officers
as of the Effective Date, each copy of which will for all purposes be deemed to be an original.
Pharmaloz
Manufacturing, Inc.
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Meda
Consumer Healthcare Inc.
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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PROPHASE
LABS, INC. (
solely with respect to
Section
15.16
)
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By:
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Name:
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Title:
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EXHIBIT
B
Form
of Trademark Assignment Agreement
EXHIBIT
C
Accounts
Payable
EXHIBIT
D
Accounts
Receivable
EXHIBIT
E
Form
of Transition Services Agreement
EXHIBIT
F
Rights
Agreement Amendment
AMENDMENT
NO. 1 TO
AMENDED
AND RESTATED RIGHTS AGREEMENT
This
AMENDMENT NO. 1 (this “
Amendment
”) to the Amended and Restated Rights Agreement, dated as of June 18, 2014
(the “
Rights Agreement
”), by and between ProPhase Labs, Inc., a Delaware corporation (the “
Company
”),
and American Stock Transfer & Trust Company, LLC, as rights agent (the “
Rights Agent
”), is entered into
January 6, 2017. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings given to them
in the Rights Agreement.
WITNESSETH
:
WHEREAS,
the Board of Directors of the Company (the “
Board
”) has determined that it is in the best interests of the
Company and its stockholders to amend the Rights Agreement as set forth herein immediately prior to and in connection with the
execution of the Asset Purchase Agreement, dated as of January 6, 2017 (as amended, modified or supplemented, from time to time,
the “
Asset Purchase Agreement
”), by and among the Company, Meda Consumer Healthcare Inc. (“
Meda
”)
and Mylan Inc. (“
Mylan
”), pursuant to which the Company will sell to Meda substantially all of the assets of
the Company;
WHEREAS,
the Company desires to amend the Rights Agreement pursuant to Section 27 of the Rights Agreement, immediately prior to entering
into the Asset Purchase Agreement, to facilitate the transactions contemplated by the Asset Purchase Agreement;
WHEREAS,
pursuant to Section 27 of the Rights Agreement, the Company has delivered to the Rights Agent a certificate signed by an appropriate
officer of the Company which states that this Amendment is in compliance with the terms of Section 27 of the Rights Agreement;
and
WHEREAS,
pursuant to resolutions adopted at a duly convened special meeting of the Board held on January 5, 2017, the Board has determined
that it is in the best interests of the Company and its stockholders, and consistent with the objectives of the Board in adopting
the Rights Agreement, to amend the Rights Agreement in the manner set forth herein immediately prior to entering into the Asset
Purchase Agreement to except from the operation of the Rights Agreement the Asset Purchase Agreement, the Voting Agreements (as
defined below) and any and all transactions contemplated by the Asset Purchase Agreement and the Voting Agreements;
NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements herein set forth, the parties hereby agree as follows:
1.
Amendment to Section 1
a.
The definition of “Acquiring Person” in Section 1(a) of the Rights Agreement is hereby amended by adding the following
sentence to the end of said definition as subsection 1(a)(vi):
“Notwithstanding
anything in this Agreement to the contrary, none of Meda, Mylan or any of their respective Affiliates or Associates shall be or
become an Acquiring Person, and the term “Acquiring Person” shall not include any of Meda, Mylan or any of their respective
Affiliates or Associates, solely by reason of (i) the approval, execution, delivery, performance or public announcement of the
Asset Purchase Agreement (including any amendments, modifications or supplements thereto), (ii) the consummation of the asset
sale provided for by the Asset Purchase Agreement, (iii) the consummation of any other transactions contemplated by the Asset
Purchase Agreement, including, but not limited to, the potential future sale of the manufacturing facility owned by the Company
and its affiliate or (iv) the execution, delivery or performance of the Voting Agreements received by Meda from certain officers
and directors of the Company.”
b.
The definition of “Beneficial Owner” of and “Beneficially Own” securities in Section 1(c) is hereby amended
by adding the following sentence at the end of Section 1(c):
“Notwithstanding
anything in this Agreement to the contrary, the definition of “Beneficial Owner” of and “Beneficially Own”
securities shall not include any beneficial ownership of securities that may result from the execution, delivery or performance
of the Voting Agreements received by Meda from certain officers and directors of the Company in connection with the execution
of the Asset Purchase Agreement.”
c.
Section 1 of the Rights Agreement is hereby amended by adding the following definitions to the end of Section 1:
“
Asset
Purchase Agreement
” shall mean that certain Asset Purchase Agreement, dated as of January 6, 2017, by and among the
Company, Meda and Mylan (as such agreement may be amended, modified or supplemented, from time to time).
“
Meda
”
shall mean Meda Consumer Healthcare Inc., a Delaware corporation.
“
Mylan
”
shall mean Mylan Inc., a Pennsylvania corporation.
“
Voting
Agreements
” shall mean those certain Voting Agreements, dated as of January 6, 2017, received by Meda from certain officers
and directors of the Company providing that, among other things, the signatory agrees to vote in favor of the transactions contemplated
by the Asset Purchase Agreement.
2.
Amendment to Section 11(a)(ii)
Section
11(a)(ii) of the Rights Agreement is hereby amended by adding the following sentence to the end of Section 11(a)(ii):
“Notwithstanding
anything in this Agreement to the contrary, none of (i) the approval, execution, delivery, performance or public announcement
of the Asset Purchase Agreement (including any amendments, modifications or supplements thereto), (ii) the consummation of the
asset sale provided for by the Asset Purchase Agreement, (iii) the consummation of any other transactions contemplated by the
Asset Purchase Agreement, including, but not limited to, the potential future sale of the manufacturing facility owned by the
Company and its affiliate or (iv) the execution, delivery or performance of the Voting Agreements received by Meda from certain
officers and directors of the Company shall cause the Rights to be adjusted or become exercisable in accordance with this Section
11(a)(ii).”
3.
Amendment to Section 13(i)
Section
13(i) of the Rights Agreement is hereby amended by adding the following sentence to the end of Section 13(i):
“Notwithstanding
anything in this Agreement to the contrary, (A) the provisions of Section 13(i) shall not be applicable to the asset sale provided
for by the Asset Purchase Agreement or as a result of the execution, delivery or performance of the Voting Agreements received
by Meda from certain officers and directors of the Company, and (B) provided that neither Meda nor Mylan has become an Acquiring
Person, any other person becoming an Acquiring Person shall not cause the provisions of Section 13(i) to apply to Meda or Mylan
as an “other Person”; provided, that nothing in this clause (B) shall restrict the application of Section 13(i) to
an Acquiring Person or any Affiliates thereof.”
4.
Benefits
All
of the covenants and provisions of this Amendment by or for the benefit of the Company or the Rights Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
5.
Severability
If
any term, provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall
remain in full force and effect and shall in no way be affected, impaired or invalidated.
6.
Effectiveness and Effect of Amendment
a.
Notwithstanding anything to the contrary set forth in Section 27, this Amendment shall become effective as of the date first written
above, but such effectiveness is contingent upon the execution and delivery of the Asset Purchase Agreement by the parties thereto.
The Company shall notify the Rights Agent via electronic mail of such execution and delivery of the Asset Purchase Agreement promptly
thereafter.
b.
Except as specifically modified herein, the Rights Agreement shall not otherwise be supplemented or amended by virtue of this
Amendment, but shall remain in full force and effect. The execution, delivery and effectiveness of this Amendment shall not, except
as expressly provided herein, constitute a waiver or amendment of any provision of the Rights Agreement. Upon and after the effectiveness
of this Amendment, each reference in the Rights Agreement to “this Agreement”, “hereunder”, “hereof”
or words of like import referring to the Rights Agreement, and each reference in any other document to “the Rights Agreement”,
“thereunder”, “thereof” or words of like import referring to the Rights Agreement, shall mean and be a
reference to the Rights Agreement as modified hereby.
7.
Governing Law
This
Amendment shall be deemed to be a contract made under the laws of the State of Nevada and for all purposes shall be governed by
and construed in accordance with the laws of the State of Nevada applicable to contracts made and to be performed entirely within
State of Nevada.
8.
Descriptive Headings
Descriptive
headings of the several sections of this Amendment are inserted for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
9.
Counterparts
This
Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Agreement transmitted
electronically shall have the same authority, effect, and enforceability as an original signature.
[Signature
Pages Follow]
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date set forth in the first paragraph hereof.
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COMPANY:
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PROPHASE
LABS, INC.
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By:
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Name:
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Title:
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[Signature
Page to Rights Agreement Amendment]
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RIGHTS
AGENT:
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AMERICAN
STOCK TRANSFER
& TRUST COMPANY, LLC
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By:
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Name:
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Title:
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[Signature Page to Rights Agreement Amendment]
EXHIBIT
G
Form
of Escrow Agreement
EXHIBIT
H
Products
EXHIBIT
I
Form
of Voting Agreement
VOTING
AGREEMENT
THIS
VOTING AGREEMENT
(this
“Agreement”
) is made and entered into as of January 6, 2017 by and between Meda
Consumer Healthcare Inc., a Delaware corporation (the
“Buyer”
), and the undersigned stockholder (
“Stockholder”
)
of ProPhase Labs, Inc., a Delaware corporation (the
“Company”
).
RECITALS
A.
The Company and the Buyer intend to enter into an Asset Purchase Agreement of even date herewith (the
“Asset Purchase
Agreement”
), which provides for the (i) sale and transfer of certain assets from the Company to the Buyer, (ii) assumption
of certain liabilities by the Buyer and (iii) assignment to the Buyer and assumption by the Buyer of certain agreements (collectively,
the
“Asset Purchase”
), on the terms and subject to the conditions set forth therein;
B.
Stockholder is the beneficial owner (for this and other terms of correlative meaning used throughout this agreement, as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”
)) of such number of
Shares (as defined below) as is indicated on the signature page of this Agreement;
C.
Stockholder believes that it is in his, her or its best interest, as a stockholder in the Company, that the Asset Purchase be
consummated;
D.
As a condition to its willingness to enter into the Asset Purchase Agreement, the Buyer has required that Stockholder undertake
in advance to vote its shares in favor of the Asset Purchase; and
E.
For these reasons, and in consideration of the execution of the Asset Purchase Agreement by the Buyer, Stockholder, solely in
his, her or its capacity as a stockholder of the Company, agrees and undertakes to vote the Shares (as defined below) in favor
of the Asset Purchase and the approval of the Asset Purchase Agreement on the terms and subject to the conditions set forth in
this Agreement.
NOW,
THEREFORE
, intending to be legally bound, the parties hereto agree as follows:
1.
Certain Definitions.
Capitalized terms not defined herein shall have the meanings ascribed to them in the Asset Purchase
Agreement. For purposes of this Agreement:
(a)
“Expiration Date”
shall mean the first to occur of (i) the termination of the Asset Purchase Agreement pursuant
to Article 7 thereof, or (ii) such date and time as the Asset Purchase shall become effective in accordance with the terms and
provisions of the Asset Purchase Agreement.
(b)
“Shares”
shall mean: (i) all equity securities of the Company (including shares of common stock and all options,
warrants, restricted common stock and other rights to acquire shares of common stock) owned by Stockholder as of the date of this
Agreement; and (ii) all additional equity securities of the Company (including all additional shares of common stock and all additional
options, warrants, restricted common stock and other rights to acquire shares of common stock) of which Stockholder acquires ownership
during the period from the date of this Agreement through the Expiration Date;
provided
,
however
, that, when used
with respect to the voting, consenting or taking action by or in the name of Stockholder or any other Person hereunder with respect
to Shares, the term “Shares” shall only include the securities covered by clause (i) or (ii) that are entitled to
be voted, or for which Stockholder or such other Person is entitled to consent or act, with respect thereto (which shall not include
Shares that are subject to issuance upon the exercise of options, warrants and such other rights to acquire shares of common stock),
and nothing herein shall require (and Stockholder undertakes no obligation and makes no representation or warranty related to)
the conversion, exercise or exchange of any security for which Stockholder has beneficial ownership into securities entitled to
be voted, or for which Stockholder or such other Person is entitled to consent or act, with respect thereto.
(c)
“
Transfer”
.
A Person shall be deemed to have effected a
“Transfer”
of a security
if such Person directly or indirectly: (i) sells, pledges, encumbers, grants an option with respect to, transfers or disposes
of such security or any interest in such security; or (ii) enters into an agreement or commitment providing for the sale of, pledge
of, encumbrance of, grant of an option with respect to, transfer of or disposition of such security or any interest in such security.
2.
Restrictions on Shares.
(a)
Stockholder shall not, directly or indirectly, during the period from the date of this Agreement through the Expiration Date,
cause or permit any Transfer of any of the Shares to be effected, except for any Transfer (i) to any other Person if (A) such
Person, prior to or concurrently with such Transfer, shall have executed a voting undertaking on the same terms and conditions
of this Agreement to which the Buyer is a beneficiary with respect to such Shares, and (B) Stockholder shall continue to be jointly
and severally liable to any breach of such voting undertaking by such other Person; or (ii) to an Affiliate of the Stockholder,
if (A) upon such Transfer the Stockholder shall continue to be a beneficial owner of such Shares; and (B) Stockholder shall continue
to be jointly and severally liable to any breach of such voting undertaking by such Affiliate.
(b)
Stockholder shall not, directly or indirectly, during the period from the date of this Agreement through the Expiration Date,
deposit (or permit the deposit of) any Shares in a voting trust or grant any proxy or enter into any voting agreement or similar
agreement in contravention of the obligations of Stockholder under this Agreement with respect to any of the Shares.
(c)
Stockholder shall not take any action that would (i) make any representation or warranty contained in this Agreement to be untrue
or incorrect; or (ii) have the effect of impairing the ability of Stockholder to perform its obligations under this Agreement
or preventing or delaying the consummation of any of the transactions contemplated hereby or by the Asset Purchase Agreement.
3.
Agreement to Vote Shares; No Solicitation
. At every meeting of the stockholders of the Company called, and at every postponement
or adjournment thereof, and on every action or approval by written resolution or consent of the stockholders of the Company, or
in any other circumstance in which the vote, consent or other approval of the stockholders of the Company is sought, until the
Expiration Date, Stockholder (solely in its, his or her capacity as such) shall vote, or cause the Shares to be voted: (i) in
favor of the approval of the Asset Purchase Agreement and the Asset Purchase and all the transactions contemplated by the Asset
Purchase Agreement; and (ii) against any Seller Acquisition Proposal (other than the Asset Purchase Agreement or the transactions
contemplated thereby, including the Asset Purchase). Except as contemplated by this Agreement, Stockholder has not (a) entered
into, and shall not enter into at any time while this Agreement remains in effect, any voting agreement or voting trust with respect
to the Shares that would prohibit, undermine, limit or otherwise adversely affect its compliance with its obligations pursuant
to this Agreement, or (b) granted, and shall not grant at any time while this Agreement remains in effect, a proxy or power of
attorney with respect to the Shares, in either case, which is inconsistent with its obligations pursuant to this Agreement.
4.
Non-Solicitation; No Effect on Fiduciary Relationship; No Other Relationship.
(a)
Between the date of this Agreement and the Expiration Date, Stockholder shall not take any action that would constitute a violation
of the provisions of Section 6.10 of the Asset Purchase Agreement if taken by the Company, in each case with the limitations and
exceptions of such provisions contemplated thereby that are applicable to the Company or its board of directors (including the
right to participate in discussions or negotiations on the circumstances set forth therein) being similarly applicable to Stockholder.
Notwithstanding anything to the contrary set forth herein, neither Stockholder nor any of its representatives shall have any liability
pursuant to this Section 4(a) upon the occurrence of the Expiration Date; provided, however, that this sentence shall not limit
the liability of Stockholder for any willful breach of this Section 4(a) by Stockholder. For purposes of this Section 4(a), “willful
breach” shall mean an act or failure to act of such person with the actual knowledge that the taking of such act or the
failure to take such act would constitute a material breach of this Section 4(a).
(b)
Nothing in this Agreement shall restrict or limit the ability of any Person who is an officer or director of the Company to take
any action solely in his or her capacity as an officer or director of the Company to the extent expressly permitted by the Asset
Purchase Agreement or otherwise required by fiduciary duties under applicable law and none of such actions in such capacity shall
be deemed to constitute a breach of this Agreement. Nothing contained in this Agreement shall be deemed to vest in the Buyer or
any other Person any direct or indirect ownership or incidence of ownership of or with respect to any Shares. All rights, ownership
and economic benefits of and relating to the Shares shall remain vested in and belong to Stockholder, and neither the Buyer nor
any other Person shall have any authority to exercise any power or authority to direct Stockholder in the voting of any of the
Shares, except as otherwise specifically provided herein, or in the performance of Stockholder’s duties or responsibilities
as a stockholder of the Company.
5.
Representations and Warranties of Stockholder.
Stockholder hereby represents, warrants and covenants to the Buyer as follows:
(i) Stockholder is the beneficial owner of the Shares indicated on the signature page of this Agreement, which are free and clear
of any liens, adverse claims, charges or other encumbrances (except as such encumbrances arising under securities laws or for
such liens, adverse claims, charges or other encumbrances as would not prohibit Stockholder’s compliance with its obligations
pursuant to this Agreement). To Stockholder’s knowledge, Stockholder does not beneficially own any securities of the Company
other than the Shares indicated on the signature page of this Agreement. Stockholder has full power and authority to make, enter
into and carry out the terms and conditions under this Agreement. The execution and delivery of this Agreement by Stockholder
does not, and Stockholder’s performance of its obligations under this Agreement will not: (a) conflict with or violate any
order, decree or judgment applicable to Stockholder or to the Shares; or (b) result in any breach of or constitute a default (with
notice or lapse of time, or both) under, or give to others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of any encumbrance on, any of the Shares pursuant to any agreement to which Stockholder is a party
or by which Stockholder is bound or affected, except in each case as would not prohibit Stockholder’s compliance with its
obligations pursuant to this Agreement.
6.
Additional Documents.
Stockholder (in his, her or its capacity as such) and the Buyer hereby covenant and agree to execute
and deliver any additional documents reasonably necessary to carry out the purpose and the intent of this Agreement. Without limiting
the generality or effect of the foregoing or any other obligation of Stockholder hereunder, Stockholder hereby authorizes the
Buyer to deliver a copy of this Agreement to the Company and hereby agrees that each of the Company and the Buyer may rely upon
such delivery as conclusively evidencing the consents, waivers and terminations of Stockholder referred to herein, in each case
for purposes of all agreements and instruments to which such elections, consents, waivers and/or terminations are applicable or
relevant. Notwithstanding anything to the contrary, Stockholder shall not be required to incur any expenses in connection with
this Section 6.
7.
Legending of Shares.
If so requested by the Buyer, Stockholder agrees that the Shares shall bear a legend stating that
they are subject to this Agreement. Upon request of the Stockholder at any time following the termination of this Agreement, the
Buyer shall take all actions required to promptly cause any such legend to be removed from any certificate for the Shares.
8.
Termination.
This Agreement shall terminate and shall have no further force or effect as of the Expiration Date;
provided
,
however
, that the last sentence of Section 7 shall survive any termination of this Agreement.
9.
Miscellaneous.
(a)
Severability.
If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future
Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby,
(i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be
affected by such provision or its severance therefrom and (iv) in lieu of such provision, there will be added automatically as
a part of this Agreement a legal, valid and enforceable provision as similar in terms to such provision as may be possible.
(b)
Binding Effect and Assignment.
This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the parties without prior written consent of the other.
(c)
Amendments and Modification.
This Agreement may not be modified, amended, altered or supplemented except upon the execution
and delivery of a written agreement executed by the parties hereto.
(d)
Specific Performance; Injunctive Relief.
The parties hereto agree that irreparable damage would occur in the event that
any provision of this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court having jurisdiction relating to this Agreement as provided in clause
(g) hereof without the necessity of demonstrating damages or posting a bond, this being in addition to any other remedy to which
they are entitled at law or in equity.
(e)
Notices.
Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile or email transmission,
by reliable overnight delivery service (with proof of service) or hand delivery (provided that any notice received on any non-Business
Day or any Business Day after 5:00 p.m. (addressee’s local time) shall be deemed to have been received at 9:00 a.m. (addressee’s
local time) on the next Business Day unless the notice is required by this Agreement to be delivered within a number of hours
or calendar days), addressed as follows (or at such other address, email address or facsimile number for a party as shall be specified
by like notice):
if
to the Buyer, to:
Meda
Consumer Healthcare Inc.
781
Chestnut Ridge Road
EOB
245
Morgantown,
WV 26505
Attention:
Joseph Duda
Facsimile:
(304) 554-4342
with
a copy (which shall not constitute notice) to each of:
Mylan
Inc.
1000
Mylan Boulevard
Canonsburg,
Pennsylvania 15317
Attention:
Global General Counsel
Facsimile:
(724) 485-6358
Hogan
Lovells US LLP
Columbia
Square
555
Thirteenth Street, NW
Washington,
DC 20004
Attention:Daniel
Keating
Facsimile:(202)
637-5910
Email:daniel.keating@hoganlovells.com
if
to Stockholder, to:
the
address set forth on the signature page of this Agreement, with a copy (which shall not constitute notice) to:
Reed
Smith LLP
599
Lexington Avenue
New
York, New York 10022
Attention:Herbert
F. Kozlov, Esq.
Facsimile:
(212) 521-5450
E-mail:HKozlov@ReedSmith.com
(f)
Governing Law.
This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware,
without reference to rules of conflicts of law.
(g)
CONSENT TO JURISDICTION AND SERVICE OF PROCESS
. EACH PARTY HERETO CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF DELAWARE AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE LITIGATED ONLY IN SUCH COURTS. EACH PARTY HERETO ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF SUCH COURTS AND WAIVES ANY DEFENSE OF FORUM
NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF SUCH COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT THE ADDRESS
SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIFTEEN (15) CALENDAR DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF EITHER PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(h)
Entire Agreement.
This Agreement contains the entire understanding of the parties in respect of the subject matter hereof
and supersedes all prior negotiations and understandings between the parties with respect to such subject matter.
(i)
Effect of Headings.
Headings of the Articles and Sections of this Agreement are for convenience of the parties only and
shall be given no substantive or interpretive effect whatsoever.
(j)
Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same instrument and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same
counterpart. This Agreement or any counterpart may be executed and delivered by facsimile copies or delivered by electronic communications
by portable document format (.pdf), each of which shall be deemed an original.
{Signatures
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IN
WITNESS WHEREOF
, the parties have caused this Agreement to be duly executed and delivered on the day and year first above
written.
Meda
Consumer Healthcare Inc.
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of Authorized Signatory
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Shares
beneficially owned:
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shares of common stock
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shares of common stock issuable upon exercise of outstanding options __________ shares of restricted common stock
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{SIGNATURE
PAGE TO VOTING AGREEMENT}
EXHIBIT
J
Purchase
Price Allocation
EXHIBIT
K
Execution
Press Release
PROPHASE
LABS, INC. ANNOUNCES
AGREEMENT
TO SELL COLD-EEZE® BRAND
-
CLOSING IS SUBJECT TO STOCKHOLDER APPROVAL –
DOYLESTOWN,
Pennsylvania – January [●], 2017
- ProPhase Labs, Inc. (NASDAQ: PRPH, www.ProPhaseLabs.com), a diversified natural
health medical science company (the “Company”), announced today that it has signed an asset purchase agreement, pursuant
to which the Company has agreed to sell its Cold-EEZE® cold remedy brand to a wholly owned subsidiary of Mylan N.V. (“Mylan”)
for $50 million before taking into account taxes, transaction costs and related deal expenses, restructuring costs and post-closing
escrow requirements.
Under
the terms of the asset purchase agreement, Mylan will purchase substantially all of the Company’s assets and other rights
relating to the Cold-EEZE® cold remedy brand. The closing of the proposed sale, which is currently expected to occur in the
first quarter of 2017, is subject to approval of the stockholders of the Company and other customary conditions of closing. The
Company is retaining ownership of its manufacturing facility and manufacturing business in Lebanon, Pennsylvania, and its headquarters
in Doylestown, Pennsylvania, as well as its dietary supplements product lines which are currently under development. As part of
the transaction, the Company, through its Pharmaloz subsidiary, will enter into a manufacturing and supply agreement with Mylan.
In
connection with the execution of the asset purchase agreement, the Company’s executive officers and directors executed voting
agreements. The voting agreements provide, among other things, for the Company’s executive officers and directors to vote
all of the shares owned by them in favor of the adoption of the transaction. The shares subject to the voting agreements represent
approximately 24.1% of the outstanding common stock of the Company.
The
Company was assisted by Bourne Partners, a boutique investment bank focused on the consumer health and pharmaceutical industries,
in this transaction and is represented by the Reed Smith LLP law firm.
Important
Information Regarding Proposed Asset Sale
This
communication is neither a solicitation of a proxy nor an offer to purchase nor a solicitation of an offer to sell any securities.
This communication is also not a substitute for any proxy statement or other filings that may be made with the Securities Exchange
Commission (the “SEC”) with respect to the proposed asset sale. Approval of the proposed asset sale will be submitted
to the Company’s stockholders for their consideration, and the Company will file a definitive proxy statement to be used
to solicit stockholder approval of the transaction with the SEC. Detailed information about the transaction will be contained
in the definitive proxy statement and other documents to be filed with the SEC and mailed to stockholders prior to the meeting.
STOCKHOLDERS
OF THE
COMPANY
ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
The
proxy statement will be available free of charge at
www.sec.gov
. In addition, investors and security holders may obtain
free copies of the proxy statement and other documents filed with the SEC when they become available by contacting the Company
at the address and telephone number below.
The
Company, its board of directors, executive officers and employees and certain other persons may be deemed to be participants in
the solicitation of proxies from the Company’s stockholders in connection with the approval of the transaction.
About
the Company
The
Company is a diversified natural health medical science company. It is a leading marketer of the Cold-EEZE® cold remedy
brand as well as other cold and flu relief products. Cold-EEZE® cold remedy zinc gluconate lozenges are clinically proven
to significantly reduce the duration of the common cold. Cold-EEZE® cold remedy customers include leading national chain,
regional, specialty and local retail stores. The Company has several wholly owned subsidiaries including a manufacturing
unit, which consists of an FDA registered facility to manufacture Cold-EEZE® cold remedy lozenges and fulfill other contract
manufacturing opportunities. For more information visit us at www.ProPhaseLabs.com.
Forward
Looking Statements
Except
for the historical information contained herein, this document contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements relating to the Company’s proposed sale of assets to Mylan,
including the anticipated completion date of the proposed transaction, the Company’s intent and ability to solicit stockholder
approval for the proposed asset sale; and the Company’s plan to continue to manufacture the Cold-EEZE® cold remedy brand,
to contract manufacture other products for third parties and to focus on its other product lines. Management believes that these
forward-looking statements are reasonable as and when made. However, such forward-looking statements involve known and unknown
risks, uncertainties, and other factors that may cause actual results to differ materially from those projected in the forward-looking
statements. These risks and uncertainties include, but are not limited to: the difficulty of predicting the acceptance and demand
for our products, the impact of competitive products and pricing, costs involved in the manufacture and marketing of products,
the timely development and launch of new products, and the risk factors listed from time to time in our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and any subsequent SEC filings.
Investor
Contact
Ted
Karkus, Chairman and CEO
ProPhase
Labs, Inc.
(215)
345-0919 x 0
EXHIBIT
L
Trademark
Consent Letter