ACQUISITION AGREEMENT CELL THERAPEUTICS, INC.,CTI TECHNOLOGIES, INC. and CEPHALON, INC. Dated as of June 10, 2005

EXHIBIT 10.1

 

EXECUTION COPY

 

ACQUISITION AGREEMENT

 

by and among

 

CELL THERAPEUTICS, INC.,

 

CTI TECHNOLOGIES, INC.

 

 

and

 

CEPHALON, INC.

 

Dated as of June 10, 2005

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

(continued)

 

 

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TABLE OF CONTENTS

(continued)

 

 

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TABLE OF CONTENTS

(continued)

 

 

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ACQUISITION AGREEMENT

 

ACQUISITION AGREEMENT , dated as of June 10, 2005 (as amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”), among Cell Therapeutics, Inc., a Washington corporation (“ CTI ”), CTI Technologies, Inc., a Nevada corporation and a wholly owned subsidiary of CTI (“ Nevada ” and together with CTI, “ Sellers ”), and Cephalon, Inc., a Delaware corporation (“ Purchaser ”).

 

W I T N E S S E T H:

 

WHEREAS , CTI, Nevada, Cell Therapeutics (UK) Limited, a United Kingdom corporation (“ UK ”) and PolaRx Biopharmaceuticals, Inc., a Delaware corporation (“ PolaRx ”), are engaged in developing, manufacturing, marketing, supporting, licensing, distributing and selling TRISENOX at various locations in the United States and other countries (the “ Business ”):

 

WHEREAS , Sellers wish to divest themselves of the Business;

 

WHEREAS , certain operations of the Business are conducted, and certain assets thereof are owned, (i) by PolaRx and UK, and (ii) directly by Sellers;

 

WHEREAS , CTI owns all of the issued and outstanding capital stock of PolaRx (the “ PolaRx Shares ”);

 

WHEREAS , CTI owns all of the issued and outstanding share capital of UK (the “ UK Shares ,” and together with the PolaRx Shares, the “ Shares ”); and

 

WHEREAS , contemporaneously with the Closing, CTI and Purchaser shall enter into a transition services agreement in the form attached as Exhibit A hereto (the “ Transition Services Agreement ”);

 

NOW, THEREFORE , in consideration of the foregoing and the respective agreements, covenants, representations and warranties hereinafter set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1. Certain Defined Terms . Unless the context otherwise requires, the following terms, when used in this Agreement, shall have the respective meanings specified below:

 

“ Accounts Receivable Amount ” shall mean the sum of (i) Accounts Receivable (CTI); (ii) Accounts Receivable (CTIT); and (iii) Accounts Receivable (CTUK), each as reflected in the Valuation Date Statement, which amounts set forth in the Valuation Date Statement shall reflect the application of the Agreed Accounting Principles, except that for purposes of calculating the

amount of the “Reserve for Returns” included in such amounts, an amount equal to 3.5% of the gross accounts receivable (without reflecting any accounts receivable credits) shall be used rather than the actual Reserve for Returns reflected on the books of the Business.

 

“ Action ” shall mean any claim, action, charge, complaint, suit, litigation, arbitration, grievance, inquiry, proceeding, hearing, audit, examination or investigation (including any civil, criminal, administrative, investigative or appellate proceeding) by or before any Governmental Authority or duly appointed arbitration authority.

 

“ Affiliate ” shall mean, with respect to any specified Person, any other Person, that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

 

“ After-Tax Basis ” means, with respect to any amount which is to be paid hereunder on an “After-Tax Basis,” an amount which, after subtraction of the amount of all federal, state and non-U.S. Taxes payable by the recipient thereof as a result of the receipt or accrual of such payment, and after taking into account (i) the increase in federal, state and non-U.S. Taxes (including estimated Taxes) payable by such recipient for all affected taxable years as a result of the event or occurrence giving rise to such payment (the “ Indemnified Event ”), and (ii) the reduction in federal, state and non-U.S. Taxes (including estimated Taxes) payable by the recipient for all taxable years ending on or before the end of the taxable year in which such payment is made, shall be sufficient as of the date of payment to compensate the recipient for such Indemnified Event.

 

“ Agreed Accounting Principles ” means GAAP as used in preparation of the Reference Statement, subject to the deviations from GAAP and the other principles set forth in Schedule 1.1A .

 

“ Agreed Adjustments ” shall have the meaning specified in Section 3.3(b) .

 

“ Agreement ” shall have the meaning specified in the preamble to this Agreement.

 

“ AML ” shall have the meaning specified in Section 3.4 .

 

“ API ” means the active pharmaceutical ingredient related to the Business.

 

“ APL ” shall have the meaning specified in Section 3.4 .

 

“ Apportioned Obligations ” shall have meaning specified in Section 8.1 .

 

“ Assets ” shall have the meaning specified in Section 2.1 .

 

“ Assumed Liabilities ” shall have the meaning specified in Section 2.3 .

 

“ Assumption Agreement ” means the Assumption Agreement in the form attached as Exhibit B hereto.

 

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“ Benefit Plan ” means a “pension plan” (as defined in Section 3(2) of ERISA, a “welfare plan” (as defined in Section 3(1) of ERISA), or any other written or oral bonus, profit sharing, retirement, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, restricted stock, stock appreciation right, holiday pay, vacation, retention, severance, medical, dental, vision, disability, death benefit, sick leave, fringe benefit, personnel policy, insurance, employment, consulting, or other similar plan, arrangement, agreement or understanding, in each case established or maintained by either of the Sellers, with respect to the Business, or either of the Companies, or as to which the Sellers, with respect to the Business, or the Companies have contributed or otherwise may have any liability or obligation.

 

“ Bill of Sale ” means the Bill of Sale in the form attached as Exhibit C hereto.

 

“ Business ” shall have the meaning specified in the recitals to this Agreement.

 

“ Business Day ” shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York City.

 

“ Claim ” shall have the meaning specified in Section 11.3(a) .

 

“ Closing ” shall have the meaning specified in Section 3.6(a) .

 

“ Closing Date ” shall have the meaning specified in Section 3.6(a) .

 

“ Code ” shall have the meaning specified in Section 8.1 .

 

“ Companies ” shall mean UK and PolaRx.

 

“ Company Group ” shall have the meaning specified in Section 8.1 .

 

“ Company Foreign Benefit Plan ” shall have the meaning specified in Section 4.19 .

 

“ Company Plans ” shall have the meaning specified in Section 4.19 .

 

“ Competitive Business ” means the development, manufacture or sale of (i) any arsenic-based compound for the treatment of cancer in humans or animals or (ii) any other compound for the treatment of APL.

 

“ Confidential Information ” shall have the meaning specified in Section 6.3 .

 

“ Confidentiality Agreement ” shall mean the Confidential Disclosure Agreement, dated as of June 23, 2004, by and between CTI and Purchaser.

 

“ Contaminant ” shall mean any waste, pollutant, hazardous or toxic substance or waste, including petroleum or petroleum-based substances, regulated as such under Environmental Laws.

 

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“ Contract ” shall mean any written or oral agreement, contract, subcontract, lease, instrument, note, option, purchase order, license or sublicense or other commitment or undertaking of any nature.

 

“ CTI ” shall have the meaning specified in the preamble to this Agreement.

 

“ Damages ” shall have the meaning specified in Section 11.2 .

 

“ Development Milestone ” shall have the meaning specified in Section 3.4 .

 

“ Development Milestone Payment ” shall have the meaning specified in Section 3.4 .

 

“ Disagreement Notice ” shall have the meaning specified in Section 8.3(b)(i) .

 

“ Disclosure Schedule ” shall mean any Disclosure Schedule delivered by Sellers to Purchaser, dated as of the date hereof, and forming a part of this Agreement.

 

“ Dollars ” and the sign “ $ ” shall each mean lawful money of the United States of America.

 

“ Encumbrance ” shall mean any security interest, pledge, hypothecation, mortgage, lien, charge, encumbrance, adverse claim, preference, priority, preferential arrangement, option, right of first refusal, conditional sale or title retention agreement, easement, encroachment, defect of title, indenture, right of way, deed of trust, lease, security agreement, covenant or restriction of any kind, excluding non-exclusive licenses of, and non-exclusive covenants not to sue with respect to, Intellectual Property.

 

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

 

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended through the date hereof.

 

“ Estimated Purchase Price ” shall have the meaning specified in Section 3.2 .

 

“ Estimated Valuation Date Accounting Statement ” shall have the meaning specified in Section 3.2 .

 

“ Exchange Act ” shall have the meaning specified in Section 6.6(e) .

 

“ Excluded Liabilities ” shall have the meaning specified in Section 2.4 .

 

“ Excluded Trademarks ” shall have the meaning specified in Section 2.2 .

 

“ FDA ” shall mean the U.S. Food and Drug Administration.

 

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“ FDCA ” shall mean the Federal Food, Drug and Cosmetic Act and the rules and regulations promulgated thereunder.

 

“ Financial Statements ” shall have the meaning specified in Section 4.5 .

 

“ Financing Agreement ” shall mean the Financing Agreement dated as of December 21, 2004 among Sellers, PolaRx and PharmaBio Development, Inc., a North Carolina corporation, as amended.

 

“ GAAP ” shall mean United States generally accepted accounting principles and practices as in effect from time to time.

 

“ Governmental Authority ” shall mean any national, federal, state, provincial, municipal, local, foreign or other government, governmental, regulatory or administrative authority, agency, political subdivision, instrumentality, self regulatory organization or commission or any court, tribunal or other judicial or arbitral body.

 

“ Governmental Order ” shall mean any order, writ, judgment, award, injunction, decree, stipulation, or determination of any Governmental Authority or any award in an arbitration proceeding.

 

“ HSR Act ” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

“ Indemnified Party ” shall have the meaning specified in Section 11.3(a) .

 

“ Indemnifying Party ” shall have the meaning specified in Section 11.3(a) .

 

“ Independent Accounting Firm ” shall have the meaning specified in Section 3.3(c) .

 

“ Intellectual Property ” shall mean any trademark, service mark, trade name, mask work, domain name, invention (whether or not reduced to practice) patent, trade secret, know-how or copyright (including any registrations or applications for registration of any of the foregoing) or any other similar type of intellectual property right.

 

“ Inventory Valuation Amount ” shall mean valuation of inventory included in the Assets in accordance with Schedule 1.1B .

 

“ Knowledge ” shall mean, (a) with respect to Sellers, the actual knowledge, after reasonable inquiry under the circumstances, of the officers of Sellers, and (b) with respect to Purchaser, the actual knowledge, after reasonable inquiry under the circumstances, of the officers of Purchaser.

 

“ Law ” shall mean any statute, law, treaty, ordinance, regulation, rule, code, order or other requirement enacted, entered or promulgated by any Governmental Authority.

 

“ Leased Real Property ” shall mean the real property presently leased by or subject to an agreement to lease or sublease or other use or occupancy agreement (a) by either of the Companies as tenant, or (b) by either Seller or any of its Subsidiaries as tenant that is used primarily in the Business.

 

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“ Liabilities ” shall mean any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable (including unasserted claims, whether known or unknown).

 

“ Licensed Intellectual Property ” shall mean all third party Intellectual Property (i) licensed to Sellers and used primarily in the Business or related to TRISENOX or (ii) licensed to the Companies.

 

“ Material Adverse Effect ” shall mean any change in the Business that is materially adverse to (a) the Business, operations, net assets, results of operations, condition (financial or otherwise) of the Business taken as a whole, or (b) Sellers’ ability to consummate the Transactions; provided , however , that no change resulting from or arising out of the announcement of this Agreement or the pendency of the Transactions shall be taken into account in determining whether there has been or will be a Material Adverse Effect.

 

“ Material Contracts ” shall have the meaning specified in Section 4.12(a) .

 

“ MDS ” shall have the meaning specified in Section 3.4 .

 

“ MM ” shall have the meaning specified in Section 3.4 .

 

“ Nevada ” shall have the meaning specified in the recitals to this Agreement.

 

“ Non-U.S. Section 338 Election ” shall have the meaning specified in Section 8.3(g)(ii) .

 

“ Permits ” shall have the meaning specified in Section 4.10 .

 

“ Permitted Encumbrances ” shall mean (a) such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (i) liens for Taxes and other governmental assessments, charges or levies not yet delinquent, or the validity of which are being contested in good faith; (ii) liens imposed by Law, such as materialmen’s, mechanics’ carriers’, workmen’s and repairmen’s liens and other similar liens for amounts not yet delinquent, or the validity of which are being contested in good faith; or (iii) other liens or imperfections on property which do not adversely affect title to, detract from the value of, or impair the existing use of, the property affect by such lien or imperfection.

 

“ Person ” shall mean any individual, partnership, firm, corporation, limited liability company, joint venture, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended through the date hereof.

 

“ PharmaBio ” shall mean PharmaBio Development, Inc., a North Carolina corporation.

 

“ PolaRx ” shall have the meaning specified in the recitals to this Agreement.

 

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“ PolaRx Inter-Company Licenses ” shall have the meaning specified in Section 6.9(b) .

 

“ PolaRx Merger Agreement ” shall have the meaning specified in Section 2.4(xiii) .

 

“ PolaRx Shares ” shall have the meaning specified in the recitals to this Agreement.

 

“ Post-Closing Tax Period ” shall have the meaning specified in Section 8.1 .

 

“ Pre-Closing Tax Period ” shall have the meaning specified in Section 8.1 .

 

“ Preliminary Accounting Statement ” shall have the meaning specified in Section 3.3(a) .

 

“ Preliminary Purchase Price ” shall have the meaning specified in Section 3.3(a) .

 

“ Preliminary Valuation Date Statement ” shall have the meaning specified in Section 3.3(a) .

 

“ Proteasome Amendment ” mean an amendment among Purchaser and CTI Europe to the Collaboration and License Agreement, dated as of May 2, 2002, as amended on July 31, 2004 and May 2, 2005, which amendment will be dated as of the date hereof and effective as of the Closing Date.

 

“ Proteasome Rights ” means the worldwide rights held by CTI with respect to the research, development and commercialization of compounds that inhibit the Proteasome Protease for uses in oncology.

 

“ Purchaser ” shall have the meaning specified in the preamble to this Agreement.

 

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

 

“ Reference Statement ” shall mean the unaudited statement of assets and liabilities of the Business dated as of March 31, 2005, a copy of which is set forth in Section 4.5 of the Disclosure Schedule.

 

“ Reference Statement Date ” shall mean March 31, 2005.

 

“ Registered IP ” shall have the meaning specified in Section 4.13(d) .

 

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

 

“ Representatives ” shall have the meaning specified in Section 6.2 .

 

“ Return ” shall have the meaning specified in Section 8.1 .

 

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“ Return Adjustment Amount ” means $1,262,342.

 

“ Sales Milestone ” shall have the meaning specified in Section 3.4(b) .

 

“ Sales Milestone Payment ” shall have the meaning specified in Section 3.4(b) .

 

“ Section 338(h)(10) Election ” has the meaning set forth in Section 8.3(g)(i) .

 

“ Section 338 Taxes ” shall mean any income Taxes imposed on CTI, UK or PolaRx as a result of the Section 338(h)(10) Election, Non-U.S. Section 338 Election or any elections under state, local or other Tax law that are required to be made or deemed to have been made as a result of the Section 338(h)(10) Election or Non-U.S. Section 338 Election.

 

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

 

“ Sellers ” shall have the meaning specified in the preamble to this Agreement.

 

“ Seller Information ” shall have the meaning specified in Section 6.6(b) .

 

“ Seller Marks ” shall have the meaning specified in Section 6.8(b)(i) .

 

“ Seller Plans ” shall have the meaning specified in Section 4.19 .

 

“ Seller Property ” means any real or personal property, plant, building, facility, structure, underground storage tank, equipment or unit, or other asset owned, leased or operated by (i) CTI or Nevada and used in the Business, or (ii) UK or PolaRx.

 

“ Shares ” shall have the meaning specified in the recitals to this Agreement.

 

“ Sloan-Kettering Agreement ” shall mean the License Agreement dated as of May 24, 1999 between PolaRx and Sloan-Kettering Institute for Cancer Research.

 

“ Sloan-Kettering Royalty Amount ” means the amount calculated as (i) (A) the Net Sales (as defined in the Sloan-Kettering Agreement) by Sellers and their Affiliates from January 1, 2005 through the Valuation Date in Dollars (calculated using the average exchange rate in effect during the period from January 1, 2005 through the Valuation Date for non-Dollar denominated sales) less (B) (1) the aggregate amount listed on the Valuation Date Statement under the line items “Accounts Receivable (CTI),” “Accounts Receivable (CTIT)” and “Accounts Receivable (CTUK) divided by (2) .95 multiplied by (ii) .02 less (iii) the aggregate amount of royalties paid by Seller and their Affiliates to the Sloan-Kettering Institute for Cancer Research from January 1, 2005 through the Valuation Date pursuant to Section 4.1(a) of the Sloan-Kettering Agreement on account of Net Sales made from January 1, 2005 through the Valuation Date.

 

“ Software ” shall have the meaning set forth in Section 4.13(c) .

 

“ Statement of Net Product Sales ” shall have the meaning specified in Section 4.5 .

 

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“ Straddle Period ” shall have the meaning specified in Section 8.1 .

 

“ Straddle Period Returns ” shall have the meaning specified in Section 8.3(b)(i) .

 

“ Subsidiary ” shall mean, with respect to any Person, any other corporation, limited liability company, general or limited partnership, unincorporated association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, or which that Person or one or more Subsidiaries of that Person serves as general partner.

 

“ Tax ” shall have the meaning specified in Section 8.1 .

 

“ Tax Asset ” shall have the meaning specified in Section 8.1 .

 

“ Tax Benefit ” shall have the meaning specified in Section 8.6(b) .

 

“ Taxing Authority ” shall have the meaning specified in Section 8.1 .

 

“ Third Party Claims ” shall have the meaning specified in Section 11.3(c) .

 

“ Transaction Agreements ” shall mean this Agreement and the Transition Services Agreement.

 

“ Transactions ” shall mean the transactions contemplated by this Agreement and the other Transaction Agreements.

 

“ Transferred Intellectual Property ” shall mean the Intellectual Property (i) owned by either Seller and primarily used in the Business or relating to TRISENOX or (ii) owned by either Company, in each case, other than the Excluded Trademarks, which Transferred Intellectual Property shall be listed on Section 4.13(b) of the Disclosure Schedule.

 

“ Transfer Taxes ” shall have the meaning specified in Section 8.1 .

 

“ Transition Services Agreement ” shall have the meaning set forth in the recitals to this Agreement.

 

“ Treasury Regulations ” shall have the meaning specified in Section 8.1 .

 

“ TRISENOX ” shall mean Trisenox (arsenic trioxide) in any and all dosage forms or formulations and for any human or animal use.

 

“ UK ” shall have the meaning specified in the recitals to this Agreement.

 

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“ UK Lease ” means the License for Use of Desk and Office Furniture between Gainsobrough Business Centres Limited and Cell Therapeutics (UK) Ltd, dated December 10, 2004.

 

“ UK Shares ” shall have the meaning specified in the recitals to this Agreement.

 

“ Valuation Date ” shall mean the close of business on the last Business Day prior to the Closing Date.

 

“ Valuation Date Statement ” has the meaning specified in Section 3.3(b) .

 

“ Valuation Date Working Capital Amount ” shall mean the sum of (i) the Accounts Receivable Amount and (ii) Prepaid Expense (CTI) as reflected in the Valuation Date Statement less, the sum of the following accounts: (i) Accounts Payable (CTI), (ii) Accounts Payable (CTUK), (iii) Accrued Expense (CTI) and (iv) Accrued Expense (CTUK), in each case, as reflected in the Valuation Date Statement, except that Accrued Expense (CTI) shall not include any amounts accrued with respect to royalty payments to be paid pursuant to Section 4.1(a) of the Sloan-Kettering Agreement for Net Sales (as defined in the Sloan-Kettering Agreement) made from January 1, 2005 through the Valuation Date.

 

“ Waxman Agreement ” shall mean the License Agreement effective as of May 24, 1999 between the Samuel Waxman Cancer Research Foundation and PolaRx.

 

“ Worldwide Net Sales ” shall mean the gross amount invoiced for the supply or sale of TRISENOX by Purchaser or its Affiliates to unaffiliated third parties (calculated in Dollars or, with respect to non-Dollar denominated sales, using the average exchange rate in effect during the applicable period for non-Dollar denominated sales), and less the following amounts to the extent deducted from or on such invoice or absorbed or accrued or reserved by Purchaser or its Affiliates in accordance with GAAP: (i) customary quantity, trade and/or cash discounts, chargebacks, anticipated returns, allowances, wholesaler inventory management fees, rebates (including any and all federal, state or local government rebates, e.g. Medicaid rebates) and price adjustments allowed or given; and (ii) sales and other excise taxes and duties directly related to the sale, to the extent such items are included in the gross invoice price.

 

Section 1.2. Other Interpretive Provisions . With reference to this Agreement, unless otherwise specified herein, the following interpretive provisions shall apply:

 

(a) the meanings of defined terms are equally applicable to the singular and plural forms of such defined terms;

 

(b) the words “ herein ,” “ hereto ,” “ hereof and “ hereunder ” and words of similar import shall refer to this Agreement as a whole and not to any particular provision hereof;

 

(c) Article, Section, Exhibit and Schedule references are references to the Articles, Sections, Exhibits and Schedules of this Agreement;

 

(d) the term “ including ” is by way of example and not limitation; and

 

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(e) section headings herein are included for convenience of reference only and shall not affect the interpretation of this Agreement.

 

ARTICLE II

 

PURCHASE AND SALE

 

Section 2.1. Purchased Assets . Upon the terms and subject to the conditions of this Agreement, on the Closing Date, Sellers shall sell, transfer, assign, convey and deliver to Purchaser, and Purchaser shall purchase from Sellers, on a going concern basis, free and clear of all Encumbrances (except for Permitted Encumbrances), all of the assets and properties of Sellers or their Affiliates (including the Companies) of every kind and description, wherever located, real, personal or mixed, tangible or intangible, used primarily in connection with the Business as the same shall exist on the Closing Date (herein collectively called the “ Assets ”), including all right, title and interest of Sellers in, to and under:

 

(i) all of the assets reflected on the Reference Statement, except those disposed of or converted into cash after the Reference Statement Date in the ordinary course of business;

 

(ii) all notes and accounts receivable generated by the Business;

 

(iii) all raw materials, supplies, work-in-process, finished goods and other materials included in the inventory of Sellers with respect to the Business;

 

(iv) the Permits listed in Section 4.10 of the Disclosure Schedule;

 

(v) the personal property leases listed in Section 4.15(c) of the Disclosure Schedule;

 

(vi) the Transferred Intellectual Property;

 

(vii) all other proprietary or confidential information used primarily in the Business but only to the extent related to the Business;

 

(viii) the agreements, contracts, licenses, sublicenses, assignments and indemnities listed in Section 4.13(b) of the Disclosure Schedule;

 

(ix) the Contracts listed or described in Section 4.12 of the Disclosure Schedule;

 

(x) to the extent permitted by Law, all books and records (including all data and other information stored on discs, tapes or other media) of Sellers to the extent relating (but solely to the extent relating) to the assets, properties, business and operations of the Business, including sales, advertising and marketing materials and customer lists;

 

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(xi) the capital stock of each of the Companies and all minute books and other corporate records relating to the Companies;

 

(xii) to the extent transferable and to the extent permitted by Law, all telephone, telex and telephone facsimile numbers and other directory listings and domain names utilized by Sellers primarily in connection with the Business, including the domain name www.trisenox.com and the telephone number 1-800-TRISENOX; and

 

(xiii) the compounding vessels and other dedicated product contact filling equipment described in item 2 of Section 4.15(b) of the Disclosure Schedule.

 

Section 2.2. Excluded Assets . Notwithstanding the provisions of Section 2.1 , the Assets shall not include the following (herein referred to as the “ Excluded Assets ”):

 

(i) any cash, bank deposits and cash equivalents;

 

(ii) the name “Cell Therapeutics” or any related or similar trade names, trademarks, service marks or logos to the extent the same incorporate the name “Cell Therapeutics”, the figure depicted on Section 2.2 of the Disclosure Schedule or any variation thereof (the “ Excluded Trademarks ”) or any variation thereof;

 

(iii) all Software;

 

(iv) Sellers’ rights, claims or causes of action against third parties relating to the assets, properties, business or operations of Sellers with respect to the Business which might arise in connection with the discharge by Sellers of the Excluded Liabilities;

 

(v) all contracts of insurance of Sellers;

 

(vi) the real estate leases with respect to, and the leasehold improvements on, the Leased Real Property;

 

(vii) except as provided in Section 2.1(xiii) , the machinery, equipment, vehicles, furniture and other personal property listed or referred to in Section 4.15(b) of the Disclosure Schedule;

 

(viii) all corporate minute books and stock transfer books and the corporate seal of Sellers;

 

(ix) Sellers’ rights under the leases, agreements, contracts and commitments listed in Schedule 2.2 ;

 

(x) any of Seller’s ERISA Plans or Seller’s Non-ERISA Plans; and

 

(xi) all refunds of any Tax for which either Seller is liable pursuant to Article VIII .

 

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Section 2.3. Assumed Liabilities . On the Closing Date, Purchaser shall deliver to Sellers the Assumption Agreement pursuant to which Purchaser shall assume and agree to discharge the following obligations and liabilities of Sellers in accordance with their respective terms and subject to the respective conditions thereof:

 

(i) all Liabilities of Sellers with respect to the Business reflected in the Valuation Date Statement as a Dollar amount and limited to such Dollar amount;

 

(ii) all Liabilities of Sellers to be paid or performed after the Closing Date under (i) the Material Contracts, (ii) the leases, contracts and other agreements with respect to the Business not required by the terms of Section 4.12 to be listed in the Disclosure Schedules and (iii) the leases, contracts and other agreements entered into by Sellers with respect to the Business after the date hereof consistent with the terms of this Agreement, except (A) in each case, to the extent such Liabilities, but for a breach or default by Sellers, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default and (B) in each case, to the extent such Liabilities would be required to be reflected on a balance sheet as of the Valuation Date with respect to the Assets prepared in accordance with Agreed Accounting Principles and were not so reflected in the Valuation Date Statement and not taken into account as a deduction in determining Valuation Date Working Capital in connection with the determination of the Purchase Price pursuant to Section 3.3 ;

 

(iii) all Liabilities in respect of Taxes for which Purchaser is liable pursuant to Article VIII ;

 

(iv) all Liabilities of CTI or any of its Affiliates under Section 1.4(f) of the PolaRx Merger Agreement arising after the Closing Date; and

 

(v) any obligations with respect to any return claim or other obligations to replace any products manufactured, distributed or sold by CTI or Nevada with respect to the Business or by UK or PolaRx, in each case, prior to the Closing Date.

 

All of the foregoing liabilities and obligations to be assumed by Purchaser hereunder (excluding any Excluded Liabilities) are referred to herein as the “ Assumed Liabilities .”

 

Section 2.4. Excluded Liabilities . Purchaser shall not assume or be obligated to pay, perform or otherwise discharge any Liability of Sellers not expressly assumed by Purchaser pursuant to the Assumption Agreement (all such Liabilities not being assumed being herein called the “ Excluded Liabilities ”) and, notwithstanding anything to the contrary in Section 2.3 , none of the following shall be Assumed Liabilities for purposes of this Agreement:

 

(i) any Liabilities in respect of Taxes for which Sellers are liable pursuant to Article VIII ;

 

(ii) any payables and other Liabilities of Sellers with respect to the Business to any other business unit of Sellers or any of Sellers’ Affiliates;

 

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

 

(iv) any Liabilities in respect of any Excluded Assets;

 

(v) any Liabilities in respect of the lawsuits, claims, suits, proceedings or investigations set forth in Section 4.8 of the Disclosure Schedule;

 

(vi) any Liabilities arising from the failure of Sellers to comply with the provisions of any applicable bulk sales or bulk transfer laws;

 

(vii) accrued Liabilities of any kind required to be reflected on the Valuation Date Statement prepared in accordance with Agreed Accounting Principles which were not reflected thereon as a dollar amount;

 

(viii) any Liabilities related to, or arising from (i) the occupancy, operation, use or control of any of the Seller Property prior to the Closing Date or (ii) the operation of the Business prior to the Closing Date, in each case incurred or imposed by any Environmental Law, including Liabilities related to, or arising from, any Release of any Contaminant on, at or from (A) the Seller Property, including all facilities, improvements, structures and equipment thereon, surface water thereon or adjacent thereto and soil or groundwater thereunder, or any conditions whatsoever on, under or in the vicinity of such real property or (B) any real property or facility owned by a third Person to which Contaminants generated by the Business were sent prior to the Closing Date;

 

(ix) any product liability or claims for injury to person or property, regardless of when made or asserted, relating to the ownership, possession or use of any products manufactured, utilized in clinical trials, sold or distributed by or on behalf of CTI or Nevada with respect to the Business or by or on behalf of UK or PolaRx, in each case, prior to the Closing Date;

 

(x) any recalls on or after the Closing Date mandated by any Governmental Authority of TRISENOX with respect to any products manufactured, distributed or sold by CTI or Nevada with respect to the Business or by UK or PolaRx, in each case, prior to the Closing Date;

 

(xi) all Liabilities of Sellers, the Companies or their Affiliates under the Financing Agreement;

 

(xii) all Liabilities under Section 4.1(b) of the Sloan-Kettering Agreement arising as a result of this Agreement, consummation of the transactions contemplated hereby or any other event occurring on or prior to the Closing Date;

 

(xiii) except as set forth in Section 2.3(iv) , all Liabilities of Sellers, the Companies or their Affiliates under the Agreement and Plan of Merger dated as of January 7, 2000 among Sellers and PolaRx, as amended on March 6, 2003 (the “ PolaRx Merger Agreement ”) including, without limitation, any Liabilities owed to former shareholders of PolaRx;

 

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(xiv) all Liabilities of Sellers for any royalties under the Waxman Agreement relating to patents issued prior to the Closing Date accruing with respect to sales made prior to the Closing Date; and

 

(xv) all Liabilities of Sellers or their Affiliates (including, with respect to periods prior to the Closing Date, the Companies) under or with respect to any compensation or employee benefit plans, programs or agreements, or otherwise arising in connection with the employment or pay practices of Sellers or their Affiliates (including, with respect to periods prior to the Closing Date, the Companies).

 

ARTICLE III

 

PURCHASE PRICE; CLOSING

 

Section 3.1. Purchase Price . The purchase price for the Assets (the “ Purchase Price ”) shall be determined in accordance with Section 3.3 and shall be equal to:

 

(i) $69,500,000, plus

 

(ii) the Inventory Valuation Amount; minus

 

(iii) the Return Adjustment Amount; minus

 

(iv) the Sloan-Kettering Royalty Amount; plus

 

(v) the amount by which the Valuation Date Working Capital Amount exceeds $1,020,045; or minus

 

(vi) the amount by which the Valuation Date Working Capital Amount is less than $1,020,045.

 

Section 3.2. Estimated Purchase Price . No later than three (3) business days prior to the Closing Date, CTI shall deliver to Purchaser a statement (the “ Estimated Valuation Date Accounting Statement ”) setting forth CTI’s good faith estimate of the Purchase Price (the “ Estimated Purchase Price ”), the Inventory Valuation Amount, the Sloan-Kettering Royalty Amount and the Valuation Date Working Capital Amount and setting forth in reasonable detail the assets and liabilities of the Business as of the Valuation Date anticipated, based on the most recent available financial information, to be reflected on the Valuation Date prepared in accordance with Agreed Accounting Principles. The Estimated Valuation Date Accounting Statement shall be certified by CTI’s chief financial officer. The Purchase Price shall thereafter be determined as provided in Section 3.3 .

 

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Section 3.3. Valuation Date Statement and Actual Purchase Price .

 

(a) No later than sixty (60) days after the Closing Date, CTI shall (i) prepare in accordance with Agreed Accounting Principles, a statement of assets and liabilities as of the Valuation Date (the “ Preliminary Valuation Date Statement ”), (ii) determine the Purchase Price in accordance with the provisions of this Agreement (the “ Preliminary Purchase Price ”), the Inventory Valuation Amount, the Sloan-Kettering Royalty Amount and the Valuation Date Working Capital Amount, and (iii) deliver to Purchaser the Preliminary Valuation Date Statement and a certificate of CTI’s chief financial officer setting forth the Preliminary Purchase Price, the Inventory Valuation Amount, the Sloan-Kettering Royalty Amount and the Valuation Date Working Capital Amount (the “ Preliminary Accounting Statement ”). Purchaser shall cooperate with Seller and its accountants to the extent reasonably required to enable CTI to prepare the Preliminary Accounting Statement in accordance with this Agreement.

 

(b) Purchaser may dispute one or more of the items set forth in the Preliminary Accounting Statement by notifying CTI in writing within forty-five (45) days after its receipt of the Preliminary Accounting Statement thereof, but only on the basis that such item was not prepared in accordance with the Agreed Accounting Principles or is mathematically inaccurate. During such 45-day period, and until the Valuation Date Statement and the Purchase Price are finally determined, employees of Purchaser and its accountants shall be entitled to access to CTI’s and its accountants’ work papers prepared in connection with the preparation of the Preliminary Accounting Statement and shall be entitled to review and discuss such work papers with CTI and its accountants. Any notice delivered in accordance with Section 3.3(b) shall specify in reasonable detail the nature of any disagreement so asserted. If Purchaser does not so notify CTI within such period, the Preliminary Valuation Date Statement and the Preliminary Purchase Price shall be final, binding and conclusive on the parties as the “ Valuation Date Statement ” and the Purchase Price, respectively. If Purchaser does so notify CTI, Purchaser and CTI and their respective accountants shall attempt to resolve by written agreement (“ Agreed Adjustments ”) any differences as to the Preliminary Accounting Statement and, in the event CTI and Purchaser so resolve such differences, the Preliminary Valuation Date Statement and the Purchase Price set forth in the Preliminary Accounting Statement as adjusted by the Agreed Adjustments shall be final and binding as the Valuation Date Statement and the Purchase Price, respectively, but shall not limit the representations, warranties, covenants and agreements of the parties set forth elsewhere in this Agreement (except to the extent any Damages related to a breach of such representations, warranties, covenants or agreements would be duplicative of amounts payable pursuant to this Section 3.3 ).

 

(c) If Purchaser and CTI are unable to reach a resolution with respect to all of the items specified in a notice provided pursuant to Section 3.3(b) within twenty (20) days after receipt by CTI of such notice, then either party may submit the items remaining in dispute for resolution to Deloitte & Touche, LLP (the “ Independent Accounting Firm ”), which shall, within twenty (20) days after such submission or such longer period as the Independent Accounting Firm may reasonably require, determine and report to Purchaser and CTI upon such remaining disputed items (based solely on the presentations of Purchaser and CTI as to whether any disputed matter has been determined in a manner consistent with Agreed Accounting Principles and this Agreement), and such determination shall be final, binding and conclusive on the parties

 

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hereto. The Preliminary Valuation Date Statement and the Preliminary Purchase Price, after giving effect to any Agreed Adjustments and to the resolution of the disputed matters by the Independent Accounting Firm, shall be the Valuation Date Statement and the Purchase Price, respectively, for purposes of this Agreement, but shall not limit the representations, warranties, covenants and agreements of the parties set forth elsewhere in this Agreement (except to the extent any Damages related to a breach of such representations, warranties, covenants or agreements would be duplicative of amounts payable pursuant to this Section 3.3 ). The parties hereto shall make available to Purchaser, CTI and, if applicable, the Independent Accounting Firm, such books, records and other information (including work papers) as any of the foregoing may reasonably request to prepare or review the Preliminary Accounting Statement or any matters submitted to the Independent Accounting Firm. The fees and disbursements of the Independent Accounting Firm shall be allocated between Purchaser and CTI in such manner that Purchaser shall be responsible for that portion of the fees and expenses equal to such fees and expenses multiplied by a fraction the numerator of which is the aggregate dollar value of disputed items submitted to the Independent Accounting Firm that are resolved against Purchaser (as finally determined by the Independent Accounting Firm) and the denominator of which is the total dollar value of the disputed items so submitted, and CTI shall be responsible for the remainder of such fees and expenses.

 

(d) Following the determination of the Purchase Price pursuant to this Section 3.3 , if (i) the Purchase Price exceeds the Estimated Purchase Price, Purchaser shall pay Seller (A) the amount by which the Purchase Price exceeds the Estimated Purchase Price and (B) with interest thereon as calculated pursuant to Section 3.3(e) , and (ii) if the Purchase Price is less than the Estimated Purchase Price, Seller shall pay Purchaser (A) the amount by which the Purchase Price is less than the Estimated Purchase Price and (B) interest thereon as calculated pursuant to Section 3.3(e) , in each case, within five (5) business days after the Purchase Price is finally determined.

 

(e) The party making the payment pursuant to Section 3.3(d) shall pay interest thereon to the other party for the period from the Closing Date to the date of payment at the Prime Rate as published in The Wall Street Journal , Eastern Edition, on the Closing Date. Payment of such amounts and interest thereon shall be made by wire transfer in immediately available funds to such account or accounts as are designated in writing by the party entitled to receive such payment no later than the second Business Day prior to the date on which such payment is due.

 

Section 3.4. Additional Consideration . (a) In addition to the Purchase Price, upon the Business attaining the development milestones set forth below (each, a “ Development Milestone ” and collectively, the “ Development Milestones ”), Purchaser shall promptly notify CTI of achievement of any Development Milestone and shall become obligated to pay to CTI the respective amounts set forth below on the terms set forth below (each, a “ Development Milestone Payment ” and collectively, the “ Development Milestone Payments ”).

 

(i) $10 million in cash payable within 30 days of receipt of final FDA approval of TRISENOX for first line treatment of acute promyelocytic leukemia (“ APL ”);

 

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(ii) $10 million in cash payable within 30 days of receipt of final FDA approval of TRISENOX for treatment of myelodysplastic syndrome (“ MDS ”);

 

(iii) $10 million in cash payable within 30 days of receipt of final FDA approval of TRISENOX for treatment of multiple myeloma (“ MM ”); and

 

(iv) $10 million in cash payable within 30 days of receipt of final FDA approval of TRISENOX for treatment of acute myeloid leukemia (“ AML ”).

 

(b) (i) In addition to the Purchase Price, upon the Business attaining the sales milestones set forth below (each, a “ Sales Milestone ” and collectively, the “ Sales Milestones ”), Purchaser shall notify CTI of achievement of any Sales Milestone and shall become obligated to pay to CTI the respective amounts set forth below, in each case on the terms set forth below (each, a “ Sales Milestone Payment ” and collectively, the “ Sales Milestone Payments ”):

 

(1) $5 million in cash when Worldwide Net Sales in any period of four consecutive calendar quarters exceed $40 million;

 

(2) $10 million in cash when Worldwide Net Sales in any period of four consecutive calendar quarters exceed $50 million;

 

(3) $5 million in cash when Worldwide Net Sales in a period of four consecutive calendar quarters exceed $60 million;

 

(4) $10 million in cash when Worldwide Net Sales in any period of four consecutive calendar quarters exceed $75 million;

 

(5) $10 million in cash when Worldwide Net Sales in any period of four consecutive calendar quarters exceed $100 million;

 

(6) $10 million in cash when Worldwide Net Sales in any four consecutive calendar quarter period exceed $150 million; and

 

(7) $10 million in cash when Worldwide Net Sales in any four consecutive calendar quarter period exceed $200 million.

 

CTI shall only be eligible to receive a single payment for each Sales Milestone described in clauses (1) through (7) above, but may receive more than one Sales Milestone Payment with respect to a single four consecutive quarter period as a result of the Worldwide Net Sales attained in a single four consecutive quarter period. If any calendar quarter is included in a four calendar quarter period with respect to which one or more Sales Milestones are achieved, then the Worldwide Net Sales for that calendar quarter may not be counted to achieve a Sales Milestone with respect to any other subsequent four calendar quarter period.

 

(ii) Purchaser will provide to CTI, within forty-five (45) days after the end of each calendar quarter, commencing at the end of the first calendar quarter ending after the Closing Date, a report setting forth in reasonable detail a calculation of the Worldwide Net Sales

 

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for the calendar quarter (the “ Purchaser Sales Milestone Report ”). If CTI does not object to the Purchaser Sales Milestone Report within thirty (30) Business Days of receipt thereof the Purchaser Sales Milestone Report or upon such earlier time as CTI shall provide written notice that it concurs with the Purchaser Sales Milestone Report, such Report shall become final and binding as the “ Final Sales Milestone Report ” and shall be used to calculate the Sales Milestone Payments. If CTI delivers notice to Purchaser objecting to the Purchaser Sales Milestone Report within such 30-Business Day period the Purchaser Sales Milestone Report shall be submitted to the Independent Accounting Firm which shall conduct an audit thereof within twenty (20) Business Days after such submission or such longer period as the Independent Accounting Firm may reasonably require (which audit shall be limited to the calculation of Worldwide Net Sales in accordance with the terms hereof (it being understood that such audit shall not cover, and the Independent Accounting Firm shall not pass upon, the appropriateness of the Purchaser’s adjustments to gross sales under GAAP) and the mathematical accuracy of the calculation contained in the Purchaser Sales Milestone Report). The determination of the Independent Accounting Firm shall be final, binding and conclusive on Purchaser and CTI and the Purchaser Sales Milestone Report, as adjusted by the determination of the Independent Accounting Firm, shall be the Final Sales Milestone Report. The fees and disbursements of the Independent Accounting Firm shall be paid by CTI unless the adjustments to the Purchaser Sales Milestone Report determined to be made by the Independent Accounting Firm would cause an additional Sales Milestone to be met that would not have been met under the calculation of Worldwide Net Sales contained in the Purchaser Sales Milestone Report, in which case the fees and disbursements of the Independent Accounting Firm shall be paid by Purchaser.

 

(iii) All Sales Milestone Payments shall be calculated on the basis of the Final Sale Milestone Reports and shall be made no later than the later of (A) 60 days after the end of the four consecutive calendar quarter period in which the applicable Sales Milestone giving rise to any Sales Milestone Payment(s) is met and (B) three (3) Business Days after the date on which Final Sales Milestone Reports for each of the calendar quarters in the applicable four consecutive calendar quarter period are deemed to be completed.

 

(c) All Development Milestone Payments and Sales Milestone Payments shall be made by wire transfer of immediately available funds to such account or accounts as are designated in writing by CTI, which designation shall be made no later than the second Business Day after Sellers receive written notice that they have become entitled to receive such payment.

 

(d) On and after the Closing Date, the control of the Business shall rest with Purchaser and Sellers shall have no right to object to the manner in which the Business is conducted after the Closing Date, Purchaser shall have complete discretion with respect to all decisions related to the Assets, including decisions relating to the research, development, manufacture, marketing, pricing and distribution of TRISENOX, and shall have no obligation to conduct clinical trials related to, or otherwise pursue regulatory approvals of, any indication for TRISENOX or otherwise take any action to protect, attain or maximize any payment to be received by Sellers pursuant to this Section 3.4 . Purchaser shall have no obligation to follow any business plan of Sellers or be legally bound by any such plan and shall have no obligation to consult with Sellers with respect to the Business. Without limiting the foregoing, Purchaser agrees that, upon the written request of CTI, representatives of Purchaser and CTI shall meet (in

 

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person or telephonically) on such date and at such location as shall be agreed upon by Purchaser and CTI to discuss the research, development and marketing of TRISENOX (including clinical trade strategy and regulatory approval strategies); provided , that Purchaser shall not be obligated to cause its representatives to attend such a meeting more than twice in any calendar year and shall not be obligated to cause its representatives to attend such a meeting after the second anniversary of the Closing.

 

Section 3.5. Allocation of Purchase Price . No later than thirty (30) Business Days following the Closing Date, Sellers shall submit to Purchaser in writing the allocation of the Purchase Price among all of the Assets in accordance with the provisions of Section 1060 of the Code and the regulations promulgated thereunder (the “ Allocation Notice ”). Purchaser shall be deemed to have accepted the Allocation Notice, and it shall be deemed final, unless Purchaser provides written notice of disagreement to Sellers within thirty (30) Business Days of receipt of the Allocation Notice (a “ Disagreement Notice ”). If Purchaser provides a Disagreement Notice, Sellers and Purchaser shall negotiate in good faith to resolve the differences. If the disagreements cannot be resolved within ten (10) Business Days of CTI’s receipt of the Disagreement Notice, Purchaser and Sellers shall engage the Independent Accounting Firm to resolve the differences. The independent accounting firm will be requested to resolve the dispute and determine the correct allocation in accordance with Section 1060 of the Code, and issue its report within ten (10) Business Days of its engagement in writing to Purchaser and Sellers (the “ Accounting Report ”), or such longer period as the accounting firm may require. One half of the fees of the independent accounting firm shall be borne by Purchaser, and one half of such fees shall be borne by Sellers. Neither Purchaser nor Sellers shall take a position on any Tax return, before any governmental Tax agency or in a judicial proceeding that is inconsistent with the Allocation Notice, if final, or the Accounting Report, except as required by law. To the extent required by Section 1060 of the Code, the Allocation Notice or Accounting Report, as appropriate, will be revised to reflect any adjustment to the Purchase Price.

 

Section 3.6. Closing .

 

(a) Upon the terms and subject to the conditions of this Agreement, the sale and purchase of the Assets contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at O’Melveny & Myers LLP, 275 Battery Street, Suite 2600, San Francisco, California 94111, on such date and at such time as Sellers and Purchaser may mutually agree, which date shall be as soon as practicable, and in any event no later than three (3) Business Days, after the satisfaction or valid waiver of the conditions set forth in Article IX that are capable of being satisfied prior to the Closing (the day on which the Closing takes place being referred to herein as the “ Closing Date ”).

 

(b) Subject to the satisfaction or waiver of the conditions set forth in Article IX , at Closing Purchaser shall pay CTI an amount equal to the Estimated Purchase Price by wire transfer of immediately available funds to such account or accounts as are designated in writing by CTI no later than the second Business Day prior to the Closing Date.

 

(c) Subject to satisfaction or waiver of the conditions set forth in Article IX , at Closing Purchaser shall deliver to Sellers the following:

 

(i) a copy of Purchaser’s Certificate of Incorporation certified as of a recent date by the Secretary of State of the State of Delaware;

 

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(ii) a certificate of good standing of Purchaser issued as of a recent date by the Secretary of State of the State of Delaware;

 

(iii) a certificate of the secretary or an assistant secretary of Purchaser, dated the Closing Date, in form and substance reasonably satisfactory to Sellers, as to (i) no amendments to the Certificate of Incorporation of Purchaser since a specified date; (ii) the by-laws of Purchaser; (iii) the resolutions of the Board of Directors of Purchaser authorizing the execution, delivery and performance of this Agreement and the Purchaser Ancillary Agreements and the transactions contemplated hereby and thereby; and (iv) the incumbency and signatures of the officers of Purchaser executing this Agreement and any Purchaser Ancillary Agreement;

 

(iv) the Assumption Agreement duly executed by Purchaser;

 

(v) the certificate of Purchaser contemplated by Section 9.2(c) duly executed by an authorized officer of Purchaser; and

 

(vi) the Transition Services Agreement duly executed by Purchaser; and

 

(vii) a certificate of resale for each state in which inventory included in the Assets is held reflecting such inventory held in the state.

 

(d) Subject to the satisfaction or waiver of the conditions set forth in Article IX , at Closing Sellers shall deliver to Purchaser the following:

 

(i) a copy of CTI’s Articles of Incorporation certified as of a recent date by the Secretary of State of the State of Washington;

 

(ii) a copy of Nevada’s Articles of Incorporation certified as of a recent date by the Secretary of State of the State of Nevada;

 

(iii) the common seal (if any), statutory books and other record books of UK written up to (but not including) the Closing Date, the certificate of incorporation and any certificate on change of name of UK and a copy of the Memorandum and Articles of Association of UK (duly certified by any director or the secretary as being true, complete and up to date)

 

(iv) a copy of the Certificate of Incorporation of PolaRx certified as of a recent date by the Secretary of State of the State of Delaware;

 

(v) a certificate of good standing of CTI issued as of a recent date by the Secretary of State of the State of Washington;

 

(vi) a certificate of good standing of Nevada issued as of a recent date by the Secretary of State of the State of Nevada;

 

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(vii) a certificate of good standing of PolaRx issued as of a recent date by the Secretary of State of the State of Delaware;

 

(viii) a certificate of the secretary or assistant secretary of CTI, dated the Closing Date, in form and substance satisfactory to Purchaser, as to (i) no amendments to the Articles of Incorporation of CTI since a specified date; (ii) the by-laws of CTI; (iii) the resolutions of the Board of Directors of CTI authorizing the execution, delivery and performance of this Agreement and the Seller Ancillary Agreements to which CTI is a party and the transactions contemplated hereby and thereby; and (iv) the incumbency and signatures of the officers of CTI executing this Agreement and any Seller Ancillary Agreement to which CTI is a party;

 

(ix) a certificate of the secretary or assistant secretary of Nevada, dated the Closing Date, in form and substance satisfactory to Purchaser as to (i) no amendment to the Articles of Incorporation of Nevada since a specified date; (ii) the by-laws of Nevada; (iii) the resolutions of the Board of Directors of Nevada authorizing the execution, delivery and performance of this Agreement and the Seller Ancillary Agreements to which Nevada is a party and the transactions contemplated hereby and thereby; and (iv) the incumbency and signatures of the officers of Nevada executing this Agreement and any Seller Ancillary Agreement to which Nevada is a party;

 

(x) a certificate of the secretary or assistant secretary of PolaRx, dated the Closing Date, in form and substance satisfactory to Purchaser, as to (i) no amendment to the Certificate of Incorporation of PolaRx since a specified date; and (ii) the by-laws of PolaRx;

 

(xi) an opinion of O’Melveny & Myers LLP, counsel to Sellers in form and substance reasonably satisfactory to Purchaser;

 

(xii) the Bill of Sale duly executed by the Sellers;

 

(xiii) the certificates contemplated by Section 9.3(c) and (e) , duly executed by an authorized officer of each of CTI and Nevada;

 

(xiv) stock certificates evidencing all outstanding capital stock of PolaRx, duly endorsed in blank or accompanied by stock powers duly executed in blank;

 

(xv) all consents, waivers or approvals obtained by Sellers with respect to the Assets or the consummation of the Transactions;

 

(xvi) the resignations of each officer and director of PolaRx;

 

(xvii) resignation letters in the agreed form from each of the directors and officers of UK, in each case acknowledging that he/she has no claims against UK whether for loss of office or otherwise;

 

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(xviii) an unqualified letter of resignation from the auditors of UK, in the form prescribed by Section 394 of the Companies Act of 1985, accompanied by a written confirmation that such auditors have no claims for unpaid fees or expenses;

 

(xix) the Transition Services Agreement duly executed by CTI;

 

(xx) a share purchase agreement in a form mutually agreeable to CTI and Purchaser duly executed by CTI in favor of Purchaser (or persons nominated by Purchaser), the share certificates for the UK Shares in the name of CTI (or duly executed lost certificate indemnities, in the agreed form, in respect thereof) and a duly executed original of any power of attorney under which the transfer is executed;

 

(xxi) assignments, in recordable form with respect to each registered copyright, issued patent, registered trademark and pending application for the registration or issuance of any copyrights, patent rights and trademarks included in the Assets, duly executed by Sellers and in form supplied by Purchaser;

 

(xxii) evidence of (A) the termination of the PolaRx Inter-Company Licenses and (B) Sellers’ compliance with Sections 6.9(c) and 6.9(d) ;

 

(xxiii) UCC-3 termination statements releasing all security interests of PharmaBio or any of its Affiliates with respect to the Assets; and

 

(xxiv) such other bills of sale, assignments and other instruments of transfer or conveyances as Purchaser may reasonably request or as may be otherwise necessary to evidence and effect the sale, assignment, transfer, conveyance and delivery of the Assets to Purchaser, in each case in such form supplied by Purchaser in forms reasonably acceptable to Sellers; and

 

(xxv) a certified copy of the minutes of a duly held meeting of the board of directors of UK at which the following resolutions were duly passed: (A) to approve the registration of the transfer of the UK Shares subject to such transfer being duly stamped for the United Kingdom Stamp Duty; (B) to accept the resignations of the directors, officers and auditors referred to in clauses (xviii) and (xix) above; and (C) to appoint such persons as Cephalon may specify prior to Closing as directors and officers of UK with effect from Closing;

 

(xxvi) powers of attorney in the agreed form in respect of the exercise of the rights attaching to the UK Shares pending registration of the transfer of the UK Shares; and

 

(xxvii) a certified copy of the minutes of a duly held meeting of the board of directors of CTI authorizing the sale of the UK Shares and the execution of this Agreement and any other documents to be executed by it on Closing in connection therewith.

 

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

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

OF SELLERS AND THE COMPANIES

 

As an inducement to Purchaser to enter into this Agreement, Sellers hereby jointly and severally represent and warrant to Purchaser that, except as set forth in the Disclosure Schedule:

 

Section 4.1. Organization; Authority .

 

(a) CTI is a corporation duly organized, validly existing and in good standing under the laws of Washington. Nevada is a corporation duly organized and validly existing under the laws of Nevada. Each of the Sellers is duly qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the ownership or leasing of the Assets or the conduct of the Business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. UK is a corporation duly organized, validly existing and in good standing under the laws of the United Kingdom. PolaRx is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Each of the Companies is duly qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the ownership or leasing of the Assets or the conduct of the Business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. Each of the Sellers and the Companies has all necessary corporate power and authority to own or lease the Assets owned or leased by it and to conduct the Business as currently conducted by it. The Companies are not presently, and have not been, engaged in any business activity other than the Business.

 

(b) Each of the Sellers has all necessary corporate power and authority to execute, deliver and perform this Agreement and each of the Seller Ancillary Agreements to which it is a party. The execution, delivery and performance of this Agreement and each Seller Ancillary Agreement to which it is a party by each Seller and the consummation by each of CTI and Nevada of the Transactions have been duly and validly authorized by the Board of Directors of CTI and the Board of Directors and sole stockholder of Nevada no other corporate proceedings on the part of either CTI or Nevada or their respective Boards of Directors or stockholders are necessary to consummate the Transactions. This Agreement has been duly and validly executed and delivered by each of CTI and Nevada and constitutes the legal, valid and binding obligation of each such party, enforceable against such party in accordance with its terms, except as such enforceability may be subject to the laws of general application relating to bankruptcy, insolvency, and the relief of debtors and rules of law governing specific performance, injunctive relief, or other equitable remedies. Upon execution and delivery by CTI and Nevada of each Seller Ancillary Agreement to which is it a party, each such Seller Ancillary Agreement will constitute the legal, valid and binding obligation of each such party, enforceable against such party in accordance with its terms, except as such enforceability may be subject to the laws of general application relating to bankruptcy, insolvency, and the relief of debtors and rules of law governing specific performance, injunctive relief, or other equitable remedies.

 

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Section 4.2. No Conflict . Assuming compliance with the notification requirements of the HSR Act and any applicable foreign antitrust regulations and the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions identified in Section 4.2 of the Disclosure Schedule, neither the execution and delivery of this Agreements or the Seller Ancillary Agreements nor the consummation of any of the Transactions do or will, directly or indirectly (with or without notice or lapse of time or both), (a) contravene, conflict with, or result in a violation of or the creation of any Encumbrance (excluding any Permitted Encumbrance) upon any of the Assets under (i) any provision of the charter or bylaws (or similar organizational documents) of Sellers or the Companies, (ii) any resolution adopted by the board of directors or the stockholders of Sellers or the Companies; (iii) any Law to which Sellers, the Companies or the Assets is subject or bound or (iv) any Governmental Order to which Sellers, the Companies or the Assets is subject; (b) contravene, conflict with, or result in a violation of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance (excluding a Permitted Encumbrance) on any of the Assets or any of the assets of the Companies pursuant to any Material Contract or any other material permit or authorization to which Sellers or the Companies is a party or is bound or to which the Assets are subject; or (c) result in the creation of any Encumbrance (other than restrictions on transfer under applicable state, provincial and federal securities Laws and Permitted Encumbrances) on any of the Shares, except, in the case of (a)(iii), as would not reasonably be expected to have a Material Adverse Effect.

 

Section 4.3. Governmental Consents and Approvals . The execution, delivery and performance of this Agreement and the Seller Ancillary Agreements and the consummation of the Transactions by Sellers does not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to any Governmental Authority or any other Person, except (a) the notification requirements of the HSR Act and (b) pursuant to any applicable foreign antitrust regulations.

 

Section 4.4. Ownership of Shares; Capitalization; Subsidiaries .

 

(a) Seller owns of record the PolaRx Shares, free and clear of all Encumbrances (other than restrictions on transfer under applicable state, provincial and federal securities Laws).

 

(b) Seller owns of record the UK Shares, free and clear of all Encumbrances (other than restrictions on transfer under applicable state, provincial and federal securities Laws).

 

(c) The authorized capital stock of UK consists of 100 ordinary shares, nominal value £1 per share, of which 100 are issued and outstanding and all of which are held by Seller and are validly issued, fully paid and nonassessable and free of preemptive rights. The UK Shares constitute all of the issued and outstanding shares of capital stock of UK.

 

(d) The authorized capital stock of PolaRx consists of 100 shares of common stock, $.001 par value per share, of which 100 shares are issued and outstanding and all of which are held by Seller and are validly issued, fully paid and nonassessable and free of preemptive rights. The PolaRx Shares constitute all of the issued and outstanding shares of capital stock of PolaRx.

 

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(e) Except as set forth above there are not outstanding any (i) securities of either Company convertible into or exchangeable or exercisable for, shares of capital stock or for share equity securities of such Company, (ii) options, warrants or other rights to acquire from either Company any shares of capital stock or equity securities or securities convertible into or exchangeable or exercisable for shares of capital stock or equity securities of such Company, or (iii) bonds, debentures, notes or other indebtedness or securities of either Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of such Company may vote.

 

(f) True and complete copies of (i) the articles of association and by-laws of UK and (ii) the certificate of incorporation and by-laws of PolaRx, each as amended to date, have been delivered to Purchaser.

 

(g) Neither of the Companies has any Subsidiaries.

 

Section 4.5. Financial Statements . Section 4.5 of the Disclosure Schedule sets forth (i) an unaudited statement of assets and liabilities of the Business as of the fiscal quarter ended March 31, 2005 and an unaudited statement of assets and liabilities of the Business as of the fiscal year ended December 31, 2004 and (ii) statements of net product sales (each, a “ Statement of Net Product Sales ”) of Trisenox for the three month period ending March 31, 2005 and for the year ended December 31, 2004 (collectively, the “ Financial Statements ”). Except as set forth therein, the Financial Statements (a) in the case of the Statements of Net Product Sales, has been prepared to reflect the consolidated net product sales of the Business for the applicable periods; (b) are in accordance with and based upon the books and records of the Sellers and the Companies; and (c) reflect account balances calculated in accordance with GAAP, consistently applied, and fairly present in all material respects the financial position and results of operations of the Business (including the Companies) as of dates presented and for the periods then ended.

 

Section 4.6. No Undisclosed Liabilities . Neither the Companies nor the Business is subject to any Liabilities required to be disclosed on a balance sheet prepared in accordance with GAAP, consistently applied, other than (a) Liabilities adequately reflected or reserved against on the Reference Statement, and (b) Liabilities of the same nature as those set forth in the Reference Statement incurred since the Reference Statement Date in the ordinary course of business consistent with past practice.

 

Section 4.7. Absence of Changes .

 

(a) Since the Reference Statement Date, there has occurred no Material Adverse Effect.

 

(b) Since the Reference Statement Date, neither Sellers nor the Companies has taken any action that would constitute a violation of Section 6.1(b) were such action to be taken after the execution of this Agreement.

 

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Section 4.8. Litigation . There are no Actions by or against Sellers relating to the Business or by or against the Companies, or affecting any of the assets of the Business (including the Assets), pending, or to the Knowledge of Sellers, threatened. As of the date hereof, none of Sellers nor any of their Subsidiaries (including the Companies), nor any of their respective assets or properties (including the Assets), is subject to any Governmental Order, nor, to the Knowledge of Sellers, are there any such Governmental Orders threatened to be imposed by any Governmental Authority. As of the date hereof, no Action is pending or, to the Knowledge of Sellers, threatened, which seeks to delay or prevent the consummation of, or which could reasonably be expected to materially adversely affect Sellers’ ability to consummate, the Transactions.

 

Section 4.9. Compliance with Laws . Sellers and the Companies are conducting the Business in all material respects in accordance with all Laws and Governmental Orders applicable to the Business or the assets of the Business (including the Assets), and neither of the Sellers and neither of the Companies is in violation of any such Law or Governmental Order in any material respect.

 

Section 4.10. Permits . Each of Sellers and each of the Companies owns, holds or possesses all permits, licenses, franchises, privileges, approvals and other authorizations from any Governmental Authority which are necessary to entitle it to own or lease, operate and use the Assets owned by it and to carry on and conduct the Business as currently conducted by it (collectively, the “ Permits ”). Section 4.10 of the Disclosure Schedule sets forth a list of each material Permit. None of the Sellers or the Companies is in violation of or default under any material Permit. Each of the Sellers and the Companies has fulfilled and performed its obligations under each material Permit, and no event has occurred or condition or state of facts exists which constitutes or, after notice or lapse of time or both, would constitute a breach of or default under any such material Permit or which permits or, after notice or lapse of time or both, would permit revocation or termination of any such material Permit. As of the date hereof, to the Knowledge of Sellers, no notice of cancellation, of default or of any dispute concerning any Permit, or of any event, condition or state of facts described in the preceding sentence, has been received by Sellers or the Companies. Each of the Permits is valid, subsisting and in full force and effect and may be assigned and transferred to Purchaser in accordance with this Agreement and will continue in full force and effect after the consummation of the Transactions, in each case without (x) the occurrence of any breach, default or forfeiture of rights thereunder, or (y) the consent, approval or act of, or the making of any filing with, and Governmental Authority.

 

Section 4.11. Environmental Matters . The operations of the Business comply in all material respects with all applicable Environmental Laws and to the Knowledge of the Sellers, no circumstances or conditions exist that may prevent or interfere with such compliance in the future. Neither Seller, with respect to the Business, nor either Company is subject to any judicial or administrative proceeding, order, judgment, decree or settlement alleging or addressing a violation of or liability under any Environmental Law. The Business is not required to have any Permits under Environmental Laws, other than those applicable to the conduct of business in the ordinary course. Except as set forth on Schedule 4.11 , no Contaminant has been generated, transported, used, disposed, stored or treated by Sellers with respect to the Business or by the Companies, and there has been no Release of Contaminant by Sellers with respect to the Business or either of the Companies.

 

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Section 4.12. Material Contracts .

 

(a) For purposes hereof, the term “ Material Contracts ” shall mean the following Contracts to which any of the Sellers or the Companies is a party or is otherwise bound:

 

(i) Contracts for the purchase by the Business or the Companies of goods or services from suppliers or service providers, including any consignment, distributor, dealer, manufacturer’s representative, sales agency, advertising representative or advertising or public relations contract, in each case involving annual payments by the Business in excess of $25,000 in fiscal year 2004 or which Sellers reasonably expect will involve payments of more than $25,000 in fiscal year 2005 or which extends beyond 2009;

 

(ii) Contracts for the purchase by customers from the Business of goods or services involving annual payments in excess of $25,000 in fiscal year 2004 or which Sellers reasonably expect will involve payments related to the Business of more than $25,000 in fiscal year 2005 or which extends beyond 2009;

 

(iii) Contracts relating to the incurrence of indebtedness for borrowed money by the Business or the Companies or the guaranteeing or securing by or of the Business or the Companies of any obligation for borrowed money (including letters of credit), except in the ordinary course in connection with accounts payable;

 

(iv) leases, installment and conditional sale agreements, having annual rentals or payments in excess of $25,000 relating to the Business or the Companies, and other Contracts affecting the ownership by, leasing of, title to, use of, or any leasehold or other interest in, any personal property used primarily in the Business;

 

(v) joint venture Contracts relating to the Business or the Companies, or other Contracts relating to the Business or the Companies creating a similar legal relationship;

 

(vi) Contracts that prohibit the Business from competing with any Person in any geographic area or from soliciting customers or from hiring or retaining any Person;

 

(vii) Contracts relating to Licensed Intellectual Property, provided in each case (A) annual payments or receipts of greater than $25,000 were attributable to the Business pursuant to such Contract in fiscal year 2004, or (B) such Contract is otherwise material to the operation of the Business;

 

(viii) Contracts relating to Software excluding non-customized software that is commercially available or subject to “shrink-wrap” and “clip-through” license agreements and primarily used in the conduct of the Business;

 

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(ix) any guarantee of the obligations of customers, suppliers, officers, directors, employees, Affiliates or others in connection with, or relating to, the Business;

 

(x) any Contract not otherwise described in this Section 4.12 that is material to the conduct of the Business as currently conducted, or that is not entered into in the ordinary course of business.

 

(b) Section 4.12 of the Disclosure Schedule sets forth a complete list of all Material Contracts to which either of the Sellers or either of the Companies is party or by which they are bound. Each Material Contract constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to Purchaser pursuant to this Agreement and will continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder and without the consent, approval or act of, or the making of any filing with, any other party. Sellers and the Companies have fulfilled and performed their respective obligations under each of the Material Contracts and none of the Sellers or the Companies has violated or breached, or committed any default under, any Material Contract; and, to the Knowledge of Sellers, no other Person has violated or breached, or committed any default under, and no condition or state of facts exists which, with the passage of time or the giving of notice or both, would constitute such a default or breach by Sellers, the Companies or any such third party under, any Material Contract. Since the Reference Statement Date, neither of the Sellers and neither of the Companies has received any written notice alleging any actual or possible violation or breach of, or default under, any Material Contract. Neither of the Companies is a party to or bound by any Contract that is not primarily related to the Business.

 

(c) No amounts are due pursuant to Article 4 of the Waxman Agreement with respect to patents issued on or before the date hereof. No amounts are due, or will become due, in connection with this Agreement and the consummation of the Transactions under Section 4.1(b) of the Sloan-Kettering Agreement.

 

Section 4.13. Intellectual Property .

 

(a) Section 4.13(a) of the Disclosure Schedule lists the material Licensed Intellectual Property.

 

(b) Section 4.13(b) of the Disclosure Schedule lists the Transferred Intellectual Property.

 

(c) There is no software owned by or licensed to Sellers and used primarily with respect to the Business or owned by or licensed to the Companies, excluding non-customized software that is commercially available or subject to “shrink-wrap” and “clip-through” license agreements (the “ Software ”).

 

(d) Section 4.13 (d) of the Disclosure Schedule sets forth a list of all registrations and applications for registration included in the Transferred Intellectual Property or Licensed Intellectual Property (“ Registered IP ”). All such Registered IP is in good standing, is in material compliance with formal legal requirements and is not subject to any unpaid

 

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maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. There are no proceedings, challenges or claims known to Sellers before any court, tribunal (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) related to any such Registered IP.

 

(e) Sellers or the Companies own all right, title and interest in and to all of the Transferred Intellectual Property.

 

(f) Sellers and the Companies have taken reasonable steps that are required to protect the rights of Sellers and the Companies in confidential information and trade secrets of Sellers and the Companies in the Transferred Intellectual Property and Licensed Intellectual Property.

 

(g) No proceedings are pending, or to the Knowledge of Sellers, threatened and no claims have been received by Sellers or their Subsidiaries within the previous two (2) years that the operation of the Business has violated, infringed or misappropriated any Intellectual Property of any other Person.

 

(h) The operation of the Business as conducted by Sellers and their Subsidiaries does not violate, infringe or misappropriate the Intellectual Property of any other Person. Within the previous two (2) years, no written claim of invalidity of any Intellectual Property used in the Business has been made by any other Person.

 

(i) As of the date of this Agreement, (i) there is no outstanding Governmental Order applicable to Sellers or their Subsidiaries, (ii) there are no proceedings pending, and (iii) there is no agreement to which either Sellers or any of their Subsidiaries is a party, restricting, or that would restrict the use of the Transferred Intellectual Property by Sellers or any of their Subsidiaries (including the Companies) with respect to the Business or restricting the licensing of the Transferred Intellectual Property by Sellers or any of their Subsidiaries (including the Companies) to any Person.

 

(j) To the Knowledge of Sellers, no Person is violating, infringing, diluting or misappropriating the Transferred Intellectual Property.

 

Section 4.14. Insurance . Sellers have provided to Purchaser true and complete copies of all policies of insurance maintained by Sellers or the Companies with respect to the properties and assets of the Business, or true and complete summaries of the material terms of such insurance policies. All such policies are in full force and effect and Sellers and the Companies have complied in all material respects with the provisions of such policies.

 

Section 4.15. Properties and Assets .

 

(a) Except for the Leased Real Property that is subject to the UK Lease, there is no Leased Real Property leased or subleased by Sellers and used primarily in connection with the Business and there is no Leased Real Property leased or subleased by the Companies. Neither of the Sellers with respect to the Business nor the Companies (i) owns any real property or (ii) is a party to or is bound by any Contract for the purchase or sale of real property.

 

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(b) Section 4.15(b) of the Disclosure Schedule contains a list of all machinery, equipment, vehicles, furniture and other tangible personal property owned by Sellers and used primarily in connection with the Business or owned by the Companies.

 

(c) Section 4.15(c) of the Disclosure Schedule contains a list and description of each lease or other agreement or right, whether written or oral (showing in each case the annual rental, the expiration date thereof and a brief description of the property covered), under which either Seller is lessee of, or holds or operates, any machinery, equipment, vehicle or other tangible personal property owned by a third Person and used primarily in connection with the Business or either of the Companies are lessee of, or hold or operate, any machinery, equipment, vehicle or other tangible personal property owned by a third Person.

 

(d) Sellers have good and marketable title to, or in the case of any leased property included in the Assets have valid leasehold interests in, all Assets, free and clear of any Encumbrance, other than Permitted Encumbrances. Upon delivery to Purchaser of the Bill of Sale and other instruments of transfer contemplated by Section 3.6(d) , Sellers will thereby transfer to Purchaser good and marketable title to the Assets, free and clear of all Encumbrances, other than Permitted Encumbrances.

 

(e) PolaRx has good title to, or in the case of leased property and assets has valid leasehold interests in, all of its physical assets, free and clear of any Encumbrances, other than Permitted Encumbrances. UK has good title to, or in the case of leased property and assets, has valid leasehold interests in, all of its physical assets free and clear of any Encumbrances, other than Permitted Encumbrances.

 

Section 4.16. Sufficiency of Assets . Except for the assets to be provided to Purchaser pursuant to the Transition Services Agreement, the Assets collectively include all the assets primarily used in the Business and all of the assets necessary to conduct the Business as currently conducted.

 

Section 4.17. Regulatory Matters .

 

(a) TRISENOX has been and is being manufactured, distributed and marketed in compliance with all applicable requirements under the FDCA and any similar Law, including those relating to investigational use, premarket approval, good manufacturing practices, labeling, advertising, record keeping, and the filing of adverse event reports and compliance with other postmarketing obligations, including obligations to conduct phase 4 studies as specified in the pertinent FDA approval letter(s). Neither the Sellers nor any of their Subsidiaries has received any formal or informal notice or other communication from the FDA or any other Governmental Authority including a warning or untitled letter, (A) contesting the premarket approval labeling, or promotion (including advertising, promotional labeling, and sampling) of, TRISENOX or (B) otherwise alleging any violation or appearance of any violation of any Law by the Sellers or any of their Subsidiaries relating to TRISENOX.

 

(b) No TRISENOX product has been recalled, withdrawn, suspended or discontinued by the Sellers or any of their Subsidiaries in the United States or outside the United States (whether voluntarily or otherwise) since January 1, 2000. No proceedings in the United

 

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States or outside of the United States (whether completed or pending) seeking the recall, withdrawal, suspension or seizure of any TRISENOX product or premarket approvals or marketing authorizations are pending, or to the Knowledge of Sellers, threatened, against the Sellers or any of their Subsidiaries, nor have any such proceedings been pending at any time since January 1, 2000.

 

(c) To the extent that a biological license application, new drug application, investigational new drug application or similar state or foreign regulatory application has been approved for TRISENOX, Sellers and their Subsidiaries are in substantial compliance with 21 U.S.C. sec. 355 and applicable FDA implementing regulations, including 21 C.F.R. Parts 312 or 314, and similar Laws and all terms and conditions of such applications. Sellers and their Subsidiaries, and the officers, employees or agents of Sellers or such Subsidiaries have included in the application for TRISENOX, where required, the certification described in 21 U.S.C. sec. 335a(k)(1) or any similar Law, and such certification and such list was in each case true and accurate in all material respects when made and remain true and accurate in all material respects. In addition, Sellers and their Subsidiaries are in substantial compliance with all applicable registration and listing requirements set forth in 21 U.S.C. sec. 360 and 21 C.F.R. Part 207 and all similar Laws with respect to TRISENOX.

 

(d) Each article of TRISENOX manufactured and/or distributed by Sellers or any of their Subsidiaries is not adulterated within the meaning of 21 U.S.C. sec. 351 (or similar Law) or misbranded within the meaning of 21 U.S.C. sec. 352 (or similar Law), and is not a product that is in violation of 21 U.S.C. sec. 355 (or similar Law).

 

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

 

(f) To Sellers’ Knowledge, all pre-clinical and clinical investigations conducted or sponsored by it with respect to TRISENOX have been and are being conducted in material compliance with all recommendations of the FDA and all applicable laws, rules, regulations and guidelines, including good laboratory practices, investigational new drug

 

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requirements, good clinical practice requirements (including informed consent and institutional review boards designed to ensure the protection of the rights and welfare of human subjects), and federal and state laws restricting the use and disclosure of individually identifiable health information. To Sellers’ Knowledge, neither Sellers nor any of their Subsidiaries have received any information that would reasonably be expected to lead to denial by the FDA of any future application by Purchaser for approval of TRISENOX for the treatment of APL, MDS, MM or AML, subject to successful completion of ongoing and future trials disclosed to Purchaser and the results thereof.

 

(g) As of the date hereof, Seller is not aware that any Governmental Authority is considering issuing any Talk Paper or other public statement, pursuant to 21 U.S.C. sec. 375 or otherwise, questioning the safety or risk-benefit ratio of TRISENOX, or requesting or directing that the official labeling for TRISENOX be revised to include additional or strengthened warning or other risk information.

 

Section 4.18. Accounts Receivable; Inventories .

 

(a) All accounts receivable of Sellers with respect to the Business (including all accounts receivable of the Companies) have arisen from bona fide transactions by Sellers or the Companies in the ordinary course of the Business. To the Knowledge of Sellers, all accounts receivable reflected in the Reference Statement are good and collectible in the ordinary course of business at the aggregate recorded amounts thereof, net of any applicable allowance for doubtful accounts reflected in the Reference Statement.

 

(b) The inventories of Sellers with respect to the Business (including the inventories of the Companies) (in each case, including raw materials, supplies, work-in-process, finished goods and other materials) (i) are in good, merchantable and useable condition, (ii) are reflected in the Reference Date Balance Sheet at the lower of cost or market in accordance with GAAP, consistently applied and will be reflected in the Valuation Date Statement at the lower of cost or market in accordance with GAAP (subject to the deviations from GAAP and the other principles set forth in Schedule 1.1A ), consistently applied, and (iii) other than any failure to be saleable in the ordinary course of business solely as a result of the age of finished goods inventory, are, in the case of finished goods, of a quality saleable in the conduct of the Business and, in the case of all other inventories are of a quality useable in the conduct of the Business. Section 4.18 of the Disclosure Schedule sets forth a list of places where material inventories of the Business were located as of March 31, 2005.

 

Section 4.19. Employees and Related Agreements; ERISA.

 

(a) Section 4.19(a) of the Disclosure Schedule sets forth a list of each Benefit Plan, and identifies each Benefit Plan that is sponsored or maintained by either of the Companies, or pursuant to which either of the Companies has any obligation or liability (“ Company Plans ”), and each Benefit Plan that is sponsored or maintained by either of the Sellers, or pursuant to which either of the Sellers has any obligation or liability (“ Seller Plans ”).

 

(b) None of the Sellers or the Companies has ever maintained any employee pension benefit plan with respect to the Business that is subject to Section 302 or Title IV of

 

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ERISA or Section 412 of the Code, or has ever been required to contribute to, or had any liability or obligation under, any “multiemployer plan” (as such term is defined in Section 3(37) of ERISA) with respect to the Business.

 

(c) Sellers have delivered or made available to Purchaser, with respect to each Seller Plan, either a true and correct copy of each such plan or a summary plan description or other comparable summary of such plan.

 

(d) Each Benefit Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS that such Plan is so qualified under the Code; and no circumstance exists which might cause such Plan to cease being so qualified.

 

(e) Each Company Plan complies, and has been administered to comply, with all applicable Laws, and there has been no notice issued by any Governmental Authority questioning or challenging such compliance, and there are no actions, suits or claims (other than routine claims for benefits) pending or, to the Knowledge of Seller, threatened involving any such plan or the assets of any such plan.

 

(f) None of the Sellers or the Companies have any obligations under any Benefit Plans or otherwise to provide health or death benefits to or in respect of former employees of either Seller or either of the Companies with respect to the Business, except as specifically required by the continuation requirements of Part 6 of Title I of ERISA.

 

(g) None of the Sellers, with respect to the Business, or the Companies have any liability of any kind whatsoever, whether direct, indirect, contingent or otherwise, on account of (i) any violation of the health care requirements of Part 6 of Title I of ERISA or Section 4980B of the Code, (ii) under Section 502(i) or Section 502(l) of ERISA or Section 4975 of the Code, (iii) under Section 302 of ERISA or Section 412 of the Code or (iv) under Title IV of ERISA.

 

(h) Section 4.19(h) of the Disclosure Schedule contains: (i) a list of all employees of the Companies or Sellers whose work is primarily related to the Business as of the date of this Agreement, indicating each such employee’s length of service, current title, the entity with which such employee is employed and, if inactive, the reason for and commencement date of such employee’s inactive status and expected date of return; (ii) the then current annual compensation of, and a description of the fringe benefits (other than those generally available to employees of Sellers or the Companies) provided by Sellers or the Companies to any such employees; (iii) a list of all present employees of Sellers with respect to the Business or the Companies; (iv) a list of any increase, effective on or after January 1, 2005, in the rate of compensation of any employees or commission salespersons if such increase exceeds 10% of the previous annual salary of such employee or commission salesperson; and (v) a list of all substantial changes in job assignments of, or arrangements with, or promotions or appointments of, any employees or commission salespersons whose compensation as of January 1, 2005 was in excess of $25,000 per annum.

 

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(i) (i) To the Knowledge of Sellers, the Business is not involved in any transaction or other situation with any employee, officer, director or Affiliate of either Seller or either of the Companies which may be generally characterized as a “conflict of interest”, including direct or indirect interests in the business of competitors, suppliers or customers of the Business, and (ii) there are no situations with respect to the Business which involved or involve (A) the us