ASSET PURCHASE AGREEMENT

Exhibit 10.49

 

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “***”.
A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE EXCHANGE ACT OF 1934.

ASSET PURCHASE AGREEMENT

AVANIR PHARMACEUTICALS, and

ALAMO PHARMACEUTICALS, LLC

and

AZUR PHARMA INTERNATIONAL III LIMITED, and

AZUR PHARMA INC.

Dated as of July 2, 2007

 

 

TABLE OF CONTENTS

				Page
ARTICLE I DEFINITIONS					1
1.1		Defined Terms			1
1.2		Other Defined Terms			12
1.3		Seller Knowledge			13
ARTICLE II PURCHASE AND SALE OF ASSETS					13
2.1		Transfer of Assets			13
2.2		Assumption of Liabilities			14
2.3		Purchase Price			14
2.4		Payment of Sales Percentage Amount			15
2.5		Allocation of Purchase Price			16
2.6		Closing Costs; Transfer Taxes and Fees			16
2.7		Further Assurances			17
2.8		Determination of Net Working Capital			17
2.9		Withholding Tax			19
ARTICLE III CLOSING					19
3.1		Closing			19
3.2		Deliveries at Closing			19
3.3		Consents to Assignment and Transfer of Certain Rights and Liabilities			21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES AND PARENT					21
4.1		Organization			22
4.2		Authorization			22
4.3		No Conflict or Violation; Consents and Approvals		22
4.4		Financial Information			23
4.5		Absence of Certain Changes or Events			23
4.6		Title to Purchased Assets and Sufficiency			23
4.7		Material Contracts			23
4.8		Permits			24
4.9		Litigation			24
4.10		Compliance with Laws			24
4.11		Brokers or Finders			26
4.12		Employment, Labor and Employee Benefit Matters			26
4.13		Intellectual Property			27

				Page
4.14		Environmental Matters			28
4.15		Inventory			28
4.16		Insurance			29
4.17		Customers			29
4.18		Taxes			29
4.19		Cutler Agreement			30
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER					30
5.1		Organization of Buyer			30
5.2		Authorization			30
5.3		Compliance with Applicable Law			30
5.4		Litigation			30
5.5		No Conflict or Violation; Consents and Approvals		30
5.6		No Brokers or Finders			31
5.7		Sufficiency of Consideration			31
5.8		[ * * * ]			31
ARTICLE VI COVENANTS OF THE SELLING PARTIES AND BUYER					32
6.1		Access by Buyer; Confidentiality Agreement			32
6.2		Conduct of Business			33
6.3		Employee Matters			34
6.4		No Additional Representations and Warranties			36
6.5		Disclaimer of Estimates and Projections			37
6.6		Revision of Marketing Materials; Use of Names		37
6.7		Customer Notifications			37
6.8		Regulatory Matters, Etc			38
6.9		Post Closing Cooperation			39
6.10		Consents			40
6.11		Financing			40
6.12		Transition Services			40
6.13		Transition Services Contracts			43
6.14		Reporting Obligations			44
6.15		Operation of Business by Buyer			44
6.16		[* * *]			44
6.17		Supplement of Disclosure Schedules			45
ARTICLE VII CONDITIONS TO THE SELLING PARTIES’ OBLIGATIONS					46
7.1		Representations, Warranties and Covenants			46

				Page
7.2		No Laws or Governmental Orders			46
7.3		Deliveries			46
ARTICLE VIII CONDITIONS TO BUYER’S OBLIGATIONS					46
8.1		Representations, Warranties and Covenants			46
8.2		No Law or Governmental Orders			47
8.3		Deliveries			47
8.4		Consents			47
8.5		Employees			47
ARTICLE IX POST-CLOSING COVENANTS					47
9.1		Selling Parties Maintenance of Insurance			47
9.2		Survival			47
9.3		Indemnification			48
9.4		Indemnification Procedures			49
9.5		Limitation on Liability			52
9.6		Calculation and Characterization of Damages			52
9.7		Exclusive Remedy			52
9.8		Mitigation of Damages			53
9.9		Certain Damages			53
9.10		Covenant Not to Compete			53
ARTICLE X MISCELLANEOUS					54
10.1		Termination			54
10.2		Assignment			54
10.3		Cooperation			55
10.4		Notices			55
10.5		Governing Law			56
10.6		Entire Agreement; Amendments and Waivers			56
10.7		Counterparts			56
10.8		No Third Party Beneficiaries; Expenses			56
10.9		Severability			57
10.10		Titles; Gender; Certain Interpretive Matters			57
10.11		Publicity			57
10.12		Exhibits and Schedules; Construction of Certain Provisions		58
10.13		Bulk Transfer Laws			58
10.14		Cumulative Remedies			58
10.15		Arbitration			58
10.16		Time of Essence			58
10.17		Drafting			59

EXHIBITS

Exhibit A-1				Form of Inc. Assignment and Assumption Agreement
Exhibit A-2				Form of Limited Assignment and Assumption Agreement
Exhibit B-1		—		Form of Inc. Assignment of Contracts
Exhibit B-2				Form of Limited Assignment of Contracts
Exhibit C		—		Form of Assignment of Owned Intellectual Property
Exhibit D		—		Form of Assignment and Assumption of Lease

ASSET PURCHASE AGREEMENT

          THIS ASSET PURCHASE AGREEMENT, dated as of July 2, 2007, is by and among Avanir Pharmaceuticals, a California corporation (“ Parent ”), Alamo Pharmaceuticals, LLC, a California limited liability company (“ Seller ” and together, the “ Selling Parties ”), and Azur Pharma Inc., a New York corporation (“ Azur Inc. ”), and Azur Pharma International III Limited, a Bermuda limited liability company (“ Azur Limited ” and together with Azur Inc., “ Buyer ”).

RECITALS

          WHEREAS, Seller is a pharmaceutical company focused on developing, acquiring and commercializing therapeutic products for the treatment of chronic diseases, including a product known as FazaClo, an orally disintegrating tablet that addresses the adherence needs in patients with refractory schizophrenia;

          WHEREAS, Seller is a wholly owned Subsidiary of Parent; and

          WHEREAS, Buyer desires to purchase from the Selling Parties, and the Selling Parties desire to sell to Buyer, certain assets relating to the Business (as defined in Section 1.1 below) and Buyer desires to assume from, and the Selling Parties desire to transfer to Buyer, certain liabilities relating to the Business, in each case upon the terms and subject to the conditions of this Agreement.

AGREEMENT

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

ARTICLE I
DEFINITIONS

          1.1 Defined Terms . As used herein, the terms below when used with an initial capital letter shall have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference.

          “ Action ” means any action, Claim, suit, litigation or other proceeding commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

          “ Affiliate ” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Exchange Act.

          “ Agreement ” means this Asset Purchase Agreement, including all exhibits and schedules hereto (including the Disclosure Schedules), as the same may be amended, modified or supplemented from time to time in accordance with its terms.

          “ Ancillary Agreements ” means, collectively, (a) the Assignment and Assumption Agreements, (b) the Assignments of Contracts, (c) the Assignment of Owned Intellectual Property, (d) the Assignment and Assumption of Lease and (e) all other instruments, certificates and documents delivered by the parties pursuant to this Agreement, as each may be amended, modified or supplemented from time to time in accordance with its terms.

           ^{[* * *]}

          “ Assumed Liabilities ” means all Liabilities, whether or not accruing, arising out of or relating to events or occurrences happening or conditions existing, before, on or after the Closing Date, which relate directly or indirectly to the Business, other than Retained Liabilities. Without limiting the foregoing, Assumed Liabilities include:

     (a) the UPA Payments;

     (b) all rebates, chargebacks (including all pricing allowances) and Product returns relating exclusively to the Business;

     (c) all accounts payable and accrued expenses relating exclusively to the Business;

     (d) all payment and performance obligations of the Selling Parties under the Business Contracts (including the lease under which Seller is the tenant and relating to the Facility, with respect to periods on and after the Closing Date);

     (e) the Assumed Tax Liabilities;

     (f) except for Taxes to be paid by the Selling Parties under Section 2.6 , all Liabilities, whether or not accrued, arising out of or relating to events or occurrences happening or conditions occurring after the Closing, for any Tax that may be imposed by any Governmental Authority on the ownership, sale, operation or use of the Purchased Assets; and

     (g) the Liabilities specified in Schedule 1.1(a) .

          “ Assumed Tax Liabilities ” means all Liabilities for Taxes and fees with respect to the Purchased Assets for which Buyer is liable pursuant to Section 2.6 hereof.

          “ Business ” means the business activities and operations of the Selling Parties involving the development, formulation, testing, production, licensing, commercialization and distribution of the Product, including the development and maintenance of a patient registry and sub-registry with respect to the Product.

          “ Business Contracts ” means all executory Contracts between the Selling Parties or their Affiliates, on the one hand, and a third party, on the other hand, relating exclusively to the operation of the Business, and all Contracts of the Business listed on Schedule 1.1(b) but in all events excluding the Contracts listed on Schedule 1.1(c) .

          “ Business Day ” means any day other than Saturday, Sunday or any day that is a legal holiday or a day in which banking institutions in Los Angeles, California are authorized by Law or other governmental action to close.

          “ Business Employees ” means employees of the Selling Parties or any of their Affiliates identified on Schedule 1.1(d) attached hereto.

          “ Buyer Employees ” means Business Employees who accept offers of employment from Azur Inc. pursuant to Section 6.3(a) hereof.

          “ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq ., as amended to date.

          “ CIMA Agreements ” means, in each case as amended, supplemented or otherwise modified from time to time (a) that certain Amended and Restated Development, License and Supply Agreement, dated as of August 22, 2005, by and between Cima Labs Inc. and Seller; (b) that certain Quality Agreement, dated as of December 29, 2003, by and between Cima Labs Inc. and Seller; and (c) that certain Feasability Plan for Alamo Clozapine DuraSolv, dated as of May 2, 2005, by and between Cima Labs Inc. and Seller.

          “ Claim ” means any claim, demand, cause of action, chose in action, right of recovery or right of set-off of whatever kind or description against any Person.

          “ Closing Net Working Capital Overage ” shall exist when the Closing Net Working Capital Estimate exceeds the Target Net Working Capital and shall be equal to the difference between the Closing Net Working Capital Estimate and the Target Net Working Capital.

          “ Closing Net Working Capital Underage ” shall exist when the Closing Net Working Capital Estimate is less than the Target Net Working Capital and shall be equal to the difference between the Target Net Working Capital and the Closing Net Working Capital Estimate.

          “ Clozapine ” or “ clozapine ” means the active ingredient in the currently marketed product known as FazaClo ^® and shall include 8-chloro-11-(4-methyl-l-piperazinyl)-5H-dibenzo(b,e)(1,4) diazepine and any salts, esters, metabolites, polymorphs, isomers, racemates, hydrates, solvates, crystalline forms thereof and/or pro-drugs thereof.

          “ COBRA ” shall mean the continuation coverage requirements set forth in Sections 601 et seq . of the Employee Retirement Income Security Act of 1974 and Section 4980B of the Code.

          “ Code ” means the Internal Revenue Code of 1986, as amended.

          “ Confidentiality Agreement ” means that certain confidentiality agreement dated March 13, 2007 by and between Azur Pharma Limited and Seller.

          “ Contract ” means all contracts, subcontracts, agreements, leases, licenses, commitments, loan agreements, mortgages, security agreements, trust indentures, sales and purchase orders, statements of work, and other instruments, arrangements or understandings of any kind, including any amendments or alterations thereto.

          “ Disclosure Schedules ” means the disclosure schedules delivered by the Selling Parties to Buyer on the date hereof which, among other things, set forth certain exceptions to the representations and warranties contained in Article IV .

          “ Domain Names ” means the domain names listed on Schedule 1.1(e) .

          “ Employee Records ” means, with respect to Buyer Employees, copies of all job-related employment documents.

          “ Encumbrance ” means any lien (including environmental and tax liens), pledge, charge, other security interest, easement, servient easement, reversion, reverter or purchase right.

          “ Environmental Laws ” means all Laws, as amended and now or hereafter in effect and as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment (including ambient air, indoor air, surface water, ground water, land surface and subsurface strata), health, safety, natural resources or Hazardous Substances, including CERCLA; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 et seq .; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et seq .; the Clean Water Act, 33 U.S.C. §§ 1251 et seq .; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq .; the Clean Air Act, 42 U.S.C. §§ 7401 et seq .; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq . and the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq .

          “ ERISA ” means the United States Employee Retirement Income Security Act of 1974 and the rules and regulations promulgated thereunder.

          “ ERISA Affiliate ” means any Person that, together with the Seller, would be deemed a “single employer” within the meaning of Section 414 of the Code.

          “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

          “ Excluded Assets ” means any and all assets, properties, rights or interests of the Selling Parties or their Affiliates that are not described in the definition of Purchased Assets.

          “ Facility ” means that certain facility used solely in connection with the Business and located in New Jersey.

          “ FDA ” means the United States Food and Drug Administration, or any successor agency thereto.

          “ Federal Food, Drug and Cosmetic Act ” means the Federal Food, Drug and Cosmetic Act of 1938, as amended.

          “ Final Net Working Capital Overage ” shall only exist when the Final Net Working Capital exceeds the Closing Net Working Capital Estimate by more than Two Hundred Fifty Thousand Dollars ($250,000) and shall be equal to the difference between the Final Net Working Capital and the Closing Net Working Capital Estimate.

          “ Final Net Working Capital Underage ” shall only exist when the Final Net Working Capital is less than the Closing Net Working Capital Estimate by more than Two Hundred Fifty Thousand Dollars ($250,000) and shall be equal to the difference between the Closing Net Working Capital Estimate and the Final Net Working Capital.

          “ Fixtures and Equipment ” means all of the computers (but not software), equipment, furniture, fixtures, furnishings, machinery, vehicles and other tangible personal property owned or leased by the Selling Parties or their Affiliates and solely used in connection with the Business, including those items set forth on Schedule 1.1(f) .

          “ GAAP ” means United States generally accepted accounting principles.

          “ Governmental Authority ” means any court, government (federal, state, local, foreign or multinational) or other regulatory, administrative or governmental agency or authority.

          “ Governmental Order ” means any judgment, decision, consent decree, injunction, ruling, writ or order of or entered by any Governmental Authority that is binding on any Person or its property under applicable Law.

          “ Hazardous Substance ” means petroleum, petroleum by-products, polychlorinated biphenyls, asbestos, or substances containing asbestos, mold and any other chemicals, compounds, constituents materials, substances or wastes in any form regulated, or which can give rise to liability under any Environmental Law.

          “ Inc. Assumed Liabilities ” means all Assumed Liabilities other than the Limited Assumed Liabilities.

          “ Inc. Business Contracts ” means all Business Contracts other than the Limited Business Contracts.

          “ Inc. Purchased Assets ” means all Purchased Assets other than the Limited Purchased Assets.

          “ IND ” means (a) the Investigational New Drug Application, as defined in the Federal Food, Drug and Cosmetic Act and as it may be superseded or amended from time to time, and the regulations promulgated thereunder, which is required to be filed with the FDA before beginning clinical testing of a product in human subjects, or any successor application or procedure, and (b) all supplements and amendments that may be filed in respect to the foregoing.

          “ Intellectual Property ” means (a) Know How, (b) trademarks (including service marks), trademark applications, trade dress, logos, trademark rights, (c) United States, foreign and international patents and patent applications (including any divisionals, continuation, continuations in part), (d) copyrights, including registrations and applications for registration thereof and (e) internet domain names.

          “ Inventory ” means all of the Selling Parties’ or any Affiliate’s inventory held for resale in the Business and all of the Selling Parties’ or any Affiliate’s raw materials, work in process or finished goods held for use in the Business, including the inventory set forth on Schedule 1.1(g)

          “ Know How ” means confidential specifications, processes, designs, plans, trade secrets, manufacturing, engineering and other manuals and drawings, standard operating procedures, flow diagrams, safety, quality assurance and quality control information, data, invention disclosures, customer and supplier lists and all other similar confidential technical and business information and data.

          “ Laws ” means any laws, statutes, ordinances, regulations, rules, executive orders, court decisions and orders of any Governmental Authority.

          “ Liabilities ” means any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, asserted or unasserted, known or unknown, whenever arising, including all costs and expenses relating thereto, and including those liabilities, indebtedness and obligations arising under any Law, Action, threatened Action, Governmental Order or any award of any arbitrator of any kind, and those arising under any Contract, commitment or undertaking.

          “ Licensing Revenues ” means, with respect to the Product, the licensing revenues, including royalties, actually received by the Buyer or any of its Affiliates from a Person (excluding any direct or indirect wholly-owned subsidiary of Azur Pharma Limited) pursuant to any sublicense agreement with such Person relating directly to the Product in any territory outside the United States, reduced by (i) any royalty payments to CIMA Labs, Inc. pursuant to Seller’s current contractual obligations to CIMA Labs, Inc. for such payments, (ii) any Net Non-US Licensing Revenues (as such term is defined in the Unit Purchase Agreement) payable pursuant to the Unit Purchase Agreement and (iii) any of such licensing revenues that are non-recurring milestone payments not based upon Product sales.

          “ Licensed Intellectual Property ” means the Intellectual Property subject to the Licenses.

          “ Licenses ” means the specific licenses and license rights set forth on Schedule 1.1(h).

          “ Limited Assumed Liabilities ” means the Assumed Liabilities consisting of (i) the UPA Payments and (ii) those Assumed Liabilities identified in subsections (b) and (c) of the definition of Assumed Liabilities.

          “ Limited Business Contracts ” means the CIMA Agreements and the Supply Agreements.

          “ Limited Purchased Assets ” means all Transferred Intellectual Property, all Product Applications, all Product Registrations, all accounts receivable relating exclusively to the Business, the Limited Business Contracts and all Inventory.

          “ Material Adverse Effect ” means any event, circumstance or occurrence that has had or that would be reasonably likely to have a material adverse change in, or material adverse effect on, the financial condition or results of operations of the Business, taken as a whole; provided that any such change or effect resulting from (a) any change in general economic conditions or in the industries in which the Business operates, to the extent the Business is not disproportionately affected, (b) any change in Law, rule or regulation or GAAP or interpretations thereof, or (c) the announcement or pendency of this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby, shall not be considered when determining whether a Material Adverse Effect has occurred.

          “ Most Recent Fiscal Month End ” means May 31, 2007.

          “ NDA ” means a New Drug Application for any product, as appropriate, requesting permission to place a drug on the market in accordance with the Federal Food, Drug and Cosmetic Act, and all supplements or amendments filed pursuant to the requirements of the FDA, including all documents, data and other information concerning a product which are reasonably necessary for FDA approval to market a product in the United States.

          “ Net Sales ” means, with respect to any period, the sum (without duplication) of (i) the net sales of the Product in the Territory as would be shown in the consolidated financial statements of Buyer’s ultimate parent entity for such period, prepared in accordance with GAAP, (ii) the net sales of the Product in the U.S. as would be shown in the consolidated financial statements for such period of any Person to which a sublicense directly related to the Product has been granted, prepared in accordance with GAAP and (iii) Licensing Revenues for such period.

          “ Net Sales Baseline ” means Seventeen Million Dollars ($17,000,000); provided that, with respect to the calendar year ended December 31, 2007, the Net Sales Baseline shall be Seventeen Million Dollars ($17,000,000) multiplied by the number of days between the Closing Date and December 31, 2007 and divided by 365.

          “ Net Working Capital ” means (i) the value of Inventory, plus (ii) accounts receivable (less any reserves for uncollectibility and payment discounts), plus (iii) current prepaid expenses related to the Business minus (iv) accounts payable to be assumed by Buyer under this Agreement, minus (v) all accrued expenses, including rebates, chargebacks, Product returns (re-

lating exclusively to Products sold prior to the Closing Date) and all other pricing allowances (but excluding accrued compensation expenses), with each amount determined in accordance with GAAP applied on a basis consistent with the past practices of Parent. For purposes of this Agreement, Net Working Capital shall, in all events, exclude cash, fixed assets, deferred tax assets, goodwill, intangible assets and long term debt.

          “ Ordinary Course of Business ” or “ Ordinary Course ” or any similar phrase means the ordinary course of the business conducted by the Selling Parties or any Affiliate with respect to the Business consistent with past practice (including with respect to quantity and frequency).

          “ Owned Intellectual Property ” means all Intellectual Property owned by the Selling Parties that is exclusively used in the Business, including (i) the Product Trademarks, (ii) the Patent Rights, (iii) the Domain Names and (iv) the other Intellectual Property set forth on Schedule 1.1(i) . Included within Owned Intellectual Property shall be the right to sue for past infringement thereof.

          “ Patent Rights ” means the patents, patent applications (including any divisionals, continuation, continuations-in-part) and patent rights set forth on Schedule 1.1(j) .

          “ Permits ” means permits, licenses, franchises and other governmental authorizations, consents and approvals.

          “ Permitted Encumbrances ” means (a) Encumbrances imposed by Law, such as carriers’, cashiers’, workmen’s, warehousemen’s, repairmen’s, mechanics’, materialmen’s, landlords’, laborers’, suppliers’ and vendors’ liens securing obligations which are not yet due or which are being contested in good faith, (b) Permitted Tax Liens, (c) other Encumbrances which do not materially detract from the value of, materially interfere with, or otherwise individually or collectively materially adversely affect the present use and enjoyment of the asset or property subject thereto or affected thereby, (d) any extensions, renewals and replacements of any of the foregoing and (e) any of the foregoing disclosed in the Disclosure Schedules.

          “ Permitted Tax Liens ” means (a) Encumbrances securing the payment of Taxes which are being contested in good faith by appropriate proceedings and (b) Encumbrances for current Taxes not yet due and payable.

          “ Person ” means an individual, a partnership, a corporation, a limited liability company, a trust, an unincorporated organization, a Governmental Authority or any department or agency thereof.

          “ Post-Closing Net Working Capital ” means the Net Working Capital reflected on the Statement of Post-Closing Net Working Capital.

          “ Product ” means, individually and collectively, the orally disintegrating pharmaceutical products that address the adherence needs in patients with refractory schizophrenia (and all improvements to and formulations thereof) currently marketed and sold in the United States pursuant to New Drug Application No. 21-590 (or the foreign equivalent thereof) under the Product Trademarks and, for the avoidance of doubt, includes the licenses applicable to the DuraSolv and OraSolv formulations.

          “ Product Applications ” means (i) the application for approval or registrations by the Selling Parties and its Affiliates, for the investigation, sale, distribution and/or marketing of the Product in the Territory set forth on Schedule 1.1(k) , and (ii) all dossiers, reports, data and other written materials prepared by or filed as part of such applications for approvals or registrations, or maintained by the Selling Parties and its Affiliates and relating to such applications for approvals or registrations.

          “ Product Records ” means to the extent permitted by Law, all existing books and records related solely to the conduct of the Business, including copies of all material customer and supplier lists, account lists, sales history, marketing studies, consultant reports, registry, subregistry and correspondence (excluding invoices) with respect to the Product or the Business to the extent maintained by the Selling Parties, all annual reports and adverse event reports, correspondence with the FDA or any equivalent foreign Governmental Authority (to the extent maintained by the Selling Parties), exception reports, specifications for raw materials and, to the extent maintained by the Selling Parties, FDA or any equivalent foreign Governmental Authority communication thereon, communication relating to manufacturing or packaging with any of the FDA or any equivalent foreign Governmental Authority, vendors or suppliers, and all complaint files and adverse event files with respect to the Product, provided, however , that (a) the Selling Parties may retain (i) a copy of any such books and records to the extent necessary for Tax, accounting, litigation or other valid business purposes and (ii) a copy of all books, documents, records and files maintained by the Selling Parties and/or its Representatives, agents or licensees in connection with their respective Tax, legal, regulatory or reporting requirements, and (b) the following shall be excluded from Product Records (i) attorney work product, attorney-client communications and other items protected by privilege, (ii) Employee Records and (ii) all books, documents, records and files prepared in connection with the Agreement and the Ancillary Agreements, including bids received from other parties and strategic, financial or Tax analyses relating to the divestiture of the Purchased Assets, the Assumed Liabilities, the Product and the Business.

          “ Product Registrations ” means (i) the approvals or registrations which have been received by the Selling Parties or their Affiliates, for the investigation, sale, distribution and/or marketing of the Product or a current Product improvement in the Territory (including any NDAs, INDs and other relevant applications/approvals), including those approvals and registrations set forth on Schedule 1.1( l ) , and (ii) all dossiers, reports, data and other written materials filed as part of such approvals or registrations, or maintained by the Selling Parties and their Affiliates and relating to such approvals or registrations.

          “ Product Trademarks ” means trademarks (including service marks), trademark applications, trade dress, logos and trademark rights as set forth on Schedule 1.1(m) .

          “ Purchased Assets ” means all of the Selling Parties’ or any of their Affiliate’s right, title and interest in and to only the following properties:

	(a)		all assets listed on Schedule 1.1(n) hereto;
	(b)		all Inventory;

	(c)		all Business Contracts;
	(d)		all Fixtures and Equipment;
	(e)		the Permits set forth on Schedule 1.1(o) ;
	(f)		the Transferred Intellectual Property;
	(g)		all Product Applications and Product Registrations;
	(h)		the Software;
	(i)		all accounts receivable relating exclusively to the Business; and
	(j)		the Product Records, including those Product Records set forth on Schedule 1.1(p) , other than to the extent they contain information, data, Know-How or trade secrets of the Selling Parties not used in the Business. Notwithstanding the foregoing, the Purchased Assets shall not include any of the Excluded Assets.

          “ Release ” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of a Hazardous Substance into the environment.

          “ Representative ” means, with respect to any Person, any officer, director, principal, attorney, agent, employee or other authorized representative of such Person.

          “ Retained Liabilities ” means the following, and only the following, Liabilities of the Selling Parties or any Affiliates relating to the Business, which, notwithstanding any other provision of this Agreement, will not be assumed by Buyer:

     (a) all Liabilities of the Selling Parties to the extent relating to Excluded Assets;

     (b) all Liabilities of the Selling Parties for Taxes incurred, or arising out of the operation of the Business through the Closing, other than Liabilities that are apportioned to Buyer pursuant to Section 2.6 hereof;

     (c) all Liabilities arising out of, relating to or in connection with any Action involving the Purchased Assets which was asserted before the Closing;

     (d) the notes in the original principal amount of $6.675 million, $14.4 million, $4 million, and $2 million (Alternate Contingent Note 1) each with Avanir as Payor and Neal R. Cutler as note holder, as described in Section 1.04(d)(ii) of the Unit Purchase Agreement;

     (e) the Subsequent Run Rate Contingent Payment (that is dependent upon achieving $1.5 million of Net Product Revenues (as defined in the Unit Purchase Agreement) for three (3) consecutive months within a fiscal quarter), as more clearly described

in the Unit Purchase Agreement, and all other obligations and liabilities relating to the Unit Purchase Agreement (other than the UPA Payments);

     (f) all Liabilities under the Selling Parties Plans, except as otherwise set forth in Section 6.3 hereof;

     (g) subject to Section 6.3 hereof, all Liabilities for wages, pensions, incentive compensation, equity compensation, severance, COBRA, retiree or other benefits, overtime, workers compensation benefits, occupational safety and health liabilities and other similar Liabilities in respect of Buyer Employees relating to the period through the Closing and in respect of employees of the Selling Parties or their Affiliates who are not Buyer Employees, whether relating to the period before or after the Closing;

     (h) all Liabilities of the Selling Parties for costs and expenses (including legal fees and expenses) that the Selling Parties have incurred in connection with this Agreement and the transactions contemplated hereby;

     (i) all Liabilities resulting from any material quality, design manufacture or safety defect in any Product sold prior to the Closing Date, whether used prior to or after the Closing Date; and

     (j) any liability or obligation of the Selling Parties under this Agreement and the Ancillary Agreements.

          “ Sales Percentage Amount ” means three percent (3%) multiplied by the difference between (a) the Net Sales minus (b) the Net Sales Baseline.

          “ Selling Parties Plans ” means any bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employment, termination, retention, severance, compensation, life insurance, retiree health benefits, workers’ compensation, medical, health or other plans, agreements, policies or arrangements that cover the Business Employees, whether offered by the Selling Parties or any of their Affiliates.

          “ Software ” means the computer software and programs set forth on Schedule 1.1(q) .

          “ Supply Agreements ” means, in each case as amended, supplemented or otherwise modified from time to time, (a) that certain Clozapine Supply Agreement, dated June 1, 2005, by and among Betachem, Inc., Medichem, S.A. and Seller; (b) that certain Packaging Agreement, dated as of January 13, 2005, by and between Cardinal Health PTS, LLC and Seller; (c) that certain Quality Agreement, dated as of June 22, 2004, by and between Cardinal Health PTS, LLC and Seller; (d) that certain Exclusive Distribution Agreement, dated as of July 29, 2004, by and between Cardinal Health PTS, LLC and Seller; and (e) that certain Technical Test Protocol, designated TTP-AHJ-M0004.00, titled “Retain Storage of Fazaclo Tablets” by and between Cardinal Health PTS, LLC and Seller.

          “ Target Net Working Capital ” means a Net Working Capital of Zero Dollars ($0).

          “ Tax or Taxes ” means all taxes (including franchise taxes), charges, fees, levies or other assessments imposed by any Taxing Authority and based on or measured solely with respect to net income or profits, including any interest, penalties or additions attributable or imposed with respect thereto, and all taxes, charges, levies, fees or other assessments, including transfer, gross receipt, sales, use, service, occupation, ad valorem, property, payroll, personal property, excise, severance, premium, stamp, documentary, license, registration, social security, employment, unemployment, disability, environmental (including taxes under Section 59A of the Code), add-on, value-added, withholding (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return therefor), commercial rent and occupancy taxes, and any estimated taxes, deficiency assessments, interest, penalties and additions to tax or additional amounts in connection therewith, imposed by any Taxing Authority, and including any obligation to indemnify or otherwise assume or succeed to the Tax Liability of any other Person.

          “ Tax Return ” means any return, report or similar statement or form required to be filed with respect to any Tax (including any attached schedules and related or supporting information), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

          “ Taxing Authority ” means any Governmental Authority responsible for the imposition of any Tax or exercising Tax regulatory authority.

          “ Transferred Intellectual Property ” means all Owned Intellectual Property and all Licenses.

          “ Unit Purchase Agreement ” means that certain Unit Purchase Agreement by and among the Selling Parties and certain other parties listed therein, dated as of May 22, 2006.

          “ UPA Payments ” means the Contingent Payments and the Non-U.S. Licensing Earn-Out Payments, as such terms are defined in the Unit Purchase Agreement, including all reporting obligations related thereto.

          1.2 Other Defined Terms . The following terms shall have the meanings defined for such terms in the Sections set forth below:

Term		Section
Accounting Firm		2.8(c)
Assignment and Assumption Agreements		3.2(a)(i)
Assignment and Assumption of Lease		3.2(a)(iv)
Assignments of Contracts		3.2(a)(ii)
Assignment of Owned Intellectual Property		3.2(a)(iii)
Buyer Indemnified Parties		9.3(a)
Buyer Plans		6.3(c)
Buyer Welfare Plans		6.3(d)
Claim Notice		9.4(a)
Closing		3.1
Closing Date		3.1

Term		Section
Closing Net Working Capital Estimate		2.8(a)
Contingent Cash Purchase Price		2.3
Contingent Payment Quarterly Report		Unit Purchase Agreement
Damages		9.3(a)
Deductible Amount		9.5(a)
Final Net Working Capital		2.8(c)
Inc. Purchase Price Allocation Schedule		2.5(a)
Inc. Up-Front Cash Purchase Price		2.3(b)
Indemnified Party		9.4(a)
Indemnifying Party		9.4(a)
Indemnity Notice		9.4(b)
Limited Purchase Price Allocation Schedule		2.5(a)
Limited Up-Front Cash Purchase Price		2.3(a)
Material Contracts		4.7(a)
Notice of Disagreement		2.8(c)
Purchase Price		2.3(b)
Reimbursement		9.6(a)
Sales Percentage Amount Dispute Notice		2.4(b)
Selling Parties		Preamble
Seller Indemnified Parties		9.3(b)
Selling Parties Welfare Plans		6.3(d)
SOL Representations and Warranties		9.2(b)
Statement of Post-Closing Net Working Capital		2.8(b)
Surviving Covenants		9.2(c)
Territory		9.10
Third-Party Claim		9.4(a)
Transfer Fees		2.6
Up-Front Cash Purchase Price		2.3
WARN Act		6.3(e)

          1.3 Seller Knowledge . Whenever a phrase herein is qualified by “to the knowledge of Seller” or a similar phrase, it shall mean, with respect to a fact, (a) the current actual knowledge of any of the following individuals: Keith Katkin, Michael Puntoriero, Greg Flesher, Matt Ruth, Eric Benevich, Randall Kaye, Mike Cruse, Susan Work and Laura Randa-King and (b) the knowledge of such individuals obtained after making an inquiry of their direct reports or current counsel or consultants of Parent most likely to have knowledge of such fact; provided, however , that with respect to this subsection (b), with respect to facts related to the Licensed Intellectual Property, the knowledge of Seller shall only relate to facts of which the foregoing individuals have been informed of by the applicable licensor.

ARTICLE II
PURCHASE AND SALE OF ASSETS

          2.1 Transfer of Assets .

          (a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Selling Parties shall sell, convey, transfer, assign and deliver to Azur Limited, and Azur Limited shall purchase and acquire from the Selling Parties, the Selling Parties’ right, title and interest in and to the Limited Purchased Assets free and clear of all Encumbrances, except for Permitted Encumbrances, for the consideration specified below in Section 2.3(a) .

          (b) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, the Selling Parties shall sell, convey, transfer, assign and deliver to Azur Inc. the Inc. Purchased Assets free and clear of all Encumbrances, except for Permitted Encumbrances, for the consideration specified below in Section 2.3(b) .

          2.2 Assumption of Liabilities .

          (a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Azur Limited shall assume, pay and perform and discharge in due course the Limited Assumed Liabilities. Azur Limited shall take, or cause to be taken, all actions necessary to cause the assumption at the Closing Date by Azur Limited of the Limited Assumed Liabilities, including the execution and delivery at the Closing of the Limited Assignment and Assumption Agreement.

          (b) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Azur Inc. shall assume, pay, perform and discharge in due course the Inc. Assumed Liabilities. Azur Inc. shall take, or cause to be taken, all actions necessary to cause the assumption on the Closing Date by Azur Inc. of the Inc. Assumed Liabilities, including the execution and delivery at the Closing of the Inc. Assignment and Assumption Agreement.

          2.3 Purchase Price . (a) The purchase price for the Limited Purchased Assets (the “ Limited Purchase Price ”) shall be an amount equal to the sum of (a) (i) Forty Million Seven Hundred Thousand Dollars ($40,700,000) plus (ii) the Closing Net Working Capital Overage, if any, minus (iii) the Closing Net Working Capital Underage, if any (the sum of the foregoing “(i)”, "(ii)” and “(iii)”, the “ Limited Up-Front Cash Purchase Price ”), payable in cash at the Closing, plus (b) Four Million Dollars ($4,000,000) payable on May 1, 2009 (the “ First Contingent Payment ”), plus (c) Six Million Dollars ($6,000,000) payable on December 31, 2009 (the “ Second Contingent Payment ” and, together with the First Contingent Payment, the “ Contingent Cash Purchase Price ”) plus (d) the Sales Percentage Amount, payable as set forth in Section 2.4 , plus (e) the assumption of the Limited Assumed Liabilities. Notwithstanding the foregoing, Azur Limited shall have no obligation to make the First Contingent Payment and/or the Second Contingent Payment in the event that on or before the date such payment is otherwise required to be made Buyer provides (i) notice to the Selling Parties, together with reasonable supporting documentation, that ^{[* * *]} and (ii) a certificate executed by an executive officer of Azur Pharma Limited certifying that Buyer and its Affiliates have at all times been in compliance with the

covenant set forth in Section 6.16 . If on or prior to September 30, 2010, Buyer provides (i) a certificate executed by an executive officer of Azur Pharma Limited certifying that Buyer and its Affiliates have at all times been in compliance with the covenant set forth in Section 6.16 and (ii) notice to the Selling Parties, together with reasonable supporting documentation, that ^{[* * *]} prior to (y) the date the First Contingent Payment was required to be paid, the Selling Parties shall, within ten (10) Business Days after the receipt of such notice, remit the First Contingent Payment to Azur Limited and/or (z) the date the Second Contingent Payment was required to be paid, the Selling Parties shall, within ten (10) Business Days after the receipt of such notice, remit the Second Contingent Payment to Azur Limited.

          (b) The purchase price for the Inc. Purchased Assets (the “ Inc. Purchase Price ” and together with the “ Limited Purchase Price ,” the “ Purchase Price ”) shall be an amount equal to One Million Three Hundred Thousand Dollars ($1,300,000 ) (the “ Inc. Up-Front Cash Purchase Price ”) plus the assumption of the Inc. Assumed Liabilities.

          2.4 Payment of Sales Percentage Amount .

          (a) Until such time as Azur Limited has paid to Parent an aggregate Sales Percentage Amount equal to Two Million Dollars ($2,000,000), Azur Limited shall pay to Parent the Sales Percentage Amount in respect of each prior calendar year (or with respect to the calendar year ended December 31, 2007, the portion of such calendar year between the Closing Date and December 31, 2007), if any. The Sales Percentage amount in respect of a calendar year, if any, shall be due and payable concurrently with the delivery of the Contingent Payment Quarterly Report to the Selling Parties pursuant to Section 6.14 , delivered pursuant to the Unit Purchase Agreement for the quarter ending December 31 of such prior calendar year.

          (b) Not more than one (1) time during each calendar year, the Selling Parties and their Representatives shall have the right, at their sole cost and expense, to audit the Net Sales during the eight (8) fiscal quarters preceding the commencement of such audit to the extent such fiscal quarters have not previously been audited by the Selling Parties. Following such audit or review of the materials supporting the preparation of a Contingent Payment Quarterly Report, the Selling Parties shall have the right to dispute one or more Contingent Payment Quarterly Reports covered by such audit that it reasonably believes contain any errors. If the Selling Parties elect to dispute one or more such Contingent Payment Quarterly Reports, in whole or in part, then the Selling Parties shall provide a written notice to Azur Limited specifying in reasonable detail its objections thereto (“ Sales Percentage Amount Dispute Notice ”). Promptly following receipt by Azur Limited of any Sales Percentage Amount Dispute Notice from the Selling Parties, Azur Limited and the Selling Parties shall attempt to reconcile their differences, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties hereto. If the Selling Parties and Azur Limited are unable to reach a resolution with such effect within twenty (20) Business Days after the receipt by Azur Limited of the Sales Percent-

age Amount Dispute Notice, the Selling Parties and Azur Limited shall submit the items remaining in dispute for resolution to the Accounting Firm, which shall, within thirty (30) days after such submission, determine and report to the Selling Parties and Azur Limited upon such remaining disputed items, and such report shall be final, binding and conclusive on the Selling Parties and Azur Limited. The fees and disbursements of any accounting firm retained by the Selling Parties or Azur Limited to assist it in any dispute regarding any Contingent Payment Quarterly Report, together with the fees and expenses of the Accounting Firm, shall be borne by the Selling Parties if an adjustment to the Sales Percentage Amount for the period under dispute is less than five percent (5%) of the Sales Percentage Amount reported for such prior calendar year. Otherwise, the fees and disbursements of any accounting firm retained by the Selling Parties or Azur Limited to assist it in any dispute regarding any Contingent Payment Quarterly Report, together with the fees and expenses of the Accounting Firm, shall be borne by Azur Limited.

          2.5 Allocation of Purchase Price .

          (a) The Limited Purchase Price shall be allocated among the Limited Purchased Assets in accordance with Schedule 2.5(a)(i) hereof, as revised pursuant to Section 2.5(b) hereof (the “ Limited Purchase Price Allocation Schedule ”), and the Inc. Purchase Price shall be allocated among the Inc. Purchased Assets in accordance with Schedule 2.5(a)(ii) hereof (the “ Inc. Purchase Price Allocation Schedule ”). The Selling Parties and Azur Limited shall prepare mutually acceptable and substantially identical IRS Forms 8594 “Asset Acquisition Statements Under Section 1060” consistent with the Limited Purchase Price Allocation Schedule and the Selling Parties and Azur Inc. shall prepare mutually acceptable and substantially identical IRS Forms 8594 consistent with the Inc. Purchase Price Allocation Schedule, which forms the parties shall use to report the transactions contemplated by this Agreement to the applicable Taxing Authorities. Each of the Selling Parties and Buyer agrees to provide the other promptly with any other information required to complete IRS Form 8594. Except as otherwise required by a “determination” within the meaning of Section 1313(a) of the Code, the Selling Parties and Buyer agree not to take any position inconsistent with that allocation on their respective Tax Returns or during any audit, examination or other administrative or judicial proceeding.

          (b) Within thirty (30) days after the determination of the Final Working Capital, the Selling Parties shall prepare and deliver to Azur Limited an amended Limited Purchase Price Allocation Schedule prepared in accordance with Schedule 2.5(a)(i) hereof and Section 1060 of the Code and the regulations thereunder that reflects (i) the Final Working Capital and (ii) any adjustments in the allocation of the initial Limited Purchase Price and Limited Assumed Liabilities among the Limited Purchased Assets reasonably necessary to reflect changes in the Limited Purchased Assets between the date hereof and the Closing Date.

          2.6 Closing Costs; Transfer Taxes and Fees . Buyer, on the one hand, and the Selling Parties, on the other hand, shall each pay half (1/2) of (a) all U.S. sales, use, transfer and other Taxes and fees, if any, imposed by reason of the transfer of the Purchased Assets and the assumption of the Assumed Liabilities provided hereunder (and any deficiency, interest or penalty asserted with respect thereto), and (b) all recording, filing and registration fees or other charges in connection with or as a direct result of the transfer of the Purchased Assets (the foregoing a “ Transfer Fee ” and collectively, the “ Transfer Fees ”). At Closing, upon the delivery by Buyer of reasonable documents identifying such Transfer Fees, the Selling Parties’ half of the

Transfer Fees shall be deducted from the Limited Up-Front Cash Purchase Price, to the extent that such Transfer Fees relate to the Limited Purchased Assets, and the Inc. Up-Front Cash Purchase Price, to the extent that such Transfer Fees relate to the Inc. Purchased Assets. Azur Limited shall pay all non-U.S. sales, use, transfer and other Taxes and fees, if any, imposed by reason of the transfer of the Limited Purchased Assets and the assumption of the Limited Assumed Liabilities provided hereunder. Azur Inc. shall pay all non-U.S. sales, use, transfer and other Taxes and fees, if any, imposed by reason of the transfer of the Inc. Purchased Assets and the assumption of Assumed Liabilities other than Limited Assumed Liabilities. Buyer shall provide the Selling Parties with any documentation that would exempt Buyer from or reduce sales, use, transfer and other Taxes and shall file all necessary documentation and Tax Returns required to be filed by Buyer with respect to such Transfer Fees, and the Selling Parties shall reasonably cooperate upon Buyer’s request.

          2.7 Further Assurances . Upon the terms and subject to the conditions contained herein, the parties agree, both before and after the Closing, (i) to use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including using commercially reasonable efforts to satisfy the conditions precedent to each party’s obligations hereunder, (ii) to execute any documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the transactions contemplated hereunder and (iii) to cooperate with each other in connection with the foregoing. In furtherance and not in limitation of the foregoing, each party hereto agrees (1) to file all necessary applications for all necessary Governmental Approvals with the appropriate Governmental Authority with respect to the transactions contemplated hereby as promptly as practical after the date hereof, (including the FDA transfer of ownership letters with respect to the transfer of the NDAs with respect to the Products from the Selling Parties to Buyer), and (2) to use commercially reasonable efforts to obtain from any Governmental Authority any non-actions, clearances, waivers, consents, approvals, authorizations, permits or orders required to be obtained in connection with the execution and performance of this Agreement or the transactions contemplated by this Agreement.

          2.8 Determination of Net Working Capital .

          (a) At least one (1) Business Day prior to the Closing Date, the Selling Parties shall deliver to Buyer a certificate signed by an executive officer of Parent, stating the estimated Net Working Capital as of the Closing Date, prepared using the same principles as the unaudited statement of net assets as of May 31, 2007 described in Section 4.4 (the “ Closing Net Working Capital Estimate ”) and, if any, the resulting Closing Net Working Capital Overage (which amount shall be used in determining the Limited Up-Front Cash Purchase Price), or the resulting Closing Net Working Capital Underage (which amount shall be used in determining the Limited Up-Front Cash Purchase Price), together with related supporting schedules, calculations and documentation.

          (b) Prior to the fifth (5 ^th ) month anniversary of the Closing Date, Buyer shall review the records and inventory of the Business to determine the Net Working Capital existing as of the Closing Date and deliver a statement of Net Working Capital to the Selling Parties and Buyer signed by an executive officer of Buyer’s ultimate parent (the “ Statement of Post-Closing

Net Working Capital ”). The Statement of Post-Closing Net Working Capital shall set forth the Net Working Capital, including a detailed breakdown of the various amounts of each component of Net Working Capital at the Closing Date, prepared using the same principles as the unaudited statement of net assets as of May 31, 2007 described in Section 4.4 , but taking into account additional information that becomes available or events occurring after the Closing Date and prior to the preparation of the Statement of Post-Closing Net Working Capital.

          (c) Within thirty (30) days following the Buyer’s delivery of the Statement of Post Closing Net Working Capital, Parent shall deliver written notice (the “ Notice of Disagreement ”) to Buyer of any dispute Parent has with respect to the preparation or content of the Statement of Post Closing Net Working Capital, including the Post Closing Net Working Capital. The Notice of Disagreement shall describe in reasonable detail the items contained in the Statement of Post Closing Net Working Capital that Parent disputes and the basis for any such disputes. If Parent does not notify Buyer of a dispute with respect to the Statement of Post Closing Net Working Capital within such 30-day period, such Statement of Post Closing Net Working Capital shall be final, conclusive and binding on the parties and the Post Closing Net Working Capital reflected thereon shall become the “ Final Net Working Capital .” In the event a Notice of Disagreement is delivered to Buyer, Buyer and Parent shall negotiate in good faith to resolve such dispute and agree upon the “ Final Net Working Capital. ” If Buyer and Parent, notwithstanding such good faith effort, fail to resolve such dispute within fourteen (14) days after Parent delivers the Notice of Disagreement, then Buyer and Parent jointly shall engage a U.S. accounting firm of national reputation as is reasonably acceptable to Buyer and Parent that has not provided services to either of Buyer or its Affiliates or the Selling Parties or their Affiliates during the prior three (3) years (the “ Accounting Firm ”) to resolve such dispute in accordance with the standards set forth in this Section 2.8 . Parent and Buyer shall use commercially reasonable efforts to cause the Accounting Firm to render a written decision resolving the matters submitted to the Accounting Firm within thirty (30) days after the making of such submission. The Accounting Firm shall address only those items in dispute. The Accounting Firm shall determine, on such basis, whether and to what extent, the Post Closing Net Working Capital or Closing Net Working Capital Estimate require adjustment, which determination shall be consistent with either the position of Buyer or the position of Parent or between the positions of Buyer and Parent and the amount determined by the Accounting Firm shall become the “ Final Net Working Capital .” Judgment may be entered upon the determination of the Accounting Firm in any court having jurisdiction over the party against which such determination is to be enforced. All determinations made by the Accounting Firm will be final, conclusive and binding on the parties. Buyer and/or Parent shall share the fees and expenses of the Accounting Firm proportionately based on which party’s position was closer to the determination by the Accounting Firm.

          (d) If there is a Final Net Working Capital Overage, then, within five (5) Business Days after the determination of the Final Net Working Capital, Azur Limited shall pay to the Selling Parties an amount equal to the Final Net Working Capital Overage by wire transfer to an account designated by Parent.

          (e) If there is a Final Net Working Capital Underage, then, within five (5) Business Days of the determination of the Final Working Capital the Selling Parties shall pay to Azur Limited an amount equal to the Final Net Working Capital Underage by wire transfer to an account designated by Azur Limited.

          (f) Any amount payable by Buyer to the Selling Parties or by the Selling Parties to Buyer pursuant to Section 2.8(d) or Section 2.8(e) shall constitute an adjustment to the Purchase Price.

          (g) For purposes of complying with the terms set forth in this Section 2.8 , each party shall cooperate with and make available to the other parties and their respective representatives all information, records, data and working papers, and shall permit reasonable access to its facilities and personnel, as may be reasonably required in connection with the preparation and analysis of the Closing Net Working Capital Estimate and the Statement of Post Closing Net Working Capital.

          2.9 Withholding Tax . Solely to the extent required by Law, Buyer shall be entitled to deduct and withhold, or cause to be deducted and withheld, the applicable Taxes from the amounts otherwise payable pursuant to this Agreement. To the extent that amounts are so withheld, they shall be treated for all purposes of this Agreement as having been paid to the Person for whom such deduction and withholding was made.

ARTICLE III
CLOSING

          3.1 Closing . Unless this Agreement shall have been terminated in accordance with Section 10.1 hereof, the closing of the purchase and sale of the Purchased Assets, the assumption of the Assumed Liabilities and the consummation of the other transactions contemplated herein relative thereto (the “ Closing ”) shall be held at 8:00 a.m. Pacific time at 101 Enterprise, Suite 300, Aliso Viejo, California on the later of (a) the thirtieth (30 ^th ) day after the date of this Agreement or (b) the third (3 ^rd ) Business Day following the satisfaction or waiver of all of the conditions precedent to the obligations of the parties set forth in Articles VII and VIII (other than conditions which are not capable of being satisfied until the Closing, but subject to the fulfillment or waiver of those conditions at the Closing) (the “ Closing Date ”), unless the parties hereto otherwise agree in writing.

          3.2 Deliveries at Closing .

          (a) To effect the transactions contemplated hereby, the Selling Parties shall, at the Closing, deliver to Buyer, or cause to be delivered to Buyer (unless previously delivered):

          (i) (x) an instrument of assignment and assumption in substantially the form attached hereto as Exhibit A-1 conveying to Azur Inc. the owned tangible personal property included in the Inc. Purchased Assets and assumption by Azur Inc. of the Inc. Assumed Liabilities (the “ Inc Assignment and Assumption Agreement ”), and (y) an instrument of assignment and assumption in substantially the form attached hereto as Exhibit A-2 conveying to Azur Limited the owned tangible personal property included in the Limited Purchased Assets and assumption by Azur Limited of the Limited Assumed Liabilities (the “ Limited Assignment and Assumption Agreement ”), each duly executed by the Selling Parties (collectively, the “ Assignment and Assumption Agreements ”);

          (ii) subject to Section 3.3 hereof, (x) an assignment and assumption document in substantially the form attached hereto as Exhibit B-1 assigning the Inc. Business Contracts to Azur Inc. (the “ Inc Assignment of Contracts ”), and (y) an assignment and assumption document in substantially the form attached hereto as Exhibit B-2 assigning the Limited Business Contracts to Azur Limited (the “ Limited Assignment of Contracts ”, duly executed by the Selling Parties (collectively, the “ Assignments of Contracts ”);

          (iii) an assignment of the Intellectual Property in substantially the form attached hereto as Exhibit C (the “ Assignment of Owned Intellectual Property ”), duly executed by the Selling Parties;

          (iv) an assignment and assumption of lease in substantially the form attached hereto as Exhibit D (the “ Lease Assignment ”), duly executed by Seller;

          (v) counterparts to any other Ancillary Agreements, duly executed by Parent or Seller or other Person, as applicable;

          (vi) a certificate from each of Seller and Parent, dated as of the Closing Date, stating that such Person is not a “foreign person” within the meaning of Section 1445(b)(2) of the Code; and

          (vii) the certificates and other documents required to be delivered at Closing as described in Article VIII , duly executed by the Selling Parties, as applicable.

          (b) To effect the transactions contemplated hereby, Buyer shall, at the Closing, deliver to the Selling Parties, or cause to be delivered to the Selling Parties (unless previously delivered):

          (i) an amount in cash equal to the Inc. Up-Front Cash Purchase Price, payable by Azur Inc., and an amount in cash equal to the Limited Up-Front Cash Purchase Price payable by Azur Limited, each by wire transfer of immediately available funds to an account designated in writing by Parent;

          (ii) a counterpart to the Inc Assignment and Assumption Agreement, duly executed by Azur Inc., and a counterpart to the Limited Assignment and Assumption, duly executed by Azur Limited;

          (iii) a counterpart to the Inc Assignment of Contracts, duly executed by Azur Inc., and a counterpart to the Limited Assignment of Contracts, duly executed by Azur Limited;

          (iv) a counterpart to the Assignment of Owned Intellectual Property, duly executed by Azur Limited;

          (v) a counterpart to the Assignment and Assumption of Lease duly executed by Azur Inc.;

          (vi) counterparts to any other Ancillary Agreements, duly executed by Buyer; and

          (vii) the certificates and other documents required to be delivered at the Closing as described in Article VII , duly executed by Buyer.

          (c) To the extent that a form of any document to be delivered hereunder is not attached as an Exhibit hereto, such documents shall be in form and substance, and shall be executed and delivered in a manner, reasonably satisfactory to the parties.

          3.3 Consents to Assignment and Transfer of Certain Rights and Liabilities . Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any Business Contract or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment or transfer thereof, without the consent of a third party thereto, would constitute a breach or default thereof or give rise to a right of termination or cancellation thereunder, or in any way materially adversely affect the rights of Buyer thereunder. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would materially adversely affect the rights of Buyer thereunder, the Selling Parties will cooperate with Buyer, and use commercially reasonable efforts, at Buyer’s expense, to provide to Buyer the benefits under any such Business Contract or claim or right, including enforcement for the benefit of Buyer of any and all rights of the Selling Parties against a third party thereto arising out of the breach, default, termination or cancellation by such third party or otherwise or, at the Selling Parties’ option, to the maximum extent permitted by Law and such Business Contract, appoint Buyer to be the Selling Parties’ Representative and agent with respect to such Business Contract, as applicable. Following the Closing, Buyer and the Selling Parties shall continue to cooperate and use commercially reasonable efforts to effect the transfer to Buyer of such Business Contracts. Subject to Article IX , Buyer shall indemnify, defend and hold harmless the Selling Parties from and against any and all Liabilities incurred by the Selling Parties in connection with, arising out of or resulting from any actions taken or not taken by Buyer after the Closing Date as Representative or agent with respect to any Business Contract or the non-compliance by Buyer on or following the Closing Date with any Laws applicable to any such Business Contract. Subject to Article IX , the Selling Parties shall indemnify, defend and hold harmless Buyer from and against any and all Liabilities incurred by Buyer in connection with, arising out of or resulting from any actions taken by the Selling Parties on or after the Closing Date with respect to any such Business Contract, other than actions taken in compliance with any such Business Contract or as directed by Buyer.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES AND PARENT

          Contemporaneously with the execution and delivery of this Agreement by the Selling Parties, the Selling Parties are delivering to Buyer the Disclosure Schedules with numbered sections and subsections corresponding to the relevant sections and subsections in this Agreement. Disclosures included in any Schedule to this Agreement shall be considered to be made for purposes of all sections and subsections of the Disclosure Schedules to the extent that such item of disclosure is made with such specificity that it is reasonably apparent that such disclosure applies to such other Schedules. Nothing in the Disclosure Schedules is intended to

broaden the scope of any representation, warranty or covenant of the Selling Parties contained in this Agreement. The inclusion of any information in the Disclosure Schedules shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material to the Business, has resulted in or would result in a Material Adverse Effect or is outside the Ordinary Course of Business. The Selling Parties hereby represent and warrant to Buyer as of (a) the date hereof and (b) the Closing Date, except (i) as to certain representations and warranties that address matters as of a particular date, which are given only as of such date and (ii) as otherwise set forth on the Disclosure Schedules, as follows:

          4.1 Organization . Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The Selling Parties are in good standing in each jurisdiction where such qualification is required, except for any jurisdictions where the failure to so qualify does not have, individually or in the aggregate, a Material Adverse Effect.

          4.2 Authorization . Each Selling Party has all requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. Without limiting the generality of the foregoing, the execution and delivery of this Agreement and the Ancillary Agreements to which a Selling Party is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all requisite action on the part of such Selling Party and its equity owners. This Agreement has been, and as of the Closing each of the Ancillary Agreements to which each Selling Party is a party will have been, duly executed and delivered by such Selling Party, and, assuming the due authorization, execution and delivery of this Agreement and the Ancillary Agreements by Buyer, will be at the Closing valid and binding obligations of the Selling Parties, enforceable against the Selling Parties in accordance with their terms, except as may be limited by the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

          4.3 No Conflict or Violation; Consents and Approvals .

          (a) Neither the execution, delivery or performance by the Selling Parties of this Agreement or the Ancillary Agreements nor the consummation by the Selling Parties of the transactions contemplated hereby and thereby will (i) violate or conflict with any provision of the articles of organization or operating agreement of Parent or Seller (as applicable), (ii) violate, conflict with, or result in or constitute a breach or default under (with the giving of notice or passage of time or both), or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, any Business Contract, or (iii) violate any Law or Governmental Order applicable to the Selling Parties, the Business or the Purchased Assets, except in the case of each of clauses (ii) and (iii) above, for such violations, conflicts, breaches, defaults, terminations or accelerations which do not, individually or in the aggregate, have a Material Adverse Effect or materially and adversely affect the ability of the Selling Parties to consummate the transactions contemplated hereby.

          (b) No consent, approval, order or authorization of, or registration, declaration or filing with any Governmental Authority is required by or with respect to the Business as a result of the execution and delivery of this Agreement by the Selling Parties or the consummation of the transactions contemplated hereby, except for any approval of or filing with a Governmental Authority required by virtue of Buyer’s or their ultimate parent’s identity.

          4.4 Financial Information . Set forth on Schedule 4.4 is an unaudited statement of net assets as of May 31, 2007 and an unaudited statement of net wholesale shipments and direct operating expenses for the eight (8) month period ended May 31, 2007 for the Business. Such statements were prepared in accordance with the books and accounts and other financial records of the Selling Parties and present fairly in all material respects the net wholesale shipments, direct operating expenses and net assets of the Business based on managements’ reasonable assumptions as of and for the periods indicated and such statements have been prepared in accordance with GAAP, applied on a basis consistent with the past practices of Parent, except as indicated on Schedule 4.4 .

          4.5 Absence of Certain Changes or Events . Since December 31, 2006, (a) the Selling Parties have not engaged in any practice or taken any action, or entered into any transaction with respect to the Business outside the Ordinary Course of Business, (b) there has not occurred any event which if it had occurred between the date hereof and the Closing Date would have been prohibited by Section 6.2(b) , and (c) there has not occurred any Material Adverse Effect.

          4.6 Title to Purchased Assets and Sufficiency . The Selling Parties have good and valid title to the Purchased Assets, free and clear of all Encumbrances, except for Permitted Encumbrances. All the tangible personal property (other than the Inventory) included in the Purchased Assets is suitable for purposes for which it is used in good working condition, reasonable wear and tear excepted. The Purchased Assets constitute all the assets required for the operation of the Business, as currently conducted, in all material respects.

          4.7 Material Contracts .

          (a) Schedule 4.7(a) sets forth as of the date hereof each Business Contract (i) involving individual annual payments in excess of One Hundred Thousand Dollars ($100,000) and pursuant to which a Selling Party has continuing obligations (other than an obligation of confidentiality), (ii) relating to the Transferred Intellectual Property, (iii) that limits or purports to limit the ability of a Selling Party to compete in any line of business or with any Person in any geographic area or for any period of time or (iv) requiring the Selling Parties to make payments to an unaffiliated third party based on the level of income or revenues of the Selling Parties (collectively, the “ Material Contracts ”).

          (b) Copies of the Material Contracts and all amendments and agreements relating thereto have been made available to Buyer. To the knowledge of the Selling Parties, all Business Contracts are in full force and effect and capable of assignment without any additional consents or approvals. Except for such exceptions as would not be material, (i) the Selling Parties have performed all obligations required to be performed by them under each of the Business Contracts, (ii) the Selling Parties are not in breach or violation of, or default under, any of the

Business Contracts, (iii) the Selling Parties have not received any written notice that either is currently in breach or violation of any of the Business Contracts and (iv) to the knowledge of the Selling Parties, no other party to any Business Contract is (with or without the lapse of time or the giving of notice or both) in breach thereof.

          4.8 Permits . To the knowledge of the Selling Parties, the Selling Parties or their Affiliates have all Permits necessary to own and operate the Business and the Purchased Assets as presently conducted, in all material respects. Such Permits are in full force and effect, except for such failures to be in full force and effect as do not have, individually or in the aggregate, a Material Adverse Effect. The Selling Parties are not in material default, nor have they received written notice of any claim of default, with respect to any such Permit.

          4.9 Litigation .

          (a) There is no material Action pending or, to the knowledge of the Selling Parties, threatened, against or affecting the Purchased Assets or the Business, (b) neither the Selling Parties nor Parent is subject to any material Governmental Order relating to the Purchased Assets or the Business and (c) there are no unsatisfied judgments against the Purchased Assets or the Business.

          (b) Between May 26, 2006 and the date of this Agreement, (i) the Selling Parties have not been notified of any Claim against them or their insurers relating to product liability or similar Liability in respect of the Product and (ii) no payment or settlement of any kind has been made in response to or in anticipation of such a Claim.

          (c) There are no outstanding Government Orders that apply to the Purchased Assets or the Business that restrict the ownership, disposition or use of the Purchased Assets or the conduct of the Business.

          (d) Schedule 4.9(d) lists, as of the date hereof, all litiga