-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NvwdZ6izU3Ckhk/Fog6tr1z0ToMQ8vb4yJvbxDpms2CwKIYDRwPByjurZRkl+mo2 jMPHN95RO75N598awWiYWg== 0000950136-01-501233.txt : 20010823 0000950136-01-501233.hdr.sgml : 20010823 ACCESSION NUMBER: 0000950136-01-501233 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010822 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MERCK KGAA /FI CENTRAL INDEX KEY: 0001004059 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 64271 DARMSTADT CITY: GERMANY HRB 6164 STATE: I8 MAIL ADDRESS: STREET 1: 64271 DARMSTADT CITY: GERMANY STATE: I8 ZIP: 00000 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PHARMACEUTICAL RESOURCES INC CENTRAL INDEX KEY: 0000878088 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 223122182 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-46121 FILM NUMBER: 1721530 BUSINESS ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 BUSINESS PHONE: 9144257100 MAIL ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 SC 13D/A 1 file001.txt AMENDMENT TO SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1)* PHARMACEUTICAL RESOURCES, INC. (Name of Issuer) COMMON STOCK, $.01 PAR VALUE (Title of Class of Securities) 717125 9108 (CUSIP Number) THOMAS J. DRAGO, ESQ. COUDERT BROTHERS 1114 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10036 (212) 626-4400 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) AUGUST 21, 2001 (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rules 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. - ----------------- *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosure provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 717125 9108 - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Merck KGaA - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS: WC - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION GERMANY - -------------------------------------------------------------------------------- NUMBER OF SHARES 7. SOLE VOTING POWER: BENEFICIALLY 13,634,012 OWNED BY EACH ----------------------------------------------------------- REPORTING PERSON 8. SHARED VOTING POWER: WITH ----------------------------------------------------------- 9. SOLE DISPOSITIVE POWER: 13,634,012 ----------------------------------------------------------- 10. SHARED DISPOSITIVE POWER: - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 13,634,012 - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 42.7% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: CO - -------------------------------------------------------------------------------- 2 This Amendment No. 1 (this "Amendment") to the statement on Schedule 13D filed by Merck KGaA, a Kommanditgesellschaft auf Aktien organized under the laws of Germany ("KGaA" or the "Acquiror"), on July 10, 1998 (the "Schedule 13D"), is being filed pursuant to Rule 13d-2(a) under the Securities Exchange Act of 1934, as amended, with respect to the common stock, par value $.01 per share (the "Common Stock"), of Pharmaceutical Resources, Inc. (the "Issuer" or the "Company"). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Schedule 13D. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Item 3 is hereby supplemented as follows: As discussed more fully in Item 4, below, on August 21, 2001, the KGaA Option, the Genpharm Option and the Genpharm Warrants (as such terms are defined in Item 4, below) were exercised. The aggregate exercise prices for the KGaA Option, the Genpharm Option and the Genpharm Warrants are $1,640,000, $702,080 and $598,200, respectively, for the 820,000, 351,040 and 249,700 shares of Common Stock issuable thereunder, respectively. Payment of the exercise prices will be made to the Company in cash prior to the Closing (as defined in Item 4, below) from the working capital of the relevant party. ITEM 4. PURPOSE OF TRANSACTION. Item 4 is hereby supplemented as follows: In July 2001, KGaA was approached by Bear, Stearns & Co. Inc. ("Bear Stearns") to determine whether KGaA would be interested in selling all or a part of the shares of Common Stock (the "KGaA Shares") beneficially owned by KGaA, including the shares of Common Stock held directly by KGaA and the shares of Common Stock beneficially owned by KGaA through its subsidiaries, Genpharm Inc., an Ontario corporation ("Genpharm"), and EMD, Inc., a Delaware corporation formerly known as "Lipha Americas, Inc." ("EMD"). KGaA responded to Bear Stearns that KGaA had not made any decision to sell the KGaA Shares, but that if KGaA were to receive offers to purchase all of the KGaA Shares on terms and conditions, including price, deemed acceptable to KGaA, KGaA might determine to sell the KGaA Shares, subject to obtaining necessary internal corporate approvals. Bear Stearns informed KGaA that it intended to contact, and conduct meetings with, a limited number of institutional investors to determine whether such institutional investors would be interested in purchasing the KGaA Shares in a private placement transaction. Representatives of KGaA informed Bear Stearns once again that (1) it had not made any decision to sell the KGaA Shares, but that if KGaA were to receive offers to purchase all of the KGaA Shares on terms and conditions, including price, deemed acceptable to KGaA, KGaA might determine to sell the KGaA Shares, subject to obtaining necessary internal corporate approvals, (2) KGaA was not retaining Bear Stearns as its agent or otherwise in connection with the KGaA Shares or in connection with soliciting any offer to purchase the KGaA Shares and that KGaA was under no obligation whatsoever to Bear Stearns or any potential investors in respect of the KGaA Shares, and (3) there could be no assurance that KGaA would determine to sell the KGaA Shares if any such offers were made. As a result of Bear Stearns' discussions with a limited number of institutional investors, representatives of Bear Stearns informed KGaA that while no firm offers to purchase the KGaA Shares had been received, Bear Stearns believed that offers could be forthcoming, although no assurance could be given that such offers would actually be made or, if offers were to be made, the price at which such offers would be made. Consequently, during the latter part of the week of August 13, 2001, representatives of KGaA were asked to review and comment on a form of purchase agreement and placement agency agreement prepared at the direction of Bear Stearns, which agreements were contemplated to be utilized in a sale of the KGaA Shares if offers to purchase the KGaA Shares were to materialize and KGaA determined to accept such offers. On August 20, 2001, representatives of KGaA discussed these agreements with representatives of Bear Stearns and the Company, which discussions continued through August 21, 2001. On August 21, 2001, Bear Stearns presented KGaA with offers to purchase all of the KGaA Shares at $27 per share in cash. KGaA, after reviewing the terms and conditions of the offers and receiving necessary internal corporate 3 approvals to sell the KGaA Shares at $27 per share in cash and otherwise on the terms and conditions proposed, executed, together with Genpharm and EMD, purchase agreements (the "Purchase Agreements") with each of the offering institutional investors (the "Investors") and executed, together with Genpharm and EMD, the placement agency agreement with Bear Stearns (the "Placement Agency Agreement"). On the same date, (a) KGaA exercised its option under the Option Agreement dated as of June 30, 1998 by and among KGaA and the Company (the "KGaA Option") to acquire 820,000 shares of Common Stock at an option exercise price of $2.00 per share; (b) KGaA caused Genpharm to exercise its option under the Option Agreement dated as of June 30, 1998 by and among Genpharm and the Company (the "Genpharm Option") to acquire 351,040 shares of Common Stock at an option exercise price of $2.00 per share; (c) KGaA caused Genpharm to exercise its warrant (the "First Warrant") under the Warrant Agreement dated as of October 16, 1992 by and between Genpharm and the Company (the "Warrant Agreement") to acquire 99,700 shares of Common Stock at a warrant exercise price of $6.00 per share; and (d) KGaA caused Genpharm to exercise its warrant (together with the First Warrant, the "Genpharm Warrants") pursuant to the distribution agreement dated April 30, 1993 by and among The Merck Generics Group, B.V. and the Company (the "Distribution Agreement") to acquire 150,000 shares of Common Stock at a warrant exercise price of $10.00 per share. Each of the Investors has entered into a Purchase Agreement with KGaA, Genpharm, EMD and the Company. Each Purchase Agreement is identical in all material respects other than with respect to the identity of the Investor and the number of KGaA Shares to be purchased by such Investor. Each Purchase Agreement provides that KGaA, Genpharm and EMD, as selling stockholders (the "Selling Stockholders"), will sell such KGaA Shares to the Investor for a purchase price of $27 per share in cash, and that the closing of the purchase and sale of such shares (the "Closing") will occur as soon as practicable and as agreed by the parties following notification by the Securities and Exchange Commission (the "Commission") to the Company of the Commission's willingness to declare effective the registration statement to be filed by the Company pursuant to the Purchase Agreement (the "Registration Statement"). The obligation of the Selling Stockholders in each Purchase Agreement to complete the purchase and sale of the KGaA Shares being purchased by the Investor is subject only to receipt by the Selling Stockholders of same day funds in the full amount of the purchase price for such shares, the completion of the purchase and sales under the Purchase Agreements with the other Investors, and the accuracy of the representations and warranties of the Investor and the performance of those undertakings of the Investor to be fulfilled prior to the Closing. The obligation of the Investor in each Purchase Agreement to pay for such shares is subject only to the Commission notifying the Company of the Commission's willingness to declare the Registration Statement effective on or prior to the sixtieth day after the date such Registration Statement was filed by the Company, the representations and warranties of the Company and the Selling Stockholders being accurate in all material respects as of the date of the Purchase Agreement, and the Company and the Selling Stockholders having fulfilled in all material respects all undertakings to be fulfilled prior to Closing. If the Closing has not occurred prior to November 14, 2001, the obligations of the Selling Stockholders and the Investors under the Purchase Agreements will expire on such date. Under each of the Purchase Agreements, the Investors have represented and warranted to the Company and the Selling Stockholders, among other things, that they are accredited investors within meaning of Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). Under each of the Purchase Agreements, the Company has agreed to file with the Commission, as promptly as practicable and in no event later than 10 days after the date of execution of such agreements, a Registration Statement on Form S-3 relating to the resale of the KGaA Shares to be purchased by the Investor. The Company further agreed to take its reasonable efforts, subject to receiving necessary information from the Investor, to cause the Commission to notify the Company of the Commission's willingness to declare the Registration Statement effective within 60 days after the date of filing by the Company, and to make such amendments and supplements thereto in order to keep the Registration Statement effective until the earliest of (i) two years after the effective date of the Registration Statement, (ii) the date on 4 which such shares may be resold by the Investors without registration by reason of Rule 144(k) under the Securities Act or any similar rule, or (iii) such time as all shares purchased by the Investor under each Purchase Agreement have been sold. Each of the Purchase Agreements contains other representations and warranties, covenants and indemnification provisions customary for agreements of this type. A copy of the form of Purchase Agreement is attached hereto as Exhibit 1 and incorporated herein by reference. Bear Stearns, as placement agent (the "Placement Agent"), the Company and the Selling Stockholders have entered the Placement Agency Agreement pursuant to which the Selling Stockholders have engaged the Placement Agent as their agent in connection with the private placement of the KGaA Shares to the Investors. Pursuant to the Placement Agency Agreement, the Placement Agent has agreed to assist the Company and the Selling Stockholders in connection with the completion of the sale of the KGaA Shares. Under the Placement Agency Agreement, the Company and the Selling Stockholders have agreed that, for a period of ninety days from the effective date of the Registration Statement, neither the Company nor any Selling Stockholder will, without the prior written consent of the Placement Agent, sell, contract to sell or otherwise dispose of or issue any securities of the Company, except pursuant to previously issued options, any agreements providing for anti-dilution or other share issuance rights in existence on August 21, 2001, any employee benefit or similar plan of the Company in existence on August 21, 2001, or any strategic investment and/or alliance transactions, acquisition or joint venture that the Company may enter into. As compensation for the services rendered by the Placement Agent, the Selling Stockholders have agreed in the Placement Agency Agreement to pay the Placement Agent a fee equal to 4.5% of the gross proceeds paid by the Investors for the KGaA Shares pursuant to the Purchase Agreements. Such fee is payable with respect to any private placement or similar transaction involving the sale of KGaA Shares that occurs either (i) during the term of the Placement Agent's engagement or (ii) at any time during a period of six months following the effective date of termination of the Placement Agent's engagement if such transaction includes a sale of KGaA Shares to an Investor named on the Placement Agent's contact list of Investors, or any parent, subsidiary or other affiliate thereof. The Placement Agency Agreement contains other representations and warranties, covenants and indemnification provisions customary for agreements of this type. A copy of the Placement Agency Agreement is attached hereto as Exhibit 2 and is hereby incorporated herein by reference. KGaA and the Company have entered into a letter agreement dated August 21, 2001 (the "Letter Agreement"), in which the parties agreed that (i) as a condition precedent to the Company's obligations under the Purchase Agreements, each of the representatives of KGaA on the Company's Board of Directors (the "Board") will execute the Registration Statement, and (ii) KGaA will cause the four representatives of KGaA on the Board to resign from the Board immediately upon, and subject to, the Closing, except that if KGaA retains over ten (10%) percent (the "Outstanding Minimum") of the Company's issued and outstanding shares of Common Stock following the Closing, KGaA will cause only three of such representatives to resign from the Board immediately upon, and subject to, the Closing, and if KGaA holds at least the Outstanding Minimum immediately following the Closing, then at such time as it may subsequently hold less than the Outstanding Minimum, KGaA will promptly cause its remaining representatives to resign from the Board. A copy of the Letter Agreement is attached hereto as Exhibit 3 and is hereby incorporated herein by reference. The purpose of the transactions described above is to accept the offers of the Investors and sell the KGaA Shares to the Investors. While the obligations of the parties to the Purchase Agreements are subject only to a limited number of conditions, there can be no assurance that such conditions will be satisfied or that the Closing will occur. If the Closing does not occur, KGaA intends to review its options with respect to the KGaA Shares. Depending upon market conditions, the strategic business goals of KGaA and other factors, if the Closing does not occur KGaA may determine to retain the KGaA Shares, acquire additional shares of Common Stock or other securities of the Company, or dispose of all or a portion of the KGaA Shares, and KGaA specifically reserves the right to do any or all the foregoing. If the Closing does not occur, KGaA would intend to continue its representation on the Board. 5 Except as set forth above in Item 4 to this Amendment, KGaA currently does not have any plans or proposals with respect to the Company. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. Item 5 is hereby supplemented as follows: (a) As of August 21, 2001, KGaA beneficially owned 13,634,012 shares of Common Stock, which shares were held as follows: EMD owned 12,213,272 shares of Common Stock, KGaA owned 820,000 shares of Common Stock (representing the shares of Common Stock for which the KGaA Option is exercisable), and Genpharm owned 600,740 shares of Common Stock (representing the shares of Common Stock for which the Genpharm Option and the Genpharm Warrants are exercisable). Such shares of Common Stock, totaling 13,634,012 in the aggregate, constitute 42.7% of the issued and outstanding shares of Common Stock, based on 31,946,891 shares of Common Stock outstanding (including the shares of Common Stock issuable upon exercise of the KGaA Option, the Genpharm Option, and the Genpharm Warrants). (b) Merck KGaA has sole voting and dispositive power over all of the KGaA Shares a result of its ownership (directly or indirectly) of EMD and Genpharm (each of which may be deemed to possess shared voting and dispositive power over such shares). (c) Except as specifically set forth in response to Item 4 to this Amendment, there have been no transactions in or relating to the shares of Common Stock of the Company by the persons named in response to paragraph (a) in the last sixty days. (d) Except as set forth in response to Items 4 and 5 to this Amendment, no person is known by KGaA to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the KGaA Shares. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Item 6 is hereby supplemented as follows: See Item 4, above. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Item 7 is hereby amended and supplemented as follows with the addition of the following agreements as exhibits to the Schedule 13D: 1. Form of the Purchase Agreements dated as of August 21, 2001, among the Company, KGaA, Genpharm, EMD and each of the Investors. 2. Placement Agency Agreement dated as of August 21, 2001, among the Company, KGaA, Genpharm, EMD and the Placement Agent. 3. Letter Agreement dated as of August 21, 2001, between the Company and KGaA. 6 SIGNATURES ---------- After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: August 21, 2001 MERCK KGaA By: /s/ Klaus-Peter Brandis ------------------------ Name: Klaus-Peter Brandis Title: Head of Legal Department 7 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION PAGE NO. 1. Form of the Purchase Agreements dated as of August 21, 2001, among the Company, KGaA, Genpharm, EMD and each of the Investors. 2. Placement Agency Agreement dated as of August 21, 2001, among the Company, KGaA, Genpharm, EMD and the Placement Agent. 3. Letter Agreement dated as of August 21, 2001, between the Company and KGaA. 8 EX-99.1 3 file002.txt PURCHASE AGREEMENT EXECUTION COPY PURCHASE AGREEMENT THIS AGREEMENT is made as of the ___ day of August, 2001, by and among Pharmaceutical Resources, Inc., a corporation organized under the laws of the State of New Jersey (the "Company"), with its principal offices at One Ram Ridge Road, Spring Valley, New York 10977, the stockholders of the Company that are listed on Exhibit A-1 hereto (the "Selling Stockholders") and the purchaser whose name and address is set forth on the signature page hereof (the "Purchaser"). IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company, the Selling Stockholders and the Purchaser agree as follows: SECTION 1. Authorization of Sale of the Shares. Subject to the terms and conditions of this Agreement, the Selling Stockholders have authorized the sale of an aggregate of 13,634,012 shares (the shares sold hereunder being referred to as the "Shares") of the Company's common stock, par value $0.01 per share (the "Common Stock"), owned by the Selling Stockholders. SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing (as defined in Section 3), the Selling Stockholders will sell to the Purchaser, and the Purchaser will buy from the Selling Stockholders, upon the terms and conditions hereinafter set forth, the number of Shares (at the purchase price) shown below: Price Per Number to Be Share In Aggregate Purchased Dollars Price ------------------------ ---------------------- -------------------- $ $ The Company and the Selling Stockholders propose to enter into this same form of purchase agreement with certain other investors (the "Other Purchasers") and expect to complete sales of the Shares to them. The Purchaser and the Other Purchasers are hereinafter sometimes collectively referred to as the "Purchasers," and this Agreement and the agreements executed by the Other Purchasers are hereinafter sometimes collectively referred to as the "Agreements." The term "Placement Agent" shall mean Bear, Stearns & Co. Inc. and any other co-placement agent designated by Bear, Stearns & Co. Inc. SECTION 3. Delivery of the Shares at the Closing. The completion of the purchase and sale of the Shares (the "Closing") shall occur at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 as soon as practicable and as agreed by the parties hereto following notification by the Securities and Exchange Commission (the "Commission") to the Company of the Commission's willingness to declare effective the registration statement to be filed by the Company pursuant to Section 8.1 hereof (the "Registration Statement") at a place and time (the "Closing Date") to be agreed upon by the Company, the Selling Stockholder and the Placement Agent and of which the Purchasers will be notified by facsimile transmission or otherwise. At the Closing, the Selling Stockholders shall deliver to the Purchaser one or more stock certificates registered in the name of the Purchaser, or, if so indicated on the Stock Certificate Questionnaire attached hereto as Appendix I, in such nominee name(s) as designated by the Purchaser in writing, representing the number of Shares set forth in Section 2 above and bearing an appropriate legend referring to the fact that the Shares were resold in reliance upon the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), provided by Section 4(2) thereof. Subject to Section 6(h) hereof, the Company will promptly substitute one or more replacement certificates without the legend at such time as the Registration Statement is effective. The name(s) in which the stock certificates are to be registered are set forth in the Stock Certificate Questionnaire attached hereto as part of Appendix I. The Selling Stockholders' obligation to complete the purchase and sale of the Shares and deliver such stock certificate(s) to the Purchaser at the Closing shall be subject only to the following conditions, any one or more of which may be waived by the Selling Stockholders: (a) receipt by the Selling Stockholders of same-day funds in the full amount of the purchase price for the Shares being purchased hereunder; (b) completion of the purchases and sales under the Agreements with the Other Purchasers; and (c) the accuracy of the representations and warranties made by the Purchasers and the fulfillment of those undertakings of the Purchasers to be fulfilled prior to the Closing. The Purchaser's obligation to accept delivery of such stock certificate(s) and to pay for the Shares evidenced thereby shall be subject only to the following conditions: (a) the Commission has notified the Company of the Commission's willingness to declare the Registration Statement effective on or prior to the 60th day after the date such Registration Statement was filed by the Company; (b) that the representations and warranties made by the Company and the Selling Stockholders herein were accurate in all material respects as of the date of this Agreement; and (c) that the Company and the Selling Stockholders have fulfilled, in all material respects, all undertakings to be fulfilled prior to Closing. The Purchaser's obligations hereunder are expressly not conditioned on the purchase by any or all of the Other Purchasers of the Shares that they have agreed to purchase from the Selling Stockholders. If the Closing Date has not occurred, the Selling Stockholders' obligations to sell and the Purchaser's obligation to purchase the Shares will expire on November 14, 2001. SECTION 4. Representations, Warranties and Covenants of the Company. The Company hereby represents and warrants to, and covenants with, the Selling Stockholders and the Purchaser as follows: 4.1 Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New Jersey and the Company is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not reasonably be expected to have a material adverse effect upon the business, financial condition, properties or operations of the Company and its Subsidiary (as defined below) taken as a whole (a "Material Adverse Effect"). The Company has one principal operating subsidiary, Par Pharmaceutical, Inc. (the "Subsidiary"). The Subsidiary is a direct wholly-owned subsidiary of the Company. The Subsidiary is duly incorporated, validly existing and in good standing under the laws of its -2- jurisdiction of incorporation and is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Material Adverse Effect. 4.2 Authorized Capital Stock. Except as disclosed in or contemplated by the Confidential Private Placement Memorandum dated August 13, 2001 prepared by the Company, including all exhibits, supplements and amendments thereto (the "Private Placement Memorandum"), the Company had authorized and outstanding capital stock as set forth under the heading "Capitalization" in the Private Placement Memorandum as of the date set forth therein; the issued and outstanding shares of the Company's Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in material compliance with all federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities. Except as disclosed in or contemplated by the Private Placement Memorandum, the Company does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations. With respect to the Subsidiary, (i) all the issued and outstanding shares of the Subsidiary's capital stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance with applicable federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and (ii) there are no outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of the Subsidiary's capital stock or any such options, rights, convertible securities or obligations. 4.3 No Other Registration Rights. Except as set forth on Schedule 4.3 hereto, no holder of any security of the Company has any right (which has not been waived or has not expired by reason of lapse of time following notification of the Company's intent to file the Registration Statement) to require the Company to register the sale of any security owned by such holder under the Securities Act in the Registration Statement. 4.4 Authority. The Company and its Subsidiary have all the requisite power and authority and have all necessary approvals, licenses, permits and authorizations to own, operate, or lease their properties and to carry on their business as now conducted, except where the failure to have any such approval, license, permit or authorization would not reasonably be expected to have Material Adverse Effect. 4.5 Due Execution, Delivery and Performance of this Agreement. The Company has corporate power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions herein contemplated will not violate any provision of the organizational documents of the Company or the Subsidiary and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Company or the Subsidiary pursuant to the terms or provisions of, or will not (i) conflict with, -3- result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under (A) any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary or any of their respective properties may be bound or affected and in each case which would have a Material Adverse Effect, or (B) any statute or any judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or the Subsidiary or any of their respective properties where such conflict, breach, violation or default is likely to, result in a Material Adverse Effect. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except for any compliance with the Blue Sky laws and federal securities laws applicable to the offering of the Shares. Upon the execution and delivery of this Agreement, and assuming the valid execution thereof by the Selling Stockholders and the Purchaser, this Agreement will constitute a valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Company in Section 8.3 hereof may be held violative of public policy and therefore legally unenforceable. 4.6 Accountants. Arthur Andersen LLP, who has expressed its opinion with respect to the consolidated financial statements included in the Company's Form 10-K for the fiscal year ended December 31, 2000 and incorporated by reference in the Registration Statement and the Prospectus which forms a part thereof, are independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder (the "Rules and Regulations"). 4.7 No Defaults. Except as disclosed in the Private Placement Memorandum, and except as to defaults, violations and breaches which individually or in the aggregate would not have a Material Adverse Effect, neither the Company nor the Subsidiary is in violation or default of any provision of its certificate of incorporation or bylaws, or in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of its properties are bound; and there does not exist any state of fact known to it which, with notice or lapse of time or both, would constitute an event of default on the part of the Company or the Subsidiary as defined in such documents, except such defaults which individually or in the aggregate would not have a Material Adverse Effect. 4.8 No Actions. Except as disclosed in the Private Placement Memorandum, there are no legal or governmental actions, suits or proceedings pending or threatened in writing to which the Company or the Subsidiary is or may be a party or of which property owned or leased by the Company or the Subsidiary is or may be the subject, or related to environmental or discrimination matters, which actions, suits or proceedings, individually or in the aggregate, prevent or could reasonably be expected to materially and adversely affect the transactions -4- contemplated by this Agreement or result in a Material Adverse Effect; no labor disturbance by the employees of the Company exists or is imminent which might reasonably be expected to have a Material Adverse Effect; and neither the Company nor the Subsidiary is party to or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body administrative agency or other governmental body. 4.9 No Material Change. Since June 30, 2001 and except as described in or specifically contemplated by the Private Placement Memorandum, (i) the Company and the Subsidiary have not incurred any known material liabilities or obligations, indirect, or contingent, or entered into any material verbal or written agreement or other transaction which was not in the ordinary course of business or which could reasonably be expected to have a Material Adverse Effect on the earnings of the Company in the reasonably foreseeable future; (ii) the Company and the Subsidiary have not sustained any material loss or interference with its businesses or properties from fire, flood, windstorm, accident or other calamity not covered by insurance; (iii) the Company and the Subsidiary have not paid or declared any dividends or other distributions with respect to its capital stock and neither the Company nor the Subsidiary is in default in the payment of principal or interest on any material outstanding debt obligations; (iv) except as set forth on Schedule 4.9 hereto, there has not been any change in the capital stock of the Company or the Subsidiary or increase in indebtedness material to the Company; (v) the Company and the Subsidiary have not incurred or sustained any other event or change that would have a Material Adverse Effect; and (vi) the Company has conducted its business only in the ordinary course of business in accordance with past practice. 4.10 Intellectual Property. (a) The Company has ownership or license or legal right to use all material patent, copyright, trade secret and trademark rights known by it to be necessary to the conduct of the business of the Company as now conducted (collectively, "Intellectual Property") other than Intellectual Property generally available on commercial terms from other sources. (b) All material licenses or other material agreements under which (i) the Company is granted rights in Intellectual Property, other than Intellectual Property generally available on commercial terms from other sources, and (ii) the Company has granted rights to others in Intellectual Property owned or licensed by the Company, are in full force and effect and there is no material default by the Company or any other party thereto. (c) The Company has taken all steps believed by it to be required in accordance with sound business practice and business judgment to establish and preserve its ownership of all material copyright, trade secret and other proprietary rights with respect to its products and technology. (d) The present business, activities and products of the Company do not infringe any intellectual property of any other person, except where such infringement would not, individually or in the aggregate, have a Material Adverse Effect on the -5- Company. The Company is not, to its knowledge, making unauthorized use of any confidential information or trade secrets of any person. The activities of the Company or, to its knowledge, any of its employees on behalf of the Company do not violate any material agreements or arrangements known to the Company which any such employees have with other persons, if any. 4.11 Compliance. Neither the Company nor the Subsidiary has been advised, nor has reason to believe, that it is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting its business, including, without limitation, all applicable local, state and federal environmental laws and regulations; except where failure to be so in compliance would not have a Material Adverse Effect. 4.12 Offering Materials. The Company has not distributed and will not distribute prior to the Closing Date any offering material in connection with the offering and sale of the Shares other than the Private Placement Memorandum or any amendment or supplement thereto. The Company has not in the past nor will it hereafter take any action independent of the Placement Agent to sell, offer for sale or solicit offers to buy any securities of the Company which would bring the offer, issuance or sale of the Shares, as contemplated by this Agreement, within the provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was or shall be within the exemptions of Section 4 of the Securities Act. 4.13 Contributions. The Company has not at any time since its incorporation, directly or indirectly, (i) made any unlawful contribution to any candidate for public office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. 4.14 Additional Information. The information contained in the following documents, which the Placement Agent has furnished to the Purchaser, or will furnish prior to the Closing, does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading, as of their respective final dates, or if amended, as so amended: (a) the Company's Annual Report on Form 10-K for the year ended December 31, 2000; (b) the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2001; (c) the Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2001; (d) Notice of Annual Meeting of Shareholders and Proxy Statement for the Company's Annual Meeting held on July 12, 2001; -6- (e) the Private Placement Memorandum, including all addenda and exhibits thereto except Exhibit E; and (f) all other documents, if any, filed by the Company with the Commission since June 30, 2001 pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 4.15 Legal Opinion. At the Closing, Kirkpatrick & Lockhart LLP, counsel to the Company, will deliver its legal opinion to the Placement Agent in a form reasonably acceptable to the Placement Agent's counsel. Such opinion shall also state that each of the Purchasers may rely thereon as though it was addressed directly to such Purchaser. 4.16 Intellectual Property Opinion. At the Closing, special counsel to the Company on intellectual property matters will deliver a legal opinion to the Placement Agent in a form reasonably acceptable to the Placement Agent's counsel. Such opinion shall also state that each of the Purchasers may rely thereon as though it was addressed directly to such Purchaser. 4.17 Certificate. At the Closing, the Company will deliver to the Purchaser a certificate executed by the Chairman of the Board or President and the chief financial or accounting officer of the Company (solely in their capacities as such), dated the Closing Date, in form and substance reasonably satisfactory to the Purchaser, to the effect that the representations and warranties of the Company set forth in this Section 4 were true and correct in all material respects as of the date of this Agreement, and the Company has complied in all material respects with all the agreements and satisfied all the conditions herein on its part to be performed or satisfied on or prior to such Closing Date. 4.18 Reliance by Placement Agent. The Company hereby acknowledges that the Placement Agent may rely on the representations, warranties and covenants set forth in this Section 4 as if such representations, warranties and covenants were made to the Placement Agent directly. 4.19 No Material Nonpublic Information. At the time of the announcement of the transaction contemplated by the Agreements, the Private Placement Memorandum, as supplemented, will include no material nonpublic information with respect to the Company. SECTION 5. Representations, Warranties and Covenants of the Selling Stockholders. Each of the Selling Stockholders, jointly and severally, represent, warrant and covenant to the Company and to the Purchaser that: 5.1 Due Execution and Delivery. Such Selling Stockholder has full power and authority to enter into this Agreement and to carry out all the terms and provisions hereof and thereof to be carried out by it. All authorizations and consents necessary for the execution, delivery and performance by such Selling Stockholder of this Agreement have been given. This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Stockholder and this Agreement will constitute a legal, valid and binding obligation of such Selling Stockholder, enforceable in accordance with its terms, except as enforceability may be -7- limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.2 Good Title. Such Selling Stockholder now has, and at the time of delivery thereof hereunder will have, (i) good and marketable title to the Shares to be sold by such Selling Stockholder hereunder, free and clear of all encumbrances, and (ii) full legal right and power, and all authorizations and approvals required by law, to sell, transfer and deliver the Shares to the Purchasers hereunder and to make the representations, warranties and agreements made by such Selling Stockholder herein. 5.3 No Defaults. None of the execution, delivery or performance of this Agreement, and the consummation of the transactions contemplated herein or therein by such Selling Stockholder conflicts or will conflict with or results or will result in any breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any encumbrance upon, any property or assets of such Selling Stockholder pursuant to (i) the terms of any contract or other agreement to which such Selling Stockholder is a party or by which it is bound or to which any of its properties is subject, which conflict, breach, violation or default would adversely affect such Selling Stockholder's ability to perform its obligations hereunder; (ii) any statute, rule or regulation of any governmental body having jurisdiction over such Selling Stockholder or any of its activities or properties; or (iii) the terms of any judgment, decree or order of any arbitration or governmental body having such jurisdiction. 5.4 Consents. No pre-emptive right, co-sale right, right of first refusal, registration right, or similar rights exist with respect to the Selling Stockholders' shares, other than any such rights which have been duly and validly waived. No consent, approval, authorization or order of, or any filing or declaration with, any governmental body is required for the consummation by such Selling Stockholder of the transactions on its part contemplated herein, except such as have been obtained under the state securities or Blue Sky laws. 5.5 Material Adverse Information. The sale of the Shares proposed to be sold by such Selling Stockholder is not prompted by such Selling Stockholder's knowledge of any material adverse information concerning the Company or its Subsidiary which is not set forth or described in the Private Placement Memorandum. 5.6 Material Information. On the date of the Private Placement Memorandum, the information with respect to such Selling Stockholder included therein did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. 5.7 Company Representations and Warranties. Such Selling Stockholder has no reason to believe that the representations and warranties of the Company contained in Section 4 are not true and correct in all material respects. -8- 5.8 Reliance by Placement Agent. Such Selling Stockholder hereby acknowledges that the Placement Agent may rely on the representations, warranties and covenants set forth in this Section 5 as if such representations, warranties and covenants were made to the Placement Agent directly. 5.9 Expenses. The Selling Stockholders shall bear all expenses in connection with the negotiation, execution and delivery of this Agreement and with the procedures in paragraphs (a) through (f) of Section 8.1 hereof and the registration of the Shares pursuant to the Registration Statement, other than fees and expenses of counsel or other advisors to the Purchaser or the Other Purchasers or underwriting discounts, brokerage fees and commissions incurred by the Purchaser or the Other Purchasers. 5.10 Selling Stockholder Notices. For a period of 12 months from the Closing Date, the Selling Stockholders shall promptly notify the Company in writing of any events or circumstances of which any member(s) of senior management of any of the Selling Stockholders becomes aware, after their conducting reasonable due inquiry (other than matters publicly known or actually known by the Company), that (i) materially adversely affects or limits the legal or other ability of any of the Selling Stockholders to perform any of its material obligations under any written agreements between any of the Selling Stockholders and the Company and (ii) the failure of which to be included in the Private Placement Memorandum and/or the Registration Statement, as such shall have been supplemented or amended, would result in an untrue statement of material fact or the omission to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances under which they were made. SECTION 6. Representations, Warranties and Covenants of the Purchaser. (a) The Purchaser represents and warrants to, and covenants with, the Company and the Selling Stockholders that: (i) the Purchaser is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in shares representing an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company, and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Shares; (ii) the Purchaser is acquiring the number of Shares set forth in Section 2 above in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Shares or any arrangement or understanding with any other persons regarding the distribution of such Shares (this representation and warranty not limiting the Purchaser's right to sell pursuant to the Registration Statement or, other than with respect to any claims arising out of a breach of this representation and warranty, the Purchaser's right to indemnification under Section 8.3); (iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, sell short, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act, the Exchange Act and the Rules and Regulations; (iv) the Purchaser has completed or caused to be completed the Registration Statement Questionnaire attached hereto as part of Appendix I, for use in preparation of the -9- Registration Statement, and the answers thereto are true and correct as of the date hereof and will be true and correct as of the effective date of the Registration Statement and the Purchaser will notify the Company immediately of any material change in any such information provided in the Registration Statement Questionnaire occurring prior to the sale by it of all of the Shares; (v) the Purchaser has, in connection with its decision to purchase the number of Shares set forth in Section 2 above, relied solely upon the Private Placement Memorandum and the documents included therein or incorporated by reference and the representations and warranties of the Company and the Selling Stockholder contained herein; and (vi) the Purchaser is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act. (b) The Purchaser understands that the Shares are being offered and sold to it in reliance upon specific exemptions from the registration requirements of Securities Act, the Rules and Regulations and state securities laws and that the Company and the Selling Stockholders are relying upon the truth and accuracy of, and the Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Shares. (c) Until the filing of the Registration Statement, the Purchaser agrees with the Placement Agent and the Company to keep confidential all information concerning this private placement. The Purchaser understands that the information contained in the Private Placement Memorandum is strictly confidential and proprietary to the Company and has been prepared from the Company's publicly available documents and other information and is being submitted to the Purchaser solely for such Purchaser's confidential use. The Purchaser agrees to use the information contained in the Private Placement Memorandum for the sole purpose of evaluating a possible investment in the Shares and the Purchaser hereby acknowledges that it is prohibited from reproducing and distributing the Private Placement Memorandum to third parties, this Purchase Agreement, or any other offering materials or other information provided by the Company in connection with the Purchaser's consideration of its investment in the Company, in whole or in part, or divulging or discussing any of their contents to third parties. Further, the Purchaser understands that the existence and nature of all conversations and presentations, if any, regarding the Company and this offering must be kept strictly confidential. The Purchaser understands that the federal securities laws may impose restrictions on trading based on information regarding this offering. In addition, the Purchaser hereby acknowledges that unauthorized disclosure of information regarding this offering may cause the Company to violate Regulation FD and agrees not to engage in any such unauthorized disclosure. The restrictions in this paragraph shall cease upon the filing of the Registration Statement. (d) The Purchaser understands that its investment in the Shares involves a significant degree of risk and that the market price of the Common Stock has been volatile and that no representation is being made as to the future value or trading volume of the Common Stock. The Purchaser has the knowledge and experience in -10- financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares and has the ability to bear the economic risks of an investment in the Shares. (e) The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Shares. (f) The Purchaser understands that, until such time as the Registration Statement has been declared effective or the Shares may be sold pursuant to Rule 144 under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Shares shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for the Shares): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT." (g) The Purchaser's principal executive offices are in the jurisdiction set forth immediately below the Purchaser's name on the signature pages hereto. (h) The Purchaser hereby covenants with the Company not to make any sale of the Shares without complying in all material respects with the provisions of this Agreement, and, if applicable, without effectively causing the prospectus delivery requirement under the Securities Act to be satisfied, and the Purchaser acknowledges and agrees that such Shares are not transferable on the books of the Company unless the certificate submitted to the transfer agent evidencing the Shares is accompanied by a separate Purchaser's Certificate of Subsequent Sale: (i) in the form of Appendix II hereto, (ii) executed by an officer of, or other authorized person expressly designated by, the Purchaser, and (iii) to the effect that (A) the Shares have been sold in accordance with the Registration Statement, the Securities Act and any applicable state securities or blue sky laws and (B), if applicable, the requirement of delivering a current prospectus has been satisfied. The Purchaser acknowledges that there may occasionally be times when the Company must suspend the use of the prospectus forming a part of the Registration Statement (a "Suspension") until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the Commission, or until such time as the Company has filed an appropriate report with the Commission pursuant to the Exchange Act or supplemented the prospectus forming a part of the Registration Statement. The Purchaser hereby covenants that it will not sell any Shares -11- pursuant to said prospectus during the period commencing at the time at which the Company gives the Purchaser written notice of the Suspension of the use of said prospectus and ending at the time the Company gives the Purchaser written notice that the Purchaser may thereafter effect sales pursuant to said prospectus, except as permitted in the second paragraph of Section 8.2 of this Agreement; provided, however, that the Purchaser shall be in compliance with the provisions contained in the first paragraph of Section 8.2, and provided further that the Company will use its best efforts to cause the prospectus so suspended to be promptly resumed. (i) The Purchaser further represents and warrants to, and covenants with, the Company and the Selling Stockholders that (i) the Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (ii) upon the execution and delivery of this Agreement, this Agreement shall constitute a legal, valid and binding obligation of the Purchaser, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Purchaser in Section 8.3 hereof may be held violative of public policy and legally unenforceable. (j) The Purchaser hereby acknowledges that the Placement Agent may rely on the representations, warranties and covenants set forth in this Section 6 as if such representations, warranties and covenants were made to the Placement Agent directly. SECTION 7. Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company, the Selling Stockholders and the Purchaser herein and in the certificates for the Shares delivered pursuant hereto shall survive the Closing, the delivery to the Purchaser of the Shares being purchased and the payment therefor; provided, however, that the representations and warranties of the Company contained in Section 4 hereof (other than Section 4.12) shall survive for one (1) year following the Closing. SECTION 8. Registration of the Shares; Compliance with the Securities Act. 8.1 Registration Procedures and Expenses. The Company shall: (a) subject to receipt of necessary information from the Purchasers, as promptly as practicable, but in no event later than 10 days after the date that the Agreements are executed, file with the Commission the Registration Statement on Form S-3 relating to the resale of the Shares by the Purchaser and the Other Purchasers from time to time on The New York Stock Exchange or the facilities of any national securities -12- exchange on which the Common Stock is then traded or in privately-negotiated transactions; (b) use its reasonable efforts, subject to receipt of necessary information from the Purchasers, to cause the Commission to notify the Company of the Commission's willingness to declare the Registration Statement effective within 60 days after the Registration Statement is filed by the Company; (c) promptly prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective and in compliance with applicable securities laws until the earliest of (i) two years after the effective date of the Registration Statement; (ii) the date on which the Shares may be resold by the Purchasers without registration by reason of Rule 144(k) under the Securities Act or any other rule of similar effect; or (iii) such time as all Shares purchased by such Purchaser under this Agreement have been sold. (d) furnish to the Purchaser with respect to the Shares registered under the Registration Statement (and to each underwriter, if any, of such Shares) such number of copies of prospectuses and such other documents as the Purchaser may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares by the Purchaser; provided, however, that the obligation of the Company to deliver copies of prospectuses to the Purchaser shall be subject to the receipt by the Company of reasonable assurances from the Purchaser that the Purchaser will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such prospectuses, and the resale of the Shares; (e) file documents required of the Company for normal blue sky clearance in states specified in writing by the Purchaser and keep such qualification or registration in effect for so long as the Registrant Statement is in effect; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; and (f) advise the Purchaser, promptly after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation of any proceeding for that purpose; and it will promptly use its reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest practicable moment if such stop order should be issued. The Company understands that the Purchaser disclaims being an underwriter, but the Purchaser being deemed an underwriter shall not, subject to the Purchaser's compliance with applicable law and this Agreement, relieve the Company of any obligations it has hereunder. A draft of the proposed form of the Registration Statement is included in the Private Placement -13- Memorandum and a questionnaire related thereto to be completed by the Purchaser is attached hereto as Appendix I. 8.2 Transfer of Shares After Registration. The Purchaser agrees that it will not effect any disposition of the Shares or its right to purchase the Shares that would constitute a sale within the meaning of the Securities Act, except as contemplated in the Registration Statement referred to in Section 8.1, and that it will promptly notify in writing the Company of any changes or additions to the information set forth in the Registration Statement regarding the Purchaser or its plan of distribution or any disposition. The obligations shall cease when the Purchaser shall have disposed of all of its Shares. Notwithstanding any other provisions of this Agreement, the Purchaser shall not be prohibited from selling Shares under the Registration Statement as a result of Suspensions on more than two occasions of not more than 30 days each in any twelve month period, unless, in the good faith judgment of the Company's Board of Directors, upon advice of counsel, the sale of Shares under the Registration Statement in reliance on this paragraph could be reasonably likely to cause a violation of the Securities Act or the Exchange Act and result in potential liability to the Company. 8.3 Indemnification. For the purpose of this Section 8.3: (i) the term "Purchaser/Affiliate" shall mean any affiliate of the Purchaser and any person who controls the Purchaser or any affiliate of the Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act; and (ii) the term "Registration Statement" shall include any final prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Registration Statement referred to in Section 8.1. (a) The Company agrees to indemnify and hold harmless each of the Purchasers and each Purchaser/Affiliate, against any losses, claims, damages, liabilities or expenses, joint or several, to which such Purchasers or such Purchaser/Affiliates may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any claims or litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the prospectus, financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and Regulations, or the prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations, or filed as part of the Registration -14- Statement at the time of effectiveness if no Rule 424(b) filing is required (the "Prospectus"), or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, or (if the Closing occurs) arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company contained in this Agreement, or any failure of the Company to perform its obligations hereunder or under law, and will reimburse each Purchaser and each such Purchaser/Affiliate for any legal and other expenses as such expenses are reasonably incurred by such Purchaser or such Purchaser/Affiliate in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such -------- ------- case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser expressly for use therein, or (ii) the failure of such Purchaser to comply with the covenants and agreements contained herein, including Sections 6(h) or 8.2 hereof respecting the sale of the Shares or to perform its obligations under law, or (iii) in whole or in part the inaccuracy of any representations or warranties made by such Purchaser herein or (iv) any statement or omission in any Prospectus or any amendment or supplement thereto that is corrected in any subsequent Prospectus or any amendment or supplement thereto that was delivered to the Purchaser prior to the pertinent sale or sales by the Purchaser. (b) Each Purchaser will severally, but not jointly, indemnify and hold harmless the Company and the Selling Stockholders, each of the Company's directors, each of the Company's officers who signed the Registration Statement and each person, if any, who controls the Company or the Selling Stockholders within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration Statement, the Selling Stockholders or any of their respective controlling persons may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any claim or litigation, if such settlement is effected with the written consent of such Purchaser) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure to comply with the covenants and agreements contained herein, including Sections 6(h) or 8.2 hereof respecting the sale of the Shares or to perform its obligations under law, or (ii) in whole or in part the inaccuracy of any representation or warranty made by such Purchaser herein or (iii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon -15- the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use therein, and will reimburse the Company and the Selling Stockholders, each of the Company's directors, each of its officers who signed the Registration Statement or controlling person for the Company or a Selling Stockholder for any legal and other expense reasonably incurred by the Company and the Selling Stockholders, each of the Company's directors, each of its officers who signed the Registration Statement or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. Notwithstanding any other provisions of this Section 8.3(b), no Purchaser shall be required to indemnify any party in excess of the gross proceeds paid by such Purchaser for Shares purchased pursuant to its respective Agreement or if the Purchaser shall sell Shares pursuant to the Registration Statement, if greater, the gross proceeds received by the Purchaser from those sales. (c) Each of the Selling Stockholders will, jointly and severally, indemnify and hold harmless each Purchaser, each Purchaser/Affiliate, the Company, each of its directors and each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including the settlement of any claim or litigation, if such settlement is effected with the written consent of such Selling Stockholder) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of, or are based upon (i) any failure to comply with the covenants and agreements of such Selling Stockholder contained in the Agreements or to perform its obligations under law or (ii) in whole or in part the inaccuracy of any representation or warranty made by such Selling Stockholder in this Agreement or (iii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in -16- reliance upon and in conformity with written information furnished to the Company by the Selling Stockholders expressly for use therein; provided, however, that the Selling Stockholder will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) in whole or in part the inaccuracy of any representations or warranties made by such Purchaser herein or (ii) any statement or omission in any Prospectus or any amendment or supplement thereto that is corrected in any subsequent Prospectus or any amendment or supplement thereto that was delivered to the Purchaser prior to the pertinent sale or sales by the Purchaser. (d) If and to the extent that the Company shall have sustained any indemnification liability under Section 8.3(a) hereof or otherwise under law and such liability shall have resulted from the failure of any of the Selling Stockholders to promptly notify the Company in writing, until the earlier of (i) two years from the effective date of the Registration Statement or (ii) the sale of all of the Shares, of any events or circumstances of which any member(s) of senior management of any of the Selling Stockholders becomes aware, after their conducting reasonable due inquiry (other than matters publicly known or actually known by the Company), that (x) materially adversely affects or limits the legal or other ability of any of the Selling Stockholders to perform any of its material obligations under any written agreements between any of the Selling Stockholders and the Company and (y) the failure of which to be included in the Private Placement Memorandum and/or the Registration Statement, as such shall have been supplemented or amended, would result in an untrue statement of material fact or the omission to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances under which they were made, the Selling Stockholders shall, jointly and severally, indemnify and hold harmless the Company from such liability and pay or reimburse the Company for any related costs. (e) Promptly after receipt by an indemnified party under this Section 8.3 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8.3, promptly notify the indemnifying party in writing thereof; however, the failure to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8.3 to the extent the indemnifying party is not prejudiced as a result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume, the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the -------- ------- defendants in any such action include both the indemnified party and the indemnifying party and, based upon the advice of such indemnified party's counsel, the indemnified party shall have reasonably concluded that there may be a conflict of interest between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the -17- indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and reasonable approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8.3 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, representing the indemnified parties who are parties to such action, plus local counsel, if appropriate) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party. (f) If the indemnification provided for in this Section 8.3 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under paragraphs (a), (b) or (c) of this Section 8.3 in respect to any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative economic benefits received by the Company, the Selling Stockholders and the Purchaser from the placement of the Common Stock contemplated by this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but the relative fault of the Company, the Selling Stockholders and the Purchaser in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Selling Stockholders on the one hand and each Purchaser on the other shall be deemed to be in the same proportion as the amount paid by such Purchaser to the Selling Stockholders pursuant to this Agreement for the Shares purchased by such Purchaser that were sold pursuant to the Registration Statement bears to the difference (the "Difference") between the amount such Purchaser paid for the Shares that were sold pursuant to the Registration Statement and the amount received by such Purchaser from such sale. The relative fault of the Company and the Selling Stockholders, respectively, on the one hand and each Purchaser on the other shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company, by any Selling Stockholder or by such Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission and/or its -18- distribution. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in paragraph (e) of this Section 8.3, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in paragraph (e) of this Section 8.3 with respect to the notice of the threat or commencement of any action shall apply if a claim for contribution is to be made under this paragraph (f); provided, however, that no additional notice shall be required with -------- ------- respect to any threat or action for which notice has been given under paragraph (e) for purposes of indemnification. The Company, the Selling Stockholders and each Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 8.3 were determined solely by pro rata allocation (even if the Purchaser were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 8.3, no Purchaser shall be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 8.3, the Selling Stockholders shall not be required to contribute any amount in excess of the gross proceeds received by the Selling Stockholders for the sales of Shares under the Agreements. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchasers' obligations to contribute pursuant to this Section 8.3 are several and not joint. 8.4 Termination of Conditions and Obligations. The conditions precedent imposed by Section 6 or this Section 8 upon the transferability of the Shares shall cease and terminate as to any particular number of the Shares upon the passage of two years from the effective date of the Registration Statement covering such Shares or at such time as an opinion of counsel satisfactory in form and substance to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act. 8.5 Information Available. So long as the Registration Statement is effective covering the resale of Shares owned by the Purchaser, the Company will furnish to the Purchaser: (a) as soon as practicable after available one copy of (i) its Annual Report to Stockholders (which Annual Report shall contain financial statements audited in accordance with generally accepted accounting principles by a national firm of certified public accountants), (ii) if not included in substance in the Annual Report to Stockholders, upon the request of the Purchaser, its Annual Report on Form 10-K, (iii) upon the request of the Purchaser, its Quarterly Reports on Form 10-Q, (iv) upon the request of the Purchaser, its Current Reports on Form 8-K, and (v) a full copy of the particular Registration Statement covering the Shares (the foregoing, in each case, excluding exhibits); -19- (b) upon the request of the Purchaser, all exhibits excluded by the parenthetical to subparagraph (a)(v) of this Section 8.5; and (c) upon the request of the Purchaser, a reasonable number of copies of the prospectuses to supply to any other party requiring such prospectuses; and the Company, upon the reasonable request of the Purchaser, will meet with the Purchaser or a representative thereof at the Company's headquarters to discuss information relevant for disclosure in the Registration Statement covering the Shares and will otherwise reasonably cooperate with any Purchaser conducting an investigation for the purpose of reducing such Purchaser's exposure to liability under the Securities Act, including the reasonable production of information at the Company's headquarters, subject to appropriate confidentiality limitations. SECTION 9. Broker's Fee. The Purchaser acknowledges that the Selling Stockholders intend to pay to the Placement Agent a fee in respect of the sale of the Shares to the Purchaser. Each of the parties hereto hereby represents that, on the basis of any actions and agreements by it, there are no other brokers or finders entitled to compensation in connection with the sale of the Shares to the Purchaser. SECTION 10. Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, confirmed facsimile or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: (a) if to the Company, to: Pharmaceutical Resources, Inc. One Ram Ridge Road Spring Valley, New York Attention: Kenneth I. Sawyer Facsimile: (914) 425-5097 with a copy to: Kirkpatrick & Lockhart LLP 1251 Avenue of the Americas 45th Floor New York, New York 10020 Attention: Stephen R. Connoni, Esq. Facsimile: (212) 536-3901 or to such other person at such other place as the Company shall designate to the Purchaser in writing; and (b) if to the Purchaser, at its address as set forth at the end of this Agreement, or at such other address or addresses as may have been furnished to the Company in writing. -20- (c) if to the Selling Stockholders, at the addresses set forth in Exhibit A-1 hereto. SECTION 11. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company, the Selling Stockholders and the Purchaser. SECTION 12. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement. SECTION 13. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. SECTION 14. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York and, to the extent applicable, the federal law of the United States of America. SECTION 15. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. Facsimile signatures shall be deemed original signatures. SECTION 16. Entire Agreement. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters. SECTION 17. Third Party Beneficiaries. Subject to Section 8.3 hereof, this Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. Notwithstanding the foregoing, the Placement Agent may rely on the representations, warranties and covenants made in Sections 4, 5 and 6 as if such representations, warranties and covenants were made to the Placement Agent directly. SECTION 18. Confidential Disclosure Agreement. Notwithstanding any provision of this Agreement to the contrary, any confidential disclosure agreement previously executed by the Company and the Purchaser in connection with the transactions contemplated by this Agreement shall remain in full force and effect in accordance with its terms following the execution of this Agreement and the consummation of the transactions contemplated hereby. SECTION 19. Assignment. This Agreement and rights of the Purchaser hereunder may be assigned by the Purchaser with the prior written consent of the Company and -21- the Selling Stockholders except such consent shall not be required in cases of assignments (x) by operation of the law; (y) by the Purchaser to its wholly-owned subsidiary; or (z) by an investment adviser to a fund for which it is the adviser or by or among funds that are under common control, provided that, in any such case, such assignee agrees to be bound by the terms of this Agreement. SECTION 20. Publicity. Neither the Company nor the Selling Stockholders will issue any public statement, press release or any other public disclosure, that includes the Purchaser's name, without the Purchaser's prior written consent. If the Company is required by an applicable law, resolution, or Securities Exchange Rule to disclose the Purchaser's name, the Company will give the Purchaser reasonable notice of the required disclosure. -22- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. PHARMACEUTICAL RESOURCES, INC. By: ----------------------------------- Name: Title: SELLING STOCKHOLDERS EMD, INC. By: ----------------------------------- Name: Title: GENPHARM, INC. By: ----------------------------------- Name: Title: MERCK KGaA By: ----------------------------------- Name: Title: -23- Print or Type: Name of Purchaser (Individual or Institution): ----------------------------------------------- Name of Individual representing Purchaser (if an Institution): ----------------------------------------------- Title of Individual representing Purchaser (if an Institution): ----------------------------------------------- Signature by: Individual Purchaser or Individual representing Purchaser: ----------------------------------------------- Address: ----------------------------------- Telephone: ----------------------------------- Facsimile: ----------------------------------- -24- SUMMARY INSTRUCTION SHEET FOR PURCHASER (to be read in conjunction with the entire Purchase Agreement which follows) A. Complete the following items on BOTH Purchase Agreements: 1. Page 24 - Signature: (i) Name of Purchaser (Individual or Institution) (ii) Name of Individual representing Purchaser (if an Institution) (iii) Title of Individual representing Purchaser (if an Institution) (iv) Signature of Individual Purchaser or Individual representing Purchaser 2. Appendix I - Stock Certificate Questionnaire/Registration Statement Questionnaire: Provide the information requested by the Stock Certificate Questionnaire and the Registration Statement Questionnaire. 3. Return BOTH properly completed and signed Purchase Agreements including the properly completed Appendix I to: Bear, Stearns & Co. Inc. 245 Park Avenue New York, NY 10167 Attention: Private Equity Group, Jason Weinstein Ryan Burkart B. Instructions regarding the transfer of funds for the purchase of Shares will be sent by facsimile to the Purchaser by the Placement Agent at a later date. C. Upon the resale of the Shares by the Purchasers after the Registration Statement covering the Shares is effective, as described in the Purchase Agreement, the Purchaser: (i) must deliver a current prospectus of the Company to the buyer (prospectuses may be obtained from the Company at the Purchaser's request); and (ii) must send a letter in the form of Appendix II to the Company so that the Shares may be properly transferred. Appendix I (one of two) PHARMACEUTICAL RESOURCES, INC. STOCK CERTIFICATE QUESTIONNAIRE Pursuant to Section 3 of the Agreement, please provide us with the following information: 1. The exact name that your Shares are to be registered in (this is the name that will appear on your stock certificate(s)). You may use a nominee name if appropriate: ---------------------------- 2. The relationship between the Purchaser of the Shares and the Registered Holder listed in response to item 1 above: ---------------------------- 3. The mailing address of the Registered Holder listed in response to item 1 above: ---------------------------- ---------------------------- ---------------------------- 4. The Social Security Number or Tax Identification Number of the Registered Holder listed in response to item 1 above: ---------------------------- Appendix I (two of two) PHARMACEUTICAL RESOURCES, INC. REGISTRATION STATEMENT QUESTIONNAIRE ------------------------------------ In connection with the preparation of the Registration Statement, please provide us with the following information: 1. Pursuant to the "Selling Stockholders" section of the Registration Statement, please state your or your organization's name exactly as it should appear in the Registration Statement: 2. Please provide the number of shares that you or your organization will own immediately after Closing, including those Shares purchased by you or your organization pursuant to this Purchase Agreement and those shares purchased by you or your organization through other transactions: 3. Have you or your organization had any position, office or other direct or indirect material relationship within the past three years with the Company or its affiliates? _____ Yes _____ No If yes, please indicate the nature of any such relationships below: ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 4. Are you (i) an NASD Member (see definition), (ii) a Controlling (see definition) shareholder of an NASD Member, (iii) a Person Associated with a Member of the NASD (see definition), or (iv) an Underwriter or a Related Person (see definition) with respect to the proposed offering; or (b) do you own any shares or other securities of any NASD Member not purchased in the open market; or (c) have you made any outstanding subordinated loans to any NASD Member? Answer: [ ] Yes [ ] No If "yes," please describe below ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- NASD Member. The term "NASD member" means either any broker or dealer admitted to membership in the National Association of Securities Dealers, Inc. ("NASD"). (NASD Manual, By-laws Article I, Definitions) Control. The term "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power, either individually or with others, to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. (Rule 405 under the Securities Act of 1933, as amended) Person Associated with a member of the NASD. The term "person associated with a member of the NASD" means every sole proprietor, partner, officer, director, branch manager or executive representative of any NASD Member, or any natural person occupying a similar status or performing similar functions, or any natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a NASD Member, whether or not such person is registered or exempt from registration with the NASD pursuant to its bylaws. (NASD Manual, By-laws Article I, Definitions) Underwriter or a Related Person. The term "underwriter or a related person" means, with respect to a proposed offering, underwriters, underwriters' counsel, financial consultants and advisors, finders, members of the selling or distribution group, and any and all other persons associated with or related to any of such persons. (NASD Interpretation) APPENDIX II Attention: PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE ------------------------------------------ The undersigned, [an officer of, or other person duly authorized by] ___________________________________________________ hereby certifies that he/she [fill in official name of individual or institution] [said institution] is the Purchaser of the shares evidenced by the attached certificate, and as such, sold such shares on _______________ in accordance with [date] Registration Statement number ____________________________________ and the [fill in the number of or otherwise identify Registration Statement] requirement of delivering a current prospectus by the Company has been complied with in connection with such sale. Print or Type: Name of Purchaser (Individual or Institution): --------------------------- Name of Individual representing Purchaser (if an Institution) --------------------------- Title of Individual representing Purchaser (if an Institution): --------------------------- Signature by: Individual Purchaser or Individual repre- senting Purchaser: --------------------------- Exhibit A-1 ----------- SELLING STOCKHOLDERS
Name Address for Notices Number of Shares to be Sold - ---- ------------------- --------------------------- EMD, Inc., c/o Merck KGaA 12,213,272 a substantially wholly-owned Frankfurter Strasse 250 subsidiary of Merck KGaA, a 64271 Darmstadt Germany Kommanditgesellschaft auf Aktien organized under the laws of Germany Genpharm, Inc., a subsidiary of Merck c/o Merck KGaA 600,740 KGaA Frankfurter Strasse 250 64271 Darmstadt Germany Merck KGaA c/o Merck KGaA 820,000 Frankfurter Strasse 250 64271 Darmstadt Germany Total: 13,634,012
EX-99.2 4 file003.txt PLACEMENT AGENCY AGREEMENT PHARMACEUTICAL RESOURCES, INC. 13,634,012 SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE PLACEMENT AGENCY AGREEMENT -------------------------- August 21, 2001 BEAR, STEARNS & CO. INC. As Placement Agent 245 Park Avenue New York, New York 10167 Dear Sir or Madam: You have approached EMD, Inc., a Delaware corporation, Genpharm Inc., a corporation organized under the laws of Ontario, and Merck KGaA, a Kommanditgesellschaft auf Aktein organized under the laws of Germany (each, a "Selling Stockholder," and collectively, the "Selling Stockholders"), to determine whether the Selling Stockholders would be interested in selling 13,634,012 shares (the "Shares") of common stock, par value $0.01 per share (the "Common Stock"), of Pharmaceutical Resources, Inc., a New Jersey corporation (the "Company"), beneficially owned by the Selling Stockholders, to certain Investors (as defined below). The Selling Stockholders have informed you that no decision has been made by them to sell the Shares, but that if the Selling Stockholders were to receive offers to purchase the Shares on terms and conditions, including price, deemed acceptable to the Selling Stockholders, the Selling Stockholders may determine to sell the Shares, subject to obtaining necessary internal corporate approvals by the Selling Stockholders. You have provided the Selling Stockholders with offers from Investors to purchase the Shares on terms and conditions that the Selling Stockholders are considering accepting. The Selling Stockholders desire to engage you, and any sub-agent designated by you, as their placement agent (the "Placement Agent") in connection with the possible sale of the Shares to the Investors. The Shares are more fully described in the Registration Statement (as hereinafter defined). The Company and the Selling Stockholders hereby confirm as follows their agreements with the Placement Agent. 1. Scope of Engagement. The Selling Stockholders hereby engage the Placement Agent as their agent, acting on a reasonable best efforts basis, in the private placement of the Shares of the Company beneficially owned by the Selling Stockholders (a "Transaction") to one or more accredited investors (collectively, the "Investors"). The number and price of the Shares that each Selling Stockholder may ultimately agree to sell, pursuant to the Purchase Agreements (as defined below), are entirely within its discretion. 2. Offering Process. The Placement Agent hereby accepts the engagement and in that connection agrees to: (a) assist the Company in the preparation of a Private Placement Memorandum, as such may be amended or supplemented (the "Memorandum"), describing the Company, the Selling Stockholders and the Common Stock; the Memorandum will not be made available to potential Investors until such Memorandum and its use shall be approved by the Company, the Selling Stockholders, the Placement Agent and their respective counsel; (b) prepare and provide to the Company and the Selling Stockholders the list of the Investors to be contacted by the Placement Agent in connection with a Transaction (the "Investor Contact List"); (c) if appropriate, assist the Company and the Selling Stockholders with the preparation of any other communications to be used in placing the Shares, whether in the form of letter, circular, notice or otherwise; and (d) assist with the negotiation of the final terms and conditions for the sale of the Shares to the Investors. 3. Company's and Selling Stockholders' Responsibilities, Representations and Warranties. (a) In connection with the engagement of the Placement Agent, the Company will furnish the Placement Agent with all information concerning the Company that the Placement Agent and its counsel shall reasonably request and will provide the Placement Agent and its counsel with reasonable access to the Company's officers, directors, accountants, counsel and other advisors. The Company represents and warrants to the Placement Agent that: (i) the Memorandum, including any documents attached as exhibits to the Memorandum and/or incorporated by reference therein, and, when delivered, any communications .prepared pursuant to Section 2(c) above, is and will be true and accurate in all material respects and the Memorandum does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (ii) any projected financial information or other forward-looking information which the Company provides to the Placement Agent will be provided by the Company in good faith and will represent management's reasonable estimates. The Company and each Selling Stockholder acknowledges and agrees that the Placement Agent will be using and relying upon such information supplied by the Company and its officers, agents and others and any other publicly available information concerning the Company without any independent investigation or verification thereof or independent appraisal by the Placement Agent of the Company or its business or assets. (b) The Company and the Selling Stockholders shall keep the Memorandum confidential and shall not distribute it or any other materials related to the Transaction contemplated hereby, or otherwise advertise to or solicit purchasers of Shares, without the consent of the Placement Agent. 2 (c) In connection with the engagement of the Placement Agent, the Selling Stockholders will furnish the Placement Agent with all information concerning the Selling Stockholders that the Placement Agent and its counsel shall reasonably request. The Selling Stockholders represent and warrant to the Placement Agent that all such information is and will be true and accurate in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances in which they were made, not misleading. (d) The sale of Shares to any Investor will be evidenced by a purchase agreement ("Purchase Agreement") among the Selling Stockholders, the Company and such Investor. Prior to the execution of any Purchase Agreement, the Company will make its management, including officers with responsibility for financial affairs, reasonably available to the Investors to address inquiries by the Investors regarding the Company. Subject to the Selling Stockholders' approval, the selling price of the Shares to be sold by the Selling Stockholders to the Investors pursuant to the Purchase Agreements will be specified in writing by the Placement Agent on behalf of the Selling Stockholders (by fax, letter or otherwise) to the Investors prior to the execution of the Purchase Agreements. (e) The form of Purchase Agreement shall be reasonably satisfactory to the Placement Agent. The Company and the Selling Stockholders will perform the covenants set forth in the Purchase Agreements. The Purchase Agreements will require the Company to file, promptly after execution and delivery of such Purchase Agreements by all parties thereto, a registration statement with the Securities and Exchange Commission (the "SEC") for the resale from time to time of the Shares to be sold to the Investors pursuant to such Purchase Agreements (the "Registration Statement"). Neither the Company nor the Selling Stockholders will modify any such Purchase Agreements, nor will they execute and deliver any additional Purchase Agreements after the time the Company has filed the Registration Statement with the SEC. The closing of the sale of the Shares contemplated by the Purchase Agreements (the "Closing") shall be held promptly following the receipt by the Company of confirmation by the SEC of its willingness to declare effective the Registration Statement (or on such other later date as the Placement Agent and the Selling Stockholders both agree) and the satisfaction of the other conditions set forth in such Purchase Agreements. (f) The Company agrees that the Placement Agent shall be entitled to rely on the representations and warranties of the Company contained in the Purchase Agreements as if they were made directly to the Placement Agent. Each Selling Stockholder, jointly and severally, (i) represents and warrants that the representations and warranties of such Selling Stockholder contained in the Purchase Agreements will be true and correct in all respects on the date of such Purchase Agreements and on the Closing Date and (ii) agrees that the Placement Agent shall be entitled to rely on such representations and warranties as if they were made directly to the Placement Agent. (g) Neither the Company nor any Selling Stockholder shall take or permit its respective directors, officers, employees, agents, affiliates controlled by it or associates to take any action that would cause the sale of Shares contemplated by this 3 Agreement to fail to qualify for an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). (h) The Company will cause its independent public accountants to address and deliver to the Company and the Placement Agent a letter or letters (which letters are frequently referred to as "Comfort Letters") dated as of the Closing, which letter or letters shall be in the form reasonably requested by the Placement Agent. (i) The Company will cause its counsel to address and deliver to the Company and the Placement Agent opinions dated, respectively, as of the date of the Closing and as of the date of effectiveness of the Registration Statement, which opinions shall be in the form reasonably requested by the Placement Agent. (j) The Company will cause its outside intellectual property and/or regulatory counsel to address and deliver to the Placement Agent one or more opinions, dated as of the Closing, which opinions shall be in the form reasonably requested by the Placement Agent. (k) The Company acknowledges that the Purchase Agreements will require the Company's counsel, its intellectual property counsel and/or its regulatory counsel to deliver one or more opinions to the Investors. The Company agrees that the Placement Agent shall be entitled to rely on any opinions delivered to the Investors in connection with the Transaction and resale of the Shares under the Registration Statement. (l) For a period of ninety (90) days from the effective date of the Registration Statement, neither the Company nor any Selling Stockholder will, without the prior written consent of the Placement Agent, sell, contract to sell or otherwise dispose of or issue any securities of the Company, except pursuant to previously issued options, any agreements providing for anti-dilution or other share issuance rights in existence on the date hereof, any employee benefit or similar plan of the Company in existence on the date hereof, or any strategic investment and/or alliance transactions, acquisition or joint venture the Company may enter into. (m) During the time the Registration Statement is effective covering the resale of any Shares sold to Investors, the Company will furnish to the Placement Agent: (i) as soon as practicable (but in the case of the annual report of the Company to its stockholders, within 150 days after the end of each fiscal year of the Company), one copy of: (A) its annual report to its stockholders (which annual report shall contain financial statements audited in accordance with generally accepted accounting principles in the United States of America by a firm of certified public accountants of recognized standing), (B) if not included in substance in its annual report to stockholders, its annual report on Form 10-K, (C) each of its quarterly reports to its stockholders and, if not included in substance in its quarterly report to stockholders, its quarterly report on Form 10-Q and any other document or agreement that is 4 incorporated by reference into the Registration Statement, and (D) a copy of the full Registration Statement (the foregoing in each case, excluding exhibits), and (ii) upon reasonable request, all exhibits excluded by the parenthetical to clause (D) of the immediately preceding subsection (i) and all other information that is generally available to the public, and the Company, upon reasonable request, will meet with the Placement Agent or its representatives to discuss all information relevant for disclosure in the Memorandum and will reasonably cooperate in any investigation undertaken by the Placement Agent thereof, including any document included or incorporated by reference therein. 4. Compensation. As compensation for the services rendered by the Placement Agent hereunder, the Selling Stockholders shall pay the Placement Agent a fee equal to 4.5% of the gross proceeds paid by the Purchasers for the Shares pursuant to the Purchase Agreements. The fees set forth in this Section 4 shall be payable with respect to any private placement or similar transaction involving the sale of Shares that occurs either (a) during the term of the Placement Agent's engagement hereunder regardless of whether the Investor is on the Investor Contact List or (b) at any time during a period of six months following the effective date of termination of the Placement Agent's engagement hereunder if such transaction includes a sale of Shares to an Investor who is named on the Investor Contact List, or any parent, subsidiary or other affiliate thereof. 5. Reimbursable Expenses. The Selling Stockholders shall reimburse the Placement Agent (up to a maximum of $175,000) for its out-of-pocket and incidental expenses incurred in connection with any Transaction (whether or not consummated), including the reasonable fees and expenses of its legal counsel and those of any advisor retained by the Placement Agent. Such expenses are to be paid in cash upon the Selling Stockholders' receipt of a bill from the Placement Agent from time to time and in all events upon the closing of a Transaction. 6. Indemnification. (a) Company Indemnification. (i) The Company agrees to indemnify and hold harmless the Placement Agent and its affiliates, their respective directors, officers, controlling persons (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act), if any, agents and employees of the Placement Agent or any of the Placement Agent's affiliates (collectively, "Indemnified Persons" and individually, an "Indemnified Person") from and against any and all actions, claims, suits, proceedings, liabilities, losses, damages and expenses incurred, joint or several (collectively, "Claims"), by any Indemnified Person (including reasonable fees and disbursements of the Placement Agent and an Indemnified Person's counsel) insofar as such Claims arise out of or are based upon any untrue statement of any material fact contained in the 5 Memorandum (or any other material used by the Company or authorized by the Company for use in connection with the Transaction) and/or the Registration Statement, including the prospectus, financial statements and schedules, and all other documents filed as a part of the Registration Statement, as amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434 of the rules and regulations promulgated by the SEC under the Securities Act (the "Rules and Regulations"), or the prospectus, in the form first filed with the SEC pursuant to Rule 424(b) of the Rules and Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required (the "Prospectus"), or any amendment or supplement thereto, or arise out of or are based upon the omission to state in such document a material fact required to be stated therein or necessary to make the statements in the Memorandum and/or the Registration Statement or any amendment or supplement thereto not misleading or in the Prospectus or any amendment or supplement thereto not misleading, in light of the circumstances under which they were made, or (if the transactions contemplated herein are consummated) arise out of or are based on any material breach in the representations and warranties of the Company contained in this Agreement, or any failure of the Company to perform its obligations hereunder or under law, and will reimburse any Indemnified Person for any legal and other expenses as such expenses are reasonably incurred by such Indemnified Person for any legal and other expenses as such expenses are reasonably incurred by such Indemnified Person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action (collectively, "Costs"); provided, however, that the Company will -------- ------- not be liable in any such case to the extent that any such Claim resulted directly and primarily from an Indemnified Person's gross negligence or willful misconduct. (ii) The Company agrees that neither the Placement Agent nor any other Indemnified Person shall have any liability to the Company for or in connection with such engagement except liability for Claims which are found in a final judgment by a court of competent jurisdiction (not subject to further appeal or as to which appeal has been waived) to have resulted directly and primarily from an Indemnified Person's gross negligence or willful misconduct. The Company shall be liable for any settlement of any claim against the Placement Agent made with the Company's written consent, which consent shall not be unreasonably withheld. The Company also agrees that the Company will not, without the prior written consent of the Placement Agent, settle or compromise or consent to the entry of any judgment in any pending or threatened Claim in respect of which indemnification may be sought hereunder (whether or not the Placement Agent or any Indemnified Person is an actual or potential party to such Claim). Such settlement, compromise or consent shall include an unconditional release of the Placement Agent and each other Indemnified Person from all liability arising out of such Claim, and the Company shall furnish the Placement Agent with a copy of such settlement reasonably in advance of entering into such settlement. 6 (iii) In order to provide for just and equitable contribution, if a demand for indemnification or reimbursement for Claims or Costs is made pursuant to these provisions but is not available for any reason, then the Company, on the one hand, and the Placement Agent, on the other hand, shall contribute to such Claims or Costs for which such indemnification or reimbursement is held unavailable in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and the Placement Agent on the other hand, in connection with the transaction or transactions from which the Claims or Costs in question arose. The relative benefits received by the Company, on the one hand, and by the Placement Agent, on the other hand, shall be deemed to be in the same proportion as the value (before deducting expenses) of the consideration paid by or received by the Company (which for these purposes shall include the consideration received by the Selling Stockholders), in connection with the transaction or transactions from which the Claims or Costs in question arose bears to the total fees actually received by the Placement Agent in connection therewith. If the allocation provided by the foregoing sentence is not permitted by applicable law, then such allocation shall be based not only on such relative benefits determined as aforesaid but also on the relative fault of the Company, on the one hand, and the Placement Agent, on the other, as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, the parties' relative intents, knowledge, access to information and, if applicable, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Placement Agent, and any other equitable considerations appropriate in the circumstances. Any such contribution shall be subject to the limitation that in any event the Placement Agent's aggregate contribution to all Claims or Costs for which contribution is available hereunder shall not exceed the amount of fees actually received by the Placement Agent pursuant to the particular engagement relating to the transaction or transactions from which the Claims or Costs in question arose. (iv) The foregoing rights to indemnity, reimbursement and contribution shall be in addition to any rights that the Placement Agent, the Company and/or any other Indemnified Person may have at common law or otherwise. (b) Selling Stockholders Indemnification. (i) In connection with the engagement agreement, the Selling Stockholders, jointly and severally, agree to indemnify and hold harmless the Placement Agent and its affiliates, their respective directors, officers, controlling persons (within the meaning of Section 15 of the Securities Act, or Section 20(a) of the Exchange Act), if any, agents and employees of the Placement Agent or any of the Placement Agent's affiliates (collectively, "Indemnified Persons" and individually, an "Indemnified Person") from and against any and all actions, claims, suits, proceedings, liabilities, losses, damages and expenses incurred, joint or several (collectively, "Claims"), by any Indemnified Person (including reasonable fees and disbursements of the Placement 7 Agent and an Indemnified Person's counsel) which are related to or arise from the Placement Agent's engagement by the Selling Stockholders, including Claims that relate to or arise from (1) the inaccuracy, in whole or in part, of any representation or warranty made by the Selling Stockholders in the Purchase Agreement; (2) any untrue statement or alleged untrue statement made by the Selling Stockholders in the Purchase Agreement; (3) any untrue statement or alleged untrue statement of any material fact contained in the Memorandum and/or the Registration Statement (or any other material used by the Company or authorized by the Company for use in connection with the Transaction, provided, that, any other such material shall have been provided to the Selling Stockholders a reasonable period in advance of its use) concerning the Selling Stockholders; or (4) the omission or alleged omission to state in such document a material fact concerning the Selling Stockholders required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and will reimburse the Placement Agent and any other Indemnified Person for all costs and expenses (including reasonable fees and disbursements of the Placement Agent or an Indemnified Person's counsel), as they are incurred, in connection with investigating, preparing for, providing depositions for, testifying in or defending any such action or claim, formal or informal, investigation, inquiry or other proceeding, whether or not in connection with pending or threatened litigation, whether or not the Placement Agent or any Indemnified Person is named as a party thereto and whether or not any liability results therefrom related to or arising from the foregoing (collectively, "Costs"). The Selling Stockholders shall not, however, be responsible for any Claims, which are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted directly and primarily from an Indemnified Person's gross negligence or willful misconduct. (ii) If the Company shall sustain any indemnification liability under Section 6(a) hereof and such liability shall be reasonably attributable or related to (x) any breach of a representation or warranty of such Selling Stockholders contained in this Agreement or (y) any untrue statement of material fact concerning the Selling Stockholders made by any Selling Stockholder and/or any of its affiliates to the Company in the Memorandum and/or the Registration Statement, such Selling Stockholders shall, jointly and severally, indemnify and hold harmless the Company from such liability and pay or reimburse the Company for any related costs. The provisions of this Agreement shall not affect any arrangements, agreements or understanding as between the Company and the Selling Stockholders concerning indemnification, including those agreements between the Company and the Selling Stockholders contained in Section 8 of the Purchase Agreement. (iii) The Selling Stockholders agree that neither the Placement Agent nor any other Indemnified Person shall have any liability to the Selling Stockholders for or in connection with such engagement except, to the extent that liability for Claims which are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted directly and primarily from 8 an Indemnified Person's gross negligence or willful misconduct. The Selling Stockholders also agree that no Selling Stockholder will, without the prior written consent of the Placement Agent, settle or compromise or consent to the entry of any judgment in any pending or threatened Claim in respect of which indemnification may be sought hereunder (whether or not the Placement Agent or any Indemnified Person is an actual or potential party to such Claim). Such prior written consent of the Placement Agent shall be required only with respect to the Placement Agent determining that such settlement, compromise or consent complies with the terms of the following sentence and does not impose any material obligation on the Placement Agent or any other Indemnified Person or contain any admission of culpability on the part of the Placement Agent or any Indemnified Person. Such settlement, compromise or consent shall include an unconditional release of the Placement Agent and each other Indemnified Person from all liability arising out of such Claim, and such Selling Stockholder shall furnish the Placement Agent with a copy of such settlement reasonably in advance of entering into such settlement. (iv) In order to provide for just and equitable contribution, if a demand for indemnification or reimbursement for Claims or Costs is made pursuant to these provisions but is not available for any reason, then the Selling Stockholders, on the one hand, and the Placement Agent, on the other hand, shall contribute to such Claims or Costs for which such indemnification or reimbursement is held unavailable in such proportion as is appropriate to reflect the relative benefits to the Selling Stockholders, on the one hand, and the Placement Agent, on the other hand, in connection with the transaction or transactions from which the Claims or Costs in question arose. The relative benefits received by the Selling Stockholders, on the one hand, and by the Placement Agent, on the other hand, shall be deemed to be in the same proportion as the value (before deducting expenses) of the consideration paid by or received by the Selling Stockholders, in connection with the transaction or transactions from which the Claims or Costs in question arose bears to the total fees actually received by the Placement Agent in connection therewith. If the allocation provided by the foregoing sentence is not permitted by applicable law, then such allocation shall be based not only on such relative benefits determined as aforesaid but also on the relative fault of the Selling Stockholders, on the one hand, and the Placement Agent, on the other, as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, the parties' relative intents, knowledge, access to information and, if applicable, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Selling Stockholders or by the Placement Agent, and any other equitable considerations appropriate in the circumstances. Any such contribution shall be subject to the limitation that in any event the Placement Agent's aggregate contribution to all Claims or Costs for which contribution is available hereunder shall not exceed the amount of fees actually received by the Placement Agent pursuant to the particular engagement relating to the transaction or transactions from which the Claims or Costs in question arose. 9 (v) Notwithstanding the other provisions of this Agreement, no Selling Stockholder shall be liable for indemnification hereunder for an amount exceeding the total net proceeds received by such Selling Stockholder from a Transaction. (vi) The foregoing rights to indemnity, reimbursement and contribution shall be in addition to any rights that the Placement Agent and/or any other Indemnified Person may have at common law or otherwise. 7. Assignment. (a) The Placement Agent may, with the prior approval of the Company and the Selling Stockholders, designate one or more sub-agents; it being understood that the Placement Agency disclaims any liability resulting from the actions of the sub-agents. (b) Without the consent of the Placement Agent, each Selling Stockholder and the Company agree that during the term of the Placement Agent's engagement hereunder: (i) it will not, and will not permit its representatives to, contact or solicit institutions, corporations or other entities other than the Investors on the Investor Contact List as potential purchasers of the Shares and (ii) it will not pursue any financing transaction with respect to the Shares which would be in lieu of a Transaction. Furthermore, each Selling Stockholder and the Company agree that during the term of the Placement Agent's engagement hereunder, all inquiries, whether direct or indirect, from prospective Investors as to the Shares will be referred to the Placement Agent and will be deemed to be added to the Investor Contact List. 8. Advertisements. Upon completion of a Transaction, the Placement Agent may place advertisements in financial and other publications at its own expense describing its services to the Selling Stockholders hereunder. 9. Survival of Terms of Agreement. Subject to the provisions of Sections 3 (excluding the first sentence thereof) through 6, and 9 through 13 which shall survive any termination of this Agreement, the Selling Stockholders may terminate the Placement Agent's engagement hereunder at any time after six months after the date hereof, with or without cause, by giving the other parties at least 10 days' prior written notice; provided, however, that the -------- ------- representations and warranties of the Company and the Selling Stockholders contained in Section 3 hereof shall survive for one (1) year following the date hereof. The Placement Agent may terminate this Agreement at any time, with or without cause, by giving the other parties at least 10 days' prior written notice. Upon termination of the Placement Agent's engagement hereunder by any party hereto, the Placement Agent shall provide the Selling Stockholders and the Company with a final Investor Contact List. 10. Disclosure to Third Parties. Without the prior written consent of the Placement Agent, none of the Selling Stockholders or the Company will, subject to applicable securities laws, publicly refer to the Placement Agent or publicly disclose or otherwise make 10 available to third parties other than to Investors (except the Selling Stockholders' or the Company's counsel or other advisers; provided, the Selling Stockholders or the Company, as applicable, informs them of this provision) and other than in the Memorandum, any advice, either oral or written, which the Placement Agent provides to the Selling Stockholders in connection with this engagement. 11. Successors and Assigns. The benefits of this Agreement shall inure to the respective successors and permitted assigns of the parties hereto and of the indemnified parties under such indemnification agreement and their respective successors, permitted assigns and representatives, and the obligations and liabilities assumed in this Agreement by the parties hereto shall be binding upon their respective successors and assigns. This Agreement may not be assigned without the prior written consent of the non-assigning parties. 12. Notices. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (a) if to the Company, at the office of the Company, One Ram Ridge Road, Spring Valley, New York 10977, Attention: Kenneth I. Sawyer, Chairman and Chief Executive Officer, with a copy to Kirkpatrick & Lockhart LLP, 1251 Avenue of the Americas, 45th Floor, New York, New York, 10020, Attention: Stephen R. Connoni; (b) if to any Selling Stockholder, at the office of Merck KGaA, Frankfurter Strasse 250, 64271 Darmstadt Germany, Attention: Klaus-Peter Brandis or (c) if to the Placement Agent, at the office of the Placement Agent, 245 Park Avenue, New York, New York 10167, Attention: Private Equity Group, Messrs. Jason Weinstein and Ryan Burkart. Any such notice shall be effective only upon receipt. Any notice under Section 6 may be made by facsimile or telephone, but if so made shall be subsequently confirmed in writing. 13. Other Terms and Conditions. (a) The Company further represents and warrants to the Placement Agent that: (i) the Company has taken no action that would give any brokers, representatives, finders or other persons an interest in the compensation due to the Placement Agent in connection with any transaction contemplated herein and there are no other financial advisors or similar persons entitled to receive compensation from the Company in connection with any transaction contemplated herein; and (ii) this Agreement does not violate or constitute a breach or default under any contract, agreement, arrangement or understanding, whether written or oral, to which the Company or any of its subsidiaries is a party or by which its or their assets are bound. (b) Each Selling Stockholder further represents and warrants to the Placement Agent that: 11 (i) such Selling Stockholder has taken no action that would give any brokers, representatives, finders or other persons an interest in the compensation due to the Placement Agent in connection with any transaction contemplated herein and there are no other financial advisors or similar persons entitled to receive compensation from the Selling Stockholders in connection with any transaction contemplated herein; and (ii) this Agreement does not violate or constitute a breach or default under any contract, agreement, arrangement or understanding, whether written or oral, to which such Selling Stockholder or any of its subsidiaries is a party or by which its or their assets are bound. (c) This Agreement may not be amended or modified except in a writing signed by the party against whom enforcement is sought and shall be governed by and construed in accordance with the laws of the State of New York, without regard to its principles of conflicts of laws. (d) EACH OF THE PLACEMENT AGENT, THE SELLING STOCKHOLDERS AND THE COMPANY (ON THE COMPANY'S AND THE SELLING STOCKHOLDERS' OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF THEIR RESPECTIVE STOCKHOLDERS) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATING TO OR ARISING OUT OF THE ENGAGEMENT OF THE PLACEMENT AGENT PURSUANT TO, OR THE PERFORMANCE BY THE PLACEMENT AGENT OF THE SERVICES CONTEMPLATED BY, THIS AGREEMENT. (e) The validity and interpretation of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. Each of the Company and the Selling Stockholders irrevocably (a) submits to the jurisdiction of any court of the State of New York or the United States District Court for the Southern District of the State of New York for the purpose of any suit, action, or other proceeding arising out of this Agreement, or any of the agreements or transactions contemplated hereby (each, a "Proceeding"), (b) agrees that all claims in respect of any Proceeding may be heard and determined in any such court, (c) waives, to the fullest extent permitted by law, any immunity from jurisdiction of any such court or from any legal process therein, (d) agrees not to commence any Proceeding other than in such courts, and (e) waives, to the fullest extent permitted by law, any claim that such Proceeding is brought in an inconvenient forum. Each Selling Stockholder hereby irrevocably designates CT Corporation located at 1633 Broadway, New York, New York 10019 as its agent for such purposes, and covenants and agrees that service of process in a Proceeding may be made upon it at its office or at the specified office of such agent. (f) The purpose of this Agreement is to set forth the services that the Placement Agent will provide to the Selling Stockholders, as an independent contractor, either 12 as specifically provided herein or as subsequently requested in writing by any Selling Stockholder and agreed to by the Placement Agent. The parties hereto do not intend to create any special or fiduciary relationship between them. In addition, the exclusivity of the relationship between the Placement Agent and the Selling Stockholders refers to the fact that the services to be provided by the Placement Agent hereunder are to be provided solely by the Placement Agent and that the fees to be paid by the Selling Stockholders hereunder are solely for the benefit of the Placement Agent. There may be other services that are required to be provided to the Selling Stockholders and the Company in connection with any transaction contemplated by this Agreement and which will be provided by others (e.g., independent auditors or appraisers). Furthermore, the parties hereto understand that the Placement Agent is not required to purchase any Shares. This Agreement is solely for the benefit of the Placement Agent, the Selling Stockholders and the Company and is not intended to create rights or obligations of any party for the benefit of third parties, including without limitation the creditors of the Selling Stockholders or the Company. Each of the Company and the Selling Stockholders also agree that the Placement Agent shall not have any liability (including without limitation, liability for any losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses or disbursements) in contract, tort or otherwise to the Company or to any Selling Stockholder or to any person claiming through the Company or any Selling Stockholder, in connection with the engagement of the Placement Agent pursuant to this Agreement and the matters contemplated hereby, except to the extent any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or willful misconduct of the Placement Agent. (g) The Selling Stockholders and the Company acknowledge that the Placement Agent is a full service securities firm and in the ordinary course of its business, for its own account or the accounts of its customers, holds long or short positions in securities or derivative securities (including options), which may include securities or derivative securities relating to the Company or other entities which may be involved in the engagement contemplated hereby. Nothing in this Agreement shall be deemed to prohibit the Placement Agent from providing any services permitted by applicable law to any third party or from engaging in any lawfully permitted activity on its own behalf. (h) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (i) This Agreement constitutes the entire understanding between the parties hereto as to the matters covered hereby and supersedes all prior understandings, written or oral, relating to such subject matter. [Signature page follows] 13 Please confirm that the foregoing correctly sets forth the agreement among the Company, the Selling Stockholders and the Placement Agent. Very truly yours, PHARMACEUTICAL RESOURCES, INC. By: /s/ Kenneth I. Sawyer ------------------------------ Name: Kenneth I. Sawyer Title: President and CEO EMD, INC. By: /s/ Klaus-Peter Brandis ------------------------------ Name: Klaus-Peter Brandis Title: Vice President GENPHARM INC. By: /s/ Klaus-Peter Brandis ------------------------------ Name: Klaus-Peter Brandis Title: Vice President MERCK KGaA By: /s/ Klaus-Peter Brandis ------------------------------ Name: Klaus-Peter Brandis Title: Director Confirmed as of the date first above mentioned: BEAR, STEARNS & CO. INC. By: /s/ W. M. Cerf ------------------------------ Name: W. M. Cerf Title: S.M.D, EX-99.3 5 file004.txt LETTER AGREEMENT DATED AS OF AUGUST 21, 2001 Pharmaceutical Resources, Inc. One Ram Ridge Road Spring Valley, New York 10977 Attention: Chief Executive Officer Dear Sir: Reference is hereby made to the Company's Registration Statement on Form S-3 which may be filed in connection with the possible sale of up to 13,634,012 shares (the "Shares") of common stock, par value $.01 per share, of Pharmaceutical Resources, Inc. (the "Company") by Merck KGaA and its subsidiaries (collectively, "Merck") (the "Transaction"). By execution below, we hereby confirm the following: 1. As a condition precedent to the Company's obligation to consummate the Transaction, which condition may be waived in writing exclusively by the Board either by unanimous written consent or upon a vote that shall be, for purposes hereof, a majority of the three representatives to the Board that are not representatives of Merck, each of the representatives of Merck on the Board shall execute the Company's Registration Statement on Form S-3 which may be filed in connection with the Transaction. 2. Merck shall cause the representatives of Merck on the Board to resign from the Board immediately upon, and subject to, the Closing of the Transaction; provided, however, that if Merck shall retain over ten (10%) percent (the -------- ------- "Outstanding Minimum") of the Company's issued and outstanding shares following the Transaction, Merck shall cause only three of such representatives to resign from the Board immediately upon, and subject to, the Closing; provided, further, that, if Merck shall hold at least the -------- ------- Outstanding Minimum immediately following the Closing, then at such time as it may subsequently hold less than the Outstanding Minimum, Merck shall promptly cause its remaining representative to resign from the Board. MERCK KGaA By: /s/ Klaus-Peter Brandis -------------------------------- Name: Klaus-Peter Brandis Title: Director August 21, 2001 Accepted and Agreed: Pharmaceutical Resources, Inc. By: /s/ Kenneth I. Sawyer -------------------------------- Name: Kenneth I. Sawyer Title: President and CEO August 21, 2001 -----END PRIVACY-ENHANCED MESSAGE-----