Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Item 1.01
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Entry into a Material Definitive Agreement.
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On December 21, 2016
(the “Effective Date”), Aceto Corporation (the “Company”) entered into a Second Amended and Restated Credit
Agreement (the “A&R Credit Agreement”), which amended and restated in its entirety the Amended and Restated Credit
Agreement, dated as of October 28, 2015, among the Company, the other loan parties party thereto, JPMorgan Chase Bank, N.A. (“JPM”),
as administrative agent, Wells Fargo Bank, National Association (“Wells”), as syndication agent, and the lenders party
thereto from time to time, as amended by that certain Amendment No. 1 to Amended and Restated Credit Agreement, dated as of November
10, 2015, and that certain Amendment No. 2 to Amended and Restated Credit Agreement, dated as of August 26, 2016 (collectively,
the “First Amended Credit Agreement”). Wells is the administrative agent and JPM is the syndication agent under the
A&R Credit Agreement.
The A&R Credit
Agreement increases the aggregate available revolving commitment under the First Amended Credit Agreement from $150,000,000 to
an initial aggregate available revolving commitment of $225,000,000 (the “Initial Revolving Commitment”), which, subject
to the terms and conditions of the A&R Credit Agreement, the Company may borrow, repay and reborrow from and as of December
21, 2016, to but excluding December 21, 2021 (the “Maturity Date”;
provided
, that if any of the Company’s
2015 Convertible Notes (as defined in the A&R Credit Agreement) remain outstanding on the date that is 91 days prior to the
maturity date of the 2015 Convertible Notes (the “2015 Convertible Maturity Date”), then the Maturity Date shall mean
the date that is 91 days prior to the 2015 Convertible Maturity Date). Under the A&R Credit Agreement, the Company also borrowed
$150,000,000 in term loans (the “Initial Term Loan”). Subject to certain conditions, including obtaining commitments
from existing or prospective lenders, the Company will have the right to increase the amount of the Initial Revolving Commitment
(each, a “Revolving Facility Increase” and, together with the Initial Revolving Commitment, the “Revolving Commitment”)
and/or the Initial Term Loan in an aggregate amount not to exceed $100,000,000 pursuant to an incremental loan feature in the A&R
Credit Agreement.
The proceeds of the
Initial Term Loan have been used to partially finance the Acquisition (as defined below) and pay fees and expenses related thereto.
The proceeds from the revolving loans under the A&R Credit Agreement are anticipated to be used for working capital and general
corporate purposes and to finance acquisitions (including acquisitions of abbreviated new drug applications), and for fees and
expenses related thereto.
The A&R Credit
Agreement provides for (i) Eurodollar Loans (as defined in the A&R Credit Agreement), (ii) ABR Loans (as defined in the A&R
Credit Agreement) or (iii) a combination thereof. All loans under the A&R Credit Agreement will bear interest per annum at
a base rate or, at the Company’s option, LIBOR, plus an applicable interest rate margin ranging from 0.50% to 1.50% in the
case of ABR Loans, and 1.50% to 2.50% in the case of Eurodollar Loans. The applicable interest rate margin percentage is subject
to adjustment quarterly based upon the Company’s senior secured net leverage ratio. On the Effective Date, the applicable
interest rate margin for (x) Eurodollar Loans was 2.25% and (y) ABR Loans was 1.25%. In addition, the Company is required to pay
a commitment fee on the undrawn revolving commitments under the A&R Credit Agreement from time to time at a rate ranging from
0.25% to 0.40% per annum. The applicable commitment fee is subject to adjustment quarterly based upon the Company’s senior
secured net leverage ratio. The commitment fee on the Effective Date was 0.375%. Letter of credit fees are payable in respect of
outstanding letters of credit at a rate per annum equal to the applicable interest rate margin for Eurodollar Loans. Interest on
ABR Loans is payable on the first day of each calendar quarter. Interest on Eurodollar Loans is payable on the last day of each
interest rate period and at the end of each three month interval within an interest rate period if the interest rate period is
longer than three months. Principal and all accrued and unpaid interest are payable in full at maturity on the Maturity Date.
The A&R Credit
Agreement provides that commercial letters of credit shall be issued to provide the primary payment mechanism in connection with
the purchase of any materials, goods or services in the ordinary course of business.
The A&R Credit
Agreement, like the First Amended Credit Agreement, provides for a security interest in substantially all of the personal property
of the Company and certain of its subsidiaries. The A&R Credit Agreement contains several financial covenants. Among other
requirements, the Company may not permit, in each case calculated on a consolidated basis, the following to occur:
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the ratio of (i) Consolidated Total Funded Indebtedness (as defined in the A&R Credit Agreement)
minus the Cash Deduction Amount (as defined in the A&R Credit Agreement) to (ii) Consolidated Adjusted EBITDA (as defined in
the A&R Credit Agreement) as of the end of each fiscal quarter to exceed (x) prior to the last day of the fourth full fiscal
quarter following the Effective Date (as defined in the A&R Credit Agreement), 4.50 to 1.00, and (y) on and after the last
day of the fourth full fiscal quarter following the Effective Date, 4.00 to 1.00 (the “Covenant Step-Down Date”) (or,
if after the Covenant Step-Down Date,
any permitted acquisition (other than the Acquisition
(as defined below)) is consummated in accordance with the terms of the A&R Credit Agreement and the aggregate consideration
paid in respect of such acquisition exceeds $20,000,000
(such acquisition, the “Trigger Acquisition”), such
ratio shall increase to 4.50 to 1.00 for the quarter in which such acquisition is consummated and the three consecutive fiscal
quarters following such quarter (such four consecutive fiscal quarter period, an “Adjusted Covenant Period”);
provided
,
that (A) a new Adjusted Covenant Period may not commence for at least two fiscal quarters following the end of an Adjusted Covenant
Period and (B) at the end of an Adjusted Covenant Period, the maximum ratio described herein shall revert to 4.00 to 1.00 as of
the end of such Adjusted Covenant Period and thereafter until another Adjusted Covenant Period (if any) commences pursuant to the
terms and conditions described above);
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the ratio of (i) Consolidated Total Funded Senior Secured Indebtedness (as defined in the A&R
Credit Agreement) minus the Cash Deduction Amount to (ii) Consolidated Adjusted EBITDA as of the end of each fiscal quarter to
exceed 3.00 to 1.00 (or, if after the Covenant Step-Down Date, any Trigger Acquisition is consummated, then such ratio shall increase
to 3.25 to 1.00 for the Adjusted Covenant Period in respect of such Trigger Acquisition;
provided
, that (A) a new Adjusted
Covenant Period may not commence for at least two fiscal quarters following the end of an Adjusted Covenant Period and (B) at the
end of an Adjusted Covenant Period, the maximum ratio described herein shall revert to 3.00 to 1.00 as of the end of such Adjusted
Covenant Period and thereafter until another Adjusted Covenant Period (if any) commences pursuant to the terms and conditions described
above); and
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the ratio, as of the end of each fiscal quarter, of (i) (x) Consolidated Adjusted EBITDA, plus,
without duplication, non-cash unrealized losses in connection with Swap Agreements (as defined in the A&R Credit Agreement),
minus (y) the sum of (1) Unfinanced Capital Expenditures (as defined in the A&R Credit Agreement), plus (2) dividends, distributions,
stock repurchases and redemptions, in each case paid in cash, plus (3) cash taxes paid with respect to income or profit for the
applicable period, including state, federal, franchise, gross receipts and margins and similar taxes, plus (4) non-cash unrealized
gains in connection with Swap Agreements (as defined in the A&R Credit Agreement), in each case for the period of four consecutive
fiscal quarters then ended to (ii) the sum of (x) Consolidated Interest Expense (as defined in the A&R Credit Agreement) for
the period of four consecutive fiscal quarters then ended, plus (y) the scheduled installments of principal on all indebtedness
(including capital leases) excluding any bullet due at maturity thereof (provided that for purposes of calculating the scheduled
installments of principal in respect of the Initial Term Loan for each of the fiscal quarters ending March 31, 2016, June 30, 2016,
September 30, 2016 and December 31, 2016, such scheduled installments of principal shall be deemed to be $3,750,000 for each such
quarter), plus (z) earn-outs and deferred acquisition consideration and payments in respect thereof, in the case of each of the
foregoing clauses (y) and (z) of this clause (ii), for the period of the immediately succeeding four consecutive fiscal quarters
to be less than 2.00 to 1.00 as of the end of each fiscal quarter.
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Under the
A&R Credit Agreement, like the First Amended Credit Agreement, the Company and its subsidiaries are also subject to
certain restrictive covenants, including, among other things, covenants governing liens, limitations on indebtedness,
limitations on guarantees, limitations on sales of assets and sales of receivables, and limitations on loans and
investments.
The foregoing description
of the A&R Credit Agreement is a summary only, and is qualified in its entirety by reference to the complete text thereof,
a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K, and which is incorporated herein.
On December 21, 2016,
various parties entered into a Transaction Agreement Amendment and Waiver that amended the Product Purchase Agreement referred
to below and certain other agreements ancillary thereto. Reference is made to Item 2.01 of this Current Report on Form 8-K, which
is incorporated herein, for a description of the Transaction Agreement Amendment and Waiver.
Item 2.01
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Completion of Acquisition or Disposition of Assets.
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As previously disclosed
in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”)
on November 2, 2016 (the “Signing 8-K”), on November 2, 2016, the Company, Rising Health, LLC (f/k/a Romeo Charlie
Acquisition I, LLC) (“Purchaser I”) and Acetris Health, LLC (f/k/a Romeo Charlie Acquisition II, LLC) (“Purchaser
II” and, together with Purchaser I, the “Purchasers”), both of which are wholly-owned subsidiaries of Rising
Pharmaceuticals, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Rising”), entered into a
product purchase agreement (as amended, the “Product Purchase Agreement”), with Cedar Pharma LLC (f/k/a Citron Pharma
LLC), a New Jersey limited liability company (“Seller I”), Aster Pharma LLC (f/k/a Lucid Pharma LLC), a New Jersey
limited liability company (“Seller II” and together with Seller I, the “Sellers”), Citgen Pharma Holding
LLC, a New Jersey limited liability company (“Member I”), Gensource Pharma LLC, a Delaware limited liability company
(“Member II”), Sudha Kavuru, an individual (“Member III” and collectively with Member I and Member II,
the “Direct Members”), Shore Pharma LLC, a New Jersey limited liability company, Pharma Reach LLC, a New Jersey limited
liability company, and SS Pharma LLC, a New Jersey limited liability company (collectively, the “Indirect Entity Members”),
Subha Sri Thogarchedu and Vimal Kavuru (together, the “Indirect Individual Members” and collectively with the Indirect
Entity Members and the Direct Members, the “Members”) and Vimal Kavuru, as agent for the Sellers and Members (“Agent”).
Pursuant to the Product Purchase Agreement, Purchaser I agreed to acquire certain launched and unlaunched products and related
assets, and assume certain liabilities, of Seller I’s generic pharmaceutical business, and Purchaser II agreed to acquire
certain launched and unlaunched products, and assume certain liabilities, of Seller II’s generic pharmaceutical business
(the “Acquisition”).
The Company, the Purchasers,
the Sellers, the Members and Agent consummated the Acquisition on December 21, 2016 (the “Closing Date”). Pursuant
to the Product Purchase Agreement, the Company and the Purchasers paid the Sellers, and others at the direction of the Sellers,
$270 million in cash on the Closing Date as initial consideration (the “Closing Date Cash Payment”) for the Acquisition.
The Closing Date Cash Payment was funded by a combination of cash-on-hand, the proceeds of the Initial Term Loan and a $115 million
draw under the Initial Revolving Commitment. (Information regarding the Initial Term Loan and the Initial Revolving Commitment
is incorporated herein by reference to Item 1.01 of this Current Report on Form 8-K.) Additionally, subject to the terms of the
Product Purchase Agreement, the Company and the Purchasers will pay the Sellers additional consideration comprised of the following
(collectively, with the Closing Date Cash Payment, the “Purchase Price”):
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$50 million in cash that will bear interest at a rate of 5% per annum and is payable on the later
of (x) the fifth anniversary of the Closing Date and (y) the earlier of (A) the date that is the six month anniversary of the date
on which the Company pays in full all amounts outstanding under its A&R Credit Facility and (B) the date that is five years
and six months after the Closing Date;
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5,121,951 shares of the Company’s common stock, par value $0.01 per share (the “Common
Stock”), 75% of which will be issued to the Sellers on the third anniversary of the Closing Date and 25% of which will be
issued to the Sellers on the fourth anniversary of the Closing Date, subject to certain acceleration or deferral events; and
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up to $50 million in cash earn-out payments based on the financial performance of four pre-specified
pipeline products.
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The Purchase Price
is subject to certain adjustments as set forth in the Product Purchase Agreement including, without limitation, upward and downward
adjustments based upon the amounts of certain current assets and current liabilities as of the Closing Date.
The Product Purchase
Agreement contemplates that the Board of Directors of the Company (the “Board”) will, following the consummation of
the Acquisition, recommend to the Nominating and Governance Committee of the Board that Mr. Kavuru, who serves as Manager and Chief
Executive Officer of the Sellers and is an indirect equity holder of the Sellers, be nominated to serve as a member of the Board
(the “Board Nomination Right”) for a period commencing subsequent to the Closing Date and ending on the third anniversary
of the Closing Date. Following the third anniversary of the Closing Date, the Product Purchase Agreement provides that the Board
will continue to recommend to the Nominating and Governance Committee of the Board that Mr. Kavuru be nominated to serve as a member
of the Board for so long as he and his permitted transferees collectively hold at least 3% of the total outstanding shares of the
Company’s Common Stock on a fully-diluted basis (excluding shares issuable pursuant to the Company’s bond hedge). The
Board Nomination Right will expire upon the earliest to occur of: (i) Mr. Kavuru’s breach of that certain Restrictive Covenants
Agreement, dated November 2, 2016, by and among each of the Sellers, the Members (including Mr. Kavuru) and Ashok Mayya and which
was described in the Signing 8-K; (ii) Mr. Kavuru’s acquisition of competing products under certain circumstances; (iii)
Mr. Kavuru’s termination for “Cause” or resignation without “Good Reason” (each as defined in his
Employment Agreement described in further detail below); (iv) Mr. Kavuru’s resignation from the Board or refusal to stand
for re-election; or (v) a change of control of the Company.
On December 21, 2016,
parties to the Product Purchase Agreement, Mr. Kavuru’s Employment Agreement (as defined below) and another ancillary agreement
entered into a Transaction Agreement Amendment and Waiver (the “Amendment Agreement”). Among other things, the Amendment
Agreement modified the manner in which certain post-closing adjustments to the purchase price will be made. As amended, in the
event that certain working capital items, on a net basis, exceed $24.5 million, the Purchasers will pay to the Sellers 50% of such
excess, but not to exceed $4,229,665. Other amendments, more technical in nature, revised the procedures followed and to be followed
in conducting a closing inventory and in the hiring by the Purchasers of certain of the Sellers’ employees.
The foregoing description
of the Product Purchase Agreement and Amendment Agreement does not purport to be complete and is qualified in its entirety by reference
to (i) the Product Purchase Agreement, which was filed as Exhibit 2.1 to the Signing 8-K, and is incorporated herein, (ii) an amendment
thereto, a copy of which is filed as Exhibit 2.2 to this Current Report, and is incorporated herein and (iii) the Amendment Agreement,
a copy of which is filed as Exhibit 2.3 to this Current Report, and is incorporated herein.
Item 2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On the Effective Date,
upon entering into the A&R Credit Agreement described in Item 1.01 to this Current Report on Form 8-K, the Company made $150,000,000
in initial term loan borrowings and $115,000,000 in initial revolving loan borrowings under the A&R Credit Agreement and used
the proceeds to partially finance the Acquisition and pay fees and expenses related thereto. After giving effect to the foregoing
transactions, the Company currently has an aggregate of $150,000,000 in outstanding term loan borrowings and $115,000,000 in outstanding
revolving loan borrowings, with $0.00 available for additional term loan borrowings and $110,000,000 available for additional revolving
loan borrowings (in each case, subject to increase as described above), under the A&R Credit Agreement. The proceeds from the
revolving loans under the A&R Credit Agreement are anticipated to be used for working capital and general corporate purposes
and to finance acquisitions (including acquisitions of abbreviated new drug applications), and for fees and expenses related thereto.
Reference is made to
Item 1.01 hereof, which is incorporated herein.
Citron Pharma LLC 2015 and 2014 Audited
Financial Statements
(Exhibit 99.1):
Independent auditors' report;
Balance sheets as of December
31, 2015 and 2014;
Statements of operations for the
years ended December 31, 2015 and December 31, 2014;
Statements of comprehensive income
for the years ended December 31, 2015 and December 31, 2014;
Statements of changes in members’
capital for the years ended December 31, 2015 and December 31, 2014;
Statements of cash flows for the
years ended December 31, 2015 and December 31, 2014; and
Notes to audited financial statements.
Citron Pharma LLC 2014 and 2013 Audited
Financial Statements
(Exhibit 99.2):
Independent auditors' report;
Balance sheets as of December
31, 2014 and 2013;
Statements of operations for the
year ended December 31, 2014 and for the period from January 7, 2013 (date of inception) through December 31, 2013;
Statements of comprehensive income
for the year ended December 31, 2014 and for the period from January 7, 2013 (date of inception) through December 31, 2013;
Statements of changes in members’
capital for the year ended December 31, 2014 and for the period from January 7, 2013 (date of inception) through December 31, 2013;
Statements of cash flows for the
year ended December 31, 2014 and for the period from January 7, 2013 (date of inception) through December 31, 2013; and
Notes to audited financial statements.
Lucid Pharma LLC 2015 and 2014 Audited
Financial Statements
(Exhibit 99.3):
Independent auditors' report;
Balance sheets as of December
31, 2015 and 2014;
Statements of income for the years
ended December 31, 2015 and December 31, 2014;
Statements of changes in members’
equity for the years ended December 31, 2015 and December 31, 2014;
Statements of cash flows for the
years ended December 31, 2015 and December 31, 2014;
Notes to audited financial statements;
and
Supplementary Information:
Schedule of Operating Activities
by Division; and
Schedule of Discontinued Operations.
Lucid Pharma LLC 2014 and 2013 Audited
Financial Statements
(Exhibit 99.4):
Independent auditors' report;
Balance sheets as of December
31, 2014 and 2013;
Statements of income for the years
ended December 31, 2014 and December 31, 2013;
Statements of changes in members’
capital for the year ended December 31, 2014 and December 31, 2013;
Statements of cash flows for the
years ended December 31, 2014 and December 31, 2013;
Notes to audited financial statements;
and
Supplementary Information:
Schedule of Operating Activities
by Division; and
Schedule of Discontinued Operations.
Citron Pharma LLC 2016 and 2015 Unaudited
Financial Statements
(Exhibit 99.5):
Balance
sheets as of September 30, 2016 (unaudited) and December 31, 2015;
Statements of operations for the
nine months ended September 30, 2016 and 2015 (unaudited);
Statements of comprehensive income
for the nine months ended September 30, 2016 and 2015(unaudited);
Statements of cash flows for the
nine months ended September 30, 2016 and 2015(unaudited); and
Notes to unaudited financial statements.
Lucid Pharma LLC 2016 and 2015 Unaudited
Financial Statements
(Exhibit 99.6):
Balance sheets as of September 30, 2016 (unaudited)
and December 31, 2015;
Statements of income for the nine
months ended September 30, 2016 and 2015(unaudited);
Statements of cash flows for the
nine months ended September 30, 2016 and 2015(unaudited); and
Notes to unaudited financial statements.
(b) Pro Forma Financial Information
(to be filed by amendment after the filing of the Company’s consolidated unaudited balance sheet as of December 31, 2016
but within 71 days after the filing of this Current Report)
Pro forma income statement for
the twelve months ended June 30, 2016;
Pro forma income statement for
the three months ended September 30, 2016; and
Notes to pro forma financial statements.
(d) Exhibits:
Exhibit No.
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Document
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2.1
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Product Purchase Agreement, by and among the Company, the Sellers, the Members, the Purchasers and the Agent, dated as of November 2, 2016, is incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the Commission on November 2, 2016 (the “Product Purchase Agreement”)
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2.2
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Amendment No. 1 to the Product Purchase Agreement, by and among the Purchasers and the Agent, dated as of December 2, 2016
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2.3
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Transaction Agreement Amendment and Waiver, dated as of December 21, 2016, by and among the Purchasers, the Agent and other parties thereto
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10.1
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Second Amended and Restated Credit Agreement, dated as of December 21, 2016, by and among the Company, the other loan parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National Association, as syndication agent, and the lenders party thereto*
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23.1
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Consent of EisnerAmper LLP
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23.2
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Consent of RAM Associates
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99.1
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Citron Pharma LLC 2015 and 2014 Audited Year-End Financial Statements
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99.2
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Citron Pharma LLC 2014 and 2013 Audited Year-End Financial Statements
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99.3
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Lucid Pharma LLC 2015 and 2014 Audited Year-End Financial Statements
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99.4
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Lucid Pharma LLC 2014 and 2013 Audited Year-End Financial Statements
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99.5
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Citron Pharma LLC 2016 and 2015 Unaudited Interim Financial Statements
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99.6
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Lucid Pharma LLC 2016 and 2015 Unaudited Interim Financial Statements
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99.7
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Pro Forma Information**
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99.8
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Press Release, December 21, 2016***
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* Pursuant to Item 601(b)(2) of Regulation S-K, exhibits
and schedules are omitted. The Company agrees to furnish supplementally to the Commission a copy of any omitted exhibit or schedule
upon request by the Commission.
** To be filed by amendment.
*** Furnished, not filed