As filed with the Securities and Exchange Commission on January 23, 2018

Registration No. 333-221707

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

ATLAS HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware		(2834)		32-0546926
(State of Incorporation)		(Primary Standard Industrial Classification Code Number)		(IRS Employer Identification No.)

 

 

Atlas Holdings, Inc.

c/o Impax Laboratories, Inc.

30831 Huntwood Ave

Hayward, CA 94544

Telephone: (510) 240-6000

(Address, including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Bryan M. Reasons

Atlas Holdings, Inc.

c/o Impax Laboratories, Inc.

30831 Huntwood Ave

Hayward, CA 94544

(510) 240-6000

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

With a copy to:

 

Francis J. Aquila, Esq. Matthew G. Hurd, Esq. Catherine M. Clarkin, Esq. Sullivan & Cromwell LLP 125 Broad Street New York, NY 10004 (212) 558-4000		Mark A. Schlossberg, Esq. Impax Laboratories, Inc. 30831 Huntwood Ave. Hayward, CA 94544 (510) 240-6000		Charles K. Ruck, Esq. R. Scott Shean, Esq. Latham & Watkins LLP 650 Town Center Drive Costa Mesa, CA 92626 (213) 891-1200

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934 (“Exchange Act”).

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒  (Do not check if a smaller reporting company)		Smaller reporting company		☐
				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to Be Registered		Amount to be Registered(1)		Proposed Maximum Offering Price Per Unit		Proposed Maximum Aggregate Offering Price		Amount of Registration Fee(2)
Class A Common Stock, par value $0.01 per share		75,579,445		N/A		$1,299,966,454		$161,845.82

(1)	Computed in accordance with Rule 457(f) under the Securities Act to be $161,845.82, by multiplying the proposed maximum aggregate offering price by .0001245.

(2)	Previously paid in connection with the initial filing of this registration statement on November 21, 2017.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.

 

 

 

The information in the combined proxy statement/prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed with the U.S. Securities and Exchange Commission is effective. The combined proxy statement/prospectus is not an offer to sell these securities and does not constitute the solicitation of offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION—DATED JANUARY 23, 2018

 

 

LETTER TO STOCKHOLDERS OF IMPAX

[            ], 2017

Dear Impax Stockholders:

The board of directors of Impax Laboratories, Inc. (“Impax”) and the board of managers of Amneal Pharmaceuticals LLC (“Amneal”) recently agreed to combine the generics and specialty pharmaceutical business of Impax with the generic drug development and manufacturing business of Amneal in a transaction that represents an opportunity to create a new generics company, pursuant to the Business Combination Agreement (the “BCA”), dated as of October 17, 2017, among Impax, Amneal, Atlas Holdings, Inc., a direct wholly owned subsidiary of Impax (“Holdco”) and K2 Merger Sub Corporation, a direct wholly owned subsidiary of Holdco (“Merger Sub”), as amended on November 21, 2017 and December 16, 2017, and the transactions contemplated thereby (the “Combination”).

The Combination includes (i) the merger of Impax with Merger Sub with Impax surviving the merger as a direct wholly owned subsidiary of Holdco (the “Impax Merger”), (ii) the conversion of the surviving corporation of the Impax Merger into a Delaware limited liability company, (iii) the contribution by Holdco of all of the equity interests of Impax to Amneal in exchange for certain equity interests of Amneal and (iv) the issuance by Holdco of shares of its Class B common stock to the existing members of Amneal (the “Existing Amneal Members”).

Following completion of the Combination, the combined businesses will operate under Holdco as a new holding company, which will be renamed Amneal Pharmaceuticals, Inc. (“New Amneal”). In connection with the Combination, each share of common stock of Impax will be converted into the right to receive one share of New Amneal Class A common stock. Holders of Impax common stock (“Impax Stockholders”) immediately prior to the Combination will collectively hold approximately 25%, and the Existing Amneal Members will hold approximately 75%, of the voting and economic interests in the combined businesses of Impax and Amneal under New Amneal. Following the closing of the Combination and the PIPE Investment (as described on page [●] of the enclosed combined proxy statement/prospectus), it is expected that the Existing Amneal Members will hold approximately 60% of the voting power of the outstanding shares of New Amneal common stock (the “New Amneal Shares”) and TPG Improv Holdings, L.P. and other institutional investors will hold approximately 15% of the voting power of the outstanding New Amneal Shares.

We are excited about the Combination and the opportunities that it presents, and we invite you to a special meeting of Impax Stockholders (the “Special Meeting”) to be held on [                    ], 2018 at [            ] [a.m./p.m.] local time, at [            ] to vote on matters relating to the Combination.

You are being asked to consider and vote on the following proposals:

 

•

a proposal to adopt the BCA and thereby approve the Combination (the “Combination Proposal”);

 

•

a proposal to approve, on a non-binding advisory basis, the compensatory arrangements between Impax and certain Impax executive officers relating to the Combination that are disclosed in the section entitled “The Special Meeting—Vote Required and Impax Board Recommendation—Compensation Proposal” beginning on page [●] of the enclosed combined proxy statement/prospectus;

 

•

a proposal to approve and adopt the Atlas Holdings, Inc. 2018 Incentive Award Plan; and

 

•

a proposal to approve any motion to adjourn the Special Meeting, if necessary or appropriate, (i) due to the absence of a quorum, (ii) to prevent a violation of applicable law, (iii) to provide to Impax

Stockholders any supplement or amendment to the combined proxy statement/prospectus and/or (iv) to solicit additional proxies if Impax reasonably determines that it is advisable or necessary to do so in order to obtain Impax Stockholder approval of the Combination Proposal.

IMPAX’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE PROPOSALS DESCRIBED ABOVE.

The Combination cannot be completed unless you vote to adopt the BCA and thereby approve the Combination. Approval of the Combination Proposal is a condition to the consummation of the Combination; the failure to adopt the other proposals will have no impact on the consummation of the Combination.

More information about the Combination and the proposals described above is contained in the enclosed combined proxy statement/prospectus. We urge you to read this document, including the Annexes and the documents incorporated by reference, carefully and in full. In particular, we urge you to read the section entitled “Risk Factors” beginning on page [●] of the enclosed combined proxy statement/prospectus.

The close of business on [                    ], 2018 has been fixed as the record date for determining the Impax Stockholders entitled to receive notice of and to vote at the Special Meeting.

We look forward to seeing you at the Special Meeting and appreciate your support at this key moment for our company.

Best regards,

Paul M. Bisaro

President and Chief Executive Officer

Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in the enclosed combined proxy statement/prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Combination, the adoption of the BCA, the issuance of New Amneal Shares in connection with the Combination, or any other transaction described in the enclosed combined proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

The enclosed combined proxy statement/prospectus is dated [            ], 2017, and is first being mailed to Impax Stockholders on or about [            ].

NOTICE OF SPECIAL MEETING

Important Notice Regarding the Special Meeting to be held on [            ], 2018

A Special Meeting of the holders of Impax Laboratories, Inc. (“Impax”) common stock (the “Impax Stockholders”) will be held on [            ], 2018, at [    ] [a.m./p.m.] local time at [            ] for the following purposes:

 

1.

To consider and vote upon a proposal to adopt the Business Combination Agreement, dated as of October 17, 2017 (the “BCA”), by and among Amneal Pharmaceuticals LLC (“Amneal”), Atlas Holdings, Inc. (“Holdco”), K2 Merger Sub Corporation (“Merger Sub”) and Impax, as amended on November 21, 2017 and December 16, 2017, and thereby approve the transactions contemplated thereby (the “Combination Proposal”);

 

2.

To consider and vote upon a proposal to approve, on a non-binding advisory basis, certain compensatory arrangements between Impax and certain named Impax executive officers relating to the Combination that are described in the section entitled “The Special Meeting—Vote Required and Impax Board Recommendation—Compensation Proposal” beginning on page [●] of the enclosed combined proxy statement/prospectus (the “Compensation Proposal”);

 

3.	To consider and vote upon a proposal to approve and adopt the Atlas Holdings, Inc. 2018 Incentive Award Plan; and

 

4.

To consider and vote upon a proposal to approve any proposal to adjourn the Special Meeting, or any postponement thereof, to another time or place if necessary or appropriate (i) due to the absence of a quorum at the Special Meeting, (ii) to prevent a violation of applicable law, (iii) to provide to Impax Stockholders any supplement or amendment to the combined proxy statement/prospectus and/or (iv) to solicit additional proxies if Impax reasonably determines that it is advisable or necessary to do so in order to obtain Impax Stockholder approval of the Combination Proposal.

The board of directors has unanimously determined that the transactions, including the merger of Merger Sub with and into Impax (the “Impax Merger”), are in the best interests of and advisable to the Impax Stockholders and recommends that the Impax Stockholders adopt the BCA and thereby approve the transactions contemplated by the BCA (the “Combination”), including the Impax Merger. The board of directors made its determination after consultation with its legal and financial advisors and consideration of a number of factors.

 

The close of business on [            ], 2018 has been fixed as the record date for determining the Impax Stockholders entitled to receive notice of and to vote at the Special Meeting.

This combined proxy statement/prospectus is available at http://investors.impaxlabs.com/Investor-Relations/default.aspx. If you are an Impax Stockholder of record, you may access your proxy card by either:

 

•

visiting: www.voteproxy.com, entering the information requested on your computer screen and following the simple instructions, or

 

•

calling (in the United States, U.S. territories, and Canada) toll-free (800) 776-9437 on a touch-tone telephone and following the simple instructions provided by the recorded message.

PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ENCLOSED COMBINED PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ENCLOSED COMBINED PROXY STATEMENT/PROSPECTUS.

 

By Order of the Board of Directors,

Mark A. Schlossberg

Corporate Secretary

ADDITIONAL INFORMATION REGARDING IMPAX

The enclosed combined proxy statement/prospectus incorporates by reference important business and financial information about Impax Laboratories, Inc. (“Impax”) from documents that are not included in or delivered with the combined proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in the enclosed combined proxy statement/prospectus by requesting them in writing or by telephone at the following address and telephone number.

Impax Laboratories, Inc.

30831 Huntwood Ave.

Hayward, CA 94544

Attention: Investor Relations

(510) 240-6000

http://investors.impaxlabs.com/Investor-Relations/default.aspx

In addition, if you have questions about the Combination or the Special Meeting, or if you need to obtain copies of the enclosed combined proxy statement/prospectus, proxy card or other documents incorporated by reference in the combined proxy statement/prospectus, you may contact Impax’s proxy solicitor at the address and telephone number listed below. You will not be charged for any of the documents you request.

MacKenzie Partners, Inc.

105 Madison Avenue

New York, NY 10016

Toll-free: (800) 322-2885

Collect: (212) 929-5500

If you would like to request documents, please do so by [            ], 2018, in order to receive them before the Special Meeting.

For a more detailed description of the information incorporated by reference in the enclosed combined proxy statement/prospectus and how you may obtain it, see the section entitled “Where You Can Find More Information” beginning on page [●] of the enclosed combined proxy statement/prospectus.

TABLE OF CONTENTS

 

		Page
QUESTIONS AND ANSWERS ABOUT THE COMBINATION AND THE SPECIAL MEETING			1
SUMMARY			10
Information About the Parties to the Combination			10
The Business Combination Agreement			11
Structure of the Combination			11
Consideration to Impax Stockholders			12
Treatment of Impax Equity Awards			13
Special Meeting of Impax Stockholders			14
Recommendation of Impax’s Board of Directors and Reasons for the Combination			15
Opinion of Financial Advisor			15
Governmental Approvals			15
Conditions to the Completion of the Combination			16
Non-Solicitation by Impax; Competing Proposals; Change of Recommendation			16
Termination and Termination Fees			17
No Delaware Appraisal Rights			18
Material Tax Consequences of the Combination			18
Interests of Impax Directors and Executive Officers in the Combination			18
Litigation Related to the Combination			19
Directors and Executive Officers of New Amneal After the Combination			19
Financing Matters			19
Accounting Treatment			20
Comparison of Stockholders’ Rights			20
Stockholders Agreement			20
Amneal Limited Liability Company Agreement			24
Tax Receivable Agreement			25
The Combination is Subject to a Number of Risks			25
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			26
RISK FACTORS			27
Risk Factors Relating to the Combination			27
Risk Factors Relating to Impax and Impax’s Business			36
Risk Factors Relating to Amneal and Amneal’s Business			36
Risk Factors Relating to the Combined Company			54
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF AMNEAL			63
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF IMPAX			64
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA			65
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE FINANCIAL INFORMATION			66
THE SPECIAL MEETING			67
Overview			67
Date, Time and Place of the Special Meeting			67
Proposals			67
Record Date; Outstanding Shares; Shares Entitled to Vote			67
Attendance			67
Quorum			68
Vote Required and Impax Board Recommendation			68
Voting Your Impax Shares			69

 

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TABLE OF CONTENTS (cont’d)

 

		Page
Voting Shares Held in Street Name			70
Revoking Your Proxy			70
Share Ownership and Voting by Impax’s Officers and Directors			71
Costs of Solicitation			71
Impax Stockholders Should Not Send in Their Stock Certificates with Their Proxy Cards.			71
Other Business			71
Assistance			71
INFORMATION ABOUT THE PARTIES TO THE COMBINATION			72
Impax Laboratories, Inc.			72
Amneal Pharmaceuticals LLC			72
Atlas Holdings, Inc.			72
K2 Merger Sub Corporation			72
THE COMBINATION			73
Structure of the Combination			73
Consideration			74
PIPE Investment			74
Background of the Combination			77
Recommendation of the Impax Board and Reasons for the Combination			87
Board of Managers of Amneal Reasons for the Combination			92
Unaudited Forecasted Financial Information			94
Opinion of Impax’s Financial Advisor			97
Accounting Treatment			107
Consent Solicitation and Tender Offer for Impax Convertible Notes			107
Delisting and Deregistration of Impax Shares; Listing of New Amneal Shares			107
Litigation Relating to the Combination			108
MATERIAL TAX CONSEQUENCES OF THE COMBINATION			109
INTERESTS OF IMPAX DIRECTORS AND OFFICERS IN THE COMBINATION			111
Interests of Impax Directors and Executive Officers in the Combination			111
Leadership of New Amneal			111
Treatment of Outstanding Equity Awards			111
Executive Officer Employment Agreements			113
Deferred Compensation Plans			115
Director and Officer Indemnification			116
Further Actions			116
Combination-Related Compensation for Impax’s Named Executive Officers			116
ADVISORY VOTE ON COMBINATION-RELATED COMPENSATION FOR IMPAX’S NAMED EXECUTIVE OFFICERS			120
BUSINESS			121
Impax Business			121
Amneal Business			121
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF AMNEAL			141
Overview			141
Results of Operations			142
Quantitative and Qualitative Disclosures about Market Risk			159
Critical Accounting Policies and Estimates			159
Recently Adopted Accounting Pronouncements			163

 

-ii-

TABLE OF CONTENTS (cont’d)

 

		Page
Recently Issued Accounting Pronouncements			163
Off-Balance Sheet Arrangements			165
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			166
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS			171
THE BUSINESS COMBINATION AGREEMENT			184
Explanatory Note Regarding the Business Combination Agreement			184
Surrender and Payment; Lost Certificates			184
Treatment of Impax Equity Incentive Awards			185
Treatment of Impax Employee Stock Purchase Plan			186
Representations and Warranties			186
Operations of Impax and Amneal Pre-Closing			189
Solicitation by Impax; Competing Proposals; Change of Recommendation			194
Impax Stockholder Meeting			196
Governmental Approvals			197
Director and Officer Indemnification and Insurance			198
Fees and Expenses			198
Employee Matters			198
Stockholder Litigation			198
Financing			199
Delisting and Deregistration of Impax Shares			199
Listing of New Amneal Shares			199
Certain Tax Matters			200
Treatment of Impax Convertible Notes			200
Conditions to Closing			200
Additional Conditions to the Obligations of Impax and Holdco			201
Additional Conditions to the Obligations of Amneal			201
Termination and Termination Fees			202
Remedies			203
Amendment of the BCA			204
ANCILLARY AGREEMENTS RELATED TO THE COMBINATION			205
Stockholders Agreement			205
Amneal LLC Agreement			211
Tax Receivable Agreement			214
NEW AMNEAL CAPITAL STOCK			217
Authorized Capital Stock			217
New Amneal Shares			217
New Amneal Preferred Stock			219
Exclusive Forum			219
Anti-takeover Effects of Provisions of the New Amneal Charter and Bylaws and Other Governing Documents			220
Corporate Opportunities and Transactions with Controlling Stockholder			222
Transfer Agent and Registrar			223
Listing of Common Stock			223
COMPARISON OF STOCKHOLDERS’ RIGHTS			224

 

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TABLE OF CONTENTS (cont’d)

 

		Page
BENEFICIAL OWNERSHIP OF IMPAX COMMON SHARES			236
Securities Ownership of Executive Officers and Directors			236
Securities Ownership of Principal Stockholders			237
BENEFICIAL OWNERSHIP OF AMNEAL VOTING EQUITY			238
DIRECTORS AND EXECUTIVE OFFICERS OF NEW AMNEAL AFTER THE COMBINATION			239
Board of Directors			239
Committees of the New Amneal Board of Directors			240
AMNEAL RELATED PARTY DISCLOSURES			246
Related Party Transactions Involving Mr. Chirag Patel and Mr.  Chintu Patel			246
ATLAS HOLDINGS, INC. 2018 INCENTIVE AWARD PLAN			251
NO DELAWARE APPRAISAL RIGHTS			255
LEGAL MATTERS			255
EXPERTS			255
WHERE YOU CAN FIND MORE INFORMATION			256
INDEX TO AMNEAL PHARMACEUTICALS LLC AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS			FS-1
ANNEX A—BUSINESS COMBINATION AGREEMENT			A-1
ANNEX B—STOCKHOLDERS AGREEMENT			B-1
ANNEX C—AMNEAL LLC AGREEMENT			C-1
ANNEX D—NEW AMNEAL CHARTER			D-1
ANNEX E—NEW AMNEAL BYLAWS			E-1
ANNEX F—TAX RECEIVABLE AGREEMENT			F-1
ANNEX G—COMMITMENT LETTER			G-1
ANNEX H—OPINION OF MORGAN STANLEY			H-1
ANNEX I—AMENDMENT NO. 1 TO BUSINESS COMBINATION AGREEMENT			I-1
ANNEX J—PIPE SIDE LETTER			J-1
ANNEX K—AMENDMENT NO. 2 TO THE BUSINESS COMBINATION AGREEMENT			K-1

 

-iv-

QUESTIONS AND ANSWERS ABOUT THE COMBINATION AND THE SPECIAL MEETING

The following are answers to certain questions that you may have regarding the Special Meeting. Impax urges you to read carefully the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this document.

 

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“Amneal” refers to Amneal Pharmaceuticals LLC, a Delaware limited liability company.

 

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“Amneal Board” refers to Amneal’s board of managers.

 

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“Amneal Common Units” refers to the common units of Amneal.

 

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“Amneal Group” refers to the Existing Amneal Members and any of their affiliates, successors and permitted assigns to which any New Amneal Shares have been transferred in accordance with the Stockholders Agreement (each an “Amneal Group Member”).

 

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“Amneal Group Representative” refers to Amneal Holdings, LLC, a Delaware limited liability company and the ultimate parent of Amneal.

 

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“BCA” refers to the Business Combination Agreement, dated as of October 17, 2017, among Impax, Amneal, Holdco and Merger Sub, as amended on November 21, 2017 and December 16, 2017.

 

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“Class A Common Stock” refers to shares of Class A common stock of New Amneal.

 

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“Class B Common Stock” refers to shares of Class B common stock of New Amneal.

 

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“Class B-1 Common Stock” refers to the shares of Class B-1 common stock of New Amneal.

 

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“Closing” refers to the closing of the Combination.

 

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“Closing Date” refers to the date on which the Closing actually occurs.

 

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“Combination” refers to the transactions contemplated by the BCA.

 

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“Combined Company” refers to New Amneal, Amneal, Impax and each of their respective subsidiaries following the consummation of the Combination.

 

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“dollars” or “$” refers to U.S. dollars.

 

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“Existing Amneal Members” refers to Amneal Pharmaceuticals Holding Company, LLC, AP Class D Member, LLC, AP Class E Member, LLC and AH PPU Management, LLC, each a Delaware limited liability company.

 

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“GAAP” refers to the generally accepted accounting principles in the United States.

 

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“Holdco” refers to Atlas Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Impax.

 

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“Impax” refers to Impax Laboratories, Inc., a Delaware corporation.

 

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“Impax Board” refers to Impax’s board of directors.

 

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“Impax Merger” means the merger of Merger Sub with and into Impax, with Impax continuing as the surviving corporation, pursuant to the BCA.

 

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“Impax Shares” refers to outstanding shares of common stock of Impax, par value $0.01 each.

 

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“Impax Stockholders” refers to the holders of Impax Shares.

 

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“Merger Sub” refers to K2 Merger Sub Corporation, a Delaware limited liability company and a direct wholly owned subsidiary of Holdco and an indirect wholly owned subsidiary of Impax.

 

-1-

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“New Amneal” refers to Holdco after it has been re-registered as a public company and renamed Amneal Pharmaceuticals, Inc. pursuant to the BCA at or prior to the Closing.

 

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“New Amneal Board” refers to New Amneal’s board of directors.

 

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“New Amneal Shares” refers collectively to shares of Class A Common Stock, shares of Class B Common Stock and shares of Class B-1 Common Stock.

 

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“New Amneal Stockholder” refers to each holder of New Amneal Shares.

 

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“our,” “we” or “us” refers to Impax.

 

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“Record Date” refers to [                    ], 2018, the date for determining the Impax Stockholders entitled to receive notice of and to vote at the Special Meeting.

 

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“Stockholders Agreement” refers to the Second Amended and Restated Stockholders Agreement, dated December 16, 2017, by and among Holdco and the Existing Amneal Members.

Q: Why am I receiving this combined proxy statement/prospectus?

A: You are receiving this combined proxy statement/prospectus because Amneal, Impax, Holdco, a wholly owned subsidiary of Impax, and Merger Sub, an indirect wholly owned subsidiary of Impax, have entered into the BCA pursuant to which, on the terms and subject to the conditions included in the BCA, Impax has agreed to combine with Amneal by means of a Combination, which includes (i) the Impax Merger, (ii) the conversion of the surviving corporation of the Impax Merger into a Delaware limited liability company, (iii) the contribution by Holdco of all of the equity interests of Impax to Amneal in exchange for certain equity interests of Amneal, and (iv) the issuance by Holdco of shares of its Class B Common Stock to the existing members of Amneal (“Existing Amneal Members”). The BCA, which governs the terms of the Combination, is attached to this combined proxy statement/prospectus as Annex A.

The BCA must be adopted by the Impax Stockholders in accordance with the General Corporation Law of the State of Delaware (the “DGCL”). Impax is holding a special meeting of its stockholders (the “Special Meeting”), to obtain such approval. Impax Stockholders will also be asked to vote on certain other matters described in this combined proxy statement/prospectus at the Special Meeting and to approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Special Meeting to adopt the BCA and thereby approve the Combination.

Q: When and where will the Special Meeting take place?

A: The Special Meeting will be held at [    ] [a.m./p.m.] Eastern Time, on [            ], 2018, at [            ], [            ].

Q: What matters will be considered at the Special Meeting?

A: The Impax Stockholders will be asked to:

 

•

consider and vote on a proposal to adopt the BCA and thereby approve the Combination (the “Combination Proposal”);

 

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consider and vote on a proposal to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to New Amneal’s named executive officers that is based on or otherwise relates to the combination (the “Compensation Proposal”);

 

•

consider and vote on a proposal to approve the Atlas Holdings, Inc. 2018 Incentive Award Plan (the “2018 Plan”) (the “2018 Plan Proposal”); and

 

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consider and vote on a proposal to adjourn the Special Meeting, or any postponement thereof, to another time or place if necessary or appropriate (i) due to the absence of a quorum at the Special

 

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Meeting, (ii) to prevent a violation of applicable law, (iii) to provide to Impax Stockholders any supplement or amendment to the combined proxy statement/prospectus and/or (iv) to solicit additional proxies if Impax reasonably determines that it is advisable or necessary to do so in order to obtain Impax Stockholder approval of the Combination Proposal (the “Adjournment Proposal”).

Q: Is my vote important?

A: Yes. The Combination cannot be completed unless the BCA is adopted by the holders representing a majority of the outstanding Impax Shares entitled to vote thereon. Only Impax Stockholders as of the close of business on the Record Date are entitled to vote at the Special Meeting. The Impax Board unanimously recommends that such Impax Stockholders vote “FOR” for the approval of the Combination Proposal, “FOR” the approval of the Compensation Proposal, “FOR” the approval of the 2018 Plan Proposal and “FOR” the approval of the Adjournment Proposal.

Q: If my Impax Shares are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically vote those shares for me?

A: A “broker non-vote” occurs when a broker submits a proxy that states that the broker does not vote for some or all of the proposals because the broker has not received instructions from the beneficial owners on how to vote on the proposals and does not have discretionary authority to vote in the absence of instructions. Under the NASDAQ Global Select Market (the “NASDAQ”), brokers are not permitted to vote on any of the matters to be considered at the Special Meeting. As a result, your Impax Shares will not be voted on any matter unless you affirmatively instruct your broker, bank or nominee how to vote your shares in one of the ways indicated by your broker, bank or other nominee.

Q: What Impax stockholder vote is required for the approval of each proposal brought before the Special Meeting? What will happen if I fail to vote or abstain from voting on each proposal?

A: The Combination Proposal. Approval of the Combination Proposal requires the affirmative vote of the holders of a majority of the Impax Shares outstanding as of the close of business on the Record Date and entitled to vote on the Combination Proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the Combination Proposal. The Combination cannot be completed unless the Combination Proposal is adopted by the holders of a majority of the outstanding Impax Shares entitled to vote thereon.

The Compensation Proposal. Approval of the Compensation Proposal requires the affirmative vote of the holders of a majority of the Impax Shares present in person or represented by proxy at the Special Meeting and entitled to vote on the Compensation Proposal. Abstentions will have the same effect as a vote “AGAINST” the Compensation Proposal, and broker non-votes will have no effect on the outcome of the vote.

The 2018 Plan Proposal. Approval of the 2018 Plan Proposal requires the affirmative vote of the holders of a majority of the Impax Shares present in person or represented by proxy at the Special Meeting and entitled to vote on the 2018 Plan Proposal. Abstentions will have the same effect as a vote “AGAINST” the 2018 Plan Proposal, and broker non-votes will have no effect on the outcome of the vote.

The Adjournment Proposal. Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the Impax Shares present in person or represented by proxy at the Special Meeting and entitled to vote on the Adjournment Proposal. Abstentions will have the same effect as a vote “AGAINST” the Adjournment Proposal, and broker non-votes will have no effect on the outcome of the vote.

As of December 22, 2017, the percentage of outstanding Impax Shares entitled to vote (including shares of common stock currently issuable or issuable within 60 days of December 22, 2017 upon the exercise of stock options and unvested RSAs) held by directors, execute officers and their affiliates was 3.3%.

Q: What will Impax Stockholders receive if the Combination is completed?

A: As a result of the Combination, each Impax Share issued and outstanding immediately prior to the effective time of the Impax Merger (the “Impax Merger Effective Time”) (other than shares owned or held

 

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by Impax in treasury, by Amneal or by any of their respective subsidiaries (“Cancelled Shares”)) will be converted into the right to receive one share of Class A Common Stock. Holders of Impax Shares immediately prior to the consummation of the Combination will collectively hold approximately 25% of the voting and economic power of the combined businesses of Impax and Amneal under New Amneal following the consummation of the Combination. For more information regarding the consideration to be provided to Impax Stockholders, see the section entitled “The Combination—Consideration” beginning on page [●].

Q: How will outstanding Impax stock options and restricted shares be treated if the Combination is completed?

A: As a result of the Combination, outstanding equity awards (other than Non-Vesting Awards as described below) will become fully vested (to the extent not otherwise vested) and be exchanged for a fully vested and exercisable option to purchase an equal number of shares of Class A Common Stock with the same exercise price per share as the original option and which will otherwise be subject to the same terms and conditions as the original option. Each restricted Impax Share will be exchanged for one unrestricted share of Class A Common Stock (subject to any required tax withholding in connection with the vesting of such restricted Impax share).

After the date of the BCA, Impax may, subject to certain restrictions, grant equity awards to its employees and other service providers, including its non-employee directors. The terms of certain awards granted after the date of the BCA (each such award as a “Non-Vesting Award”) may provide that such award will not vest as a result of the Combination. As a result of the Combination, each such Non-Vesting Award will be exchanged for an equity award with respect to a number of shares of Class A Common Stock equal to the number of the Impax Shares subject to such Non-Vesting Award immediately prior to the Closing. Each replacement equity award will continue to be subject to the same terms and conditions (including vesting terms and conditions) as the original Non-Vesting Award. All Impax equity awards held by non-employee directors will vest upon the Closing.

For additional information regarding the treatment of Impax equity awards, see the section entitled “The Business Combination Agreement—Treatment of Impax Equity Incentive Awards” beginning on page [●].

Q: How does the Impax Board recommend that I vote?

A: The Impax Board recommends that the Impax Stockholders vote “FOR” the approval of the Combination Proposal, “FOR” the approval of the Compensation Proposal, “FOR” the approval of the 2018 Plan Proposal and “FOR” the approval of the Adjournment Proposal. For more information regarding how the board of directors of Impax recommends that Impax Stockholders vote, see the section entitled “The Combination—Recommendation of the Impax Board and Reasons for the Combination” beginning on page [●].

Q: What is executive officer compensation and why are Impax Stockholders being asked to vote on it?

A: The Securities and Exchange Commission (the “SEC”) has adopted rules that require Impax to seek a non-binding, advisory vote on the compensation payments that will or may be made to its named executive officers in connection with the Combination. Impax urges Impax Stockholders to read the section entitled “Interests of Impax Directors and Officers in the Combination” beginning on page [●].

Q: Who is entitled to vote at the Special Meeting?

A: The Impax Board has fixed [    ], 2018 as the Record Date for the Special Meeting. All holders of record of Impax Shares as of the close of business on the Record Date are entitled to receive notice of, and to vote at, the Special Meeting, provided that those shares remain outstanding on the date of the Special Meeting. Physical attendance at the Special Meeting is not required to vote. See the section entitled “Questions and Answers About the Combination and the Special Meeting—How can I vote my shares without attending the Special Meeting?” beginning on page [●] for instructions on how to vote your Impax Shares without attending the Special Meeting.

 

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Q: How many votes do I have?

A: Each Impax Stockholder of record is entitled to one vote for each Impax Share held by such holder as of the close of business on the Record Date. As of the close of business on the Record Date, there were [    ] outstanding Impax Shares.

Q: What constitutes a quorum for the Special Meeting?

A: A quorum is the minimum number of stockholders necessary to hold a valid meeting.

A quorum will exist at the Special Meeting with respect to each matter to be considered at the Special Meeting if the holders of a majority of Impax Shares outstanding as of the close of business on the Record Date are present in person or represented by proxy at the Special Meeting.

Q: What will happen to Impax as a result of the Combination?

A: As part of the completion of the Combination, (i) the Impax Merger will be consummated with the separate corporate existence of Merger Sub ceasing and Impax surviving as a wholly owned subsidiary of Holdco; (ii) each outstanding Impax Share (other than Cancelled Shares), will be converted into the right to receive one share of Class A Common Stock; (iii) Impax will convert to a Delaware limited liability company to be named Impax Laboratories, LLC (“Impax LLC”); (iv) Holdco will contribute all of the equity interests of Impax to Amneal in exchange for certain equity interests of Amneal; (v) New Amneal will issue shares of Class B Common Stock to the Existing Amneal Members; and (vi) New Amneal will become the managing member of Amneal.

Q: What is Amneal?

A: Amneal, whose legal name is Amneal Pharmaceuticals LLC, is a privately-held company headquartered in Bridgewater, New Jersey. Founded in 2002 by Chintu and Chirag Patel, Amneal is one of the largest and fastest growing generic pharmaceutical manufacturers in the United States and has approximately 5,000 employees in its operations in North America, Asia, and Europe, working together to bring high-quality, affordable medicines to patients worldwide. Amneal has significantly expanded its portfolio of generic products to include complex dosage forms in a broad range of therapeutic areas. See the section entitled “Business—Amneal Business” beginning on page [●].

Q: What will happen to my Impax Shares as a result of the Combination?

A: If the Combination is completed, your Impax Shares will be cancelled and thereafter represent only the right to receive one share of Class A Common Stock per Impax Share. See the section entitled “The Combination—Consideration” beginning on page [●].

Q: Where will the Class A Common Stock that Impax Stockholders receive in the Combination be publicly traded?

A: Assuming the Combination is completed, the shares of Class A Common Stock issued in connection with the Combination will be listed and traded on the New York Stock Exchange (the “NYSE”).

Q: How will my rights as a New Amneal Stockholder differ from the rights of Existing Amneal Members as the holders of Class B Common Stock?

A: If the Combination is completed, Impax Stockholders will own 100% of the Class A Common Stock, which will represent approximately 25% of the voting power of all outstanding New Amneal Shares, and the

 

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Existing Amneal Members will own 100% of the shares of Class B Common Stock, which will represent approximately 75% of the voting power of all outstanding New Amneal Shares (without giving effect to the investment by certain institutional investors including TPG Improv Holdings, L.P. (“TPG”) and funds affiliated with Fidelity Management & Research Company (“Fidelity”) (the “PIPE Investment”)). The rights of Class A Common Stock and Class B Common Stock will be identical including equal voting rights, except that the Existing Amneal Members, as the holders of Class B Common Stock, will have no economic rights in New Amneal, including no right to dividends and no right to any assets in the event of the liquidation of New Amneal.

Q: What happens if the Combination is not completed?

A: If the BCA is not adopted by Impax Stockholders or if the Combination is not completed for any other reason, Impax Stockholders will not receive any stock consideration or other consideration in connection with the proposed Combination, and their Impax Shares will remain outstanding. Impax will remain an independent public company and its common stock will continue to be listed and traded on the NASDAQ. If the BCA is terminated under specified circumstances, Impax may be required to pay Amneal a termination fee, or other termination-related expense reimbursement. See “The Business Combination Agreement—Termination and Termination Fees” beginning on page [●] for a more detailed discussion of the termination fees that may be payable pursuant to the BCA.

Q: How can I vote my shares in person at the Special Meeting?

A: Impax Shares held directly in your name as the stockholder of record of such Impax Shares as of the close of business on the Record Date, may be voted in person at the Special Meeting. If you choose to attend the Special Meeting, you will need to bring valid, government-issued photo identification. If you are a beneficial owner of Impax Shares but not the stockholder of record of such Impax Shares, you will also need proof of stock ownership to be admitted into the Special Meeting. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. Please note that if your shares are held in “street name” by a broker, bank or other nominee and you wish to vote at the Special Meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner and present it to the inspector of election with your ballot at the Special Meeting. To request a legal proxy, please contact your broker, bank or other nominee holder of record. It is suggested you do so in a timely manner to ensure receipt of your legal proxy prior to the Special Meeting.

Failure to bring the appropriate documentation may delay your entry into or prevent you from attending the Special Meeting. The doors to the meeting room will be closed promptly at the start of the meeting, and stockholders will not be permitted to enter after that time.

Q: How can I vote my shares without attending the Special Meeting?

A: If you are a stockholder of record of Impax Shares as of the close of business on the Record Date, you can vote by proxy via the Internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. Please note that if you are a beneficial owner, you may vote by submitting voting instructions to your bank, brokerage firm or other nominee, or otherwise by following the instructions provided by your bank, brokerage firm or other nominee.

Q: What is a proxy?

A: A proxy is a legal designation of another person to vote the Impax Shares you own. If you are a stockholder of record of Impax Shares as of the close of business on the Record Date, and you vote by phone, by Internet or by signing, dating and returning your proxy card in the enclosed postage-paid envelope, you designate two of Impax’s officers as your proxies at the Special Meeting, each with full power to act without the other and with full power of substitution. These two officers are [    ] and [    ].

 

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Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A: If your Impax Shares are registered directly in your name with Impax’s transfer agent, AST Financial (“AST”), you are considered the stockholder of record with respect to those Impax Shares, and access to proxy materials is being provided directly to you. If your Impax Shares are held in a stock brokerage account or by a bank or other nominee, then you are considered the beneficial owner of those Impax Shares, which are considered to be held in street name. Access to proxy materials is being provided to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares.

Direct holders (stockholders of record). For Impax Shares held directly by you, please complete, sign, date and return each proxy card (or cast your vote by telephone or Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this combined proxy statement/prospectus in order to ensure that all of your Impax Shares are voted.

Shares held in “street name”. For Impax Shares held in “street name” through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your Impax Shares.

Q: If an Impax Stockholder gives a proxy, how will the Impax Shares covered by the proxy be voted?

A: If you provide a proxy, regardless of whether you provide that proxy by phone, via the Internet or by completing and returning the applicable enclosed proxy card, the individuals named on the enclosed proxy card will vote your Impax Shares in the way that you indicate when providing your proxy in respect of the Impax Shares you hold. When completing the Internet or telephone processes or the proxy card, you may specify whether your Impax Shares should be voted for or against, or should be abstained from voting on, all, some or none of the specific items of business to come before the Special Meeting.

Q: How will my Impax Shares be voted if I return a blank proxy?

A: If you sign, date and return your proxy and do not indicate how you want your Impax Shares to be voted, then your Impax Shares will be voted “FOR” the approval of Combination Proposal, “FOR” the approval of the Compensation Proposal, “FOR” the approval of the 2018 Plan Proposal and “FOR” the approval of the Adjournment Proposal.

Q: Can I change my vote after I have submitted my proxy?

A: Yes. If you are a stockholder of record of Impax Shares as of the close of business on the Record Date, whether you vote by telephone, Internet or mail, you can change or revoke your proxy before it is voted at the meeting in one of the following ways:

 

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submit a new proxy card bearing a later date;

 

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vote again by telephone or the Internet at a later time;

 

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give written notice of your revocation to the Impax Corporate Secretary; or

 

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vote in person at the Special Meeting. Please note that your attendance at the Special Meeting will not alone serve to revoke your proxy.

If you are a beneficial owner of Impax Shares as of the close of business on the Record Date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.

Q: Where can I find the voting results of the Special Meeting?

A: The preliminary voting results will be announced at the Special Meeting. In addition, within four business days following certification of the final voting results, Impax intends to file the final voting results of the Special Meeting with the SEC in a Current Report on Form 8-K.

 

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Q: Are Impax Stockholders able to exercise dissenters’ rights or appraisal rights with respect to the matters being voted upon at the Special Meeting?

A: No, Impax Stockholders are not entitled to exercise dissenters’ rights or appraisal rights under Delaware law in connection with the Combination, because they are not required to receive any consideration other than the shares of Class A Common Stock, which will be listed on the NYSE. Impax Stockholders may vote against the Combination Proposal if they are not in favor of the adoption of the BCA.

Q: Are there any risks that I should consider as an Impax Stockholder in deciding how to vote?

A: Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page [●]. You also should read and carefully consider the risk factors of Impax and Amneal contained in the documents that are incorporated by reference herein.

Q: What happens if I sell my Impax Shares before the Special Meeting?

A: The Record Date for Impax Stockholders entitled to vote at the Special Meeting is earlier than the date of the Special Meeting. If you transfer your Impax Shares before the Record Date, you will not be entitled to vote at the Special Meeting. If you transfer your Impax Shares after the Record Date but before the Special Meeting, you will, unless special arrangements are made, retain your right to vote at the Special Meeting.

Q: What are the material U.S. federal income tax consequences of the Combination to me?

A: Assuming that the Impax Merger and the subsequent conversion of Impax to a Delaware limited liability company, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), an Impax Stockholder generally will not recognize any gain or loss upon receipt of Class A Common Stock in exchange for Impax Shares in the Impax Merger. The U.S. federal income tax consequences of receiving Class A Common Stock in exchange for Impax Shares in the Impax Merger are discussed in more detail in the section entitled “Material Tax Consequences of the Combination” beginning on page [●]. The discussion of the material U.S. federal income tax consequences contained in this combined proxy statement/prospectus is intended to provide only a general discussion and is not a complete analysis or description of all potential U.S. federal income tax consequences of the Combination that may vary with, or which may be dependent on, individual circumstances. In addition, it does not address the effects of any foreign, state or local tax laws.

TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF THE COMBINATION WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE COMBINATION TO YOU IN YOUR PARTICULAR CIRCUMSTANCES.

Q: When is the Combination expected to be completed?

A: Subject to the satisfaction or waiver of the closing conditions described in the section entitled “The Business Combination Agreement—Conditions to Closing” beginning on page [●], including the adoption of the BCA by the Impax Stockholders at the Special Meeting, the Combination is expected to close in the first half of 2018. However, it is possible that factors outside the control of both companies could result in the Combination being completed at a later time, or not being completed at all.

Q: Who will solicit and pay the cost of soliciting proxies?

A: Impax has engaged a professional proxy solicitation firm, MacKenzie Partners, Inc. (“MacKenzie”), to assist in soliciting proxies. MacKenzie will receive customary compensation for its services, including a fee of $25,000.

 

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Q: What are the conditions to completion of the Combination?

A: In addition to the approval of the Combination Proposal by Impax Stockholders and the adoption of the BCA by the Impax Stockholders as described above, completion of the Combination is subject to the satisfaction of a number of other conditions, including, but not limited to, the expiration or termination of the waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), without the imposition of a Burdensome Condition (as defined in the section entitled “The Business Combination Agreement—Governmental Approvals” beginning on page [●]), the accuracy of representations and warranties under the BCA (subject to certain materiality qualifiers), Impax’s and Amneal’s performance of their respective obligations under the BCA, the absence of a material adverse effect with respect to Impax (as described in the BCA), and the absence of a material adverse effect with respect to Amneal (as described in the BCA). For a more complete summary of the conditions that must be satisfied or waived prior to completion of the Combination, see the section entitled “The Business Combination Agreement—Conditions to Closing” beginning on page [●].

Q: How do I exchange my Impax Shares for the per share Combination consideration to be received in the Combination?

A: Each Impax Stockholder must deliver, for book-entry Impax Shares, customary evidence of ownership of such Impax Shares as determined by the exchange agent by the election deadline, and for certificated Impax Shares, the certificate representing such Impax Shares (or affidavits of loss in lieu of the certificates or an appropriate guarantee of delivery of such certificates by a financial institution, provided that the certificates are in fact delivered to the exchange agent within three trading days after the date of execution of such guarantee of delivery) and a letter of transmittal by the election deadline.

After receiving the proper documentation from you, following the effective time, the exchange agent will deliver to you the stock consideration to which you are entitled. More information on the documentation you are required to deliver to the exchange agent can be found in the section entitled “The Business Combination Agreement—Surrender and Payment; Lost Certificates” beginning on page [●].

Q: What should I do now?

A: You should read this combined proxy statement/prospectus carefully in its entirety, including the Annexes, and return your completed, signed and dated proxy card(s) by mail in the enclosed postage-paid envelope or submit your voting instructions by telephone or via the Internet as soon as possible so that your Impax Shares will be voted in accordance with your instructions.

Q: Whom do I call if I have questions about the Special Meeting or the Combination?

A: If you have questions about the Special Meeting or the Combination, or desire additional copies of this combined proxy statement/prospectus or additional proxies, you may contact MacKenzie, toll-free at (800) 322-2885 or collect at (212) 929-5500.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This combined proxy statement/prospectus contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on our beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as: anticipate, believe, intend, estimate, expect, continue, should, could, may, plan, project, predict, will, target, potential, forecast, and the negative thereof and similar expressions. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential timing or consummation of the Combination or the anticipated benefits thereof, including, without limitation, future financial and operating results. Readers are cautioned that these and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important risk factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to: (i) the ability to obtain shareholder and regulatory approvals, or the possibility that they may delay the combination or that such regulatory approval may result in the imposition of conditions that could cause the parties to abandon the combination, (ii) the risk that a condition to effecting the combination may not be satisfied, (iii) the ability of Impax and Amneal to integrate their businesses successfully and to achieve anticipated synergies, (iv) the possibility that other anticipated benefits of the Combination will not be realized, including without limitation, anticipated revenues, expenses, earnings and other financial results, and growth and expansion of New Amneal’s operations, and the anticipated tax treatment, (v) potential litigation relating to the Combination that could be instituted against Impax, Amneal or their respective directors, (vi) possible disruptions from the Combination that could harm Impax’s and/or Amneal’s business, including current plans and operations, (vii) the ability of Impax or Amneal to retain, attract and hire talented personnel, (viii) potential adverse reactions or changes to relationships with clients, employees, suppliers or other parties resulting from the announcement or completion of the combination, (ix) potential business uncertainty, including changes to existing business relationships, during the pendency of the Combination that could affect Impax’s or Amneal’s financial performance, (x) certain restrictions during the pendency of the Combination that may impact Impax’s or Amneal’s ability to pursue certain business opportunities or strategic combination, (xi) continued availability of capital and financing and rating agency actions, (xii) legislative, regulatory and economic developments, (xiii) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors, and (xiv) such other factors as are set forth in Impax’s periodic public filings with the SEC, including but not limited to those described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in this combined proxy statement/prospectus, Impax’s Form 10-K for the fiscal year ended December 31, 2016, Impax’s Form 10-Q for the quarterly period ended June 30, 2017, and in Impax’s other filings made with the SEC from time to time, which are available via the SEC’s website at www.sec.gov. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Impax’s or Amneal’s consolidated financial condition, results of operations, credit rating or liquidity. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than Impax has described. All such factors are difficult to predict and beyond our control. All forward-looking statements included in this document are based upon information available to Impax on the date hereof, and unless legally required, Impax disclaims and does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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RISK FACTORS

Impax Stockholders should carefully consider the following factors, in addition to those factors discussed elsewhere in this combined proxy statement/prospectus, before voting at the Special Meeting.

Risk Factors Relating to the Combination

The Combination may not be completed on the terms or timeline currently contemplated, or at all, and failure to complete the Combination may result in material adverse consequences to Impax’s business and operations.

The Combination is subject to several closing conditions, including the approval and adoption of the BCA by Impax Stockholders, the effectiveness of a registration statement registering the public offering and sale of New Amneal Shares to be issued in connection with the Combination, the approval of the listing of the Class A Common Stock to be issued in connection with the Holdco Share Issuance (as defined in the section entitled “The Business Combination Agreement—Listing of New Amneal Shares” beginning on page [●])) on the NYSE, and the expiration or termination of any applicable waiting period under the HSR Act. If any one of these conditions is not satisfied or waived, the Combination may not be completed. There is no assurance that the Combination will be completed on the terms or timeline currently contemplated, or at all. See the section entitled “The Business Combination Agreement—Conditions to Closing” beginning on page [●] for a more detailed discussion.

The parties have not yet obtained all regulatory clearances, consents and approvals required to complete the Combination. Governmental or regulatory agencies could still seek to block or challenge the Combination or could impose restrictions they deem necessary or desirable in the public interest as a condition to approving the Combination. These restrictions could include a requirement to sell certain specified businesses to obtain such regulatory approvals. See the section entitled “The Business Combination Agreement—Governmental Approvals” beginning on page [●]. If these approvals are not received, then neither Impax nor Amneal will be obligated to complete the Combination. If the approvals could be received, but the applicable antitrust regulatory agency imposes on a party any action that would reasonably be expected to have a material adverse effect on the business, financial conditions or results of operation of Impax, Amneal or the Combined Company, none of the parties or their respective subsidiaries would be required to agree to undertake such actions or be obligated to complete the Combination.

If Impax Stockholders do not approve and adopt the BCA and thereby approve the Combination or if the Combination is not completed for any other reason, Impax would be subject to a number of risks, including the following:

 

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Impax and its stockholders would not realize the anticipated benefits of the Combination, including any anticipated synergies from combining Impax and Amneal;

 

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Impax may be required to pay a termination fee of $45,000,000 if the BCA is terminated (i) due to an adverse change in the Impax Board’s recommendation to Impax Stockholders to approve the Combination, (ii) in order to allow it to proceed with a Superior Proposal (as defined in the section entitled “The Business Combination Agreement—Solicitation by Impax; Competing Proposals; Change of Recommendation” beginning on page [●]), or (iii) if the Impax Stockholders have not approved the Combination upon a vote at the Special Meeting or the Combination is not completed within a specified time frame, and Impax enters into an agreement with respect to a Competing Proposal (as defined in the section entitled “The Business Combination Agreement—Solicitation by Impax; Competing Proposals; Change of Recommendation” beginning on page [●]) within 12 months following the termination of the BCA (provided, that for purposes of this termination right, the percentage in the definition of Competing Proposal is changed from 20% to 50%);

 

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Impax may be required to reimburse Amneal for all reasonable out-of-pocket fees and expenses incurred by Amneal in connection with the BCA and the Combination up to a maximum of $15,000,000 in the event that Impax fails to receive Impax Stockholder approval; and

 

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•

the trading price of Impax Shares may experience increased volatility to the extent that the current market prices reflect a market assumption that the Combination will be completed.

The occurrence of any of these events individually or in combination could have a material adverse effect on the results of operations of Impax or the trading price of Impax Shares. Impax is also exposed to general competitive pressures and risks, which may be increased if the Combination is not completed.

Governmental entities or private parties could take actions under antitrust laws to enjoin the completion of the Combination or to seek the divestiture of substantial assets of Impax or Amneal.

At any time before or after consummation of the Combination, notwithstanding the termination of the waiting period under the HSR Act, the Antitrust Division of the Department of Justice (“DOJ”) or the FTC or other state governmental entity could take such action under the antitrust laws as it deems necessary or desirable in the public interest including seeking to enjoin the completion of the Combination or seeking divestiture of substantial assets of Impax or Amneal. Such action could include seeking to enjoin the completion of the Combination or seeking divestiture of substantial assets of Impax and Amneal. Any divestitures could have an adverse effect on the business, results of operations, financial condition or prospects of Impax, Amneal or New Amneal before and after Closing, diminish the anticipated benefits of the Combination in full or in part, or cause the benefits to take longer to be realize than expected. The parties, however, are not required to agree to take, or take any action that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of Impax, Amneal or the Combined Company. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

Each of Impax and Amneal will be subject to business uncertainties and contractual restrictions while the Combination is pending that could adversely affect each of them.

Uncertainty about the effect of the Combination on employees and customers may have an adverse effect on either or both of Impax and Amneal, regardless of whether the Combination is eventually completed. These uncertainties may impair Impax’s and Amneal’s ability to attract, retain and motivate talented personnel until the Combination is completed, or the BCA is terminated, and for a period of time thereafter, and could cause customers, suppliers and others that deal with Impax and Amneal to seek to change existing business relationships with Impax and Amneal.

Employee retention and recruitment may be particularly challenging for Impax and Amneal during the pendency of the Combination, as employees and prospective employees may experience uncertainty about their future roles with Impax, Amneal or New Amneal. For each of Impax and Amneal, the departure of existing talented employees or the failure of potential talented employees to accept or maintain employment with Impax, Amneal or New Amneal, despite Impax’s and Amneal’s retention and recruiting efforts, could have a material adverse impact on Impax’s and New Amneal’ business, financial condition and operating results, regardless of whether the Combination is eventually completed.

The pursuit of the Combination and the preparation for the integration of Impax and Amneal have placed, and will continue to place, a significant burden on the management and internal resources of both Impax and Amneal. There is a significant degree of difficulty and management distraction inherent in the process of closing the Combination and planning for the integration of Impax and Amneal, which could cause an interruption of, or loss of momentum in, the activities of each company’s existing businesses, regardless of whether the Combination is eventually completed. Before and immediately following Closing, the management teams of Impax and Amneal will be required to devote considerable amounts of time to this integration planning process, which will decrease the time they will have to manage their respective existing businesses, service existing customers, attract new customers and develop new products, services or strategies. One potential consequence of such distractions could be the failure of management to realize other opportunities that could be beneficial to Impax and Amneal, respectively. If Impax’s and Amneal’s senior management are not able to effectively manage

 

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the process leading up to and immediately following Closing, or if any significant business activities are interrupted as a result of the integration planning process, the business of Impax and of Amneal could suffer.

In addition, the BCA restricts Impax and Amneal from making certain acquisitions and taking other specified actions without the consent of the other until the Combination is consummated or the BCA is terminated. These restrictions may prevent Impax and Amneal from pursuing otherwise attractive business opportunities and making other changes to their businesses before completion of the Combination or termination of the BCA. For a description of the restrictive covenants applicable to Impax and Amneal, see the section entitled “The Business Combination Agreement—Solicitation by Impax; Competing Proposals; Change of Recommendation” beginning on page [●].

The integration of Impax and Amneal following Closing will present challenges that may result in a decline in the anticipated benefits of the Combination.

The Combination involves the integration of two businesses that currently operate as independent businesses. Impax and Amneal will be required to devote management attention and resources to integrating their business practices and operations following the Closing, and prior to the Combination, management attention and resources will be required to plan for such integration. Potential difficulties Impax, Amneal or New Amneal may encounter in the integration process include the following:

 

•

the inability to successfully integrate the two businesses, including operations, technologies, products and services, in a manner that permits Impax, Amneal or New Amneal to achieve the cost savings and operating synergies anticipated to result from the Combination, which could result in the anticipated benefits of the Combination not being realized partly or wholly in the time frame currently anticipated or at all;

 

•

the loss of sales and customers as a result of certain customers of either or both of the two businesses deciding not to continue to do business with Impax or Amneal, or deciding to decrease their amount of business in order to reduce their reliance on a single company;

 

•

the necessity of coordinating geographically separated organizations, systems and facilities;

 

•

potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Combination;

 

•

the integration of personnel with diverse business backgrounds and business cultures, while maintaining focus on providing consistent, high-quality products and services;

 

•

the consolidation and rationalization of information technology platforms and administrative infrastructures as well as accounting systems and related financial reporting activities;

 

•

the potential weakening of established relationships with regulators; and

 

•

the challenge of preserving important relationships of both Impax and Amneal and resolving potential conflicts that may arise.

Furthermore, it is possible that the integration process could result in the loss of talented employees or skilled workers of Impax and Amneal. The loss of talented employees and skilled workers could adversely affect Impax’s, Amneal’s or New Amneal’s ability to successfully conduct their respective businesses because of such employees’ experience and knowledge of Impax’s and Amneal’s businesses. In addition, Impax, Amneal or New Amneal could be adversely affected by the diversion of management’s attention and any delays or difficulties encountered in connection with the integration of Impax and Amneal. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of Impax’s or Amneal’s segments. If Impax, Amneal or New Amneal experience difficulties with the integration process, the anticipated benefits of the Combination may not be realized fully or at all, or may take longer to realize than expected. These integration matters could have an adverse effect on the business, results of operations, financial condition or prospects of

 

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Impax, Amneal or New Amneal during this transition period and for an undetermined period after completion of the Combination.

Ownership interests will not be adjusted if there is a change in the value of Impax or Amneal and their respective assets before the Combination is completed.

The interests of Class A Common Stock received by former Impax Stockholders, Amneal Common Units received by New Amneal and the Amneal Group Members, and the Class B Common Stock received by Amneal Group Members (as defined in the section entitled “Ancillary Agreements Related to the Combination—Stockholders Agreement” on page [●]) in connection with the Combination will not be adjusted if there is a change in the value or assets of Amneal, Impax or New Amneal prior to the consummation of the Combination. No termination rights will arise in connection with an adverse change at Amneal or Impax unless there has been an Amneal Material Adverse Effect or an Impax Material Adverse Effect as applicable (as defined in the section entitled “The Business Combination Agreement—Representations and Warranties” beginning on page [●]).

The BCA contains provisions that may discourage other companies from trying to acquire Impax. In addition, Impax negotiated exclusively with Amneal rather than conducting a public or private “auction” or sales process of Impax, which could result in unsolicited offers from third parties that could complicate, challenge or prevent the completion of the Combination, and could result in additional costs to Impax, including a possible termination fee paid by Impax to Amneal.

The BCA contains provisions that may discourage third parties from submitting business combination proposals to Impax that might result in greater value to Impax Stockholders than would the Combination. The BCA generally prohibits Impax from soliciting any competing acquisition proposal. For a description of the restriction on solicitations applicable to Impax, see the section entitled “The Business Combination Agreement—Solicitation by Impax; Competing Proposals; Change of Recommendation” beginning on page [●]. In addition, if the BCA is terminated by Impax or Amneal in circumstances that obligate Impax to pay a termination fee of $45,000,000 or to reimburse transaction expenses of up to $15,000,000 incurred by Amneal (see the section entitled “The Business Combination Agreement—Termination and Termination Fees” beginning on page [●] for further details), Impax’s financial condition may be adversely affected as a result of the payment of the termination fee and transaction expenses, which might deter third parties from proposing alternative business combination proposals.

The fact that Impax negotiated exclusively with Amneal rather than conducting a public or private “auction” or sales process of Impax could result in unsolicited offers from third parties that could complicate, challenge, prevent or delay the consummation of the Combination, and could result in additional costs to Impax.

The shares of Class A Common Stock to be received by Impax Stockholders as a result of the Combination will have different rights from Impax Shares.

Following the Closing, Impax Stockholders will no longer be stockholders of Impax but will instead be stockholders of New Amneal holding Class A Common Stock. There are important differences between the rights of Impax Stockholders and the rights of holders of Class A Common Stock. For a description of different rights associated with Impax Shares and Class A Common Stock, see the section entitled “New Amneal Capital Stock” beginning on page [●]. Class A Common Stock will be listed on the NYSE under the ticker symbol “AMRX” (or if such ticker symbol becomes unavailable, such other ticker symbol as may be agreed upon in writing by the parties).

No trading market currently exists for Class A Common Stock.

Prior to Closing, there is no trading market for the Class A Common Stock. At or prior to Closing, the Class A Common Stock is expected to be listed for trading on the NYSE. However, there can be no assurance

 

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that an active market for the Class A Common Stock will develop after Closing, or if it develops, that such market will be sustained. In the absence of an active trading market for the Class A Common Stock, investors may not be able to sell their Class A Common Stock at the time that they would like to sell.

Following the completion of the Combination, New Amneal will be controlled by the Amneal Group Members. The interests of Amneal Group Members may differ from the interests of other stockholders of New Amneal.

Immediately following Closing and the closing of the PIPE Investment, Amneal Group Members (as defined in the section entitled “Ancillary Agreements Related to the Combination—Stockholders Agreement” beginning on page [●]) are expected to beneficially own approximately 60% of the fully diluted New Amneal Shares.

Through its ownership of a majority of New Amneal’s voting power and the provisions set forth in the New Amneal Charter, the New Amneal Bylaws and the Stockholders Agreement, the Amneal Group Members will have the ability to designate a majority of the New Amneal Board. As a result of the Amneal Group Members’ ownership of a majority of the voting and economic interests in the combined businesses of Impax and Amneal under New Amneal, New Amneal will be a “controlled company” as defined in the NYSE listing rules and will, therefore, not be subject to the NYSE requirements that would otherwise require New Amneal to have (i) a majority of independent directors, (ii) a nominating committee composed solely of independent directors, (iii) the compensation of its executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors, and (iv) director nominees selected, or recommended for the board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors. Further, the Amneal Group Representative will have the right to nominate half of the directors to serve on each of the Nominating Committee and Compensation Committee for so long as the Amneal Group Members beneficially own more than 50% of the outstanding New Amneal Shares. For further information regarding the New Amneal Board and its committees following Closing, see the section entitled “Ancillary Agreements Related to the Combination—Stockholders Agreement” beginning on page [●].

The Amneal Group Members will also have control over certain New Amneal actions through certain consent rights:

 

•

For so long as Amneal Group Members beneficially own more than 25% of the outstanding New Amneal Shares, New Amneal will not take the following actions without obtaining the prior consent of the Amneal Group Representative:

 

•

amend, modify, or repeal any provision of the New Amneal Charter or the New Amneal Bylaws in a manner that adversely impacts any Amneal Group Member;

 

•

effect any change in the authorized number of directors, except pursuant to the Stockholders Agreement;

 

•

create or reclassify any new or existing class or series of capital stock to grant rights, preferences, or privileges with respect to voting, liquidation, redemption, conversion or dividends that are senior to or on parity with those of the New Amneal Shares; or

 

•

consummate any transaction as a result of which (i) more than 50% of the outstanding New Amneal Shares will be beneficially owned by any persons other than Amneal Group Members and (ii) any Amneal Group Member receives an amount or form of consideration different that which is granted to from other holders of New Amneal Shares.

 

•

For so long as the Amneal Group satisfies certain ownership thresholds pursuant to the Stockholders Agreement, New Amneal must obtain consent from Amneal before consummating any transaction involving New Amneal or any of its subsidiaries that would reasonably be expected to result in the recognition of $40,000,000 or more in taxable income or gain by the Amneal Group.

 

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•

Pursuant to the Tax Receivable Agreement, New Amneal and its subsidiaries must seek consent from Amneal or agree to certain conditions before (i) making a disposition of certain assets if the cumulative “amount realized” (as such term is defined for U.S. federal income tax purposes) for all such dispositions in any 12-month period would be in excess of $40,000,000, (ii) acquiring any equity interests or assets of other business entities, or (iii) entering into additional agreements with other persons that are similar to the Tax Receivable Agreement. In addition, New Amneal will be required to pay an Early Termination Payment to the Members in the event of a Change of Control (as defined in the section entitled “Ancillary Agreements Related to the Combination—Tax Receivable Agreement” beginning on page [●]).

Amneal may have different interests than other holders of New Amneal Shares and may make decisions adverse to your interests.

Among other things, the Amneal Group’s control of New Amneal could delay, defer, or prevent a sale of New Amneal that other New Amneal Stockholders support, or, conversely, could result in the consummation of such a transaction that other New Amneal Stockholders do not support. This concentrated control could discourage a potential investor from seeking to acquire Class A Common Stock and, as a result, might harm the market price of that Class A Common Stock.

Members of the management and the Impax Board have interests in the Combination that are different from, or in addition to, those of other stockholders.

In considering whether to approve the Combination, Impax Stockholders should recognize that members of Impax management and the Impax Board have interests in the Combination that differ from, or are in addition to, their interests as stockholders of Impax. For a description of these interests, see the section entitled “Interests of Impax Directors and Officers in the Combination” beginning on page [●].

Impax, Amneal and New Amneal will incur transaction-related costs in connection with the Combination and the integration of the two businesses.

Impax, Amneal and New Amneal will incur transaction-related costs in connection with the Combination and in connection with the integration of Impax’s and Amneal’s businesses. There are many systems that must be integrated, including information management, purchasing, accounting and finance, sales, billing, payroll and benefits, and regulatory compliance. Impax and Amneal are in the early stages of assessing the magnitude of these costs and are therefore unable to provide estimates of these costs. Moreover, many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Such expenses could, particularly in the near term, reduce the cost synergies that Impax and Amneal expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost synergies related to the integration of the businesses following the completion of the Combination. Accordingly, any net synergies may not be achieved in the near term or at all. These integration expenses may result in Impax, Amneal or New Amneal taking significant charges against earnings following the completion of the Combination. Some of these costs and expenses will be incurred even if the Combination is not consummated.

The unaudited pro forma condensed combined financial information of Impax and Amneal is not intended to reflect what actual results of operations and financial condition would have been had Impax and Amneal been a combined company for the periods presented, and therefore these results may not be indicative of Impax’s, Amneal’s or New Amneal’s future operating performance.

Because Amneal will combine with Impax only upon completion of the Combination, there is no available historical financial information that combines the financial results of Impax and Amneal. The historical financial statements contained or incorporated by reference in this document consist of and are based on the separate financial statements of Impax and Amneal.

 

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The unaudited pro forma condensed combined financial information presented in this document is for illustrative purposes only and is not intended to, and does not purport to, represent what Impax’s, Amneal’s or New Amneal’s actual results or financial condition would have been if the Combination, the related financing transactions and the PIPE Investment had occurred on the relevant dates. In addition, such unaudited pro forma condensed combined financial information is based in part on certain assumptions regarding the transactions that Impax, Amneal and New Amneal believe are reasonable. These assumptions, however, are merely preliminary and will be updated upon Closing. The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting. Under the acquisition method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective acquisition date fair values with any excess purchase price allocated to goodwill. The pro forma purchase price allocation was based on an estimate of the acquisition date fair values of the tangible and intangible assets and liabilities of Impax. In arriving at the estimated fair values, Impax and Amneal have considered the preliminary appraisals of independent consultants, which were based on a preliminary and limited review of the assets and liabilities related to Impax to be held by New Amneal following the consummation of the Combination. Following Closing, New Amneal will have a one-year period to complete the purchase price allocation after considering the fair value of Impax’s assets and liabilities at the level of detail necessary to finalize the required purchase price allocation. The final purchase price allocation may be different from that reflected in the pro forma purchase price allocation presented herein, and this difference may be material.

The unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities or transaction-related costs or incremental capital spending that Impax’s or Amneal’s management believes are necessary to realize the anticipated synergies from the Combination. Accordingly, the pro forma financial information included in this document does not reflect what Impax’s, Amneal’s or New Amneal’s results of operations or operating condition would have been had Impax and Amneal been a combined entity during all periods presented, or what Impax’s, Amneal’s or New Amneal’s results of operations and financial condition will be in the future.

Business issues currently faced by one company may be imputed to the operations of the Combined Company.

To the extent that either Amneal or Impax currently has or is perceived to have operational, regulatory or other challenges, those challenges may raise concerns with respect to the other company following Closing, which may limit or impede Impax’s, Amneal’s or New Amneal’s future ability to conduct its business consistently with past practice.

If Amneal were to cease being a subsidiary of New Amneal or Impax were to cease being a subsidiary of Amneal in the future, such a separation could adversely affect our business and profitability due to Amneal’s strong brand and reputation.

Amneal has marketed and Impax and Amneal expect to market many of their respective products and services using the “Amneal” brand name and logo. Impax believes that the association with Amneal will provide many benefits, including:

 

•

brand associated with trust, integrity and longevity;

 

•

perception of high-quality products and related services;

 

•

strong research and development (“R&D”) capabilities, intellectual property, and technology; and

 

•

established relationships with regulators, suppliers, customers and employees.

While there is no present intention to separate Impax from Amneal or separate Amneal from New Amneal, if Impax were to cease being a subsidiary of Amneal or Amneal were to cease being a subsidiary of New Amneal, such a separation could adversely affect Impax’s, Amneal’s or New Amneal’s ability to attract and retain customers. Impax, Amneal or New Amneal may be required to provide more favorable pricing and other

 

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terms to our customers and take other action to maintain our relationship with existing, and attract new, customers, all of which could have a material adverse effect on our business, financial condition and results of operations.

Some of Impax’s or Amneal’s existing agreements contain change in control or early termination rights that may be implicated by the Combination.

Parties with which Impax or Amneal currently does business or may do business in the future, including customers and suppliers, may experience uncertainty associated with the Combination, including with respect to current or future business relationships with Impax, Amneal and New Amneal. As a result, the business relationships of Impax or Amneal may be subject to disruptions if customers, suppliers, or others attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than Impax, Amneal or New Amneal. For example, certain customers and collaborators may have contractual consent rights or termination rights that may be triggered by a change of control or assignment of the rights and obligations of contracts that will be transferred in the Combination. These disruptions could harm our relationships with existing customers and preclude us from attracting new customers, all of which could have a material adverse effect on our business, financial condition and results of operations, cash flows, and/or share price of Impax, Amneal or New Amneal. The effect of such disruptions could be exacerbated by a delay in the consummation of the Combination.

Some of Impax’s or Amneal’s relationships with its customers may experience disruptions in connection with the Combination, which may limit New Amneal’s business.

Parties with which Impax or Amneal currently does business or may do business in the future, including customers and suppliers, may experience uncertainty associated with the Combination, including with respect to future business relationships with the other or with New Amneal. As a result, the business relationships of Impax, Amneal and New Amneal may be subject to disruptions if customers, suppliers, or others attempt to renegotiate changes in existing business relationships or consider entering into business relationships with parties other than Impax, Amneal or New Amneal, in respect of Impax, Amneal or New Amneal. For example, certain customers and collaborators of Impax or Amneal may exercise contractual termination rights as they arise or elect to not renew contracts with Impax or Amneal. These disruptions could harm relationships with existing customers, suppliers or others and preclude us from attracting new customers, all of which could have a material adverse effect on our business, financial condition and results of operations, cash flows, and/or the share price of Impax, Amneal or New Amneal. The effect of such disruptions could be exacerbated by a delay in the consummation of the Combination.

Potential changes in laws and regulations affecting Impax’s and Amneal’s businesses could have a material adverse effect on their respective financial performance.

Many of Impax’s and Amneal’s businesses are subject to various federal, state, local and foreign laws and regulations. Their failure to comply with applicable laws and regulations could restrict their ability to provide certain services or result in imposition of civil fines and criminal penalties, substantial regulatory and compliance costs, litigation expense, adverse publicity and loss of revenues. Adverse legislation or regulations could be adopted prior to the Closing in any country, state or municipality in which Impax and Amneal operate. If such legislation or regulation is adopted in any particular jurisdiction and Impax or Amneal is unable to continue to operate profitably under the new rules, then Impax or Amneal may decide to make certain strategic decisions, resulting in decreased revenues, earnings and assets. If Impax or Amneal is unable to adapt its products and services to conform to any new laws and regulations, or if such laws and regulations have a negative effect on their customers, Impax or Amneal may experience customer losses or increased operating costs or be required to dispose of all or a part of their businesses, which could have a material adverse effect on their businesses, financial condition and results of operations.

 

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After the Combination is complete, Impax Stockholders will have a significantly lower ownership and voting interest in New Amneal than the Existing Amneal Members and will exercise less influence over New Amneal than they do over Impax.

Upon the completion of the Combination, each holder of Impax Shares will have a percentage ownership of New Amneal that is smaller than such holder’s percentage ownership of Impax immediately prior to the Combination. At the Closing, approximately 75% of the total New Amneal Shares will not be held by Impax Stockholders. Following the Closing, Existing Amneal Members are expected to hold approximately 60% of the voting power of the outstanding New Amneal Shares and the PIPE Investors will hold approximately 15% of the voting power of the outstanding New Amneal Shares pursuant to an approximately $855,000,000 commitment to purchase 46,849,316 New Amneal Shares.

In addition, the Class A Common Stock to be received by Impax Stockholders as consideration if the Combination is completed will have different rights than Impax Shares. See the section entitled “New Amneal Capital Stock” beginning on page [●] for a more detailed discussion of the rights of holders of Class A Common Stock.

Prior to the Closing, Amneal Group Members who will hold an interest in New Amneal after Closing may be contemplating sale of their post-Closing interest in New Amneal, which could impact or differ from the remaining interest holders in New Amneal.

Prior to the completion of the Combination, the sale of additional New Amneal Shares under a PIPE Investment (as defined on page [●]) by Existing Amneal Members to other potential investors may adversely affect prevailing market prices for New Amneal Shares. In addition, the investors in such a PIPE Investment may have registration rights, the future exercise of which may adversely affect the market price of New Amneal Shares.

Pending litigation against Impax or Amneal could result in an injunction preventing the completion of the Combination or a judgment resulting in the payment of damages.

Impax, Amneal and members of their respective boards are currently and may in the future be parties, among others, to various claims and litigation related to the BCA and the Combination, including putative shareholder class actions. Among other remedies, the plaintiffs in such matters are seeking to enjoin the Combination. The results of complex legal proceedings are difficult to predict, and could delay or prevent the Combination from becoming effective in a timely manner. The existence of litigation relating to the Combination could impact the likelihood of obtaining the required shareholder approvals from Impax. Moreover, the pending litigation is, and any future additional litigation could be, time consuming and expensive, could divert the attention of Impax’s and Amneal’s management away from their regular business, and, if any one of these lawsuits is adversely resolved against either Impax or Amneal, could have a material adverse effect on their respective financial condition. For additional information regarding the pending litigation matters, please see the section entitled “The Combination—Litigation Relating to the Combination” beginning on page [●].

One of the conditions to the Closing is that no governmental entity will have issued an order or injunction or taken any other action enjoining or otherwise prohibiting the consummation of the Combination, and that no law will have been enacted or promulgated by any Governmental Authority of competent jurisdiction which prohibits or makes illegal the consummation of the Combination. Consequently, if a settlement or other resolution is not reached in the litigation referenced above and the plaintiffs secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting Impax’s and/or Amneal’s ability to complete the Combination on the terms contemplated by the BCA, then such injunctive or other relief may prevent the Combination from being completed in a timely manner or at all.

 

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The Combination could have an adverse effect on the Impax and Amneal brands.

The success of Impax and Amneal is largely dependent upon the ability of Impax and Amneal to maintain and enhance the value of their respective brands, their customers’ connection to and perception of the brands, and a positive relationship with customers and suppliers. The businesses and results of operations of Impax and Amneal, could be severely damaged if the Combination receive considerable negative publicity or if customers or suppliers otherwise come to have a diminished view of the brands as a result of the Combination or the common ownership of the existing businesses.

Risk Factors Relating to Impax and Impax’s Business

See “Risk Factors” in Part I of Impax’s Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on March 1, 2017 (incorporated by reference herein) and Form 10-Q for the quarterly period ended June 30, 2017 filed with the SEC on August 9, 2017 (incorporated by reference herein), and in Impax’s other filings made with the SEC from time to time, which can be obtained at the Internet website maintained by the SEC at www.sec.gov.

Risk Factors Relating to Amneal and Amneal’s Business

Global economic conditions could harm Amneal.

While global economic conditions have been fairly stable as a whole in recent years, continued concerns about the systemic impact of potential geopolitical issues and economic policy uncertainty, particularly in areas in which Amneal operates, could potentially cause economic and market instability in the future and could adversely affect Amneal’s business, including its financial performance.

Challenging economic conditions could result in tighter credit conditions. The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, which could adversely affect the ability of Amneal’s third-party distributors, partners, manufacturers and suppliers to buy inventory or raw materials and to perform their obligations under agreements with Amneal, which could disrupt Amneal’s operations and adversely affect Amneal’s financial performance.

Global efforts to contain health care costs continue to exert pressure on product pricing and market access to pharmaceutical products. In many international markets, government-mandated pricing actions have reduced prices of patented drugs. Some countries may be subject to periods of financial instability, may have reduced resources to spend on healthcare or may be subject to economic sanctions, and Amneal’s business in these countries may be disproportionately affected by these changes. In addition, the currencies of some countries may depreciate against the U.S. dollar substantially and if Amneal is unable to offset the impact of such depreciation, its financial performance within such countries could be adversely affected.

If Amneal is unable to successfully develop or commercialize new products, its operating results will suffer.

Developing and commercializing a new product is time consuming, costly and subject to numerous factors that may delay or prevent such development and commercialization. Amneal’s future results of operations will depend to a significant extent upon its ability to successfully commercialize new products in a timely manner. Amneal faces several challenges when developing and commercializing new products, including:

 

•

its ability to develop products in a timely and cost-efficient manner and in compliance with regulatory requirements, including delays associated with the Food and Drug Administration (the “FDA”) listing and approval process and the ability of Amneal to obtain required regulatory approvals in a timely manner, or at all, and maintain such approvals if obtained;

 

•

the success of its clinical testing process to ensure that new products are safe and effective or the bioequivalent to the reference listed drug;

 

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•

the risk that any of Amneal’s products presently under development, if and when fully developed and tested, will not perform as expected;

 

•

the risk that legal action may be brought against Amneal’s generic drug products by its branded drug product competitors, including patent infringement claims among others;

 

•

the availability, on commercially reasonable terms, of raw materials, including Active Pharmaceutical Ingredients (“APIs”) and other key ingredients necessary to the development of Amneal’s generic drug products; and

 

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Amneal’s ability to scale-up manufacturing methods to successfully manufacture commercial quantities of generic drug product in compliance with regulatory requirements.

As a result of these and other difficulties, Amneal’s products currently in development may or may not receive necessary regulatory approvals on a timely basis or at all, which may result in unsuccessful development or commercialization of new products. If any of Amneal’s products, when acquired or developed and approved, cannot be successfully or timely commercialized, its operating results could be adversely affected. Amneal cannot guarantee that any investment it makes in developing or marketing products will be recouped, even if it is successful in commercializing those products.

If Amneal fails to obtain exclusive marketing rights for its products or fails to introduce its products on a timely basis, its revenues, gross margin and operating results may decline significantly.

The Hatch-Waxman amendments to the Federal Food, Drug, and Cosmetic Act (the “FDCA”) provide for a period of 180 days of generic marketing exclusivity for any applicant that is first to file an ANDA containing a certification of invalidity, non-infringement or unenforceability related to a patent listed with respect to the corresponding branded drug (commonly referred to as a “Paragraph IV certification”). “First filers” are often able to price the applicable generic drug to yield relatively high gross margins during this 180-day marketing exclusivity period.

ANDAs containing Paragraph IV certifications generally become the subject of patent litigation that can be both lengthy and costly. There is no certainty that Amneal will prevail in any such litigation, that it will be the first to file and thus granted the 180-day marketing exclusivity period, or, if it is granted the 180-day marketing exclusivity period, that it will not forfeit such period. Even where Amneal is awarded marketing exclusivity, it may be required to share its exclusivity period with other first filers. In addition, branded drug product companies often authorize a generic version of the corresponding branded drug product to be sold during any period of marketing exclusivity that is awarded (described further below), which reduces gross margins during the marketing exclusivity period. Branded drug product companies may also reduce the price of their branded drug product to compete directly with generic drug products entering the market, which would similarly have the effect of reducing gross margins. Furthermore, timely commencement of the litigation by the patent owner imposes an automatic stay of ANDA approval by the FDA for 30 months, unless the case is decided in the ANDA applicant’s favor during that period. Finally, if the court decision is adverse to the ANDA applicant, the ANDA approval will be delayed until the challenged patent expires, and the applicant forfeits the 180-day marketing exclusivity.

Amneal’s future profitability depends, to a significant extent, upon its ability to introduce, on a timely basis, new generic drug products that are either the first-to-market (or among the first-to-market) or that otherwise can gain significant market share. The timeliness of Amneal’s product introductions is dependent upon, among other things, the timing of regulatory approval of its products, which to a large extent is outside of its control, as well as the timing of the introduction of competing products. As additional distributors introduce comparable generic pharmaceutical products, price competition intensifies, market access narrows, and product sales prices and gross margins decline, often significantly and rapidly. Accordingly, Amneal’s revenues and future profitability are dependent, in large part, upon its ability or the ability of its development partners to file ANDAs with the FDA in

 

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a timely and effective manner or, alternatively, to enter into contractual relationships with other parties that have obtained marketing exclusivity. No assurances can be given that Amneal will be able to develop and introduce successful products in the future within the time constraints necessary to be successful. If Amneal or its development partners are unable to continue to timely and effectively file ANDAs with the FDA or to partner with other parties that have obtained marketing exclusivity, Amneal’s revenues, gross margin and operating results may decline significantly, and its prospects and business may be materially adversely affected.

Amneal faces intense competition in the pharmaceutical industry from both brand and generic drug product companies, which could significantly limit its growth and materially adversely affect its financial results.

The pharmaceutical industry is highly competitive. The principal competitive factors in the pharmaceutical market include:

 

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introduction of other generic drug manufacturers’ products in direct competition with Amneal’s generic drug products;

 

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introduction of authorized generic drug products in direct competition with Amneal’s products, particularly during exclusivity periods;

 

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ability of generic drug product competitors to quickly enter the market after the expiration of patents or exclusivity periods, diminishing the amount and duration of significant profits;

 

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consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups;

 

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the willingness of generic drug customers, including wholesale and retail customers, to switch among products of different pharmaceutical manufacturers;

 

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pricing pressures by competitors and customers;

 

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a company’s reputation as a manufacturer and distributor of quality products;

 

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a company’s level of service (including maintaining sufficient inventory levels for timely deliveries);

 

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product appearance and labeling; and

 

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a company’s breadth of product offerings.

Many of Amneal’s competitors have longer operating histories and greater financial, R&D, marketing and other resources than Amneal. Consequently, some of Amneal’s competitors may be able to develop products and/or processes competitive with, or superior to, Amneal’s products. Furthermore, Amneal may not be able to (i) differentiate its products from those of its competitors, (ii) successfully develop or introduce new products—on a timely basis or at all—that are less costly than those of its competitors, or (iii) offer customers payment and other commercial terms as favorable as those offered by its competitors. The markets in which Amneal competes and intends to compete are undergoing, and are expected to continue to undergo, rapid and significant change. Amneal expects competition to intensify as technological advances and consolidation continues. New developments by other manufacturers and distributors could render Amneal’s products uncompetitive or obsolete.

Amneal believes its principal competitors in the U.S. generic pharmaceutical market, where Amneal primarily competes, are Teva Pharmaceutical Industries Limited (“Teva”), Sandoz (a division of Novartis AG) (“Sandoz”), Endo International plc (Par) (“Endo”), Mylan Inc. (“Mylan”) and Fresenius Medical Care AG & Co. KGAA /Akorn, Inc. These companies, among others, collectively compete with the majority of Amneal’s products. Amneal also faces price competition generally as other generic manufacturers enter the market. Any such price competition may be especially pronounced where Amneal’s competitors source their products from jurisdictions where production costs may be lower (sometimes significantly) than Amneal’s production costs, especially lower-cost foreign jurisdictions. Any of these factors could result in reductions in Amneal’s sales

 

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prices and gross margin. This price competition has led to an increase in demands for downward price adjustments by generic pharmaceutical distributors. Amneal’s principal strategy in addressing its competition is to offer customers a consistent supply of its generic drug products, as well as to pursue product opportunities with the potential for limited competition, such as high-barrier-to-entry first-to-file (“FTF”) or first-to-market (“FTM”) products. There can be no assurance, however, that this strategy will enable Amneal to compete successfully in the generic drug product industry or that it will be able to develop and implement any new or additional viable strategies.

Competition in the generic drug industry has also increased due to the proliferation of authorized generic pharmaceutical products. Authorized generic drug products are generic drug products that are introduced by brand companies, either directly or through third parties, under the brand’s New Drug Application (“NDA”) approval for its own branded drug. Authorized generics do not face any regulatory barriers to introduction and are not prohibited from sale during the 180-day marketing exclusivity period granted to the FTF Abbreviated New Drug Application (“ANDA”) applicant. The sale of authorized generics adversely impacts the market share of a generic drug product that has been granted 180 days of marketing exclusivity. This is a significant source of competition for Amneal, because an authorized generic drug product can materially decrease the profits that Amneal could receive as an otherwise exclusive marketer of a generic drug product. Such actions have the effect of reducing the potential market share and profitability of Amneal’s generic drug products and may inhibit Amneal from developing and introducing generic pharmaceutical drug products corresponding to certain branded drugs.

As Amneal’s competitors introduce their own generic equivalents of Amneal’s generic drug products, Amneal’s revenues and gross margin from such products generally decline, often rapidly.

Revenues and gross margin derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that Amneal believes are unique to the generic pharmaceutical industry. As the patent(s) for a brand name product or the statutory marketing exclusivity period (if any) expires, the first generic manufacturer to receive regulatory approval for a generic equivalent of the product is often able to capture a substantial share of the market. However, as other generic manufacturers receive regulatory approvals for their own generic versions, that market share, and the price of that product, will typically decline depending on several factors, including the number of competitors, the price of the branded product and the pricing strategy of the new competitors. Amneal cannot provide assurance that it will be able to continue to develop such products or that the number of its competitors for any given product will not increase to such an extent that Amneal may stop marketing a generic drug product for which it previously obtained approval, which may have a material adverse impact on its revenues and gross margin.

Due to Amneal’s dependence on a limited number of products, its business could be materially adversely affected if its key products do not perform as well as expected.

Amneal generates a significant portion of its total revenues and gross margin from the sale of a limited number of generic drug products. For the year ended December 31, 2016, Amneal’s top ten revenue generating generic drug products accounted for approximately 50% of Amneal’s total net revenues and a significant portion of Amneal’s gross margin. Any material adverse developments, including increased competition and supply shortages, with respect to the sale or use of these generic drug products, or Amneal’s failure to successfully introduce new key products to replace or surpass the revenues of existing key products, could have a material adverse effect on its revenues and gross margin.

The development, manufacture and sale of Amneal’s generic drug products involves the risk of product liability claims by consumers and other third parties, and insurance against such potential claims is expensive and may be difficult to obtain.

The development, manufacture and sale of Amneal’s generic drug products involves an inherent risk of product liability claims and the associated adverse publicity, and insurance against such potential claims is

 

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expensive and may be difficult to obtain. Litigation is inherently subject to uncertainties and Amneal may be required to expend substantial amounts in the defense or resolution of this and similar matters. Amneal regularly monitors the use of its products for trends or increases in reports of adverse events or product complaints, and regularly reports such matters to the FDA. In some cases, an increase in adverse event reports may be an indication that there has been a change in a product’s specifications or efficacy. Such changes could lead to a recall of the product in question or, in some cases, increases in product liability claims related to the product in question. If the coverage limits for product liability insurance policies are not adequate, or if certain of Amneal’s products are excluded from coverage, a claim brought against Amneal, whether covered by insurance or not, could have a material adverse effect on its business, results of operations, financial condition and cash flows. Amneal also relies on self-insurance to cover product liability claims, and these claims may exceed the amounts Amneal has reserved under its self-insurance program.

In the ordinary course of its business, Amneal may also be subject to a variety of other types of claims, proceedings, investigations and litigation initiated by government agencies or third parties. These matters may include compliance matters, product regulation or safety, taxes, employee benefit plans, employment discrimination, health and safety, environmental, antitrust, customs, import/export, government contract compliance, financial controls or reporting, intellectual property, allegations of misrepresentation, false claims or false statements, commercial claims, claims regarding promotion of its products and services, or other similar matters. In addition, government investigations related to the use of Amneal’s generic drug products may cause reputational harm to the Amneal. Negative publicity, whether accurate or inaccurate, about the efficacy, safety or side effects of Amneal’s generic drug products or product categories, whether involving Amneal or a competitor, could materially reduce market acceptance of Amneal’s products, cause consumers to seek alternatives to its products, result in product withdrawals and cause its stock price to decline. Negative publicity could also result in an increased number of product liability claims, whether or not these claims have a basis in scientific fact. Any such claims, proceedings, investigations or litigation, regardless of the merits, might result in substantial costs, restrictions on product use or sales, or otherwise injure Amneal’s business.

Both Impax and Amneal manufacture and derive a portion of their revenue from the sale of pharmaceutical products in the opioid class of drugs. The U.S. Department of Health and Human Services has declared the wide spread addiction to and abuse of such products a public health emergency. Changing public and clinical perceptions of opioid products and the risks relating to their use may result in the imposition of even stricter regulation of such products and further restrict their sale and use, thereby reducing the amount of such products Impax and Amneal. As of September 30, 2017, revenues from the sale of opioid products (other than products used to treat opioid addiction such as Buprenorphine and Naxolone) represented less than 4% of the net revenues of Amneal.

Amneal is subject to United States federal and state laws related to healthcare fraud and abuse and health information privacy and security, and the failure to comply with such laws may adversely affect its business.

In the United States, many of Amneal’s products are eligible for reimbursement under federal and state health care programs such as Medicaid, Medicare, TriCare, and/or state pharmaceutical assistance programs, and as a result, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are, and will be, applicable to its business. Amneal could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which it conducts its business. The laws that may affect Amneal’s ability to operate include, but are not limited to: (i) the U.S. Anti-Kickback Statute, which applies to Amneal’s marketing and research practices, educational programs, pricing policies and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, as a means of inducing, or in exchange for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; (ii) federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payers

 

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that are false or fraudulent; (iii) the U.S. Health Insurance Portability and Accountability Act of 1996, (“HIPAA”), which among other things created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters, and HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and its implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information and place restrictions on the use of such information for marketing communications; (iv) the U.S. Physician Payments Sunshine Act, which among other things, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under a federal healthcare program to report annually information related to “payments or other transfers of value” made to physicians and teaching hospitals, and ownership and investment interests held by certain healthcare professionals and their immediate family members, and similar state laws; (v) the government pricing rules applicable to the Medicaid, Medicare Part B, 340B Drug Pricing Program, the U.S. Department of Veterans Affairs program, the TRICARE program, and state price reporting laws; and (vi) state and foreign law equivalents of each of the above U.S. laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Violations of the fraud and abuse laws may result in severe penalties against Amneal and/or its responsible employees, including jail sentences, large fines, and the exclusion of Amneal’s products from reimbursement under federal and state programs. Defense of litigation claims and government investigations can be costly, time-consuming, and distract management, and it is possible that Amneal could incur judgments or enter into settlements that would require Amneal to change the way it operates its business. Amneal is committed to conducting the sales and marketing of its products in compliance with the healthcare fraud and abuse laws, but certain applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity, a governmental authority may take a position contrary to a position Amneal has taken, or should an employee violate these laws without Amneal’s knowledge, a governmental authority may impose civil and/or criminal sanctions.

Any adverse outcome in these types of actions, or the imposition of penalties or sanctions for failing to comply with fraud and abuse laws, could adversely affect Amneal and may have a material adverse effect on its business, results of operations, financial condition and cash flows. Some of the statutes and regulations that govern Amneal’s activities, such as federal and state anti-kickback and false claims laws, are broad in scope, and while exemptions and safe harbors protecting certain common activities exist, they are often narrowly drawn. While Amneal manages its business activities to comply with these statutory provisions, due to their breadth, complexity and, in certain cases, uncertainty of application, it is possible that Amneal’s activities could be subject to challenge by various government agencies. In particular, the FDA, the DOJ and other agencies have increased their enforcement activities with respect to the sales, marketing, research and similar activities of pharmaceutical companies in recent years, and many pharmaceutical companies have been subject to government investigations related to these practices. A determination that Amneal is in violation of these and/or other government regulations and legal requirements may result in civil damages and penalties, criminal fines and prosecution, administrative remedies, the recall of products, the total or partial suspension of manufacturing and/or distribution activities, seizure of products, injunctions, whistleblower lawsuits, failure to obtain approval of pending product applications, withdrawal of existing product approvals, exclusion from participation in government healthcare programs and other sanctions.

Any of these types of investigations or enforcement actions could affect Amneal’s ability to commercially distribute its products and could materially and adversely affect its business, financial condition, results of operations and cash flows.

 

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Extensive industry regulation has had, and will continue to have, a significant impact on Amneal’s business, especially its product development, manufacturing and distribution capabilities.

All pharmaceutical companies, including Amneal, are subject to extensive, complex, costly and evolving government regulation. In the United States, this type of regulation is principally administered by the FDA, but is also administered by the Drug Enforcement Agency (the “DEA”) and state government agencies. Internationally, these type of regulations are administered by various regulatory agencies in foreign countries where Amneal’s products or product candidates are being manufactured and/or marketed. The FDCA, the Controlled Substances Act and other federal statutes and regulations, and similar foreign statutes and regulations, govern or influence the development, testing, manufacturing, packing, labeling, storing, record keeping, safety, approval, advertising, promotion, sale, distribution and import/ export of Amneal’s products. Foreign regulatory authorities impose similar requirements focused on drug safety and effectiveness. Obtaining and maintaining regulatory approval has been, and will continue to be, increasingly difficult, time-consuming and costly. In addition, changes in applicable federal, state and foreign laws and regulations or the implementation of new laws and regulations could affect Amneal’s ability to obtain or maintain approval of its products and could have a material adverse effect on Amneal’s business. Additionally, recent uncertainty with respect to U.S. regulatory policy may result in regulatory changes adverse to Amneal’s business.

Once regulatory approval for a generic drug product has been obtained, regulatory agencies continue to have substantial authority to require additional testing, perform inspections, mandate a change to a product’s labeling based on post-marketing safety information or mandate withdrawals of Amneal’s products. Failure to comply with applicable regulatory requirements may subject Amneal to administrative or judicially-imposed sanctions. These sanctions may include, among others, untitled letters, warning letters, fines, civil penalties, criminal penalties, injunctions, debarment, product seizure or detention, product recalls and total or partial suspension of production, sale and promotion of a generic drug product. In addition, Amneal may voluntarily elect to recall or restrict the use of one or more of its generic drug products. Any such recall or restriction could divert managerial and financial resources and may harm Amneal’s reputation.

Under certain regulatory statutes and regulations, Amneal is subject to periodic inspection of its facilities, procedures and operations, and/or the testing of its products by the FDA and similar non-U.S. authorities, the DEA and other regulatory authorities, which conduct periodic inspections to confirm that Amneal is in compliance with all applicable requirements. In addition, the FDA and foreign regulatory agencies conduct pre-approval and post-approval reviews and plant inspections to determine whether Amneal’s systems and processes are in compliance with cGMP (as defined on page [●]) and other regulations. Following such inspections, the FDA or other agency may issue observations, notices, citations and/or warning letters that could cause Amneal to modify certain activities identified during the inspection. FDA guidelines specify that a warning letter is issued only for violations of “regulatory significance” for which the failure to adequately and promptly achieve correction may be expected to result in an enforcement action. Amneal is also required to report adverse events associated with its products to the FDA and other regulatory authorities. Unexpected or serious health or safety concerns could result in product liability claims, labeling changes, recalls, market withdrawals or other regulatory actions, including withdrawal of product approvals. Adverse events and safety concerns may arise as Amneal’s product candidates are evaluated in clinical trials or as its marketed products are used in clinical practice. Amneal is required to communicate to regulatory agencies adverse events reported to it regarding its products.

Amneal cannot ensure that FDA inspections at any of its manufacturing sites will not result in inspectional observations at such sites, that approval of any of its pending or subsequently submitted marketing authorization applications or supplements to such applications by Amneal or its subsidiaries will be granted, or that the FDA will not seek to impose additional sanctions against Amneal or any of its subsidiaries. The range of possible sanctions includes, among others, FDA issuance of adverse publicity, product recalls or seizures, fines, total or partial suspension of production and/or distribution, suspension of the FDA’s review of product applications, enforcement actions, injunctions, and civil or criminal prosecution. Any such sanctions, if imposed, could have a material adverse effect on Amneal’s business, operating results, financial condition and cash flows. Under certain

 

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circumstances, the FDA also has the authority to revoke previously granted drug approvals. Similar sanctions as detailed above may be available to the FDA under a consent decree, depending upon the actual terms of such decree. Although Amneal has instituted internal compliance programs, if these programs do not meet regulatory agency standards or if compliance is deemed deficient in any significant way, it could materially harm Amneal’s business. Certain of Amneal’s vendors are subject to similar regulation and periodic inspections and may be operating under consent decrees.

In order to market its products in the United States and other jurisdictions, Amneal must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements required for approval and maintenance of registrations post-approval. The process for obtaining governmental approval to manufacture and market pharmaceutical products is rigorous, time-consuming, uncertain and costly, and Amneal cannot predict the extent to which it may be affected by legislative and regulatory developments. Amneal is dependent on receiving FDA and other governmental or third-party approvals prior to manufacturing, marketing and shipping its products. There is always the chance that Amneal will fail to obtain FDA or other necessary approvals or that the rate, timing and cost of obtaining such approvals will adversely affect its product introduction plans or results of operations. Additionally, any regulatory approvals Amneal receives may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval or may contain requirements for potentially costly additional clinical trials and surveillance to monitor the safety and efficacy of the product. Amneal may only market or promote its products for their approved indications and Amneal’s labeling, promotional activities and advertising are subject to extensive regulation and oversight. Amneal carries inventories of certain product(s) in anticipation of launch; if such product(s) are not subsequently launched, Amneal may be required to write-off the related inventory.

Amneal’s customers may also be subject to various regulatory requirements, including requirements of the DEA, FDA, state boards of pharmacy, and city and county health regulators, among others. These include licensing, registration, recordkeeping, security and reporting requirements. Additionally, although physicians may prescribe FDA approved products for an “off label” indication, Amneal is permitted to market its products only for the indications for which they have been approved. Some of its products are prescribed off label and the FDA, the DOJ, the U.S. Attorney or other regulatory authorities could take enforcement actions if they conclude that Amneal or its distributors have engaged in off label marketing. In addition, historically, a number of states and the federal government have enforced licensing and anti-counterfeit drug pedigree laws which require the tracking of all transactions involving prescription drugs beginning with the manufacturer, through the supply chain, and down to the pharmacy or other health care provider dispensing or administering prescription drug products. Therefore, manufacturers and wholesale distributors have been required to maintain records documenting the chain of custody on distribution of prescription drugs. On November 27, 2013, the federal government enacted the Drug Quality and Security Act (“DQSA”) amending federal requirements in regard to the licensing and tracking of prescription drugs. Certain provisions in the new law related to licensing and track and trace requirements have specifically preempted prior state laws related to drug pedigrees that are inconsistent, more stringent, or in addition to the federal law. Specifically, Title II of the DQSA, also known as the Drug Supply Chain Security Act (“DSCSA”), provides for creation of an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States. These amendments include new requirements for licensing, tracking and tracing and other operations applicable to manufacturers and wholesale distributors of prescription drug products. The full requirements of the DSCSA will be phased in over a ten year period; however, in January 2015, specific product tracing requirements for manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of prescription drugs became effective. Also, as of January 2015, the DSCSA required manufacturers and wholesale distributors to implement systems to identify potential “suspect” or “illegitimate” product, and take appropriate action. The DSCSA also addresses product tracing using unique product identifiers on packaging, and requirements for standardized numerical identifiers which will take effect in the future.

Because of the chemical ingredients of pharmaceutical products and the nature of the manufacturing process, Amneal is subject to extensive environmental laws and regulations and the risk of incurring liability for damages

 

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and/or the costs of remedying environmental problems. These requirements include regulation of the handling, manufacture, transportation, storage, use and disposal of materials, including the discharge of hazardous materials and pollutants into the environment. In the normal course of Amneal’s business it is exposed to risks relating to the possible release of hazardous substances into the environment, which could cause environmental or property damage or personal injuries and which could result in (i) Amneal’s noncompliance with such environmental and occupational health and safety laws and regulations and (ii) regulatory enforcement actions or claims for personal injury and property damage against Amneal. If an unapproved or illegal environmental discharge or accident occurred or if Amneal were to discover contamination caused by prior operations, including by prior owners and operators of properties it acquires, then it could be liable for cleanup, damages or fines, which could have a material adverse effect on its business, financial position, results of operations, and cash flow. In the future, Amneal may be required to increase expenditures in order to remedy environmental problems and/or comply with changes in applicable environmental laws and regulations. Amneal could also become a party to environmental remediation investigations and activities. These obligations may relate to sites that Amneal currently or in the future may own or lease, sites that it formerly owned or operated, or sites where waste from its operations was disposed. Additionally, if Amneal fails to comply with environmental regulations to use, discharge or dispose of hazardous materials appropriately or otherwise fails to comply with the provisions of its operating licenses, the licenses could be revoked, and it could be subject to criminal sanctions and/or substantial civil liability or be required to suspend or modify its manufacturing operations. Among other jurisdictions, Amneal currently has significant manufacturing and other operations in New Jersey and New York, which are often recognized for having very aggressive public health and environmental protection laws. Amneal also operates in India, where environmental, health and safety regulations are developing and expanding, and Amneal cannot determine how these laws will be implemented and the impact of such regulation on its operations in India. In the future, Amneal may establish or acquire operations in other jurisdictions subject to laws and regulations equally (or more) stringent than those in the jurisdictions highlighted above. Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to Amneal and could subject its handling, manufacture, use, reuse or disposal of substances or pollutants to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures, as well as other costs and liabilities, which could materially adversely affect us.

In addition to government agencies that promulgate regulations and guidelines directly applicable to Amneal, other professional societies, practice management groups, insurance carriers, physicians, private health or science foundations and organizations involved in various diseases from time to time may also publish guidelines or recommendations to healthcare providers, administrators and payers, and patient communities. For example, the treatment practices of physicians that currently prescribe Amneal’s products may change. Recommendations by government agencies or other groups and organizations may relate to such matters as usage, dosage, route of administration and use of related therapies, as well as reimbursement of Amneal’s products by government and private payors. Any recommendations or guidelines that result in decreased use, dosage or reimbursement of Amneal’s products could materially and adversely affect its product sales, business and operating results.

Federal regulation of arrangements between manufacturers of branded and generic products could adversely affect Amneal’s business.

As part of the Medicare Prescription Drug and Modernization Act of 2003, companies are required to file with the FTC and the DOJ certain types of agreements entered into between branded and generic pharmaceutical companies related to the manufacture, marketing and sale of generic versions of branded drugs. This requirement could affect the manner in which brand drug manufacturers resolve intellectual property litigation and other disputes with generic pharmaceutical companies and could result generally in an increase or lengthening of litigation against pharmaceutical companies or additional investigations or proceedings by the FTC or other governmental authorities. The impact of this requirement, the pending legislation and the potential private-party lawsuits associated with arrangements between brand and generic drug manufacturers is uncertain and could adversely affect Amneal’s business.

 

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Healthcare reform and a reduction in the coverage and reimbursement levels by governmental authorities, HMOs, MCOs or other third-party payers may adversely affect Amneal’s business.

As part of commercializing its products, Amneal has obtained authorization to receive reimbursement at varying levels for the cost of certain products and related treatments from governmental authorities and private health insurers and other organizations, such as health maintenance organizations (“HMOs”) and managed care organizations (“MCOs”). The trend toward managed healthcare in the United States, the growth of organizations such as HMOs and MCOs, and legislative proposals to reform healthcare and government insurance programs could significantly influence the purchase of pharmaceutical products, resulting in lower prices and a reduction in product demand. The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law on March 23, 2010 and March 30, 2010, respectively. These laws are referred to herein as “healthcare reform.” A number of provisions of the healthcare reform laws continue to have a negative impact on the price of Amneal’s products sold to U.S. government entities. For example, the legislation includes measures that (i) significantly increase Medicaid rebates through both the expansion of the program; (ii) substantially expand the Public Health System (340B) program to allow other entities to purchase prescription drugs at substantial discounts; (iii) extend the Medicaid rebate rate to a significant portion of Managed Medicaid enrollees; (iv) apply a 50% discount to Medicare Part D beneficiary spending in the coverage gap for branded and authorized generic prescription drugs; and (v) levy a significant excise tax on the industry to fund healthcare reform. Such cost containment measures and healthcare reform affect Amneal’s ability to sell its products and have a material adverse effect on its business, results of operations and financial condition. Additionally, the Medicare Part D Prescription Drug Benefit established a voluntary outpatient prescription drug benefit for Medicare beneficiaries (primarily the elderly over 65 and the disabled). These beneficiaries may enroll in private drug plans. There are multiple types of Part D plans and numerous plan sponsors, each with its own formulary and product access requirements. The plans have considerable discretion in establishing formularies and tiered co-pay structures and in placing prior authorization and other restrictions on the utilization of specific products. In addition, Part D plan sponsors are permitted and encouraged to negotiate rebates with manufacturers. The Medicare Part D program, which went into effect January 1, 2006, is administered by the Centers for Medicare & Medicaid Services (“CMS”) within the Department of Health and Human Services.

The CMS has issued extensive regulations and other sub-regulatory guidance documents implementing the Medicare Part D benefit, and the OIG has issued regulations and other guidance in connection with the Medicare Part D program. The federal government can be expected to continue to issue guidance and regulations regarding the obligations of Part D sponsors and their subcontractors. Participating drug plans may establish drug formularies that exclude coverage of specific drugs and payment levels for drugs negotiated with Part D drug plans may be lower than reimbursement levels available through private health plans or other payers. Moreover, beneficiary co-insurance requirements could influence which products are recommended by physicians and selected by patients. There is no guarantee that any drug that Amneal markets will be offered by drug plans participating under the Medicare Part D program or of the terms of any such coverage, or that covered drugs will be reimbursed at amounts that reflect current or historical levels. Additionally, any reimbursement granted may not be maintained, or limits on reimbursement available from third-party payers may reduce the demand for, or negatively affect the price of those products, which could significantly harm Amneal’s business, results of operations, financial condition and cash flows. Amneal may also be subject to lawsuits relating to reimbursement programs that could be costly to defend, divert management’s attention and adversely affect its operating results. Most state Medicaid programs have established preferred drug lists, and the process, criteria and timeframe for obtaining placement on the preferred drug list varies from state to state. Under the Medicaid drug rebate program, a manufacturer must pay a rebate for Medicaid utilization of a product. The rebate for single source products (including authorized generics) is based on the greater of (i) a specified percentage of the product’s average manufacturer price or (ii) the difference between the product’s average manufacturer price and the best price offered by the manufacturer. The rebate for multiple source products is a specified percentage of the product’s average manufacturer price. In addition, many states have established supplemental rebate programs as a condition for including a drug product on a preferred drug list. The profitability of Amneal’s products may depend on the extent to which they appear on the preferred drug lists of a significant number of state Medicaid

 

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programs and the amount of the rebates that must be paid to such states. In addition, there is significant fiscal pressure on the Medicaid program, and amendments to lower the pharmaceutical costs of the program are possible. Such amendments could materially adversely affect Amneal’s anticipated revenues and results of operations. Due to the uncertainties regarding the outcome of future healthcare reform initiatives and their enactment and implementation, Amneal cannot predict which, if any, of the future reform proposals will be adopted or the effect such adoption may have on its business. Future rulemaking and reform, including repeal of existing law, with respect to the healthcare and pharmaceutical industries, could increase rebates, reduce prices or the rate of price increases for healthcare products and services, or require additional reporting and disclosure. Amneal cannot predict the timing or impact of any future rulemaking, reform or repeal of healthcare laws.

The majority of Amneal’s products are produced at a few locations and a business interruption at one or more of these locations could have a material adverse effect on its business, financial position and results of operations.

Amneal produces the majority of the products that it manufactures at its manufacturing facilities in New York, New Jersey and in India. A significant disruption at any of these facilities, even on a short-term basis, could impair Amneal’s ability to produce and ship products to the market on a timely basis, which could have a material adverse effect on its business, financial position and results of operations.

Amneal’s profitability depends on its major customers. If these relationships do not continue as expected, Amneal’s business, condition (financial and otherwise), prospects and results of operations could materially suffer.

Amneal has in excess of 200 direct customers for its products. For the full year completed December 31, 2016, Amneal’s top 15 customers accounted for approximately 73% of its total consolidated net revenue. For the year ended December 31, 2016, Amneal’s four largest customers accounted for approximately 54% of net revenue, broken out as follows: AmerisourceBergen Corporation (17%), Cardinal Health, Inc. (16%), McKesson Drug Co. (11%) and CVS Caremark (10%). The loss of any one or more of these or any other major customer or the substantial reduction in orders from any one or more of Amneal’s major customers could have a material impact on Amneal’s future operating results and financial condition.

Amneal may experience declines in the sales volume and prices of its products as a result of the continuing trend of consolidation of certain customer groups, which could have a material adverse effect on its business, financial position and results of operations.

Amneal’s ability to successfully commercialize any generic or branded pharmaceutical product depends in large part upon the acceptance of the product by third parties, including pharmacies, government formularies, other retailers, physicians and patients. Therefore, Amneal’s success will depend in large part on market acceptance of its products. Amneal makes a significant amount of its sales to a relatively small number of drug wholesalers and retail drug chains. These customers represent an essential part of the distribution chain of its pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and are continuing to undergo, significant consolidation. This consolidation may result in these groups gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing Amneal’s business. Additionally, the emergence of large buying groups representing independent retail pharmacies and other drug distributors, and the prevalence and influence of managed care organizations and similar institutions, potentially enable such groups to demand larger price discounts on Amneal’s products. For example, there has been a recent trend of large wholesalers and retailer customers forming partnerships, such as the alliance between Walgreens and AmerisourceBergen Corporation, the alliance between Rite Aid and McKesson Drug Company, and the alliance between CVS Caremark and Cardinal Health. The result of these developments may have a material adverse effect on Amneal’s business, financial position and results of operations.

 

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Amneal depends to a large extent on third-party suppliers and distributors for the raw materials for its products, particularly the chemical compounds comprising the APIs that it uses to manufacture its products, as well as for certain finished goods. A prolonged interruption in the supply of such products could have a material adverse effect on Amneal’s business, financial position and results of operations.

The bulk of the raw materials essential to Amneal’s manufacturing business are purchased from third parties. If Amneal experiences supply interruptions or delays, Amneal may have to obtain substitute materials or products, which in turn would require Amneal to obtain amended or additional regulatory approvals, subjecting it to additional expenditures of significant time and resources. In addition, changes in Amneal’s raw material suppliers could result in significant delays in production, higher raw material costs and loss of sales and customers, because regulatory authorities must generally approve raw material sources for pharmaceutical products, which may be time consuming. Any significant supply interruption could have a material adverse effect on Amneal’s business, condition (financial and otherwise), prospects and results of operations. To date, Amneal has experienced no significant difficulties in obtaining raw materials. However, because the federal drug application process requires specification of raw material suppliers, if raw materials from a specified supplier were to become unavailable, FDA approval of a new supplier would be required. The amount of time required for the FDA to qualify a new supplier and confirm that its manufacturing processes meet the necessary standards could cause delays in the manufacturing and marketing of one or more of Amneal’s products and could, depending on the particular product, have a material adverse effect on Amneal’s results of operations and financial condition.

The testing required for the regulatory approval of Amneal’s products is conducted primarily by independent third parties. Any failure by any of these third parties to perform this testing properly and in a timely manner may have an adverse effect upon Amneal’s ability to obtain regulatory approvals.

Amneal’s applications for regulatory approval of its products, including both internally-developed and in-licensed products, incorporate the results of testing and other information that is conducted or gathered primarily by independent third parties (including, for example, manufacturers of raw materials, testing laboratories, contract research organizations or independent research facilities). Amneal’s ability to obtain and maintain regulatory approval of the products being tested is dependent upon the quality of the work performed by these third parties, the quality of the third parties’ facilities, and the accuracy of the information provided by third parties. Amneal has little or no control over any of these factors. If this testing is not performed properly, Amneal’s ability to obtain or maintain regulatory approvals, and to launch or continue selling products, could be restricted or delayed.

Amneal depends on third-party agreements for a portion of its product offerings and any failure to maintain these arrangements or enter into similar arrangements with new partners could result in a material adverse effect.

Amneal has broadened its product offering by entering into a variety of third-party agreements covering any combination of joint development, supply, marketing and/or distribution of products. Amneal cannot provide assurance that the development, supply, marketing and/or distribution efforts of its contractual partners will continue to be successful, that it will be able to renew such agreements or that it will be able to enter into new agreements for additional products. Any alteration to, or termination of, Amneal’s current distribution and marketing agreements, failure to enter into new and similar agreements, or interruption of Amneal’s product supply under the such agreements, could have a material adverse effect on Amneal’s business, condition (financial and otherwise), prospects or results of operations.

Amneal may make acquisitions of, or investments in, complementary businesses or products, which may be on terms that may not turn out to be commercially advantageous, may require additional debt or equity financing, which could increase Amneal’s leverage and dilute equity holders.

Amneal regularly reviews the potential acquisition of technologies, products, product rights and complementary businesses and is currently evaluating, and intends to continue to evaluate, potential product and/

 

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or company acquisitions and other business development opportunities. Amneal may choose to enter into such transactions at any time. Nonetheless, Amneal cannot provide assurance that it will be able to identify suitable acquisition or investment candidates. To the extent that Amneal does identify candidates that it believes to be suitable, Amneal cannot provide assurance that it will be able to reach an agreement with the selling party or parties, that the terms it may agree to will be commercially advantageous to Amneal, or that it will be able to successfully consummate such investments or acquisitions even after definitive documents have been signed. If Amneal makes any acquisitions or investments, it may finance such acquisitions or investments through its cash reserves, debt financing, which may increase its leverage, or by issuing additional equity interests, which could dilute the holdings of its then-existing owners. If Amneal requires financing, it cannot provide assurance that it will be able to obtain required financing when needed on acceptable terms or at all.

Amneal’s operations in, and anticipated expansion into additional, international markets subjects it to increased regulatory oversight both in those international markets and domestically and regulatory, economic, social and political uncertainties, which could cause a material adverse effect on its business, financial position and results of operations.

Amneal is subject to certain risks associated with having assets and operations located in foreign jurisdictions, including its operations in India, Germany and the United Kingdom. Amneal may also in the future expand its international business and operations into jurisdictions in which it has limited operating experience, including with respect to seeking regulatory approvals, marketing or selling products.

Amneal’s operations in these jurisdictions may be adversely affected by general economic conditions and economic and fiscal policy, including changes in exchange rates and controls, interest rates and taxation policies, increased government regulation, and, with respect to India, any reversal of India’s recent economic liberalization and deregulation policies, as well as social stability and political, economic or diplomatic developments in the future. Certain jurisdictions have, from time to time, experienced instances of civil unrest and hostilities, both internally and with neighboring countries. Rioting, military activity, terrorist attacks, or armed hostilities could cause Amneal’s operations in such jurisdictions to be adversely affected or suspended. Amneal generally does not have insurance for losses and interruptions caused by terrorist attacks, military conflicts and wars. In addition, anti-bribery and anti-corruption laws may conflict with some local customs and practices in foreign jurisdictions. Amneal’s international operations may subject it to heightened scrutiny under the U.S. Foreign Corrupt Practices Act (“FCPA”), the UK Bribery Act and similar anti-bribery laws, and could subject Amneal to liability under such laws despite its best efforts to comply with such laws. As a result of its policy to comply with the FCPA, the UK Bribery Act and similar anti-bribery laws, Amneal may be at a competitive disadvantage to competitors that are not subject to, or do not comply with, such laws.

Amneal has increased exposure to tax liabilities, including foreign tax liabilities.

As a U.S. company with subsidiaries in, among other countries, India, Germany, Switzerland and England, Amneal is subject to, or potentially subject to, income taxes as well as non-income based taxes in these jurisdictions as well as the United States. Significant judgment is required in determining Amneal’s worldwide provision for income taxes and other tax liabilities. Changes in tax laws or tax rulings may have a significantly adverse impact on Amneal’s effective tax rate. Recent proposals by U.S. lawmakers related to fundamental tax reform for U.S. entities with international operations, if enacted, could have a significant adverse impact on Amneal’s effective tax rate. In addition, Amneal has potential tax exposures resulting from the varying application of statutes, regulations and interpretations, which include exposures on intercompany terms of cross-border arrangements among foreign subsidiaries in relation to various aspects of Amneal’s business, including research and development activities and manufacturing. Tax authorities in various jurisdictions may disagree with, and subsequently challenge, the amount of profits taxed in such jurisdictions; such challenges may result in increased tax liability, including accrued interest and penalties, which would cause Amneal’s tax expense to increase and which may have a material adverse effect on Amneal’s business, financial position and results of operations and its ability to satisfy its debt obligations.

 

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Amneal’s competitors or other third parties may allege that Amneal is infringing upon their intellectual property, forcing Amneal to expend substantial resources in litigation, the outcome of which is uncertain. Any unfavorable outcome of such litigation, including losses related to “at-risk” product launches, could have a material adverse effect on Amneal’s business, financial position and results of operations.

Companies that produce branded pharmaceutical products routinely bring litigation against ANDA or similar applicants that seek regulatory approval to manufacture and market generic forms of their branded products alleging patent infringement or other violations of intellectual property rights. Patent holders may also bring patent infringement suits against companies that are currently marketing and selling approved generic products. Litigation often involves significant expense and can delay or prevent introduction or sale of Amneal’s generic products. If valid and enforceable patents are infringed by Amneal’s products, Amneal would need to delay selling the infringing generic product unless it could obtain a license from the patent holder, and, if it was already selling the infringing product, cease selling and potentially destroy existing product stock.

There may be situations in which Amneal may make business and legal judgments to market and sell products that are subject to claims of alleged patent infringement prior to final resolution of those claims by the courts, based upon its belief that such patents are invalid, unenforceable, or are not infringed by Amneal’s marketing and sale of such products. This is referred to in the pharmaceutical industry as an “at-risk” launch. The risk involved in an at-risk launch can be substantial because, if a patent holder ultimately prevails against Amneal, the remedies available to such holder may include, among other things, damages measured by the profits lost by the patent holder, which can be significantly higher than the profits Amneal makes from selling the generic version of the product. Amneal could be liable for substantial damages from adverse court decisions in such matters. Amneal may also be harmed by the loss of any value of such inventory that it is unable to market or sell.

Amneal is, and will continue to be in the future, a party to legal proceedings that could result in unexpected adverse outcomes.

Amneal is a party to certain legal proceedings, including matters involving personnel and employment issues, breach of contract claims and other proceedings arising in the ordinary course of business. In addition, there are an increasing number of investigations and proceedings in the health care industry generally that seek recovery under a broad range of statutes and regulations. Amneal evaluates its exposure to these legal proceedings and establishes reserves for estimated liabilities in accordance with GAAP. Assessing and predicting the outcome of these matters involves substantial uncertainties. Unexpected outcomes in these legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves, could have a material adverse impact on Amneal’s financial results.

The use of legal, regulatory and legislative strategies by brand competitors, including authorized generics and citizen’s petitions, as well as the potential impact of proposed legislation, may increase Amneal’s costs associated with the introduction or marketing of its generic products, delay or prevent such introduction and/or significantly reduce the profit potential of its products.

Brand drug companies often pursue strategies that may serve to prevent or delay competition from Amneal’s generic alternatives to their branded products. These strategies include, but are not limited to:

 

•

marketing an authorized generic version of a branded product at the same time that Amneal introduces a generic equivalent of that product, directly or through agreement with a generic competitor;

 

•

filing “citizen’s petitions” with the FDA to thwart generic competition by causing delays of Amneal’s product approvals;

 

•

using risk evaluation and mitigation strategies (“REMS”),related distribution restrictions or other means of limiting access to their branded products, to prevent Amneal from obtaining product samples needed to conduct bioequivalence testing required for ANDA approval, thereby delaying or preventing Amneal from obtaining FDA approval of a generic version of such branded products;

 

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•

seeking to secure patent protection of certain “Elements to Assure Safe Use” of a REMS program, which are required medical interventions or other actions healthcare professionals need to execute prior to prescribing or dispensing the drug to the patient, in an attempt to thwart Amneal’s ability to avoid infringement of the patents in question or secure approval;

 

•

seeking to establish regulatory and legal obstacles that would make it more difficult for Amneal to demonstrate a generic product’s bioequivalence or “sameness” to the related branded product;

 

•

initiating legislative and administrative efforts in various states to limit the substitution of generic versions of branded pharmaceutical products for the corresponding branded products;

 

•

filing suits for patent infringement that automatically delay FDA approval of Amneal’s generic products;

 

•

introducing “next-generation” products prior to the expiration of market exclusivity for their branded product, which often materially reduces the demand for the generic product for which Amneal may be seeking FDA approval;

 

•

obtaining extensions of market exclusivity by conducting clinical trials of branded drugs in pediatric populations or by other methods as discussed below;

 

•

persuading the FDA to withdraw the approval of branded drugs for which the associated patents are about to expire, thus allowing the brand company to develop and launch new patented products serving as substitutes for the withdrawn products;

 

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seeking to obtain new patents on drugs for which patent protection is about to expire;

 

•

filing patent applications that are more complex and costly to challenge;

 

•

seeking temporary restraining orders and injunctions against selling a generic equivalent of their branded product based on alleged misappropriation of trade secrets or breach of confidentiality obligations;

 

•

seeking temporary restraining orders and injunctions against Amneal after Amneal has received final FDA approval for a product for which Amneal is attempting to launch at-risk prior to resolution of related patent litigation;

 

•

reducing the marketing of the branded product to healthcare providers, thereby reducing the branded drug’s commercial exposure and market size, which in turn adversely affects the market potential of the equivalent generic product; and

 

•

converting branded prescription drugs that are facing potential generic competition to over-the-counter products, thereby significantly impeding the growth of the generic prescription market for such drugs.

Amneal expends a significant amount of resources on research and development, including milestones on in-licensed products, which may not lead to successful product introductions.

Much of Amneal’s development effort is focused on technically difficult-to-formulate products and/or products that require advanced manufacturing technology. Amneal expends significant resources on research and development primarily to enable it to manufacture and market FDA-approved pharmaceuticals in accordance with FDA regulations. Amneal has entered into, and may in the future enter into, agreements that require it to make significant milestone payments upon achievement of various research and development events and regulatory approvals. As Amneal continues to develop and in-license new products, it will likely incur increased research and licensing expenses. Because of the inherent risk associated with research and development efforts in the industry, particularly with respect to new drugs, Amneal’s research and development expenditures may not result in the successful introduction of FDA-approved pharmaceutical products. Additionally, after Amneal or its development partners submits an ANDA, the FDA may request that additional studies be conducted. As a result, Amneal may be unable to reasonably determine the total research and development costs required to develop a particular product. Finally, Amneal cannot be certain that any investment made in developing products will be

 

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recovered, even if it is successful in commercialization. To the extent that Amneal expends significant resources on research and development efforts and is not ultimately able to successfully introduce new products as a result of those efforts, its business, financial position and results of operations may be materially adversely affected.

Amneal’s reporting and payment obligations under the Medicaid rebate program and other governmental purchasing and rebate programs are complex and may involve subjective decisions. Any determination that Amneal has failed to comply with those obligations could subject it to penalties and sanctions, which could have a material adverse effect on Amneal’s business.

The regulations applicable to Amneal regarding reporting and payment obligations with respect to Medicaid reimbursement and rebates and other governmental programs are complex. As discussed elsewhere in this combined proxy statement/prospectus, Amneal and other pharmaceutical companies are defendants in a number of suits filed by state attorneys general and have been notified of an investigation by the DOJ with respect to Medicaid reimbursement and rebates. Amneal’s calculations and methodologies are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could adversely affect Amneal and its business In addition, because Amneal’s processes for these calculations and the judgments involved in making these calculations involve, and will continue to involve, subjective decisions and complex methodologies, these calculations are subject to the risk of error and misjudgment. Any governmental agencies that have commenced (or that may commence) an investigation of Amneal could impose, based on a claim of violation of anti-fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal health care programs (including Medicaid and Medicare). Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with respect to how to properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority may take a position contrary to a position that Amneal has taken and may impose civil and/or criminal sanctions on Amneal. Any such penalties, sanctions, or exclusion from federal health care programs could have a material adverse effect on Amneal’s business, financial position and results of operations. From time to time Amneal conducts routine reviews of its government pricing calculations. These reviews may have an impact on government price reporting and rebate calculations used to comply with various government regulations regarding reporting and payment obligations.

Amneal’s operating results are affected by many factors and may fluctuate significantly on a quarterly basis.

Amneal’s operating results may vary substantially from quarter to quarter and may be greater or less than those achieved in the immediately preceding period or in the comparable period of the prior year. Factors that may cause quarterly results to vary include, but are not limited to, the following:

 

•

the number of new product introductions by Amneal;

 

•

losses related to inventory write-offs;

 

•

marketing exclusivity, if any, which may be obtained on certain new products;

 

•

the level of competition in the marketplace for certain products;

 

•

Amneal’s ability to create demand in the marketplace for its products;

 

•

availability of raw materials and finished products from suppliers;

 

•

Amneal’s ability to manufacture products at its manufacturing facilities;

 

•

the scope and outcome of governmental regulatory actions;

 

•

Amneal’s dependence on a small number of products for a significant portion of net revenue or income;

 

•

legal actions against Amneal’s generic products brought by brand competitors, and legal challenges to its intellectual property rights by generic competitors;

 

•

price erosion and customer consolidation; and

 

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•

significant payments (such as milestones) payable by Amneal under collaboration, licensing, and development agreements to its partners before the related product has received FDA approval.

The profitability of Amneal’s product sales is also dependent upon the prices it is able to charge for its products, the costs to purchase products from third parties, and its ability to manufacture its products in a cost effective manner. If Amneal’s revenues decline or do not grow as anticipated, it may not be able to reduce its operating expenses to offset such declines. Failure to achieve anticipated levels of revenues could, therefore, significantly harm Amneal’s operating results for a particular fiscal period.

In certain circumstances, Amneal issues price adjustments and other sales allowances to its customers. Although Amneal may establish reserves based on its estimates of these amounts, if estimates are incorrect and the reserves are inadequate, it may result in adjustments to these reserves that may have a material adverse effect on Amneal’s financial position and results of operations.

As described above, the first company to file an ANDA containing a Paragraph IV certification that successfully challenges the patent(s) on a branded product may be granted 180 days of generic market exclusivity by the FDA for such generic product. At the expiration of such exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug (in some instances, price declines have exceeded 90%). When Amneal experiences price declines following a period of generic marketing exclusivity, or at any time when a competitor enters the market or offers a lower price with respect to a product it is selling, Amneal may, at its discretion, decide to lower the price of its product to retain market share and provide price adjustments to its customers for the difference between its new (lower) price and the price at which it previously sold the product which is still held in inventory by such customers. Because the entry of a competitive generic product following the expiration of any exclusivity period is unpredictable, Amneal does not establish reserves for such potential adjustments, and therefore the full effect of such adjustments are not reflected in its operating results until such adjustments actually occur. There are also circumstances under which Amneal may decide not to provide price adjustments to certain customers, and consequently, as a matter of business strategy, it may risk a greater level of sale returns of products in a customer’s existing inventory and lose future sales volume to competitors rather than reduce its pricing.

Based on estimates, Amneal establishes reserves for sales allowances including, but not limited to: sales discounts and returns, chargebacks, sales volume rebates, shelf stocks, re-procurement charges, cash discounts, and Medicaid rebate obligations at the time of sale. Although Amneal believes its reserves are adequate as of the date of this combined proxy statement/prospectus, it cannot provide assurances that its reserves will ultimately prove to be adequate. Increases in sales allowances may exceed Amneal’s estimates for a variety of reasons, including unanticipated competition or an unexpected change in one or more of its contractual relationships. Amneal will continue to evaluate the effects of competition and will record a price adjustment reserve if and when it deems it necessary. Any failure to establish adequate reserves with respect to sales allowances may result in a material adverse effect on Amneal’s financial position and results of operations.

If Amneal determines that its goodwill and other intangible assets have become impaired, it may record significant impairment charges, which would adversely affect its results of operations.

Goodwill and other intangible assets represent a significant portion of Amneal’s assets. Goodwill is the excess of cost over the fair market value of net assets acquired in business combinations. In the future, goodwill and intangible assets may increase as a result of future acquisitions. Amneal reviews its goodwill and indefinite lived intangible assets at least annually for impairment. Amneal reviews its intangible assets with finite lives for recoverability whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Impairment may result from, among other things, deterioration in the performance of acquired businesses, adverse market conditions and adverse changes in applicable laws or regulations, including changes that restrict the activities of an acquired business. Any impairment of goodwill or other intangible assets would result in a non-cash charge against earnings, which would adversely affect Amneal’s results of operations.

 

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Investigations and litigation concerning the calculation of average wholesale prices may adversely affect Amneal’s business.

Many government and third-party payers, including Medicare, Medicaid, HMOs and others, reimburse doctors and others for the purchase of certain prescription drugs based on a drug’s average wholesale price (“AWP”). In the past several years, state and federal government agencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to AWP, as a result of which certain agencies have suggested that reporting of inflated AWPs by manufacturers has led to excessive payments for prescription drugs. Numerous pharmaceutical companies have been named as defendants in actions brought by various State Attorneys General and have faced state law qui tam actions brought on behalf of various states, alleging generally that the defendants defrauded state Medicaid systems by purportedly reporting or causing the reporting of AWP and/or “Wholesale Acquisition Costs” that exceeded the actual selling price of the defendants’ prescription drugs. Amneal, for example, is subject to a civil investigative demand issued by the Texas State Attorney General alleging certain overpayments to Amneal by the Texas Medicaid system. These cases generally seek some combination of actual damages, and/or double damages, treble damages, compensatory damages, statutory damages, civil penalties, disgorgement of excessive profits, restitution, disbursements, counsel fees and costs, litigation expenses, investigative costs, injunctive relief, punitive damages, imposition of a constructive trust, accounting of profits or gains derived through the alleged conduct, expert fees, interest and other relief that the court may have deemed proper.

Amneal can give no assurance that it will be able to settle current or future actions on terms that it deems reasonable, or that such settlements or adverse judgments, if entered, will not exceed the amount of any reserve. Accordingly, such actions could adversely affect Amneal and may have a material adverse effect on its business, results of operations, financial condition and cash flows.

Amneal is increasingly dependent on information technology, and its systems and infrastructure face certain risks, including cybersecurity and data leakage risks.

Significant disruptions to Amneal’s information technology systems or breaches of information security could adversely affect Amneal’s business. In the ordinary course of business, Amneal collects, stores and transmits large amounts of confidential information, and it is critical that it does so in a secure manner to maintain the confidentiality and integrity of such information. Amneal has also outsourced significant elements of its information technology infrastructure; as a result Amneal manages independent vendor relationships with third parties who are responsible for maintaining significant elements of its information technology systems and infrastructure and who may or could have access to its confidential information. The size and complexity of Amneal’s information technology systems, and those of its third party vendors, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by its employees, partners or vendors. These systems are also vulnerable to attacks by malicious third parties, and may be susceptible to intentional or accidental physical damage to the infrastructure maintained by Amneal or by third parties. Maintaining the secrecy of confidential, proprietary, and/or trade secret information is important to Amneal’s competitive business position. While Amneal has taken steps to protect such information and has invested in systems and infrastructures to do so, there can be no guarantee that Amneal’s efforts will prevent service interruptions or security breaches in its systems or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect its business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of Amneal’s security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use Amneal’s proprietary technology or information, and/or adversely affect Amneal’s business position. Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business, and reputational harm to Amneal and could have a material adverse effect on its business, financial position, results of operations and/or cash flow.

 

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Amneal’s future success depends on its ability to attract and retain talented employees and consultants.

Amneal’s future success depends, to a substantial degree, upon the continued service of the members of Amneal’s management team. The loss of the services of members of Amneal’s management team, or their inability to perform services on its behalf, could have a material adverse effect on Amneal’s business, condition (financial and otherwise), prospects and results of operations. Amneal’s success also depends, to a large extent, upon the contributions of its sales, marketing, scientific and quality assurance staff. Amneal competes with brand and generic pharmaceutical manufacturers for qualified personnel, and Amneal’s competitors may offer more favorable employment opportunities than Amneal does. If Amneal is not able to attract and retain the necessary personnel to accomplish its business objectives it could experience constraints that would adversely affect its ability to sell and market its products effectively, to meet the demands of its strategic partners in a timely fashion, and to support its research and development programs. In particular, Amneal’s sales and marketing efforts depend on the ability to attract and retain skilled and experienced sales, marketing and quality assurance representatives. Although Amneal believes that it has been successful in attracting and retaining skilled personnel in all areas of its business, it cannot provide assurance that it can continue to attract, train and retain such personnel. Any failure in this regard could limit the rates at which Amneal generates sales and develops or acquires new products.

Amneal depends on its ability to protect its intellectual property and proprietary rights.

Amneal’s success depends on its ability to protect and defend the intellectual property rights associated with its current and future products. If Amneal fails to protect its intellectual property adequately, competitors may manufacture and market products similar to, or that may be confused with, Amneal’s products, and its generic competitors may obtain regulatory approval to make and distribute generic versions of Amneal’s branded products. Some patent applications in the United States are maintained in secrecy or are not published until the resulting patents issue. Amneal also cannot be certain that patents will be issued with respect to any of its patent applications or that any existing or future patents issued to or licensed by Amneal will provide competitive advantages for its products or will not be challenged, invalidated, circumvented or held unenforceable in proceedings commenced by its competitors or other third parties. Furthermore, Amneal’s patent rights may not prevent or limit its present and future competitors from developing, making, importing, using or commercializing products that are functionally similar to Amneal’s products. Amneal relies particularly on trade secrets, trademarks, unpatented proprietary expertise and continuing innovation that it seeks to protect, in part, by registering and using marks; and by entering into confidentiality agreements with licensees, suppliers, employees, consultants and other parties—Amneal uses this approach to protection of its intellectual property in large part because few of its products are protected by patents. Amneal cannot provide assurance that these agreements will not be breached or circumvented. Amneal also cannot be certain that it will have recourse to adequate remedies in the event of a breach of such agreements. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Amneal cannot be sure that its trade secrets and proprietary technology will not be independently developed or otherwise become known by its competitors or, if patents are not issued with respect to its internally-developed products, that it will be able to maintain the confidentiality of information relating to these products. In addition, efforts to ensure Amneal’s intellectual property rights may be costly, time-consuming and/or ultimately unsuccessful. Amneal cannot be sure that it will have the resources to protect its own rights against infringement by third parties.

Risk Factors Relating to the Combined Company

Following the consummation of the Combination, New Amneal will be a holding company that conducts business primarily from its direct subsidiary, Amneal. As such, the same risk factors applicable to the business of Amneal and Impax will be applicable to the Combined Company collectively. Additionally, following the consummation of the Combination, the Combined Company will be subject to the following risks.

 

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Following the Combination, the Combined Company may be unable to integrate operations successfully and realize the anticipated synergies and other benefits of the Combination.

The Combination involves the combination of two companies that operated as independent public companies prior to the Combination. The integration of the businesses may be more time consuming and require more resources than initially estimated and the Combined Company may fail to realize some or all of the anticipated benefits of the Combination if the integration process takes longer than expected or is more costly than expected. In addition, Impax and Amneal have operated and, until the completion of the Combination, will continue to operate, independently. It is possible that the integration process could result in the diversion of each company’s management’s attention, the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, control, procedures and policies, any of which could adversely affect the Combined Company’s ability to maintain relationships with customers, partners and employees or its ability to achieve the anticipated benefits of the Combination, or could reduce the earnings or otherwise adversely affect the business and financial results of the Combined Company. Moreover, in addition to the Combined Company’s failure to realize the anticipated benefits of any acquisition, including its revenues or return on investment assumptions, the Combined Company may be exposed to unknown liabilities or impairment charges as a result of acquisitions it does complete.

Following the Combination, the Combined Company will have a substantial amount of indebtedness, which could adversely affect its financial health.

Following the Combination, the Combined Company will have a substantial amount of indebtedness. As of September 30, 2017, on a pro forma basis giving effect to the Combination and the related financing, the Combined Company would have had approximately $2,700,000,000 of total gross indebtedness and approximately $250,000,000 of available borrowing capacity under its credit facilities. For additional details of the expected debt of the Combined Company, see the section entitled “Selected Unaudited Pro Forma Condensed Combined Financial Data” beginning on page [●].

The Combined Company’s substantial level of indebtedness could have important consequences to you. For example, it could:

 

•

increase the Combined Company’s vulnerability to adverse economic and industry conditions;

 

•

limit the Combined Company’s ability to obtain additional financing for future working capital, capital expenditures, raw materials, strategic acquisitions and other general corporate requirements;

 

•

expose the Combined Company to interest rate fluctuations because the interest on certain debt under the credit facilities is imposed at variable rates;

 

•

require the Combined Company to dedicate a substantial portion of its cash flow from operations to payments on the Combined Company’s debt, thereby reducing the availability of cash flow for operations and other purposes;

 

•

make it more difficult for the Combined Company to satisfy its obligations to its lenders, resulting in possible defaults on and acceleration of such indebtedness;

 

•

limit the Combined Company’s ability to refinance indebtedness or increase the associated costs;

 

•

require the Combined Company to sell assets to reduce debt or influence the decision about whether to do so;

 

•

limit the Combined Company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it will operate or prevent the Combined Company from carrying out capital spending that is necessary or important to the Combined Company’s growth strategy and efforts to improve operating margins or its business; and

 

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•

place the Combined Company at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns.

The Combined Company may need to raise additional funds in the future which may not be available on acceptable terms or at all.

The Combined Company may consider issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to refinance existing debt, or for general corporate purposes. If the Combined Company issues equity, convertible preferred equity or convertible debt securities to raise additional funds, New Amneal Stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of New Amneal Stockholders. If the Combined Company incurs additional debt, it may increase its leverage relative to its earnings or to its equity capitalization, requiring the Combined Company to pay additional interest expenses and potentially lowering New Amneal’s credit ratings. The Combined Company may not be able to market such issuances on favorable terms, or at all, in which case, the Combined Company may not be able to develop or enhance its products, execute its business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements.

The terms of the Combined Company’s credit agreements will restrict its operations, particularly its ability to respond to changes or to take certain actions.

The Combined Company’s credit agreements will contain a number of restrictive covenants that impose operating and financial restrictions on the Combined Company and may limit its ability to engage in acts that may be in the Combined Company’s long-term best interest, including restrictions on the ability to:

 

•

incur additional indebtedness;

 

•

pay dividends or make other distributions or repurchase or redeem capital stock;

 

•

prepay, redeem or repurchase certain debt;

 

•

make loans and investments;

 

•

sell assets;

 

•

incur liens;

 

•

enter into transactions with affiliates;

 

•

alter the businesses conducted by the Combined Company;

 

•

enter into agreements restricting subsidiaries’ ability to pay dividends; and

 

•

consolidate, merge or sell all or substantially all of the Combined Company’s assets.

A breach of the covenants under such credit agreements could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies which could have a material adverse effect on the Combined Company’s business, operations and financial results. Furthermore, if the Combined Company were unable to repay the amounts due and payable under its credit agreements, those lenders could proceed against the collateral granted to them to secure that indebtedness which could force the Combined Company into bankruptcy or liquidation. In the event the Combined Company’s lenders accelerated the repayment of the borrowings, the Combined Company and its subsidiaries may not have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the credit agreements would likely have a material adverse effect on the Combined Company. As a result of these restrictions, the Combined Company may be:

 

•

limited in how it conducts business;

 

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•

unable to raise additional debt or equity financing to operate during general economic or business downturns; or

 

•

unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect the Combined Company’s ability to grow in accordance with Impax’s and Amneal’s strategy.

The Combined Company may not be able to generate sufficient cash to service all of its indebtedness and may be forced to take other actions to satisfy our obligations under its indebtedness, which may not be successful.

The Combined Company’s ability to make scheduled payments on or refinance its debt obligations depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors which may be beyond the Combined Company’s control. The Combined Company may be unable to maintain a level of cash flows from operating activities sufficient to permit it to pay the principal, premium, if any, and interest on its indebtedness. Following the Combination, the Combined Company is expected to have approximately $2.7 billion of indebtedness, with an annual interest expense of approximately $115 million to $135 million and an annual debt amortization of approximately $60 million to $70 million.

If the Combined Company’s cash flows and capital resources are insufficient to fund its debt service obligations, the Combined Company could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness. The Combined Company may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow the Combined Company to meet its scheduled debt service obligations. The Combined Company’s credit agreements restrict its ability to dispose of assets and use the proceeds from those dispositions and also restrict its ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. The Combined Company may not be able to consummate those dispositions or obtain proceeds in an amount sufficient to meet any debt service obligations when due.

The Combined Company’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its indebtedness on commercially reasonable terms or at all, would materially and adversely affect the Combined Company’s financial position and results of operations and its ability to satisfy its obligations, including its indebtedness.

If the Combined Company cannot make scheduled payments on its debt, it will be in default and, as a result:

 

•

its debt holders could declare all outstanding principal and interest to be due and payable;

 

•

the lenders under its credit agreements could terminate their commitments to lend the Combined Company money; and

 

•

the Combined Company could be forced into bankruptcy or liquidation.

New Amneal will be a holding company with nominal net worth and will depend on dividends and distributions from its subsidiaries to pay any dividends.

New Amneal will be a holding company with nominal net worth and will not have any material assets or conduct any business operations other than its investments in its subsidiaries. New Amneal’s business operations will be conducted primarily out of its direct operating subsidiary, Amneal, and its subsidiaries. As a result, notwithstanding any restrictions on payment of dividends under the Combined Company’s existing indebtedness, New Amneal’s ability to pay dividends, if any, will be dependent upon cash dividends and distributions or other transfers from its subsidiaries, including from Amneal.

 

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The Class A Common Stock price is expected to be volatile, and the market price of Class A Common Stock may decline following the Combination.

The market price of Class A Common Stock following the Combination could be subject to significant fluctuations. Market prices for securities of pharmaceutical, biotechnology, and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of Class A Common Stock to fluctuate following the Combination include:

 

•

the ability of the Combined Company to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals;

 

•

the failure of any of the Combined Company’s product candidates, if approved for marketing and commercialization, to achieve commercial success;

 

•

issues in manufacturing the Combined Company’s approved products or product candidates;

 

•

the entry into, or termination of, key agreements, including key licensing or collaboration agreements;

 

•

the initiation of material developments in, or conclusion of, litigation to enforce or defend any of the Combined Company’s intellectual property rights or defend against the intellectual property rights of others;

 

•

announcements by commercial partners or competitors of new commercial products, clinical progress (or the lack thereof), significant contracts, commercial relationships, or capital commitments;

 

•

adverse publicity relating to the Combined Company’s markets, including with respect to other products and potential products in such markets;

 

•

the introduction of technological innovations or new therapies competing with potential products of the Combined Company;

 

•

the loss of talented employees;

 

•

changes in estimates or recommendations by securities analysts, if any, who cover the Class A Common Stock;

 

•

general and industry-specific economic conditions potentially affecting the Combined Company’s research and development expenditures;

 

•

changes in the structure of health care payment systems;

 

•

period-to-period fluctuations in New Amneal’s financial results;

 

•

failure to meet or exceed financial and development projections New Amneal may provide to the public;

 

•

failure to meet or exceed the financial and development projections of the investment community;

 

•

the perception of the pharmaceutical industry by the public, legislators, regulators, and the investment community;

 

•

adverse regulatory decisions;

 

•

disputes or other developments relating to proprietary rights, including patents, litigation matters, and the Combined Company’s ability to obtain patent protection for its technologies;

 

•

sales of the Class A Common Stock by New Amneal or its stockholders in the future;

 

•

trading volume of the Class A Common Stock; and

 

•

period-to-period fluctuations in New Amneal’s financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies or the biotechnology sector. These broad market fluctuations may also adversely affect the trading price of the New Amneal’s Class A Common Stock.

 

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In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management’s attention and resources, which could significantly harm the Combined Company’s profitability and reputation.

Future sales of shares by stockholders could cause the Class A Common Stock price to decline.

If New Amneal Stockholders sell, or indicate an intention to sell, substantial amounts of Class A Common Stock in the public market after the Lock-up Period and other legal restrictions on resale discussed in this combined proxy statement/prospectus lapse, the trading price of Class A Common Stock could decline. Based on Impax Shares outstanding as of November 16, 2017 (inclusive of all Impax Shares issuable pursuant to the exercise of Impax options), upon completion of the Combination, New Amneal is expected to have outstanding a total of approximately 75,579,445 shares of Class A Common Stock (inclusive of the diluted effect of stock options using Black Scholes Valuation).

The Stockholders Agreement includes certain lock-up provisions limiting the ability of the Amneal Group Members to transfer New Amneal Shares held by such members for a period of 180 days from the Closing of the Combination. Based on Impax Shares outstanding as of November 16, 2017, following the consummation of the PIPE Investment and upon the expiration of the lock-up restrictions, approximately 179,889,019 shares of Class A Common Stock will become eligible for sale or transfer (subject to certain continuing restrictions), approximately [    ] of which will be held by directors, executive officers of New Amneal, and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of the Class A Common Stock could decline.

Impax Stockholders will have a reduced voting interest after the Combination and will exercise less influence over management of New Amneal following the Combination.

After the Combination, Impax Stockholders will hold a significantly smaller percentage of the voting interests of New Amneal than they currently own of Impax. Following completion of the Combination, Impax Stockholders will hold approximately 25% of the voting interests in New Amneal. Consequently, Impax Stockholders will be able to exercise less influence over the management and policies of New Amneal than they currently exercise over the management and policies of Impax.

If the ownership of the Class A Common Stock is highly concentrated, it may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause the Class A Common Stock’s stock price to decline.

Executive officers and directors of New Amneal, and affiliates of executive officers and directors of New Amneal, are expected to beneficially own or control approximately [    ] % of the outstanding shares of New Amneal Shares following the completion of the Combination. Accordingly, these executive officers, directors, and their affiliates, acting as a group, will have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation, or sale of all or substantially all of New Amneal’s assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of New Amneal, even if such a change of control would benefit the other New Amneal Stockholders. The significant concentration of stock ownership may adversely affect the trading price of Class A Common Stock due to investors’ perception that conflicts of interest may exist or arise.

Following the completion of the Combination, New Amneal will be controlled by the Existing Amneal Members. The interests of the Existing Amneal Members may differ from the interests of other stockholders of New Amneal.

Immediately following consummation of the Combination, the Existing Amneal Members will possess 75% of the voting power of all outstanding New Amneal Shares (prior to giving effect to the PIPE Investment).

 

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Through its ownership of a majority of New Amneal’s voting power and the provisions set forth in the New Amneal Charter, the New Amneal Bylaws and the Stockholders Agreement, the Existing Amneal Members will have the ability to designate and elect a majority of the New Amneal Board. The Existing Amneal Members will have control over all matters submitted to New Amneal Stockholders for approval, including changes in capital structure, transactions requiring stockholder approval under Delaware law and corporate governance, subject to the terms of the Stockholders Agreement relating to the Existing Amneal Members’ agreement to vote in favor of Non-Amneal Directors and such other matters that are described in more detail in the section entitled “Ancillary Agreements Related to the Combination—Stockholders Agreement” beginning on page [●]. The Existing Amneal Members may have different interests than other New Amneal Stockholders and may make decisions adverse to your interests.

Among other things, the Existing Amneal Members’ control could delay, defer, or prevent a sale of New Amneal that the company’s other stockholders support, or, conversely, this control could result in the consummation of such a transaction that other New Amneal Stockholders do not support. This concentrated control could discourage a potential investor from seeking to acquire Class A Common Stock and, as a result, might harm the market price of that Class A Common Stock.

The New Amneal Charter provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between New Amneal and its stockholders, which could limit New Amneal Stockholders’ ability to obtain a favorable judicial forum for disputes with New Amneal or its current or former directors, officers or employees.

The New Amneal Charter provides that unless New Amneal consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if such court does not have jurisdiction, the Superior Court of the State of Delaware or the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of New Amneal, any action asserting a claim of breach of fiduciary duty owed by any current or former director or officer of New Amneal to New Amneal or its stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, the New Amneal Charter or the New Amneal Bylaws or any action asserting a claim governed by the internal affairs doctrine. The choice of forum provision may limit a New Amneal Stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with New Amneal or its current or former directors, officers or other employees, which may discourage such lawsuits against New Amneal and its current or former directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the New Amneal Charter to be inapplicable or unenforceable in an action, New Amneal may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, results of operations, and financial condition.

An active trading market for the Class A Common Stock may not develop and New Amneal Stockholders may not be able to resell their shares of Class A Common Stock for a profit, if at all.

An active trading market for Class A Common Stock may never develop or be sustained. If an active market for Class A Common Stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.

Anti-takeover provisions under Delaware law could make an acquisition of New Amneal more difficult and may prevent attempts by New Amneal’s stockholders to replace or remove the Combined Company’s management.

Because New Amneal will be incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of the outstanding voting stock of New Amneal from merging or combining with the New Amneal. Although Impax and Amneal believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirers to

 

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negotiate with New Amneal’s board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by the New Amneal’s stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management.

Impax and Amneal do not anticipate New Amneal will pay any cash dividends in the foreseeable future.

The current expectation is New Amneal will retain its future earnings to fund the development and growth of New Amneal’s business. As a result, capital appreciation, if any, of the Class A Common Stock will be your sole source of gain, if any, for the foreseeable future.

If New Amneal fails to maintain proper and effective internal controls, New Amneal’s ability to produce accurate and timely financial statements could be impaired, which could harm its operating results, its ability to operate its business and investors’ views of the Combined Company.

New Amneal will be required to comply with Section 404 of the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and attestations of the effectiveness of internal controls by independent auditors. Ensuring that New Amneal has adequate internal financial and accounting controls and procedures in place so that it can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. New Amneal’s failure to maintain the effectiveness of its internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on its business. New Amneal could lose investor confidence in the accuracy and completeness of its financial reports, which could have an adverse effect on the price of its common stock. In addition, if New Amneal’s efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against New Amneal and its business may be harmed.

If securities or industry analysts do not publish, or cease publishing, research or reports about New Amneal, its business or its market, or if they change their recommendations regarding the Class A Common Stock adversely, the Class A Common Stock price and trading volume could decline.

If a trading market for Class A Common Stock develops, the trading market for Class A Common Stock will be influenced by whether industry or securities analysts publish research and reports about New Amneal, its business, its market or its competitors and, if any analysts do publish such reports, what they publish in those reports. New Amneal may not obtain analyst coverage in the future. Any analysts that do cover New Amneal may make adverse recommendations regarding the Class A Common Stock, adversely change their recommendations from time to time, and/or provide more favorable relative recommendations about New Amneal’s competitors. If any analyst who may cover New Amneal in the future were to cease coverage of New Amneal or fail to regularly publish reports on New Amneal, or if analysts fail to cover New Amneal or publish reports about New Amneal at all, New Amneal could lose, or never gain, visibility in the financial markets, which in turn could cause the stock price or trading volume of the Class A Common Stock to decline.

New Amneal’s growth is dependent on its ability to continue to successfully develop and commercialize new products in a timely manner.

New Amneal’s financial results will depend upon the Combined Company’s ability to introduce and commercialize additional generic and branded products in a timely manner. In the generic pharmaceutical products market, revenue from newly launched generic products is typically relatively high during the period immediately following launch and can be expected generally to decline over time. Revenue from generic drugs in general, including prices of generic products that have generic alternatives on the market, can generally be expected to decline over time. Revenue from branded pharmaceutical products can be expected to decline as the

 

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result of entry of new competitors, particularly of companies producing generic versions of the branded products. New Amneal’s growth is therefore dependent upon the Combined Company’s ability to successfully introduce and commercialize new generic and branded products.

A substantial portion of New Amneal’s total revenues is expected to be derived from sales of a limited number of products.

Impax and Amneal expect that New Amneal will derive a substantial portion of its revenue from sales of a limited number of products. In 2016, Impax’s significant products accounted for 11%, 9%, 9%, 8% and 8%, or an aggregate of 45%, of its net revenue and Amneal’s significant products accounted for 12%, 7%, 5%, 3% and 3%, or an aggregate of 31% of its net revenue. The sale of New Amneal’s products may be significantly influenced by market conditions, as well as regulatory actions. New Amneal may experience decreases in the sale of its products in the future as a result of actions taken by its competitors, such as price reductions, or as a result of regulatory actions related to its products or to competing products, which could have a material impact on New Amneal’s results of operations. Actions which could be taken by New Amneal’s competitors, which may materially and adversely affect its business, results of operations and financial condition, may include, without limitation, pricing changes and entering or exiting the market for specific products.

New Amneal’s approved products may not achieve expected levels of market acceptance.

Even if New Amneal is able to obtain regulatory approvals for its new products, the success of those products is dependent upon market acceptance. Levels of market acceptance for New Amneal’s new products could be affected by several factors, including:

 

•

the availability of alternative products from New Amneal’s competitors;

 

•

the prices of New Amneal’s products relative to those of its competitors;

 

•

the timing of New Amneal’s market entry;

 

•

the ability to market New Amneal’s products effectively at the retail level;

 

•

the perception of patients and the healthcare community, including third-party payers, regarding the safety, efficacy and benefits of New Amneal’s drug products compared to those of competing products; and

 

•

the acceptance of New Amneal’s products by government and private formularies.

Some of these factors will not be in New Amneal’s control, and New Amneal’s products may not achieve expected levels of market acceptance. Additionally, continuing and increasingly sophisticated studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by the industry, government agencies and others which can call into question the utilization, safety and efficacy of products previously or currently marketed by Impax or Amneal. In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or other risk management programs such as the need for a patient registry.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF AMNEAL

The selected historical consolidated financial data of Amneal for each of the years ended December 31, 2016, 2015 and 2014, and as of December 31, 2016 and 2015 have been derived from Amneal’s audited consolidated financial statements and related notes, which are included in the section entitled “Index to Amneal Pharmaceuticals LLC and Subsidiaries Consolidated Financial Statements” beginning on page [    ] of this combined proxy statement/prospectus. The selected historical consolidated financial data of Amneal for each of the nine-month periods ended September 30, 2017 and 2016, and as of September 30, 2017 are derived from Amneal’s unaudited consolidated financial statements and related notes, which are included in the section entitled “Index to Amneal Pharmaceuticals LLC and Subsidiaries Consolidated Financial Statements” beginning on page [    ] of this combined proxy statement/prospectus. The selected historical consolidated financial data as of September 30, 2016 has been derived from Amneal’s unaudited consolidated financial statements and related notes, which have not been incorporated by reference in this combined proxy statement/prospectus. The selected historical consolidated financial data for the years ended December 31, 2013 and 2012 and as of December 31, 2014, 2013 and 2012 have been derived from the audited consolidated financial statements and related notes of Amneal’s immediate parent, Amneal Pharmaceuticals Holding Company, LLC (“APHC” ), as adjusted to exclude the immaterial activities of APHC. These financial statements have not been incorporated by reference in this combined proxy statement/prospectus. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Amneal or New Amneal, and you should read the following information together with Amneal’s audited consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Amneal” included in this combined proxy statement/prospectus beginning on page [    ]. For more information, see the section entitled “Where You Can Find More Information” beginning on page [    ] of this combined proxy statement/prospectus.

 

		(Unaudited)
		Nine-Months Ended, September 30,								Years Ended December 31,
(In thousands)		2017				2016				2016				2015				2014				2013				2012
Statements of Income Data:
Net revenue		$	740,285			$	719,649			$	1,018,225			$	866,280			$	785,263			$	531,126			$	352,011
Research and development and intellectual property legal development expenses			134,836				143,487				193,865				153,713				118,539				73,606				54,459
Total operating expenses			208,678				226,330				312,610				265,525				229,847				132,287				94,924
Operating profit			166,084				192,409				284,881				236,158				218,575				100,815				46,311
Net income attributable to Amneal Pharmaceuticals LLC and Subsidiaries			106,079				153,480				207,378				169,451				176,928				91,776				33,466
		(Unaudited)
		As of September 30,								As of December 31,
(In thousands)		2017				2016				2016				2015				2014				2013				2012
Balance Sheet Data:
Cash and cash equivalents		$	19,348			$	36,767			$	27,367			$	61,087			$	117,522			$	81,885			$	38,663
Working capital			434,276				483,967				501,041				365,454				325,989				207,501				196,868
Total assets			1,239,611				1,157,325				1,218,817				1,014,093				829,983				592,289				405,478
Long-term debt, net			1,358,127				1,121,212				1,119,268				911,043				711,914				424,902				237,100
Long-term portion of financing obligations			40,071				40,373				40,298				40,578				17,310				16,237				16,737
Total liabilities			1,665,821				1,366,163				1,394,762				1,200,966				927,670				616,375				337,295
Total members’ (deficit) equity			(426,210	)			(208,837	)			(175,945	)			(186,873	)			(97,686	)			(24,086	)			68,183

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF IMPAX

The selected historical consolidated financial data below as of September 30, 2017 and for the nine months ended September 30, 2016 and 2017 has been derived from Impax’s unaudited consolidated financial statements as of and for such periods, as contained in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2017, which is incorporated by reference in this combined proxy statement/prospectus. The selected historical consolidated financial data as of September 30, 2016 has been derived from Impax’s unaudited consolidated financial statements, which have not been incorporated by reference in this combined proxy statement/prospectus. The selected historical consolidated financial data of Impax for each of the years ended December 31, 2016, 2015 and 2014, and as of December 31, 2016 and 2015 have been derived from Impax’s audited consolidated financial statements and related notes contained in its Annual Report on Form 10-K for the year ended December 31, 2016, which is incorporated by reference in this combined proxy statement/prospectus. The selected historical consolidated financial data for the years ended December 31, 2013 and 2012 and as of December 31, 2014, 2013 and 2012 have been derived from Impax’s audited consolidated financial statements, which have not been incorporated by reference in this combined proxy statement/prospectus. The information set forth below is a summary and not necessarily indicative of future results and should be read together with the other information contained in Impax’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. See the section entitled “Where You Can Find More Information” beginning on page [●].

 

(In thousands, except per share data)		Nine Months Ended September 30, (unaudited)								Years Ended December 31,
Statements of Operations Data:		2017				2016				2016				2015				2014				2013				2012
Total revenues		$	592,877			$	626,007			$	824,429			$	860,469			$	596,049			$	511,502			$	581,692
Research and development			65,157				59,937				80,466				70,622				78,642				68,854				81,320
Total operating expenses			227,373				240,424				343,080				282,836				223,837				205,687				199,562
(Loss) income from operations			(96,043	)			(230,276	)			(494,182	)			69,568				88,816				(6,387	)			82,992
Net (loss) income			(168,217	)			(192,446	)			(472,031	)			38,997				57,353				101,259				55,873
Net (loss) income per share—Basic		$	(2.34	)		$	(2.71	)		$	(6.63	)		$	0.56			$	0.84			$	1.51			$	0.85
Net (loss) income per share—Diluted		$	(2.34	)		$	(2.71	)		$	(6.63	)		$	0.54			$	0.81			$	1.47			$	0.82

 

(In thousands)		As of September 30, (unaudited)								As of December 31,
Balance Sheet Data:		2017				2016				2016				2015				2014				2013				2012
Cash, cash equivalents and short-term investments		$	157,658			$	232,123			$	180,133			$	340,351			$	414,856			$	413,133			$	298,918
Working capital			284,160				366,053				309,817				495,312				516,927				505,852				400,248
Total assets			1,649,154				2,119,656				1,823,018				1,922,487				1,079,197				996,923				863,970
Long-term debt			767,935				812,375				813,545				424,595				—				—				—
Total liabilities			1,167,223				1,215,796				1,199,044				860,078				191,320				186,720				172,867
(Accumulated deficit) retained earnings			(71,376	)			377,777				98,192				570,223				531,226				473,873				372,614
Total stockholders’ equity			481,931				903,860				623,974				1,062,409				887,877				810,203				691,103

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following (i) selected Unaudited Pro Forma Condensed Combined Statement of Operations Information of New Amneal for the nine months ended September 30, 2017 and for the year ended December 31, 2016, have been prepared to give effect to the Combination, the related financing and the PIPE Investment as if Closing had occurred on January 1, 2016 and (ii) selected Unaudited Pro Forma Condensed Combined Balance Sheet Information of New Amneal as of September 30, 2017 has been prepared to give effect to the Combination, the related financing and the PIPE Investment as if Closing had occurred on September 30, 2017.

The following selected Unaudited Pro Forma Condensed Combined Financial Information is for illustrative and informational purposes only and is not necessarily indicative of the results that might have occurred had the Combination, the related financing and the PIPE Investment taken place on January 1, 2016 for statements of operations purposes and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” beginning on page [●]. The following selected Unaudited Pro Forma Condensed Combined Financial Information should be read in conjunction with the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” and related notes beginning on page [●].

 

(In thousands, except per share data)		Nine months Ended September 30,				Year Ended December 31,
Statements of Operations Data:		2017				2016
Net revenue		$	1,333,162			$	1,842,654
Research and development			179,664				245,762
Total operating expenses			436,051				655,690
Operating income (loss)			63,055				(230,678	)
Net loss attributable to New Amneal			(46,531	)			(154,313	)
Net loss per share – Basic		$	(0.39	)		$	(1.28	)
Net loss per share – Diluted		$	(0.39	)		$	(1.37	)

(In thousands)		As of September 30,
Balance Sheet Data:		2017
Cash and cash equivalents		$	195,420
Working capital			804,764
Total assets			4,708,633
Long-term debt and capital lease obligations, net			2,614,754
Total liabilities			3,643,132
Accumulated deficit			(480,822	)
Total stockholders’ equity			1,065,501
Total New Amneal stockholders’ equity			685,704

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE FINANCIAL INFORMATION

The following table summarizes unaudited per share information for New Amneal, on a pro forma equivalent basis based on the exchange ratio of 1.00 Impax Share for 1.00 share of Class A Common Stock. It has been assumed for purposes of the pro forma combined financial information provided below that Closing had occurred on January 1, 2016 for income per share purposes and on September 30, 2017 for book value per share purposes. The following information should be read in conjunction with the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” and related notes beginning on page [●].

Impax Shares are listed on the NASDAQ under the trading symbol “IPXL.” Amneal was not a publicly company during the period.

 

		Year Ended December 31, 2016
		Historical								Pro Forma Combined
		Amneal				Impax
Basic loss per share			—			$	(6.63	)		$	(1.28	)
Diluted loss per share			—			$	(6.63	)		$	(1.37	)
Cash dividends per share			—			$	0.00			$	0.00
Book value per share at period end			—			$	8.47			$	—
Weighted average common shares (Basic)			—				71,147,397				120,376,060
Weighted average common shares (Diluted)			—				71,147,397				301,033,378

 

		Nine Months Ended September 30, 2017
		Historical								Pro Forma Combined
		Amneal				Impax
Basic loss per share			—			$	(2.34	)		$	(0.39	)
Diluted loss per share			—			$	(2.34	)		$	(0.39	)
Cash dividends per share			—			$	0.00			$	0.00
Book value per share at period end			—			$	6.50			$	5.70
Weighted average common shares (Basic)			—				71,775,537				120,376,060
Weighted average common shares (Diluted)			—				71,775,537				120,376,060

 

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THE SPECIAL MEETING

Overview

This combined proxy statement/prospectus is being provided to Impax Stockholders as part of a solicitation of proxies by the Impax Board for use at the Special Meeting of Impax Stockholders and at any adjournments or postponements of such meeting. This combined proxy statement/prospectus is being furnished to Impax Stockholders on or about [                    ], 2017. In addition, this combined proxy statement/prospectus constitutes a prospectus for New Amneal in connection with the issuance by New Amneal of Class A Common Stock to be delivered to Impax Stockholders in connection with the Combination.

Date, Time and Place of the Special Meeting

Impax will hold the Special Meeting on [                    ], 2018, at [        ] [a.m./p.m.] local time, at [            ].

Proposals

At the Special Meeting, Impax Stockholders will vote upon:

 

•

the Combination Proposal;

 

•

the Compensation Proposal;

 

•

the 2018 Plan Proposal; and

 

•

the Adjournment Proposal.

 

Record Date; Outstanding Shares; Shares Entitled to Vote

Only holders of Impax Shares as of the close of business on the Record Date will be entitled to notice of, and to vote at, the Special Meeting or any adjournments thereof. On the Record Date, there were [            ] Impax Shares outstanding, held by [            ] holders of record. Each outstanding Impax Share is entitled to one vote on each proposal and any other matter properly coming before the Special Meeting.

Attendance

Only holders of Impax Shares on the Record Date or persons holding a written proxy for any holder of Impax Shares or account of such Impax Stockholder as of the Record Date may attend the Special Meeting. Due to seating limitations, admission to the Special Meeting will be on a first-come, first-served basis. Registration and seating will begin at [            ] [a.m./p.m.], local time. Each Impax Stockholder will be asked to present valid photo identification issued by a government agency, such as a driver’s license or passport. Proof of stock ownership is necessary to attend the Special Meeting. If you hold your Impax Shares in your name as a stockholder of record and you wish to attend the Special Meeting, please bring evidence of your stock ownership, such as your most recent account statement. If your Impax Shares are held in “street name” in a stock brokerage account or by a bank, broker or other holder of record and you wish to attend the Special Meeting, you must obtain a legal proxy from the bank, broker or other holder of record and you will need to bring a copy of a bank or brokerage statement to the Special Meeting reflecting your stock ownership as of the Record Date.

 

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Quorum

The Impax Stockholders present in person or by proxy holding a majority of the Impax Shares entitled to vote will constitute a quorum for the transaction of business at the Special Meeting. Impax’s inspector of election intends to treat as “present” for these purposes Impax Stockholders who have submitted properly executed or transmitted proxies that are marked “abstain.”

Vote Required and Impax Board Recommendation

Combination Proposal

Impax Stockholders are considering and voting on a proposal to adopt the BCA and thereby approve the Combination. You should carefully read this combined proxy statement/prospectus in its entirety for more detailed information concerning the Combination. In particular, your attention is directed to the full text of the BCA, which is attached as Annex A to this combined proxy statement/prospectus.

The approval of the Combination Proposal requires approval by a majority of the Impax Shares outstanding as of the close of business on the Record Date and entitled to vote on the Combination Proposal. Because the vote required to approve the Combination Proposal is based upon the total number of outstanding Impax Shares entitled to vote, if you vote to abstain, or if you are an Impax Stockholder of record and you fail to submit a proxy or vote in person at the Special Meeting, or if your Impax Shares are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your Impax Shares, this will have the same effect as a vote “AGAINST” the adoption of the Combination Proposal.

IMPAX’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE COMBINATION PROPOSAL.

Compensation Proposal

Impax Stockholders are considering and voting on a proposal to approve, on a non-binding, advisory basis, specified compensatory arrangements between Impax and its named executive officers relating to the Combination.

Approval of the Compensation Proposal requires approval by a majority of the Impax Shares outstanding as of the close of business on the Record Date, present in person or represented by proxy at the Special Meeting and entitled to vote on the Compensation Proposal, although such vote will not be binding on Impax. Because the vote required to approve the Compensation Proposal is based upon the total number of Impax Shares represented in person or by proxy, abstentions will have the same effect as a vote “AGAINST” the Compensation Proposal. If you fail to submit a proxy or to attend the Special Meeting or if your Impax Shares are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your Impax Shares, your Impax Shares will not be voted, but this will not have an effect on the vote to approve the Compensation Proposal.

IMPAX’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE COMPENSATION PROPOSAL.

2018 Plan Proposal

In connection with the Combination, we expect the Impax Board to recommend that stockholders approve the 2018 Plan. If approved by Impax stockholders, the 2018 Plan will only become effective on the consummation of the Combination. The purposes of the 2018 Plan are (1) to promote the success and enhance the value of New Amneal by linking the individual interests of the members of the New Amneal Board and employees and consultants of New Amneal and its subsidiaries to those of New Amneal stockholders and by

 

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providing such individuals with an incentive for outstanding performance to generate superior returns to New Amneal stockholders and (2) to provide flexibility to New Amneal in its ability to motivate, attract, and retain the services of members of the New Amneal Board and employees and consultants of New Amneal and its subsidiaries upon whose judgment, talent, and special effort New Amneal’s success is largely dependent.

If stockholders approve the 2018 Plan, no further awards will be issued under the Impax Laboratories, Inc. Fourth Amended and Restated 2002 Equity Incentive Plan (the “Existing Plan”). As of the Record Date, there were (i) [            ] shares that remained available for future awards under the Existing Plan, (ii) [            ] shares underlying outstanding option awards under the Existing Plan, (iii) [            ] outstanding restricted stock awards under the Existing Plan and (iv) [            ] shares of Impax common stock outstanding.

We are still in the process of developing, approving and implementing the 2018 Plan and, accordingly, this summary is subject to change. For a more detailed description of the 2018 Plan, see the section entitled “Atlas Holdings, Inc. 2018 Incentive Award Plan” beginning on page [●].

WE EXPECT THE IMPAX BOARD TO RECOMMEND A VOTE “FOR” THE 2018 PLAN PROPOSAL.

Adjournment Proposal

If the chairman of the Impax Board or the president of Impax does not adjourn the Special Meeting, Impax Stockholders may be asked to vote on a proposal to adjourn the Special Meeting, or any postponement thereof, to another time or place if necessary or appropriate (i) due to the absence of a quorum at the Special Meeting, (ii) to prevent a violation of applicable law, (iii) to provide to Impax Stockholders any supplement or amendment to this combined proxy statement/prospectus and/or (iv) to solicit additional proxies if Impax reasonably determines that it is advisable or necessary to do so in order to obtain Impax Stockholder approval of the Combination Proposal.

Approval of the Adjournment Proposal requires approval by a majority of the Impax Shares outstanding as of the close of business on the Record Date, present in person or represented by proxy at the Special Meeting and entitled to vote on the Adjournment Proposal, whether or not a quorum is present. Because the vote required to approve the Adjournment Proposal is based upon the total number of Impax Shares represented in person or by proxy, abstentions will have the same effect as a vote “AGAINST” the Adjournment Proposal. If you fail to submit a proxy and to attend the Special Meeting or if your Impax Shares are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee to vote your Impax Shares, your Impax Shares will not be voted, but this will not have an effect on the vote to approve the Adjournment Proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ADJOURNMENT PROPOSAL.

The Combination Proposal requires the affirmative vote of a majority of the Impax Shares outstanding as of the close of business on Record Date and entitled to vote on the Combination Proposal. The Compensation Proposal, the 2018 Plan Proposal and the Adjournment Proposal each require the affirmative vote of holders of a majority of the Impax Shares present in person or represented by proxy, at the Special Meeting and is entitled to vote on such proposals. As of the Record Date, Impax’s directors, executive officers and their affiliates are entitled to vote [            ] Impax Shares, or approximately [    ]% of the total outstanding shares of Impax Shares.

Voting Your Impax Shares

Impax Stockholders may vote in person at the Special Meeting or by proxy. Impax recommends that you submit your proxy even if you plan to attend the Special Meeting. If you vote by proxy, you may change your vote by submitting a later dated proxy before the deadline or in-person at the Special Meeting.

 

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If your Impax Shares are owned directly in your name with our transfer agent, AST, you are considered, with respect to those Impax Shares, the “stockholder of record.” If your Impax Shares are held in a stock brokerage account or by a bank or other nominee or intermediary, you are considered the beneficial owner of Impax Shares held in “street name” and are considered a “non-record (beneficial) stockholder.”

If you are an Impax Stockholder of record you may use the enclosed proxy card to tell the persons named as proxies how to vote your Impax Shares. If you properly complete, sign and date your proxy card, your Impax Shares will be voted in accordance with your instructions. The named proxies will vote all shares at the meeting for which proxies have been properly submitted and not revoked. If you sign and return your proxy card but do not mark your card to tell the proxies how to vote, your shares will be voted “FOR” the Combination Proposal, “FOR” the Compensation Proposal, “FOR” the 2018 Plan Proposal and “FOR” the Adjournment Proposal.

Your Impax Shares will be counted for purposes of determining a quorum if you vote:

 

•

via the Internet;

 

•

by telephone;

 

•

by submitting a properly executed proxy card or voting instruction form by mail; or

 

•

in person at the Special Meeting.

Abstentions will be counted for determining whether a quorum is present for the Special Meeting.

Voting instructions are printed on the proxy card or voting information form you received. Either method of submitting a proxy will enable your shares to be represented and voted at the Special Meeting.

Voting Shares Held in Street Name

If your Impax Shares are held in an account through a broker, bank or other nominee, you must instruct the broker, bank or other nominee how to vote your shares by following the instructions that the broker, bank or other nominee provide to you with this combined proxy statement/prospectus. Your broker, bank or other nominee may have an earlier deadline by which you must provide instructions to it as to how to vote your Impax Shares, so you should read carefully the materials provided to you by your broker, bank or other nominee or intermediary.

If you do not provide voting instructions to your bank, broker or other nominee, your Impax Shares will not be voted on any proposal on which your bank, broker or other nominee does not have discretionary authority to vote. In these cases, the bank, broker or other nominee or intermediary will not be able to vote your shares on those matters for which specific authorization is required. Brokers do not generally have discretionary authority to vote on any of the proposals to be considered at the Special Meeting.

Broker non-votes are shares held by a broker, bank or other nominee that are present in person or represented by proxy at the Special Meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not generally have voting power on such proposal. Because brokers, banks and other nominees do not generally have discretionary voting with respect to any of the proposals to be considered at the Special Meeting, if a beneficial owner of Impax Shares held in “street name” does not give voting instructions to the broker, bank or other nominee for any proposal, then those Impax Shares will not be present in person or represented by proxy at the Special Meeting.

Revoking Your Proxy

If you are an Impax Stockholder of record, you may revoke your proxy at any time before it is voted at the Special Meeting by:

 

•

timely delivering a written revocation letter to the Corporate Secretary of Impax;

 

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•

timely submitting your voting instructions again by telephone or over the Internet;

 

•

signing and returning by mail a proxy card with a later date so that it is received prior to the Special Meeting; or

 

•

attending the Special Meeting and voting by ballot in person. Attendance at the Special Meeting will not, in and of itself, revoke a proxy.

If you are a non-record (beneficial) Impax Stockholder, you should follow the instructions of your bank, broker or other nominee regarding the revocation of proxies.

Share Ownership and Voting by Impax’s Officers and Directors

As of the Record Date, Impax’s directors and executive officers and their affiliates had the right to vote approximately [            ] Impax Shares, representing approximately [    ]% of the Impax Shares then outstanding and entitled to vote at the Special Meeting. It is expected that Impax’s directors and executive officers who are Impax Stockholders will vote “FOR” the Combination Proposal, “FOR” the Compensation Proposal, “FOR” the 2018 Plan Proposal and “FOR” the Adjournment Proposal, although none of them has entered into any agreement requiring them to do so.

Costs of Solicitation

Impax will bear the cost of soliciting proxies from Impax Stockholders.

Impax will solicit proxies by mail. In addition, the directors, officers and employees of Impax may solicit proxies from Impax Stockholders by telephone, electronic communication, or in person, but will not receive any additional compensation for their services. Impax will make arrangements with brokerage houses and other custodians, nominees, and fiduciaries for forwarding proxy solicitation material to the beneficial owners of Impax Shares held of record by those persons and will reimburse them for their reasonable out-of-pocket expenses incurred in forwarding such proxy solicitation materials.

Impax has engaged a professional proxy solicitation firm, MacKenzie Partners, Inc., to assist in soliciting proxies. MacKenzie will receive customary compensation for its services, including a fee of $25,000.

Impax Stockholders Should Not Send in Their Stock Certificates with Their Proxy Cards.

As described in the section entitled “The Business Combination Agreement—Impax Stockholder Meeting” beginning on page [●], Impax Stockholders of record will be sent letter of transmittal materials for exchanging Impax Shares shortly after the Closing.

Other Business

Impax is not aware of any other business to be acted upon at the Special Meeting. If, however, other matters are properly brought before the Special Meeting, the proxies will have discretion to vote or act on those matters according to their best judgment and they intend to vote the Impax Shares for which they are the valid proxy as the Impax Board may recommend.

Assistance

If you need assistance in completing your proxy card or have questions regarding the Special Meeting, please contact MacKenzie, the proxy solicitation agent for Impax, by mail at 105 Madison Avenue, New York, NY 10016, or by phone toll-free at (800) 322-2885 or collect at (212) 929-5500.

 

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INFORMATION ABOUT THE PARTIES TO THE COMBINATION

Impax Laboratories, Inc.

Impax is a specialty pharmaceutical company applying formulation and development expertise, as well as our drug delivery technology, to the development, manufacture and marketing of bioequivalent pharmaceutical products, commonly referred to as “generics,” in addition to the development, manufacture and marketing of branded products. Impax operates two segments, referred to as “Impax Generics” and “Impax Specialty Pharma.” The Impax Generics division concentrates its efforts on generic products, which are the pharmaceutical and therapeutic equivalents of brand-name drug products and are usually marketed under their established non-proprietary drug names rather than by a brand name. The Impax Specialty Pharma division utilizes its specialty sales force to market proprietary branded pharmaceutical products for the treatment of CNS disorders and other select specialty segments. For more information regarding Impax, see the section entitled “Where You Can Find More Information” beginning on page [●].

Amneal Pharmaceuticals LLC

Amneal is a privately-held company headquartered in Bridgewater, New Jersey. Founded in 2002 by Chintu and Chirag Patel, Amneal is one of the largest and fastest growing generic pharmaceutical manufacturers in the United States and has approximately 5,000 employees in its operations in North America, Asia, and Europe, working together to bring high-quality, affordable medicines to patients worldwide. Amneal has significantly expanded its portfolio of generic products to include complex dosage forms in a broad range of therapeutic areas. For more information regarding Amneal, see the section entitled “Business—Amneal Business” beginning on page [●].

Atlas Holdings, Inc.

Holdco is a Delaware corporation and a direct subsidiary of Impax that was formed by Impax for the purpose of engaging in the Impax Merger. Upon the Closing of the Combination, Holdco, which we refer to as New Amneal in this combined proxy statement/prospectus, will be renamed Amneal Pharmaceuticals, Inc. and will become a holding company whose principal asset will be the economic interests in the combined business of Impax and Amneal. Immediately following the completion of the Combination and the PIPE Investment, New Amneal’s equity capital will consist solely of the Class A Common Stock, Class B Common Stock and Class B-1 Common Stock issued pursuant to the Combination and in connection with the PIPE Investment. For a description of the capital stock of New Amneal, see the section entitled “New Amneal Capital Stock” beginning on page [●].

K2 Merger Sub Corporation

Merger Sub is an indirect, wholly owned subsidiary of Impax. Upon the completion of the Impax Merger, Merger Sub will cease to exist. Merger Sub was incorporated in Delaware on October 4, 2017 for the sole purpose of effecting the Impax Merger as part of the Combination.

 

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THE COMBINATION

Structure of the Combination

Pursuant to the BCA, among other things: (i) the Impax Merger will be effected; (ii) each Impax Share outstanding immediately prior to the Impax Merger Effective Time, other than Cancelled Shares, will be converted into the right to receive one share of Class A Common Stock; (iii) Impax will convert to a Delaware limited liability company to be named Impax Laboratories, LLC; (iv) Holdco will contribute all of the equity interests of Impax to Amneal in exchange for certain equity interests of Amneal; (v) New Amneal will issue shares of Class B Common Stock to the Existing Amneal Members; and (vi) New Amneal will become the managing member of Amneal. For the avoidance of doubt, as used in this section, New Amneal refers to Holdco after it has been re-registered as a public company and renamed Amneal Pharmaceuticals, Inc. pursuant to the BCA at or prior to the Closing.

Amneal Holdings, LLC is currently the sole beneficial owner of all outstanding Amneal Common Units. Immediately following the consummation of the Combination and the PIPE Investment, Amneal Holdings, LLC will be the sole beneficial owner of all outstanding Amneal Common Units (other than Amneal Common Units held by New Amneal). Immediately following the Closing: (i) (A) Existing Amneal Members will hold 100% of the Class B Common Stock, which will represent approximately 75% of the voting power of the outstanding New Amneal Shares, and (B) Impax Stockholders immediately prior to the Closing will hold 100% of the Class A Common Stock, which will represent approximately 25% of the voting power of the New Amneal Shares; (ii) (A) the Existing Amneal Members will hold approximately 75% of the Amneal Common Units and (B) Impax Stockholders will indirectly, through their ownership in New Amneal, hold approximately 25% of the Amneal Common Units; and (iii) the Amneal Common Units will be exchangeable on a one-to-one basis for Class A Common Stock or Class B-1 Common Stock. The rights (including voting rights) of Class A Common Stock and Class B Common Stock are identical, except that Class B Common Stock has no economic rights and the rights of Class A Common Stock and Class B-1 Common Stock are identical, except that Class B-1 Common Stock has no voting rights (other than to elect the Class B-1 Director (as defined on page [●])).

Following the Closing and the closing of the PIPE Investment, it is expected that Existing Amneal Members will hold approximately 60% of the voting power of the outstanding New Amneal Shares, and the PIPE Investors will hold approximately 15% of the voting power of the outstanding New Amneal Shares.

 

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Simplified Post-Combination Combined Company Structure Immediately Following Closing

 

 

Consideration

Subject to the terms and conditions of the BCA, at Closing, each Impax Share issued and outstanding immediately prior to Closing (other than Cancelled Shares) will be automatically converted into the right to receive one share of Class A Common Stock (the “Merger Consideration”).

PIPE Investment

In connection with the Combination and the PIPE Investment, members of the Amneal Group have entered into a definitive purchase agreement (the “PIPE Purchase Agreement”) with select institutional investors, including TPG and funds affiliated with Fidelity (the “PIPE Investors”). Pursuant to the PIPE Purchase Agreement, upon the Closing of the Combination, members of the Amneal Group will exercise their right to cause Amneal to redeem certain of the Amneal Common Units (the “Redeemed Units”) held by such members pursuant to the LLC Agreement. In connection with such redemption, such members of the Amneal Group will receive shares of Class A Common Stock or shares of Class B-1 Common Stock in exchange for such Redeemed Units, in each case pursuant to the LLC Agreement (such redemption and issuance of Class A Common Stock and Class B-1 Common Stock to the members of the Amneal Group, the “Redemption”). Following the Redemption, the members of the Amneal Group will sell such shares of Class A Common Stock and Class B-1 Common Stock to the PIPE Investors at a per share purchase price of $18.25 for gross proceeds of approximately $855,000,000. Following the PIPE Investment, the PIPE Investors will own collectively approximately 15% of the New Amneal Shares on a fully diluted and as converted basis. The PIPE Investors other than TPG will receive shares of Class A Common Stock only, with approximately 30.4 million shares of Class A Common Stock issued to such investors in connection with the PIPE Investment. TPG will receive up to approximately 16.4 million shares of Class A Common Stock or Class B-1 Common Stock in connection with the PIPE

 

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Investment, with the exact split between Class A Common Stock and Class B-1 Common Stock to be determined prior to the Closing upon written notice by TPG to the Amneal Group in accordance with the PIPE Purchase Agreement. Following the PIPE Investment, TPG will own all outstanding shares of Class B-1 Common Stock, to the extent they elect to receive shares of Class B-1 Common Stock. The Class B-1 Common Stock held by TPG following the PIPE Investment will not be entitled to any voting rights, will have economic rights that are identical to those of the Class A Common Stock, and will be convertible into shares of Class A Common Stock. The Class A Common Stock and Class B-1 Common Stock held by the PIPE Investors following the PIPE Investment will represent approximately 15% of the voting shares and 37.5% of the economic interest of New Amneal (assuming the conversion of all such shares of Class B-1 Common Stock into shares of Class A Common Stock).

Following the Closing and the PIPE Investment, it is expected that Existing Amneal Members will hold approximately 60% of the voting power and no economic interest of the outstanding New Amneal Shares (assuming the conversion of all Amneal Common Units into shares of Class A Common Stock), the PIPE Investors will hold approximately 15% of the voting power and 37.5% of the economic interest of the outstanding New Amneal Shares (assuming the conversion of all such shares of Class B-1 Common Stock into shares of Class A Common Stock), and former Impax Stockholders will hold approximately 25% of the voting power and 62.5% of the economic interest of the outstanding New Amneal Shares.

In connection with the Combination and in furtherance of the PIPE Investment, TPG, the Amneal Group Representative and Holdco have entered into a side letter (the “PIPE Side Letter”) providing for certain rights and obligations of each in connection with the PIPE Investment. Pursuant to the PIPE Side Letter, following the consummation of the PIPE Investment, TPG will have customary registration rights with respect to the New Amneal Shares owned by it. The PIPE Side Letter also provides TPG the right to designate a board observer with respect to the New Amneal Board, as well as the right, subject to certain ownership thresholds discussed on page [●], to designate a director for appointment to the New Amneal Board. The PIPE Side Letter is attached to this combined proxy statement/prospectus as Annex J.

 

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Simplified Post-PIPE Investment Combined Company Structure

 

 

 

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Background of the Combination

The Impax Board and Impax management regularly review the potential acquisition of technologies, products, product rights and complementary businesses and other strategic transactions available to Impax in an effort to enhance stockholder value. As part of that review, the Impax Board from time to time has considered potential strategic transactions and has evaluated Impax’s prospects as a standalone company in light of, among other factors, industry conditions, the regulatory environment and Impax’s operating and financial performance.

In addition to being highly competitive, the pharmaceutical industry, including wholesalers of pharmaceutical products, has in recent years seen increased consolidation, resulting in larger competitors and placing further pressure on prices, development activities and customer retention. Given these dynamics in the pharmaceutical industry and the fact that several of Impax’s competitors have longer operating histories and substantially greater resources than Impax, combined with the fluctuation in recent years in the price of Impax Shares and Impax’s financial and operating performance, the Impax Board has focused on exploring strategic opportunities that could result in growth and transformation for Impax and deliver value to Impax Stockholders.

On March 1, 2017, Impax released its financial results for the fourth quarter of 2016 and full year 2016, reflecting a decrease in total revenues of approximately 29.7% for the fourth quarter of 2016 and 4.2% for full year 2016, and higher net losses and lower adjusted diluted earnings per share for the fourth quarter of 2016 and full year 2016, in each case as compared to the corresponding prior year period. Impax’s earnings announcement disclosed that the decrease in revenues and earnings per share and increase in losses were due primarily to increased competition across the generic pharmaceuticals industry resulting in lower generic product pricing and lower sales of certain products, including products acquired in March 2015 in Impax’s acquisition of Tower Holdings, Inc. and subsidiaries (the “Tower Acquisition”), in addition to the recording of impairment charges related to certain products acquired in the Tower Acquisition and from Teva Pharmaceuticals Industries Ltd. and affiliates of Allergan plc in August 2016 (the “Teva Acquisition”). Impax’s earnings announcement disclosed that in order to offset the impact of these items, Impax continued to pursue growing its specialty pharmaceuticals business in addition to identifying incremental operational improvements that would assist Impax with cost savings and operating efficiencies. The closing price of Impax Shares on March 1 was $9.30 per share, or $4.95 or 34.7% lower than the closing price on the previous trading day of $14.25 per share.

On March 3, 2017, the Impax Board held a meeting in Philadelphia attended by members of Impax management and representatives of Morgan Stanley, financial advisers to Impax, and Sullivan & Cromwell LLP, outside counsel to Impax (“Sullivan & Cromwell”), to discuss certain stockholder relations matters, Impax’s recent historical and prospective financial and operational performance, Impax’s prospects as a standalone company, as well as the exploration of various types of strategic alternatives and business development opportunities, including sales of assets, purchases of assets or businesses and/or a business combination with another company.

On March 7, 2017, Reuters published an article reporting that Morgan Stanley was helping Impax to conduct a review of strategic options available to Impax.

On March 27, 2017, the Impax Board appointed Mr. Paul M. Bisaro as its new Chief Executive Officer based on his broad experience in the pharmaceutical industry and his demonstrated ability to grow and transform an organization.

On April 5, 2017, a representative of J.P. Morgan & Co. (“J.P. Morgan”), Amneal’s financial advisor, called Mr. Bisaro regarding a potential business combination involving Impax and Amneal (the “Potential Combination”). Prior to April 2017, Mr. Bisaro and Mr. Chirag Patel had been professionally acquainted with each other for several years as a result of meeting at events and gatherings involving generic pharmaceutical industry executives. There were no commercial or contractual relationships between Impax and Amneal, or between Messrs. Bisaro and Patel, prior to discussions concerning the Potential Combination.

 

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On April 6, 2017, Mr. Bisaro discussed with certain members of the Impax Board several business development opportunities for Impax that merited further exploration, including the Potential Combination.

On April 12, 2017, Impax and Amneal entered into a confidentiality agreement, which included, among other things, reciprocal confidentiality and non-use obligations to apply in respect of any confidential information that would be disclosed by and between Impax and Amneal in connection to any upcoming discussions in relation to, and the evaluation of, any Potential Combination.

On April 17, 2017, Mr. Bisaro, together with Impax’s Chief Financial Officer, Mr. Bryan Reasons, and another member of Impax management, and a representative of Morgan Stanley, met with Mr. Chirag Patel, Mr. Chintu Patel and representatives of Tarsadia Investments (“Tarsadia”). Tarsadia represents a group of investors with a significant ownership interest in Amneal, along with a representative of Amneal’s financial advisor J.P. Morgan, in Bridgewater, New Jersey to have preliminary discussions regarding the Potential Combination.

On April 29, 2017, Mr. Bisaro met with Mr. Chirag Patel and continued discussions regarding the key terms of the Potential Combination, including, among other things, the relative ownership percentages Impax Stockholders and the Existing Amneal Members would have in the combined company (the “Equity Split”) following the Potential Combination the composition of the combined company board and various other governance issues. While the discussions were preliminary, informal and exploratory in nature, Mr. Bisaro expressed his preliminary view that the Equity Split should be approximately 70% ownership for the Existing Amneal Members and approximately 30% ownership for Impax Stockholders. Mr. Chirag Patel expressed his preliminary view that the Equity Split should be approximately 80% ownership for the Existing Amneal Members and approximately 20% ownership for Impax Stockholders. In discussing their respective views, Messrs. Bisaro and Patel discussed Impax’s historical and current market valuation, a preliminary valuation of Amneal prepared by Impax management based on publicly available information and the level of Amneal debt that might remain on the balance sheet of the combined company at the closing of the Potential Combination as two factors that affected their preliminary views on the Equity Split. Neither side presented any valuation or other analyses. Messrs. Bisaro and Patel discussed the desirability of structuring the Potential Combination as an all-stock transaction in order to permit both the Impax Stockholders and Amneal equity holders to participate in the performance of the combined company.

On May 10, 2017, Impax released its financial results for the first quarter of 2017, reflecting a decrease in total revenues of approximately 18.2% and higher net loss and lower net income per diluted share, in each case as compared to the first quarter of 2016. Impax’s earnings announcement disclosed that the decrease in revenues and net income was due primarily to the increased competition across the generic pharmaceuticals industry and that the increase in losses was due primarily to the recording of $45.4 million in intangible asset impairment charges and a $30.9 million income tax provision on net loss in the first quarter of 2017. Impax’s earnings announcement also disclosed that Impax had decided to undertake certain internal consolidation and improvement actions (the “Consolidation and Improvement Plan”), which included consolidating its generic R&D, manufacturing and packaging operations in its Hayward, California facilities, closing its Middlesex, New Jersey manufacturing and generic R&D facility; exploring strategic alternatives for Impax’s Taiwan manufacturing facility and divesting products that were not strategically advantageous for Impax.

From May 16 to 17, 2017, the Impax Board held an in-person meeting during which the Impax Board and management discussed the Consolidation and Improvement Plan. In an executive session, Mr. Bisaro discussed the Potential Combination and briefed the Impax Board concerning the discussions with Amneal, and discussed certain other strategic alternatives and business development opportunities potentially available to Impax, which had not theretofore resulted in any formal discussions with any potential counterparties. Such alternatives and opportunities included the possible sale of Impax, the possible entry into a strategic merger transaction, various product line acquisitions or divestiture transactions and/or commercial collaborations with other companies. The

 

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Impax Board authorized Mr. Bisaro to continue discussions with Amneal regarding the Potential Combination, and to engage in discussions with any potential counterparties to the strategic alternatives and business development opportunities that Mr. Bisaro discussed with the Impax Board at such meeting. As a result of such meeting, Impax management conducted further discussions with Amneal regarding the Potential Combination and undertook the discussions with Party B, Party C and Party D described below.

On May 17, 2017, Impax, in continuation of its ongoing discussions with Amneal, provided an initial term sheet to Amneal, which set forth, among other things, an Equity Split of approximately 67% ownership for the Existing Amneal Members and approximately 33% ownership for Impax Stockholders, which Impax management believed represented an aggressive proposal for maximizing the Impax Stockholders’ ownership stake in the combined company. The initial term sheet also included Impax’s initial proposals with respect to certain key terms of the Stockholders Agreement designed to protect the rights of Impax Stockholders following the consummation of the Potential Combination, including with respect to: (i) the governance of the combined company, which Impax proposed would include a board of directors comprised of nine directors designated by Impax (including Mr. Bisaro) and three directors designated by the Existing Amneal Members (including Mr. Chirag Patel and Mr. Chintu Patel as vice chairmen of the combined company board), (ii) the standstill provisions applicable to the Existing Amneal Members, restricting their ability to acquire beneficial ownership of any voting securities or assets of the combined company for a period of time following the Closing, (iii) the lock-up and transfer restrictions applicable to the Existing Amneal Members’ equity in the combined company, (iv) registration rights with respect to Existing Amneal Members’ equity in the combined company and (v) the voting obligations applicable to the Existing Amneal Members following the Closing.

On May 26, 2017, Impax engaged Morgan Stanley as its financial advisor in connection with the Potential Combination. Impax later executed an updated indemnity letter for the benefit of Morgan Stanley and an engagement letter with Morgan Stanley. Impax selected Morgan Stanley as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and experience in recent transactions in Impax’s industry and its knowledge of Impax’s business and affairs.

On June 1, 2017, Mr. Bisaro and Mr. Chirag Patel had another informal discussion regarding the terms of the Potential Combination.

On June 8, 2017, Mr. Bisaro and other members of Impax management, along with representatives of Morgan Stanley, met with Mr. Chirag Patel, Mr. Chintu Patel and other members of Amneal management and representatives of Tarsadia, along with representatives of J.P. Morgan, in New York City to continue discussions regarding the Equity Split and the governance issues covered in Impax’s initial term sheet.

Also on June 8, 2017, Impax entered into a confidentiality agreement with a public pharmaceutical company, which we refer to as Party B, in connection with interest expressed by Party B in engaging in high-level discussions on potential strategic transactions involving the two companies, ranging from a whole-company acquisition of Impax to commercial collaborations in various therapeutic areas. Neither Impax’s management nor Party B’s management expressed interest in pursuing further discussions beyond these initial high-level discussions at such time due to changes in management taking place at Party B and Party B’s view that, given such changes, it would not be an appropriate time to be pursuing such potential strategic transactions. As a result, Impax’s discussions with Party B did not proceed further. Impax also entered into a confidentiality agreement with another public pharmaceutical company, which we refer to as Party C, on June 19, 2017 following interest expressed by Party C to engage in high-level discussions to explore an acquisition by Impax of Party C’s generics business and/or Party C’s acquisition of certain Impax products. Impax and Party C did not continue discussions because Impax and Party C disagreed by a wide margin on valuation with respect to the transactions, and because Impax management determined that the industrial and strategic logic underlying Impax’s potential acquisition of certain Party C products would not be sufficiently compelling. Also in June 2017, Mr. Bisaro met with the chief executive of a third public pharmaceutical company, which we refer to as Party D, following an expression of interest by Party D’s chief executive to have preliminary and informal exploratory discussions

 

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regarding potential strategic transactions involving Impax and Party D. Neither Impax nor Party D pursued any further discussions regarding potential strategic transactions beyond this discussion, as Party D’s chief executive expressed that Party D was not prepared to proceed further with any such potential strategic transactions at such time.

On June 22, 2017, Impax received a response from Amneal regarding the proposal set forth by Impax in the initial term sheet, which set forth, among other things, (i) Amneal’s request for an up-C tax structure for the combined company, (ii) Amneal’s request for a Tax Receivable Agreement which would provide the Existing Amneal Members with 90% of the cumulative net realized federal and state income tax savings of New Amneal attributable to the Existing Amneal Members as a result of the up-C structure (the “Tax Benefits”), (iii) Amneal’s request for Amneal control of the New Amneal Board, which would be comprised of seven directors nominated by the Amneal Holdings LLC, two directors nominated by the Impax Stockholders and one independent director, (iv) Amneal’s request for Mr. Bisaro to serve as chief executive officer of New Amneal and Mr. Chirag Patel to serve as chairman of the New Amneal Board, (v) Amneal’s request for a six-month lock-up period with a carve-out for an undetermined percentage of equity interests in the combined company held by the Existing Amneal Members that would not be subject to such lock-up period and (vi) Amneal’s request for the customary standstill on the Existing Amneal Members’ ability to acquire beneficial ownership of any voting securities or assets of the combined company to be in effect until the Existing Amneal Members cease to own an undetermined percentage of the combined company. Over the course of his subsequent discussions with Amneal, Mr. Bisaro regularly updated members of the Impax Board on the status and substance of discussions with Amneal regarding the Potential Combination.

On August 1, 2017, Amneal granted Impax access to its virtual data room for purposes of commencing Impax’s due diligence of Amneal, and Impax granted Amneal access to its virtual data room for purposes of commencing Amneal’s due diligence of Impax.

On August 4, 2017, Mr. Bisaro and other members of Impax management, along with representatives of Morgan Stanley, met with Mr. Chirag Patel, Mr. Chintu Patel and other members of Amneal management and Tarsadia, along with representatives of J.P. Morgan, in Morristown, New Jersey, to conduct a high-level diligence review of Impax’s and Amneal’s respective businesses.

On August 9, 2017, Impax released its financial results for the second quarter of 2017, reflecting an increase in total revenues of approximately 17.1%, but higher net loss and lower net income per share, in each case as compared to the second quarter of 2016. Impax’s earnings announcement disclosed that the increase in revenues was primarily due to an increase in generic product sales, including certain of the products acquired in the Teva Acquisition, and that the increase in losses and lower net income per share were primarily due to restructuring and severance charges related to Impax’s continuing execution of the Consolidation and Improvement Plan, charges related to certain potential legal settlements and higher acquisition-related amortization expenses compared to the prior year period.

On August 18, 2017, Mr. Bisaro and Mr. Chirag Patel met to continue discussions regarding the Potential Combination, including with respect to the terms of the Equity Split, the sharing of the Tax Benefits, the New Amneal Board composition and the standstill and lock-up restrictions on the Existing Amneal Members. Mr. Bisaro’s negotiating position was that Impax and/or the Impax Stockholders should receive a larger portion of the Equity Split, and a larger share of the Tax Benefits and greater representation on the New Amneal Board. Mr. Patel took the opposite position for the benefit of the Amneal equity holders, with neither negotiator presenting specific valuations or other analyses or considerations.

On August 24 and 25, 2017, the Impax Board held an in-person meeting that was also attended by representatives of Morgan Stanley, during which Mr. Bisaro provided the Impax Board with an update on the negotiations held with Amneal regarding the Potential Combination. The Impax Board discussed the fact that the Potential Combination was an “all stock” transaction in which Impax Stockholders would receive equity

 

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securities in the combined company, allowing them to participate in the performance of the combined company. The Impax Board discussed the desirability of receiving for Impax Stockholders a larger portion of the Equity Split, a larger share of Tax Benefits and greater representation on the New Amneal Board and authorized Mr. Bisaro at such meeting to continue negotiations with Amneal regarding the Potential Combination.

On August 31, 2017, Mr. Bisaro and Mr. Chirag Patel met to continue discussions regarding the Potential Combination, including with respect to the Equity Split, the sharing of the Tax Benefits, board composition and standstill and lock-up restrictions. As before, Mr. Bisaro’s negotiating position was that Impax and/or the Impax Stockholders should receive a larger portion of the Equity Split, a larger share of the Tax Benefits and greater representation on the New Amneal Board, and Mr. Patel took the opposite position for the benefit of the Amneal equity holders, with neither negotiator presenting specific valuations or other analyses or considerations.

Also on August 31, 2017, Shanghai Fosun Pharmaceutical (Group) Co., Ltd. filed a Schedule 13G with the SEC in which it disclosed that it beneficially owned 5.19% of the Impax Shares. The closing price of Impax Shares on that day was $21.65 per share, equal to $3.70 (or 20.6%) greater than the closing price on the previous trading day of $17.95 per share.

On September 1, 2017, Mr. Bisaro and other members of Impax management, along with representatives of Morgan Stanley and Sullivan & Cromwell, met with Mr. Chirag Patel, Mr. Chintu Patel and other members of Amneal management and representatives of Tarsadia, along with representatives of J.P. Morgan and Latham & Watkins LLP, outside counsel to Amneal (“Latham & Watkins”), at the offices of Latham & Watkins in New York City. During this meeting, the parties discussed key business terms and certain legal issues with respect to the Potential Combination and, without presenting specific valuations or other analyses or considerations other than their respective positions, tentatively agreed upon an Equity Split of approximately 75% ownership for the Existing Amneal Members and approximately 25% ownership for Impax Stockholders, in tandem with a $1.6 billion cap on the level of Amneal indebtedness at the Closing, and the allocation of 85% of the Tax Benefits to the Existing Amneal Members. The parties did not reach a resolution on other open governance issues, including the composition of New Amneal Board committees, nor did the parties resolve the standstill and lock-up restrictions that would apply to the Existing Amneal Members following the Closing. Amneal and Impax also discussed the possibility of the PIPE Investment at that meeting as a potential means of providing added liquidity to the members of the Amneal Group without requiring the Combined Company to incur additional indebtedness.

During the course of the negotiations of the Potential Combination, Amneal had discussions with multiple interested parties regarding potential strategic transactions, including discussions with at least one strategic counterparty regarding a sale of Amneal. Amneal considered such discussions during the course of its negotiations with Impax and determined that the Potential Combination presented a more strategic and attractive opportunity to grow the combined businesses in the generic pharmaceuticals industry and maximize value for the stockholders of the combined business in the long term.

On September 7, 2017, Sullivan & Cromwell had a telephonic meeting with Latham & Watkins to discuss Amneal’s proposed structure of the Potential Combination.

On September 11, 2017, the Impax Board held an in-person meeting that was also attended by members of Impax management and representatives of Sullivan & Cromwell and Morgan Stanley. At that meeting, Mr. Bisaro and other members of Impax management made a presentation regarding the terms of the Potential Combination and the status of diligence, representatives from Sullivan & Cromwell reviewed with the directors their fiduciary duties under applicable law and legal considerations with respect to the Potential Combination, and representatives from Morgan Stanley reviewed with the Impax Board its preliminary financial analyses regarding the Potential Combination. The directors also discussed whether it would be advisable to initiate an auction process to explore strategic transactions available to Impax at such time. The directors took into consideration the fact that Impax had not received bids for any alternative strategic transactions from any interested parties (despite Mr. Bisaro’s discussions with potential counterparties, and Impax’s lower share price

 

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in the preceding months); the directors’ views concerning the likelihood that an auction would generate actionable proposals for strategic transactions, Impax’s ability to conduct multi-party discussions simultaneously; the risk of distracting Impax management from their operational duties; the risk of disrupting the progress made in the pending discussions with Amneal; and finally, the directors’ respective assessments of whether the terms of any transaction agreement with Amneal would likely permit the Impax Board to respond to and accept a superior proposal. Based upon these factors, the Impax Board determined it would not be advisable to initiate an auction process at such time.

Also at this meeting, the directors authorized Mr. Bisaro and Impax management to continue negotiations with Amneal regarding the Potential Combination. In the following weeks leading up to the execution of the BCA, Mr. Bisaro frequently engaged in conversations with the chairman of the Impax Board and kept the Impax Board regularly updated on the status and substance of discussions with Amneal regarding the Potential Combination.

On September 19, 2017, Latham & Watkins sent Sullivan & Cromwell initial drafts of the BCA, the LLC Agreement and the Tax Receivable Agreement, and Sullivan & Cromwell sent Latham & Watkins an initial draft of the Stockholders Agreement.

On September 21, 2017, the Wall Street Journal reported that Impax was in talks possibly to merge with Amneal. The closing price of Impax Shares on September 21 following the report rose to $23.80 per share, equal to $2.25 per share (or 10.4%) greater than the closing price on the previous trading day of $21.55 per share, with a trading volume of 5,630,800 shares on September 21, representing a trading volume nearly nine times greater than that of the previous trading day.

On September 27, 2017, Sullivan & Cromwell sent Latham & Watkins a revised draft of the BCA that included, among other things, (i) a 60-day period during which Impax would be permitted to solicit Competing Proposals (as defined on page [●], and such period, the “Go-Shop Period”) and revisions with respect to Impax’s ability, following the Go-Shop Period, to evaluate a Competing Proposal and the Impax Board’s rights to terminate the BCA in connection with a Superior Proposal or change its approval and recommendation in favor of the BCA and the transactions contemplated thereby in connection with a Competing Proposal or for any other reasons (rather than just an Intervening Event defined to capture material events with respect to Impax only, as initially proposed by Amneal), including with respect to a shorter 96-hour match right period for Amneal in connection with a Superior Proposal as compared to Amneal’s proposed five business day period (“Fiduciary Outs”), (ii) the rejection of Fiduciary Outs for Amneal in connection with proposals that would be financially superior for the Existing Amneal Members than the Potential Combination, (iii) a covenant by Amneal to take any and all steps necessary to avoid or eliminate any impediments under any antitrust laws, including making any divestitures required of Amneal by antitrust authorities in connection with the Combination (the “Hell-or-High-Water Proposal”), and (iv) a $1,600,000,000 cap on the aggregate Indebtedness of Amneal and its subsidiaries at the Closing.

On September 28, 2017, Sullivan & Cromwell sent Latham & Watkins a revised draft of the Tax Receivable Agreement, and Latham & Watkins sent Sullivan & Cromwell a revised draft of the Stockholders Agreement that included, among other things, (i) revisions requiring the Amneal-designated directors to comprise 50% of the Nominating Committee and a majority of the Compensation Committee of the New Amneal Board and representation of Amneal-designated directors on each other committee of the New Amneal Board (other than the Conflicts Committee and the Audit Committee), (ii) Amneal Group consent rights with respect to various New Amneal corporate actions, including (A) any amendment, modification or repeal of New Amneal’s organizational documents, (B) the creation of indebtedness beyond an unspecified threshold, (C) the consummation of a transaction resulting in a person holding more than 50% of the outstanding shares of Class A Common Stock or any sale of all or substantially all of the assets of New Amneal and (D) the hiring, termination or replacement of the chief executive officer or chief financial officer of New Amneal, (iii) carve-outs from the lock-up provisions for certain transfers of New Amneal Shares by the Amneal Group Members, including (a carve-out for any

 

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transfer of up to an aggregate 60,000,000 New Amneal Shares by the Amneal Group Members, collectively, aside from any other transfers permitted during the lock-up period, (iv) standstill provisions restricting only the acquisition of New Amneal Shares by the Amneal Group so long as the Amneal Group beneficially owns at least 20% of the outstanding Class A Common Stock, rejecting the restrictions in Impax’s proposed customary standstill on the ability of Amneal Group Members to otherwise exert influence over the voting of New Amneal Shares and, (v) a rejection of required approval from a majority of the minority New Amneal Stockholders with respect to any buyout transaction of New Amneal by an Amneal Group Member.

On September 29, 2017, the Impax Board held a telephonic meeting, with representatives of Morgan Stanley and Sullivan & Cromwell also attending, and received updates from Mr. Bisaro and other members of Impax management and representatives of Sullivan & Cromwell regarding the Potential Combination and the status of due diligence and negotiations.

Also on September 29, 2017, Sullivan & Cromwell sent Latham & Watkins a revised draft of the LLC Agreement, which included, among other things, a rejection of Amneal’s proposed dissolution of Amneal upon a change of control transaction that does not receive the approval of a supermajority of Amneal members.

On September 30, 2017, Sullivan & Cromwell and Latham & Watkins held a telephonic meeting to negotiate open issues in the BCA, the Stockholders Agreement and the Tax Receivable Agreement, including Impax’s proposed Go-Shop Period (to which Amneal vigorously objected), and the scope of Impax’s Fiduciary Outs (including limiting the Impax Board’s ability to terminate the BCA other than in connection with a Superior Proposal to such terminations only in connection with an Intervening Event defined to capture material events with respect to Impax only, rather than any reason determined by the Impax Board), the Hell-or-High-Water Proposal and other proposals as to the level of efforts and divestiture commitments required of the parties to obtain antitrust approval, the treatment of Impax equity awards in the Combination, the scope of the standstill restrictions applicable to Amneal Group Members, the approval requirements with respect to a buyout transaction of New Amneal by an Amneal Group Member and the scope of Amneal Group consent rights with respect to various corporate actions by New Amneal.

On October 1, 2017, Latham & Watkins sent Sullivan & Cromwell a revised draft of the BCA that included, among other things, (i) a rejection of Impax’s proposed Go-Shop Period (but provided for Fiduciary Outs for the Impax Board in connection with a Competing Proposal or Intervening Event (as defined on page [●]) that was defined to include material events solely with respect to Impax that occurred or arose after the date of the BCA and were not known to, or reasonably foreseeable by any member of the Impax Board, subject to the terms and procedures set forth in the draft of the BCA), (ii) with respect to obtaining antitrust approvals, instead of the Hell-or-High-Water Proposal, a proposal for a Burdensome Condition (as defined on page [●]) threshold that would not require either party to make divestitures that would result in a material adverse effect on Amneal, Impax or the combined company, (iii) a Termination Fee equal to 3.0% of Impax’s equity value and a reimbursement of Amneal’s expenses of up to an amount equal to 1.5% of Impax’s equity value in the event that the requisite approval of Impax Stockholders is not obtained, and (iv) a proposal for an Outside Date of nine months following the date of the BCA.

On October 2, 2017, Amneal executed non-disclosure agreements with each of two potential investors in connection with the PIPE Investment, including TPG.

Also on October 2, 2017, Latham & Watkins sent Sullivan & Cromwell the initial drafts of the commitment letter, fee letter, and structuring fee letter in connection with the Debt Financing, which we refer to as the Debt Commitment Letter, the Debt Fee Letter, and the Debt Structuring Fee Letter, respectively.

On October 3, 2017, Sullivan & Cromwell sent Latham & Watkins a revised draft of the BCA including, among other things, (i) revisions to the terms of Impax’s Fiduciary Outs, including with respect to the definition of an Intervening Event that was revised to include events materially affecting the business, assets or operations

 

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of Amneal or Impax that were unknown to, and not reasonably foreseeable, by the Impax Board as of the date of the BCA, and to Impax’s termination rights in connection with its exercise of its Fiduciary Outs, (ii) a Termination Fee of $45,000,000 and expense reimbursement of Amneal’s expenses of up to $15,000,000 in the event that the requisite approval of Impax Stockholders is not obtained and (iii) an Outside Date of twelve months following the date of the BCA, and Latham & Watkins sent Sullivan & Cromwell a revised draft of the LLC Agreement and a further revised draft of the Stockholders Agreement, including, among other things, (i) revisions to permit a Qualifying Investor (as defined on page [●]) to designate a director to serve on the New Amneal Board, (ii) Amneal Group consent rights with respect to a limited set of New Amneal corporate actions and (iii) standstill provisions limited only to restrictions on the acquisition of New Amneal Shares by the Amneal Group.

On October 4, 2017, Latham & Watkins sent Sullivan & Cromwell a revised draft of the Tax Receivable Agreement. On that same date, Sullivan & Cromwell, on behalf of Impax, made the required filings with the Secretary of State of the State of Delaware and formed Merger Sub and Holdco.

From October 4 to 5, 2017, Mr. Bisaro and another member of Impax management, Mr. Chirag Patel, Mr. Chintu Patel, a representative of Tarsadia, and a representative of J.P. Morgan met with representatives of TPG in San Francisco to discuss the PIPE Investment.

On October 5, 2017, Sullivan & Cromwell sent Latham & Watkins revised drafts of the LLC Agreement and Stockholders Agreement, including, among other things, (i) more expansive standstill provisions with customary restrictions on the ability of Amneal Group Members to exert influence over the voting of New Amneal Shares in addition to restrictions on the ability to acquire New Amneal Shares and (ii) Conflicts Committee and minority New Amneal Stockholder approval requirements with respect to any buyout transaction of New Amneal by an Amneal Group Member, and Latham & Watkins sent Sullivan & Cromwell an initial draft of the Amneal Disclosure Letter and a revised draft of the BCA, which included, among other things, (i) a requirement that any disputes between the parties on timing, strategy and approach with respect to antitrust approvals be determined by Amneal in its reasonable discretion and (ii) the ability for Amneal to seek damages for fraud or willful and material breach of the BCA by Impax following the receipt of the Termination Fee rather than any payment of the Termination Fee being in full and complete satisfaction of any monetary damages of Amneal related to the BCA and the Combination. Later on October 5, 2017, Sullivan & Cromwell and Latham & Watkins held a telephonic meeting to negotiate open legal issues regarding the Combination, including with respect to the issues described in the previous sentence.

Also on October 5, 2017, Morgan Stanley provided Impax a letter summarizing certain information as of such date concerning Morgan Stanley’s material relationships with Impax, Amneal and certain other parties, which information was later shared with the Impax Board at its meeting of October 9, 2017, and based on which the Impax Board determined at such meeting that there were no relationships which presented a conflict of interest with respect to Morgan Stanley’s role as financial advisor to Impax in the Combination.

On October 6, 2017, Latham & Watkins sent to Sullivan & Cromwell revised drafts of the Tax Receivable Agreement and the Debt Commitment Letter, Debt Fee Letter and Debt Structuring Fee Letter. Sullivan & Cromwell sent to Latham & Watkins a revised draft of the LLC Agreement and an initial draft of the Impax Disclosure Letter.

Over the course of October 7 and 8, 2017, Sullivan & Cromwell held telephonic meetings with Latham & Watkins to continue negotiation of the open issues in the BCA, Stockholders Agreement and LLC Agreement, and on October 8, Mr. Bisaro met with Mr. Chirag Patel and representatives of Tarsadia in New York City, with representatives of Impax management, Sullivan & Cromwell and Latham & Watkins participating in the meeting by telephone. The parties’ discussions included (i) Impax’s Fiduciary Outs under the BCA, including whether the definition of Intervening Event would include events with respect to either Impax or Amneal (or just Impax), (ii) the acceleration and/or cancellation of Impax options in connection with the Combination, (iii) the resolution

 

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of antitrust strategy disputes, (iii) the timing of the Outside Date as the later of (A) nine months following the Date of the BCA and (B) 75 days following effectiveness of the Registration Statement, (iv) the payment of the Termination Fee in full and complete satisfaction of Amneal monetary damages, (v) approval requirements with respect to any buyout transaction of New Amneal by an Amneal Group Member, (vi) the scope of the standstill provisions applicable to the Amneal Group, (vii) Amneal’s request that New Amneal provide payments to cover the Amneal Group’s tax liabilities in the event of certain stock-for-stock transactions resulting in tax liabilities for the Amneal Group and (viii) certain consent rights and acceleration triggers with respect to tax benefit payments to the Amneal Group under the Tax Receivable Agreement.

On October 9, 2017, the Impax Board held a meeting at Bridgewater, New Jersey that was also attended by members of Impax management and representatives of Sullivan & Cromwell and Morgan Stanley. Representatives of Impax management gave updates on the status of negotiations with Amneal and Tarsadia and also gave presentations on their diligence findings with respect to the Combination. Representatives of Sullivan & Cromwell reviewed with the directors their fiduciary duties under applicable law and provided summaries of the principal negotiated terms and open negotiation points in the latest drafts of the BCA, Stockholders Agreement, LLC Agreement and Tax Receivable Agreement, including with respect to (i) the timing of the Outside Date, (ii) the payment trigger for the $45,000,000 Termination Fee in connection with Amneal’s termination of the BCA for a breach of the BCA by Impax followed by Impax’s entry into a definitive agreement with respect to a Competing Proposal or Impax’s consummation of a Competing Proposal within 12 months of such termination, (iii) the scope of the standstill provisions applicable to the Amneal Group, and (iv) approval requirements with respect to any buyout transaction of New Amneal by an Amneal Group Member. Morgan Stanley provided the Impax Board with its valuation views with respect to Impax and Amneal, each as a standalone company, and the pro forma combined company. The Impax Board considered the presentations of Impax management, Sullivan & Cromwell and Morgan Stanley and authorized Mr. Bisaro and Impax management to continue negotiations with Amneal regarding the Potential Combination.

On October 10, 2017, Mr. Bisaro and other members of Impax management, together with Mr. Chirag Patel and Mr. Chintu Patel, along with representatives of Tarsadia and J.P. Morgan, had a follow-up meeting with TPG and meetings with other potential investors in New York City.

Also on October 10, 2017, Latham & Watkins sent to Sullivan & Cromwell a revised draft of the BCA, which included, among other things, terms providing for (i) the acceleration of Impax options in connection with the Combination, (ii) Impax’s proposed definition of Intervening Event that incorporates events materially affecting the business, assets or operations of either Amneal or Impax and (iii) the ability of Amneal to seek damages for fraud or willful and material breach of the BCA by Impax following the receipt of the Termination Fee, and a revised draft of the Stockholders Agreement, which included, among other things, terms providing for a more limited scope of standstill provisions applicable to the Amneal Group. Later that evening, Mr. Bisaro and other members of Impax management, representatives of Tarsadia, and representatives of Sullivan & Cromwell and Latham & Watkins held a telephonic meeting to continue negotiation of the open issues regarding the Combination, including with respect to the legal issues described in the previous sentence.

On October 11, 2017, Mr. Bisaro and other members of Impax management, together with Mr. Chirag Patel, Mr. Chintu Patel and a representative of J.P. Morgan, had meetings in Boston with Fidelity and other potential investors in the PIPE Investment. Latham & Watkins sent potential investors an initial draft of the share purchase agreement in connection with the PIPE Investment, which we refer to as the Share Purchase Agreement.

Also on October 11, 2017, Latham & Watkins sent Sullivan & Cromwell revised drafts of the Amneal Disclosure Letter and the Debt Commitment Letter, Debt Fee Letter and Debt Structuring Fee Letter, and Sullivan & Cromwell sent Latham & Watkins a revised draft of the Amneal Disclosure Letter.

On October 12, 2017, Mr. Bisaro and other members of Impax management had a telephone call about the Combination with a potential investor in the PIPE Investment. Simpson Thacher & Bartlett LLP, the outside counsel to the potential investors in the PIPE Investment (“Simpson Thacher”), sent Latham & Watkins a revised draft of the Share Purchase Agreement.

 

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Also on October 12, 2017, Sullivan & Cromwell sent Latham & Watkins (i) a revised draft of the BCA, which included, among other things, that any payment of the Termination Fee would in full and complete satisfaction of any monetary damages of Amneal related to the BCA and the Combination, (ii) a revised draft of the Stockholders Agreement, which included, among other things, an Amneal Group consent right with respect to the consummation by New Amneal of certain transactions which would result in the recognition of $40,000,000 or more in taxable income or gain by the Amneal Group, and (iii) a revised draft of the Impax Disclosure Letter.

On October 13, 2017, Mr. Bisaro and other members of Impax management had telephone calls about the Combination with various potential investors in the PIPE Investment.

From October 13 to October 14, 2017, Mr. Bisaro met with Mr. Chirag Patel, Mr. Chintu Patel and representatives from Tarsadia in New York City to further discuss open issues.

On October 14, 2017, Sullivan & Cromwell and Latham & Watkins held a telephonic meeting to continue negotiation of open legal issues in the BCA, Stockholders Agreement and Tax Receivable Agreement, including (i) the ability for Amneal to seek damages for fraud or willful and material breach of the BCA by Impax following the receipt of the Termination Fee, (ii) the treatment of Impax equity awards for purposes of calculating the Equity Split, (iii) the length of the lock-up period and standstill provisions applicable to Amneal Group Members and (iv) the Amneal Group consent right with respect to the consummation by New Amneal of certain transactions which would result in the recognition of $40,000,000 or more in taxable income or gain by the Amneal Group and certain other consent rights under the Tax Receivable Agreement. Also on October 14, 2017, Latham & Watkins sent Sullivan & Cromwell a revised draft of the Impax Disclosure Letter.

On October 15, 2017, Mr. Bisaro and other members of Impax management met with Mr. Chirag Patel and another member of Amneal management and representatives of Tarsadia, together with representatives of Sullivan & Cromwell and Latham & Watkins at Latham & Watkins’ offices in New York City. During this meeting, the parties negotiated the final open issues regarding the Combination, including the open points previously discussed between the representatives of Sullivan & Cromwell and Latham & Watkins on October 14. Sullivan & Cromwell sent Latham & Watkins the revised drafts of the Impax Disclosure Letter and the Amneal Disclosure Letter, and Latham & Watkins negotiated the final terms of the Share Purchase Agreement with Simpson Thacher. Latham & Watkins and Sullivan & Cromwell finalized the transaction documentation during the course of the evening on October 16, 2017.

In the evening of October 16, 2017, the Impax Board held a telephonic meeting with members of Impax management and representatives of Morgan Stanley and Sullivan & Cromwell attending the call. During this telephonic meeting, Sullivan & Cromwell provided the Impax Board with updates on the terms of the BCA, Stockholders Agreement, LLC Agreement and Tax Receivable Agreement as agreed at the October 15 meeting, and Morgan Stanley rendered its oral financial opinion, which was subsequently confirmed in writing on October 17, 2017, to the Impax Board to the effect that, as of such date, and based upon and subject to the various assumptions, procedures, matters, qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the consideration to be received by the holders of Impax Shares (other than Cancelled Shares) pursuant to the BCA was fair from a financial point of view to such holders (as discussed in the section entitled “The Combination—Opinion of Impax’s Financial Advisor” on page [●]). The Impax Board unanimously (i) approved and declared advisable the BCA and ancillary transaction agreements to which Impax is a party and the Combination and declared it advisable for Impax to enter into such agreements, (ii) determined that the Combination, including the Impax Merger, is in the best interests of and advisable to the Impax Stockholders, (iii) directed that the BCA be submitted to the Impax Stockholders for their consideration, approval and adoption and (iv) resolved to recommend that Impax Stockholders adopt the BCA and thereby approve the Combination, including the Impax Merger.

On the morning of October 17, 2017, Impax, Amneal, Holdco, and Merger Sub executed the BCA; Holdco and the Existing Amneal Members executed the Stockholders Agreement; and Amneal, JPMorgan Chase Bank, Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated executed the Debt Commitment

 

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Letter, Debt Fee Letter and Debt Structuring Fee Letter. Also on October 17, 2017, the Amneal Group Representative, TPG, funds affiliated with Fidelity and other investors in the PIPE Investment executed the PIPE Purchase Agreement, and the Amneal Group Representative executed the Lock-Up Agreement attached thereto.

On November 20, 2017, the Impax Board approved by unanimous written consent the PIPE Side Letter and an amendment to the BCA to amend certain provisions therein in order to facilitate the PIPE Investment described in this combined proxy statement/prospectus ( “BCA Amendment No. 1”). On November 21, 2017, Amneal, Impax, Holdco and Merger Sub executed BCA Amendment No. 1, and Amneal Holdings, LLC, Holdco and TPG executed the PIPE Side Letter.

In early December 2017, Mr. Chirag Patel discussed with Mr. Bisaro Robert A. Stewart’s extensive background as an executive in the pharmaceutical industry and experience in executing business transformations. Following such discussion, Mr. Patel approached Mr. Stewart to propose that Mr. Stewart should serve as Chief Executive Officer of Amneal prior to the Closing and continue as Chief Executive Officer of the combined company following the Closing, focusing on the day-to-day responsibilities of the combined company. Messrs. Bisaro and Patel agreed that Mr. Bisaro should serve as Executive Chairman of the combined company and that Mr. Bisaro, as an experienced public pharmaceutical company executive, would focus his efforts primarily on the long-term growth strategy for the combined company and lead the New Amneal Board.

On December 16, 2017, the Impax Board held a telephonic meeting with members of Impax management and approved Amendment No. 2 to the BCA (“BCA Amendment No. 2”). In order to facilitate Impax and Amneal’s intent to appoint Mr. Stewart as Chief Executive Officer and Mr. Bisaro as Executive Chairman of New Amneal following the Closing, BCA Amendment No. 2 provided for certain revisions to the forms of the Stockholders Agreement and the Amended and Restated Bylaws of Holdco to revise the composition of the New Amneal Board and the management of New Amneal in order to permit such appointments of Messrs. Stewart and Bisaro. At such meeting of the Impax Board, the Impax Board approved the employment agreements and compensation of each of Mr. Stewart and Mr. Bisaro and the amended form of the Stockholders Agreement (with Mr. Bisaro recusing himself from consideration of the matters relating to his employment by New Amneal).

Also on December 16, 2017, Amneal, Impax, Holdco and Merger Sub executed BCA Amendment No. 2 and Holdco, Amneal Pharmaceuticals Holding Company, LLC, AP Class D Member, LLC, AP Class E Member, LLC and AH PPU Management, LLC executed the Stockholders Agreement.

Recommendation of the Impax Board and Reasons for the Combination

The Impax Board, with the advice and assistance of its financial and legal advisors, oversaw the negotiation of, and evaluated, the BCA and the Combination and, at a meeting held on October 16, 2017, unanimously (i) approved and declared advisable the BCA, the Ancillary Agreements and the transactions contemplated thereby and declared it advisable for Impax to enter into such agreements, (ii) determined that the Combination, including the Impax Merger, is in the best interests of and advisable to the Impax Stockholders, (iii) directed that the BCA be submitted to the Impax Stockholders for their consideration, approval and adoption and (iv) resolved to recommend that Impax Stockholders adopt the BCA and thereby approve the Combination, including the Impax Merger.

In light of the number and wide variety of factors considered in connection with its evaluation of the BCA and the Combination, the Impax Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its determination. The Impax Board viewed its position and determinations as being based on all of the information available and the factors presented to and considered by it. In addition, Impax’s individual directors may have given different weight to different factors.

In reaching the decisions to approve the BCA and the Combination, as well as the Ancillary Agreements and the transactions contemplated thereby, and to recommend that the Impax Stockholders vote to adopt the BCA and approve the Combination, the Impax Board consulted extensively with its financial and legal advisors and

 

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Impax’s management and considered the strategic rationale of, and strategic alternatives to the proposed Combination. After such discussions and considering such alternatives, the Impax Board’s unanimous decision to approve the BCA and the Combination and to recommend that Impax Stockholders vote “FOR” the Compensation Proposal and the adoption of the BCA was based on a number of factors. These factors included, without limitation, the following (which are not necessarily presented in order of relative importance):

Strategic Rationale; Stockholder Value

 

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Pipeline. The Combined Company would have a competitive, highly differentiated generics pipeline that would be one of the largest in the United States, with approximately 150 pending ANDAs and 165 projects in active stages of development, providing for sustainable long-term growth potential in the generic pharmaceuticals industry. Nearly half of all the Combined Company’s pipeline products would be exclusive FTF, FTM or other high-value opportunities with three or fewer competitors estimated at the time of launch. The Combination also adds a foundation for Impax’s commercial entry into biosimilars with two in-licensed products: one filed and one near-term filing opportunity in development. Further, the Combined Company’s internal generic R&D capability is expected to drive growth through continued investment in the development of complex dosage forms and technologies, including injectables, topicals, transdermals, inhalation, complex molecules and drug-device combinations. Additionally, the Combined Company is expected to benefit from well-established external partnerships focused on maximizing pipeline opportunities in specialty delivery forms and biosimilars.

 

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Marketed Products. The Combined Company would be the fifth largest in the United States generics market, placing it ahead of several of Impax’s current competitors in size. Further, the Combined Company is expected to hold a #1 or #2 position with respect to a significant number of its marketed products.

 

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Growth. On a pro forma basis, the Combined Company is expected to generate annual double-digit growth in net revenue, adjusted EBITDA and adjusted earnings per share (“EPS”) over the three years following the Closing. The Combination is expected to be accretive to Impax’s adjusted EPS in the first 12 months after the Closing. The Combined Company would have significant cash flow generation (including through Impax’s high-margin specialty franchise that includes its platform of products targeting CNS disorders, anti-parasitic infections and other select specialty therapeutic areas), enabling future investments in R&D and high-growth specialty assets and the repayment of debt.

 

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Scale and Expansion Potential. the Combined Company would have a differentiated platform well-suited to participate in the sector consolidation occurring across the pharmaceutical industry, utilizing its scale, resources and corporate structure to drive expansion, strategic initiatives and investments across markets in the pharmaceutical industry, and avoiding the headwinds being faced by smaller companies across the industry due to larger competitors and further pressure on prices, development activities and customer retention.

 

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Revenue Diversification. The Combination would result in significant revenue diversification with the top five generic drugs of the Combined Company accounting for approximately 25% of pro forma net revenue for the last 12 months ended June 30, 2017, as compared to Impax’s top five significant products (which consist of both generic and specialty pharmaceutical products) accounting for 45% of Impax’s net product sales in 2016.

 

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Cost Savings. The Combination is expected to create cost saving opportunities of up to $200 million within three years following the Closing of the Combination through combined footprint and product transfer opportunities. The Combined Company is expected to manufacture and distribute its products from a strengthened global supply chain supporting capabilities across all dosage forms, with R&D and manufacturing sites in the United States, India and Ireland.

 

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Up-C Structure. The fact that the “Up-C” structure will allow New Amneal to realize certain tax benefits following the Combination. For more information see section entitled “Ancillary Agreements Related to the Combination—Tax Receivable Agreement” beginning on page [●].

 

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Strategic Alternatives

 

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The availability of alternative strategic transactions for Impax, the Impax Board’s views with respect to whether alternative counterparties would engage in a business combination transaction with Impax on terms and conditions superior to those of the Combination, as well as the alternative of remaining an independent standalone company in light of the historical and then-current market prices of Impax Shares and the challenging macro environment in which Impax and other generic pharmaceutical companies operate. Based on these considerations, the Impax Board has determined that the Combination represents the best value for the Impax Stockholders as compared to any other strategic alternative reasonably available to Impax, including remaining as a standalone company.

 

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The belief that it was preferable to negotiate on a one-on-one basis with Amneal rather than conduct an auction or other sale process of Impax, particularly in light of the fact that (i) the Impax Board believed that the terms of the BCA would not preclude or deter a willing and able third party, were one to exist, from making a Superior Proposal (as defined on page [●]) following the announcement of the Combination and (ii) since the appointment of Paul Bisaro as President and CEO of Impax in March 2017, Impax had received no indications of interest regarding a business combination transaction that would be superior to the Combination.

 

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The fact that, as of the date of this combined proxy statement/prospectus no other potential counterparties made proposals to, or expressed any interest in any alternative transaction with, Impax following the report by the Wall Street Journal on September 21, 2017, that Impax was in talks to merge with Amneal.

Opinion of Impax’s Financial Advisor

 

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The receipt of an opinion from Morgan Stanley dated October 17, 2017, to the effect that as of such date, and based upon and subject to the various assumptions, procedures, matters, qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the consideration to be received by the holders of lmpax Shares (other than Cancelled Shares) pursuant to the BCA was fair from a financial point of view to such holders.

Transaction Terms

 

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The fact that the Merger Consideration is in the form of New Amneal Shares, which affords the Impax Stockholders the opportunity to participate in the future earnings and expected growth of New Amneal and any future appreciation in the value of Class A Common Stock should Impax Stockholders retain the shares of Class A Common Stock they receive as Merger Consideration.

 

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The fact that the terms of the BCA provide for certainty of the consummation of the Combination:

 

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The parties are required to take all actions necessary to obtain regulatory approvals needed to consummate the Combination, unless such actions would result in a material adverse effect on Impax, Amneal or New Amneal;

 

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There are limited circumstances in which Amneal may terminate the BCA;

 

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An Outside Date of up to 12 months after the date of the BCA;

 

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The BCA contains no financing condition;

 

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Impax has the ability to specifically enforce Amneal’s obligations under the BCA, including Amneal’s obligations to consummate the Combination; and

 

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The likelihood that the Combination will be consummated in a timely manner.

 

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The reasonableness of the terms of the BCA, including Impax’s representations, warranties and covenants and the conditions to each party’s obligations.

 

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•

The fact that the BCA provides appropriate fiduciary outs for the Impax Board given that the Combination did not arise from an auction process:

 

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Impax is permitted, under certain circumstances, and subject to certain conditions, to furnish information to and conduct negotiations with a third party in connection with an unsolicited proposal that constitutes or is reasonably likely to lead to a Superior Proposal;

 

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The Impax Board, subject to certain conditions, has the right to change its recommendation in support of the Combination in response to an Intervening Event (as defined on page [●]);

 

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The Impax Board has the right to terminate the BCA to enter into a definitive agreement related to a Superior Proposal, subject to giving Amneal notice and an opportunity to propose changes to the BCA, and the payment of the Termination Fee; and

 

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The Termination Fee size is consistent with market practice and the Impax Board’s determination that it would not preclude or deter a willing and financially capable third party, were one to exist, from making a Superior Proposal following the announcement of the Combination.

 

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The fact that a vote of the Impax Stockholders to approve the Combination Proposal is required under Delaware law, providing the Impax Stockholders with the ability to approve or disapprove the Combination.

 

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The expectation that Impax Stockholders will not recognize gain or loss for U.S. federal income tax purposes as a result of the Combination.

 

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The fact that the Impax Stockholders will retain significant governance protections as the holders of 25% of New Amneal’s interests, including, among other things:

 

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The appointment of Paul M. Bisaro as Executive Chairman (or CEO if an Executive Event has occurred) and a director of New Amneal;

 

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The appointment of Robert L. Burr, current chairman of the Impax Board, as a director on the New Amneal Board as Lead Independent Director;

 

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The designation by Impax of three additional independent directors to the 11-member New Amneal Board;

 

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The formation of a Conflicts Committee of the New Amneal Board that will be required to approve any related party transactions with the Amneal Group Members; and

 

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The agreement by the Amneal Group Members to not acquire additional New Amneal stock or otherwise seek to exert influence over the voting of New Amneal Shares without the prior written consent of the Conflicts Committee until the earlier of three years following the Closing and when the Amneal Group Members cease to own at least 20% of the outstanding New Amneal Shares.

Risks and Potential Negative Factors

 

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The fact that the Combination may not be completed in a timely manner, or at all, despite the parties’ efforts. Even if the requisite approval is obtained from the Impax Stockholders, if required antitrust approvals are not obtained or if obtaining antitrust approval would require the parties to take actions that would result in a material adverse effect on Impax, Amneal or New Amneal, none of the parties or their respective subsidiaries may agree to take, or take any action that has the effect of a Burdensome Condition (as defined on page [●]) without the prior written consent of the other parties.

 

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Despite the fact that, as of the date of this combined proxy statement/prospectus, no other potential counterparties made proposals to, or expressed any interest in any alternative transaction with, Impax following the report by the Wall Street Journal on September 21, 2017, that Impax was in talks to merge with Amneal and the fact that the BCA provides appropriate fiduciary outs for the Impax Board, the fact that Impax negotiated exclusively with Amneal rather than conducting a public or private “auction” or sales process of Impax.

 

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