Exhibit 1.5
SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT
ELAN CORPORATION, PLC
ELAN PHARMA INTERNATIONAL LIMITED
ELAN INTERNATIONAL SERVICES, LTD.
AND
DEPOMED, INC.
AND
DEPOMED DEVELOPMENT, LTD.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
1
INDEX
-----
CLAUSE 1 DEFINITIONS
CLAUSE 2 BUSINESS
CLAUSE 3 REPRESENTATIONS AND WARRANTIES
CLAUSE 4 AUTHORIZATION AND CLOSING
CLAUSE 5 DIRECTORS; MANAGEMENT AND R&D COMMITTEES
CLAUSE 6 THE BUSINESS PLAN AND REVIEWS
CLAUSE 7 RESEARCH AND DEVELOPMENT WORK
CLAUSE 8 COMMERCIALIZATION
CLAUSE 9 OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS/[**]
CLAUSE 10 INTELLECTUAL PROPERTY RIGHTS
CLAUSE 11 CROSS LICENSING/EXPLOITATION OF NEWCO INTELLECTUAL PROPERTY
OUTSIDE FIELD
CLAUSE 12 REGULATORY
CLAUSE 13 MANUFACTURING
CLAUSE 14 TECHNICAL SERVICES AND ASSISTANCE
CLAUSE 15 AUDITORS, BANKERS, ACCOUNTING REFERENCE DATE; SECRETARY; "TICK
THE BOX"
CLAUSE 16 TRANSFER OF SHARES; RIGHTS OF FIRST OFFER; TAG ALONG RIGHTS
CLAUSE 17 MATTERS REQUIRING STOCKHOLDERS' APPROVAL
CLAUSE 18 DISPUTES
CLAUSE 19 TERMINATION
CLAUSE 20 SHARE RIGHTS
2
CLAUSE 21 CONFIDENTIALITY
CLAUSE 22 COSTS
CLAUSE 23 GENERAL
3
THIS SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT dated 21 January,
2000
BETWEEN:
(1) ELAN CORPORATION, PLC, a public limited company incorporated under the laws
of Ireland, and having its registered office at ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇;
(2) ELAN PHARMA INTERNATIONAL LIMITED, a private limited company incorporated
under the laws of Ireland, and having its registered office at ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇;
(3) ELAN INTERNATIONAL SERVICES, LTD., a Bermuda exempted limited liability
company incorporated under the laws of Bermuda, and having its registered
office at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ("▇▇▇");
(4) DEPOMED, INC. a corporation duly incorporated and validly existing under
the laws of California and having its principal place of business at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America; and
(5) DEPOMED DEVELOPMENT, LTD. a Bermuda exempted limited liability company
incorporated under the laws of Bermuda, and having its registered office at
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ("▇▇▇▇▇").
RECITALS:
A. Newco desires to issue and sell to Depomed and Depomed desires to purchase
from Newco, for aggregate consideration of $[**] 6,000 ordinary shares of
Newco's common stock, par value $1.00 per share (the "Common Stock").
Additionally, Newco desires to issue and sell to the Stockholders (as
defined below), and the Stockholders desire to purchase from Newco, for
aggregate consideration of $[**] apportioned between them as set forth
herein, 6,000 shares of Newco's preferred stock, par value $1.00 per share
(the "Preferred Stock"), allocated 3,612 Shares to Depomed for aggregate
consideration of $[**] and 2,388 Shares to EIS for aggregate consideration
of $[**].
B. As of the Closing Date, Elan Corp and EPIL have entered into a license
agreement with Newco, and Depomed has entered into a license agreement with
Newco, in connection with the license to Newco of the Elan Intellectual
Property and the Depomed Intellectual Property, respectively (each as
defined below).
4
C. Elan and Depomed have agreed to co-operate in the research, development and
commercialization of the Products (as defined below) based on their
respective technologies.
D. Elan and Depomed have agreed to enter into this Agreement for the purpose
of recording the terms and conditions regulating their relationship with
each other, with respect to the Licensed Technologies and with Newco.
NOW IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1
DEFINITIONS
1.1 In this Agreement, the following terms shall, where not inconsistent with
the context, have the following meanings respectively.
"Affiliate" of any Person (in the case of a legal entity) shall mean any
other Person controlling, controlled or under the common control of such
first Person, as the case may be. For the purpose of this definition,
"control" shall mean direct or indirect ownership of fifty percent (50%) or
more of the stock or shares entitled to vote for the election of directors
in the case of a corporation and, in the case of a non-corporate entity,
the power to direct or cause the direction of management and policies.
Newco is not an Affiliate of Elan, EIS, EPIL or Depomed.
"Agreement" shall mean this agreement (which expression shall be deemed to
include the Recitals and the Schedules hereto).
"Board" shall mean the board of directors of Newco.
"Business" shall mean the business specified in the Business Plan.
"Business Plan" shall mean the business plan and program of development to
be agreed by Elan Corporation, Plc. and Depomed Inc. pursuant to Clause 6
that shall contain, among other things, to the extent practicable, the
research and development objectives, desired Product specifications,
clinical indications, preliminary clinical trial designs (Phase I/II),
development timelines, budgeted costs and the relative responsibilities of
Depomed and Elan as it relates to the implementation of the R&D Plan.
"Certificate of Designations" shall mean that certain certificate of
designations, preferences and rights of Series A Preferred Stock of Depomed
issued on the Closing Date.
5
"Closing Date" shall mean the date upon which the Definitive Documents are
executed and delivered by the Parties and the transactions effected thereby
are closed.
"Compound" shall, subject to Clause 2.3, mean [**].
"Common Stock Equivalents" shall mean any options, warrants, rights or any
other securities convertible, exercisable or exchangeable, in whole or in
part, for or into Common Stock.
"Convertible Note" shall mean that certain convertible promissory note, of
even date herewith, by and between Depomed and EIS.
"Definitive Documents" shall mean this Agreement, the Funding Agreement,
Elan License Agreement, the Depomed License Agreement, the Convertible
Note, the Depomed Securities Purchase Agreement, the Registration Rights
Agreements, the Escrow Agreement, the Certificate of Designations and
associated documentation of even date herewith, by and between Depomed,
EPIL, Elan Corp, EIS and Newco, as applicable.
"Depomed" shall mean Depomed, Inc and its Affiliates.
"Depomed Directors" has the meaning set forth in Clause 5.
"Depomed Intellectual Property" shall mean the Depomed Know-How, the
Depomed Patents and the Depomed Improvements.
"Depomed Know-How" shall, subject to Clause 4.2 of the Depomed License
Agreement, mean any and all rights owned, licensed to or controlled by
Depomed on the Closing Date to any discovery or invention (whether
patentable or not) and owned, licensed to or controlled by Depomed on the
Closing Date to any know-how, substances, data, techniques, processes,
systems, formulations and designs relating to the Depomed Technology.
"Depomed License Agreement" shall mean the license agreement between
Depomed and Newco, of even date herewith, attached hereto in Schedule 2.
"Depomed Patents" shall, subject to Clause 4.2 of the Depomed License
Agreement, mean any and all rights under any and all patents applications
and/or patents, now existing, currently pending or hereafter filed or
obtained by Depomed on inventions conceived or reduced to practice on or
before the Closing Date relating to the Depomed Technology as set forth in
Schedule 1 of the Depomed License Agreement, and any foreign counterparts
thereof and all divisionals, continuations, continuations-in-part, patents
of addition, supplementary protection certificates, any foreign
counterparts thereof and all
6
patents issuing on, any of the foregoing, together with all registrations,
reissues, re-examinations or extensions thereof.
"Depomed Technology" shall mean the Depomed technology directly related to:
(i) a solid oral dosage form which swells in the gastric cavity, remains
therein for an extended period of time in order to release drug
dispersed therein at a pre-defined rate from the stomach; and
(ii) [**].
"Depomed Improvements" shall mean improvements relating to the Depomed
Patents and/or the Depomed Know-How, developed (i) by Depomed whether or
not pursuant to the Project, (ii) by Newco or Elan or by an independent
third party (under contract with Newco) pursuant to the Project, and/or
(iii) jointly by any combination of Depomed, Elan or Newco pursuant to the
Project, except as limited by agreements with independent third parties.
Subject to independent third party agreements, Depomed Improvements shall
constitute part of Depomed Intellectual Property and shall, upon
development, be included in the license of the Depomed Intellectual
Property pursuant to Clause 2.1 of the Depomed License Agreement solely for
the purposes set forth therein. If the inclusion of a Depomed Improvement
in the license of Depomed Intellectual Property is restricted or limited by
an independent third party agreement, Depomed shall use reasonable
commercial efforts to exclude or minimize any such restriction or
limitation.
"Depomed Securities Purchase Agreement" shall mean that certain securities
purchase agreement, of even date herewith, by and between Depomed and EIS.
"Directors" shall mean, at any time, the directors of Newco.
"EIS Director" has the meaning set forth in Clause 5.
"Elan" shall mean Elan Corp, EPIL and EIS.
"Elan Corp" shall mean Elan Corporation, Plc. and Affiliates of Elan
Corporation, Plc. within the division of Elan Corporation, Plc. carrying on
business as Elan Pharmaceutical Technologies but shall not include
Affiliates (present or future) of Elan Corporation Plc within the division
of Elan Corporation, Plc carrying on business as Elan Pharmaceuticals which
incorporates, inter alia, Targon Corporation, Athena Neurosciences, Inc.,
Elan Pharmaceuticals, Inc., Elan Diagnostics, Carnrick Laboratories, and
Elan Europe Limited.
"Elan Intellectual Property" shall mean:
7
(i) the Nano Know-How and the Nano Patents;
(ii) the Elan Corp CR Know-How and the Elan Corp CR Patents;
(iii) [**]; and
(iii) the Elan Improvements;
and shall exclude the Elan Excluded Intellectual Property.
"Elan License Agreement" shall mean the license agreement between Elan and
Newco, of even date herewith, attached hereto in Schedule 1.
"Elan Excluded Intellectual Property" shall mean:
(i) Elan's patent rights and know-how relating to protein or peptide
agents or peptodomimetics, derivatives or analogs thereof, designed
to target a pharmaceutically active agent to a certain site or sites
in the body (targeting technology);
(ii) [**]
(iii) for the avoidance of doubt, inventions, patents and know-how owned,
licensed or controlled by Axogen Limited and Neurelab Limited and by
all Affiliates or subsidiaries (present or future) of Elan
Corporation, Plc. within the division of Elan Corporation, Plc
carrying on business as Elan Pharmaceuticals which incorporates,
inter alia, EPIL (only to the extent that it is the owner of patents,
know-how or other intellectual property or technology invented and/or
developed within the division of Elan Corporation, Plc carrying on
business as Elan Pharmaceuticals but, for the avoidance of doubt, not
to the extent that it is the owner of patents, know-how or other
intellectual property or technology expressly licensed or sub-
licensed to Depomed pursuant to the Elan License Agreement), Targon
Corporation, Athena Neurosciences, Inc., Elan Pharmaceuticals, Inc.,
Elan Diagnostics, Carnrick Laboratories, and Elan Europe Limited.
"Elan Improvements" shall mean improvements relating to:
(i) the Nano Know-How and/or the Nano Patents;
(ii) the Elan Corp CR Know-How and/or the Elan Corp CR Patents; and
(iii) the [**];
8
developed (i) by Elan whether or not pursuant to the Project, (ii) by Newco
or Depomed or by an independent third party (under contract with Newco)
pursuant to the Project, and/or (iii) jointly by any combination of Elan,
Depomed or Newco pursuant to the Project, except as limited by agreements
with independent third parties.
Subject to independent third party agreements, Elan Improvements shall
constitute part of Elan Intellectual Property and shall, upon development,
be included in the licenses of the Elan Intellectual Property pursuant to
Clause 2.1 of the Elan License Agreement solely for the purposes set forth
therein. If the inclusion of a Elan Improvement in the license of Elan
Intellectual Property is restricted or limited by an independent third
party agreement, Elan shall use reasonable commercial efforts to exclude or
minimize any such restriction or limitation.
"Elan Corp CR Know-How" shall, subject to the exclusions set forth in the
definition of "Elan Excluded Intellectual Property" and Clause 4.2 of the
Elan License Agreement, mean any and all rights owned, licensed or
controlled by Elan Corp on the Closing Date to any discovery or invention
(whether patentable or not) and owned, licensed or controlled by Elan Corp
on the Closing Date to any know-how, substances, data, techniques,
processes, systems, formulations, designs, knowledge, expertise and
information relating to oral controlled release formulation technologies.
"Elan Corp CR Patents" shall, subject to the exclusions set forth in the
definition of "Elan Excluded Intellectual Property" and Clause 4.2 of the
Elan License Agreement, mean any and all rights under any and all patents
applications and/or patents, now existing, currently pending or hereafter
filed or obtained by Elan Corp on inventions conceived or reduced to
practice on or before the Closing Date relating to oral controlled release
formulation technologies and any foreign counterparts thereof and all
divisionals, continuations, continuations-in-part, patents of addition,
supplementary protection certificates, any foreign counterparts thereof and
all patents issuing on, any of the foregoing, together with all
registrations, reissues, re-examinations or extensions thereof.
"EGTS Know-How" shall mean any and all discoveries or inventions (whether
patentable or not), know-how, substances, data, techniques, processes,
systems, formulations, designs, knowledge, expertise and information
relating to the EGTS Technology [**].
"EGTS Patents" shall mean the patents relating to the EGTS Technology, as
set forth in Schedule 1 of the Elan License Agreement, which were assigned
by [**] and all divisionals, continuations, continuations-in-part, patents
of addition, supplementary protection certificates, any foreign
counterparts thereof and all patents issuing on, any of the foregoing,
together with all registrations, reissues, re-examinations or extensions
thereof..
9
"EGTS Technology" shall mean the technology directly relating to the [**].
"Encumbrance" shall mean any liens, charges, encumbrances, equities,
claims, options, proxies, pledges, security interests, or other similar
rights of any nature.
"EPIL" shall mean Elan Pharma International Limited and Affiliates of Elan
Corporation, Plc. within the division of Elan Corporation, Plc. carrying on
business as Elan Pharmaceutical Technologies but shall not include
Affiliates (present or future) of Elan Corporation Plc within the division
of Elan Corporation, Plc carrying on business as Elan Pharmaceuticals which
incorporates, inter alia, Targon Corporation, Athena Neurosciences, Inc.,
Elan Pharmaceuticals, Inc., Elan Diagnostics, Carnrick Laboratories, and
Elan Europe Limited.
"EPIL [**] Know-How" shall, subject to the exclusions set forth in the
definition of "Elan Excluded Intellectual Property" and Clause 4.2 of the
Elan License Agreement, mean [**], including but not limited to:
(i) the EGTS Know-How; and
(ii) the [**] Know-How.
"EPIL [**] Patents" shall, subject to the exclusions set forth in the
definition of "Elan Excluded Intellectual Property" and Clause 4.2 of the
Elan License Agreement, mean any and all rights under any and all patents
applications and/or patents, now existing, currently pending or hereafter
filed or obtained by EPIL on inventions conceived or reduced to practice on
or before the Closing Date relating to [**] Technology, including but not
limited to the EGTS Patents, and any foreign counterparts thereof and all
divisionals, continuations, continuations-in-part, patents of addition,
supplementary protection certificates, any foreign counterparts thereof and
all patents issuing on, any of the foregoing, together with all
registrations, reissues, re-examinations or extensions thereof.
[**]
"Exchange Right" has the meaning assigned to such term in the Certificate
of Designations in effect on the Closing Date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDA" shall mean the United States Food and Drug Administration or any
other successor agency in the USA.
"Financial Year" shall mean each year commencing on January 1 (or in the
case of the first Financial Year, the Closing Date) and expiring on
December 31 of
10
each year.
"[**] Field" shall mean [**].
"[**] Product" shall mean [**].
"Fields" shall mean the [**] Field, the [**] Field and the [**] Field.
"Fully Diluted Common Stock" shall mean all of the issued and outstanding
Common Stock, assuming the conversion, exercise or exchange of all
outstanding Common Stock Equivalents.
"Funding Agreement" shall mean the Funding Agreement, dated as of the
Closing Date, between Elan and Depomed.
"[**] Technology" shall mean [**].
"[**] Field" shall mean [**].
"[**] Product" shall mean [**].
"[**] Know-How" shall mean[**].
"[**] Technology" shall mean [**].
"License Agreements" shall mean the Elan License Agreement and the Depomed
License Agreement.
"Licensed Technologies" shall mean, collectively, the Elan Intellectual
Property and the Depomed Intellectual Property.
"Nano Know-How" shall, subject to the exclusions set forth in the
definition of "Elan Excluded Intellectual Property" and Clause 4.2 of the
Elan License Agreement, mean any and all rights owned, licensed to or
controlled by EPIL on the Closing Date to any discovery or invention
(whether patentable or not) and owned, licensed to or controlled by EPIL on
the Closing Date to any know-how, substances, data, techniques, processes,
systems, formulations, designs, knowledge, expertise and information
relating to Nanocrystal(R) Technology.
"Nano Patents" shall, subject to the exclusions set forth in the definition
of "Elan Excluded Intellectual Property" and Clause 4.2 of the Elan License
Agreement, mean any and all rights under any and all patents applications
and/or patents, now existing, currently pending or hereafter filed or
obtained by EPIL on inventions conceived or reduced to practice on or
before the Closing Date relating to Nanocrystal(R) Technology and any
foreign counterparts thereof and all divisionals, continuations,
continuations-in-part, patents of addition,
11
supplementary protection certificates, any foreign counterparts thereof and
all patents issuing on, any of the foregoing, together with all
registrations, reissues, re-examinations or extensions thereof.
"Nanocrystal(R) Technology" shall mean the EPIL proprietary technology
directly related to nanoparticulate formulations of compounds used in the
manufacturing and/or formulation process, and methods of making the same.
"Newco Bye-Laws" shall mean the Memorandum of Association and Bye-Laws of
Newco
"Newco Intellectual Property" shall mean all rights to patents, know-how
and other intellectual property arising out of the conduct of the Project
by any person, including any technology acquired by Newco from a third
party, that does not constitute Elan Intellectual Property or Depomed
Intellectual Property.
"Newco Patents" shall mean any and all patents now existing, currently
pending or hereafter filed or obtained relating to the Newco Intellectual
Property, and any foreign counterparts thereof and all divisionals,
continuations, continuations-in-part, patents of addition, supplementary
protection certificates, any foreign counterparts thereof and all patents
issuing on, any of the foregoing, together with all registrations,
reissues, re-examinations or extensions thereof.
"[**]" shall mean [**].
"[**] Agreement" shall mean [**].
"[**] Amendment Agreement" shall mean [**].
"Participant" shall mean Depomed or Elan, as the case may be, and
"Participants" shall mean both of the Participants together;
"Party" shall mean EPIL, EIS, Elan Corp, Depomed, or Newco, as the case may
be, and "Parties" shall mean all five together;
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental entity or authority
or other entity of whatever nature.
"Permitted Transferee" shall mean any Affiliate or subsidiary of Elan, EPIL
or EIS or Depomed, to whom this Agreement may be assigned, in whole or in
part, pursuant to the terms hereof or in the case of Elan, EPIL or EIS, a
special purpose financing entity created by Elan, EPIL or EIS.
"Product(s)" shall mean [**].
12
"Project" shall mean all activity as undertaken by or on behalf of Newco in
order to develop the Products in accordance with the Business Plan.
"Registration Rights Agreements" shall mean the Registration Rights
Agreements of even date herewith relating to Newco and Depomed,
respectively.
"Regulatory Application" shall mean any regulatory application or any other
application for marketing approval for a Product, which Newco will file in
any country of the Territory, including any supplements or amendments
thereto.
"Regulatory Approval" shall mean the final approval to market a Product in
any country of the Territory, and any other approval which is required to
launch the Product in the normal course of business.
"RHA" shall mean any relevant government health authority (or successor
agency thereof) in any country of the Territory whose approval is necessary
to market a Product in the relevant country of the Territory.
"Securities Act" shall mean the US Securities Act of 1933, as amended.
"Shares" shall mean the shares of Common Stock and shares of Preferred
Stock of Newco.
"[**] License Agreement" shall mean [**].
"[**] Field" shall mean [**].
"[**] Product" shall mean [**].
"Stockholder" shall mean any of EIS, Depomed, any Permitted Transferee or
any other Person who subsequently becomes bound by this Agreement as a
holder of the Shares, and "Stockholders" shall mean all of the Stockholders
together.
"Technological Competitor of Elan" shall mean a company, corporation or
person listed in Schedule 3 and successors thereof or any additional broad-
based technological competitor of Elan added to such Schedule from time to
time upon mutual agreement of the Parties.
"Technological Competitor of Depomed" shall mean a company, corporation or
person listed in Schedule 4 and successors thereof or any additional broad-
based technological competitor of Depomed added to such Schedule from time
to time upon mutual agreement of the Parties.
"Term" shall mean the term of this Agreement.
"Territory" shall mean all of the countries of the world.
13
"United States Dollar" and "US$" and "$" shall mean the lawful currency of
the United States of America.
1.2 In addition, the following definitions have the meanings in the Clauses
corresponding thereto, as set forth below.
Definition Clause
"AAA" 18.4
"Buyout Option" 19.4
"Closing" 4.3
"Common Stock" Recital
"Confidential Information" 21.1
"Co-sale Notice" 16.4
"Expert" 18.4
"Management Committee" 5.2.1
"Notice of Exercise" 16.3
"Notice of Intention" 16.3
"Offered Shares" 16.3
"Offer Price" 16.3
"Preferred Stock" Recital
"Proposing Participant" 19.4
"Proposing Participant Price: 19.6
"Purchase Price" 19.6
"R&D Committee" 5.2.3
"Recipient Participant" 19.4
"Recipient Participant Price" 19.6
"Remaining Stockholders" 16.4
"Relevant Event" 19.2
"Selling Stockholder" 16.3
"Tag-Along Right" 16.4
"Transaction Proposal" 16.3
"Transfer" 16.1
"Transferee Terms" 16.4
"Transferring Stockholder" 16.4
1.3 Words importing the singular shall include the plural and vice versa.
1.4 Unless the context otherwise requires, reference to a recital, article,
paragraph, provision, clause or schedule is to a recital, article,
paragraph, provision, clause or schedule of or to this Agreement.
1.5 Reference to a statute or statutory provision includes a reference to it as
from time to time amended, extended or re-enacted.
14
1.6 The headings in this Agreement are inserted for convenience only and do not
affect its construction.
1.7 Unless the context or subject otherwise requires, references to words in
one gender include references to the other genders.
1.8 Capitalized terms used but not defined herein shall have the meanings
ascribed in the Definitive Documents, if defined therein.
CLAUSE 2
BUSINESS
2.1 This Agreement shall regulate the business of the development, testing,
registration, manufacture, commercialization and licensing of Products in
the Territory and to achieve the other objectives set out in this
Agreement. The focus of the Business will be to develop the Products using
the Elan Intellectual Property, the Depomed Intellectual Property and the
Newco Intellectual Property to agreed-upon specifications and timelines.
2.2 The central management and control of Newco shall be exercised in Bermuda
and shall be vested in the Directors and such Persons as they may delegate
the exercise of their powers in accordance with the Newco Bye-Laws. The
Stockholders agree to conduct the Business in such a manner as to ensure
that Newco is liable to taxation in Bermuda and not in any other
jurisdiction. The Stockholders shall use their best endeavors to ensure the
sole residence of Newco in Bermuda, all meetings of the Directors are held
in Bermuda or other jurisdictions outside the United States and Ireland and
generally to ensure that Newco is treated as resident for taxation purposes
in Bermuda.
2.3 An additional Compound or Compounds may be selected and designated as
Compound(s) by the unanimous vote of the Management Committee. In such
case, the Parties shall negotiate in good faith such amendments as are
required to this Agreement and the License Agreements, such as amending the
provisions of the License Agreements regulating non-competition.
CLAUSE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Newco: Newco hereby represents and
---------------------------------------
warrants to each of the Stockholders as follows, as of the Closing Date:
15
3.1.1 Organization: Newco is an exempted company duly organized,
------------
validly existing and in good standing under the laws of
Bermuda, and has all the requisite corporate power and
authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be
conducted.
3.1.2 Capitalization: As of the Closing Date, the authorized capital
stock of Newco consists of 6,000 shares of Common Stock and
6,000 shares of Preferred Stock. Prior to the Closing Date, no
shares of capital stock of Newco have been issued.
3.1.3 Authorization: The execution, delivery and performance by Newco
-------------
of this Agreement, including the issuance of the Shares, have
been duly authorized by all requisite corporate actions; this
Agreement has been duly executed and delivered by Newco and is
the valid and binding obligation of Newco, enforceable against
it in accordance with its terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the enforcement of
creditors' rights generally, and except as enforcement of
rights to indemnity and contribution hereunder may be limited
by United States federal or state securities laws or principles
of public policy. The Shares, when issued as contemplated
hereby, will be validly issued and outstanding, fully paid and
non-assessable and not subject to preemptive or any other
similar rights of the Stockholders or others.
3.1.4 No Conflicts: The execution, delivery and performance by Newco
------------
of this Agreement, the issuance, sale and delivery of the
Shares, and compliance with the provisions hereof by Newco,
will not:
(i) violate any provision of applicable law, statute, rule or
regulation applicable to Newco or any ruling, writ,
injunction, order, judgment or decree of any court,
arbitrator, administrative agency or other governmental
body applicable to Newco or any of its properties or
assets;
(ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with
notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or
acceleration) under its charter or organizational
documents or any material contract to which Newco is a
party, except where such violation, conflict or breach
would not, individually or in the aggregate, have a
material adverse effect on Newco; or
(iii) result in the creation of, any Encumbrance upon any of
the properties or assets of Newco.
16
3.1.5 Approvals: As of the Closing Date, no permit, authorization, consent
---------
or approval of or by, or any notification of or filing with, any
Person is required in connection with the execution, delivery or
performance of this Agreement by Newco. Newco has full authority to
conduct its business as contemplated in the Business Plan and the
Definitive Documents.
3.1.6 Disclosure: This Agreement does not contain any untrue statement
----------
of a material fact or omit to state any material fact necessary to
make the statements contained herein not misleading. Newco is not
aware of any material contingency, event or circumstance relating to
its business or prospects, which could have a material adverse
effect thereon, in order for the disclosure herein relating to Newco
not to be misleading in any material respect.
3.1.7 No Business; No Liabilities: Newco has not conducted any business
---------------------------
or incurred any liabilities or obligations prior to the Closing
Date, except solely in connection with its organization and
formation.
3.2 Representations and Warranties of the Stockholders: Each of the
---------------------------------------------------
Stockholders and Elan (where expressly stated) hereby severally represents
and warrants to Newco as follows as of the Closing Date:
3.2.1 Organization: Such Stockholder and Elan is a corporation duly
------------
organized and validly existing under the laws of its jurisdiction of
organization and has all the requisite corporate power and authority
to own and lease its respective properties, to carry on its
respective business as presently conducted and as proposed to be
conducted and to carry out the transactions contemplated hereby.
3.2.2 Authority: Such Stockholder and Elan has full legal right, power
---------
and authority to enter into this Agreement and to perform its
obligations hereunder, which have been duly authorized by all
requisite corporate action. This Agreement is the valid and binding
obligation of such Stockholder and Elan, enforceable against it in
accordance with its terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the enforcement of creditors' rights
generally, and except as enforcement of rights to indemnity and
contribution hereunder may be limited by United States federal or
state securities laws or principles of public policy.
3.2.3 No Conflicts: The execution, delivery and performance by such
------------
Stockholder and Elan of this Agreement, purchase of the Shares by
such Stockholder, and compliance with the provisions hereof by such
Stockholder and Elan will not:
17
(i) violate any provision of applicable law, statute, rule or
regulation known by and applicable to such Stockholder or Elan
or any ruling, writ, injunction, order, judgment or decree of
any court, arbitrator, administrative agency or other
governmental body applicable to such Stockholder or Elan or any
of its properties or assets;
(ii) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with notice or lapse
of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under the charter or
organizational documents of such Stockholder or Elan or any
material contract to which such Stockholder or Elan is a party,
except where such violation, conflict or breach would not,
individually or in the aggregate, have a material adverse effect
on such Stockholder or Elan; or
(iii) result in the creation of, any Encumbrance upon any of the
properties or assets of such Stockholder or Elan.
3.2.4 Approvals: As of the Closing Date, no permit, authorization, consent
----------
or approval of or by, or any notification of or filing with, any
Person is required in connection with the execution, delivery or
performance of this Agreement by such Stockholder or Elan.
3.2.5 Investment Representations: Such Stockholder is sophisticated in
--------------------------
transactions of this type and capable of evaluating the merits and
risks of its investment in Newco. Such Stockholder has not been
formed solely for the purpose of making this investment and such
Stockholder is acquiring the Common Stock and Preferred Stock for
investment for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution
of any part thereof. Such Stockholder understands that the Shares
have not been registered under the Securities Act or applicable state
and foreign securities laws by reason of a specific exemption from
the registration provisions of the Securities Act and applicable
state and foreign securities laws, the availability of which depends
upon, among other things, the bona fide nature of the investment
intent and the accuracy of such Stockholders' representations as
expressed herein. Such Stockholder understands that no public market
now exists for any of the Shares and that there is no assurance that
a public market will ever exist for such Shares.
18
CLAUSE 4
AUTHORIZATION AND CLOSING
4.1 Newco has authorized the issuance to (i) EIS of 2,388 shares of Preferred
Stock and (ii) Depomed of 6,000 shares of Common Stock and 3,612 shares of
Preferred Stock, issuable as provided in Clause 4.4 hereof.
4.2 Depomed and EIS hereby subscribe for the number of Shares set forth in
Clause 4.1 and shall pay to Newco in consideration therefore, by wire
transfer of immediately available funds (to a bank account established by
Newco in connection with the Closing) the subscription amounts each as
provided in Clause 4.4.1.
4.3 The closing (the "Closing") shall take place at the offices of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ LLC at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on the
Closing Date or such other places if any, as the Parties may agree and
shall occur contemporaneously with the closing under the Depomed Securities
Purchase Agreement.
4.4 At the Closing, each of the Stockholders shall take or (to the extent
within its powers) cause to be taken the following steps at Directors and
shareholder meetings of Newco, or such other meetings, as appropriate:
4.4.1 Newco shall issue and sell to EIS, and EIS shall purchase from
Newco, upon the terms and subject to the conditions set forth
herein, 2,388 shares of Preferred Stock for an aggregate purchase
price of $[**]. Newco shall issue and sell to Depomed, and Depomed
shall purchase from Newco, upon the terms and conditions set forth
herein, (i) 6,000 shares of Common Stock for an aggregate purchase
price of $[**] and (ii) 3,612 shares of Preferred Stock for an
aggregate purchase price of $[**].
4.4.2 the Parties shall execute and deliver to each other, as applicable,
certificates in respect of the Common Stock and Preferred Stock
described above and any other certificates, resolutions or documents
which the Parties shall reasonably require;
4.4.3. the adoption by Newco of Newco Bye-Laws;
4.4.4. the appointment of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ as Directors of Newco;
4.4.5. the resignation of all directors and the secretary of Newco holding
office prior to the execution of this Agreement and delivery of
written confirmation under seal by each Person so resigning that he
has no claim
19
or right of action against Newco and that Newco is not in any way
obligated or indebted to him; and
4.4.6. the transfer to Newco of the share register.
4.5 Exemption from Registration:
----------------------------
The Shares will be issued under an exemption or exemptions from
registration under the Securities Act. Accordingly, the certificates
evidencing the Shares shall, upon issuance, contain the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
SECURITIES LAWS OF A STATE OR OTHER JURISDICTION AND MAY NOT
UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF (OTHER THAN TO AN AFFILIATE OF THE ORIGINAL
HOLDER OR AS OTHERWISE PERMITTED IN THE AGREEMENT PURSUANT
TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, OR
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE SECURITIES
ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING
TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR APPLICABLE
STATE SECURITIES LAWS.
4.6. Newco shall use reasonable efforts to file any documents that require
filing with the Registrar of Companies in Bermuda within the prescribed
time limits. EIS and Depomed shall provide all reasonable co-operation to
Newco in relation to the matters set forth in this Clause 4.6.
4.7. In the event that EIS validly exercises the Exchange Right, Newco shall,
immediately upon such exercise, take all necessary steps to ensure that EIS
is duly and validly issued and has full legal right, title and interest in
and to the shares of Preferred Stock covered thereby. The Parties
acknowledge that such Shares have been pledged to EIS pursuant to the
Depomed Securities Purchase Agreement and that the [**] has physical
possession of such Shares pursuant to the [**]; upon such exercise, EIS
shall be entitled to physical possession of such Shares, which shall be
owned by EIS as provided above. In connection with the foregoing,
20
Newco and the Participants shall take all necessary or appropriate steps to
ensure such ownership by EIS.
CLAUSE 5
DIRECTORS; MANAGEMENT AND R&D COMMITTEES
5.1. Directors:
---------
5.1.1 Prior to the exercise of the Exchange Right, the Board shall be
composed of five Directors.
Depomed shall have the right to nominate four directors of Newco,
("Depomed Directors") and EIS shall have the right to nominate one
Director of Newco ("EIS Director") which Director, save as further
provided herein, shall only be entitled to 15% of the votes of the
Board.
In the event that the Exchange Right is exercised by EIS within 2
years following the Closing Date, the EIS Director shall only be
entitled to 15% of the votes of the Board until the expiry of 2
years from the Closing Date.
In the event that the Exchange Right is exercised by EIS at any time
after two years following the Closing Date or upon the expiry of 2
years following the Closing Date where the Exchange Right has been
exercised by EIS within 2 years following the Closing Date, each of
Depomed, and EIS shall cause the Board to be reconfigured so that an
equal number of Directors are designated by EIS and Depomed and that
each of the Directors has equal voting power.
5.1.2 If EIS removes the EIS Director, or Depomed removes any of the
Depomed Directors, EIS or Depomed, as the case may be, shall
indemnify the other Stockholder against any claim by such removed
Director arising from such removal.
5.1.3 The Directors shall meet not less than three times in each Financial
Year and all Board meetings shall be held in Bermuda to the extent
required pursuant to the laws of Bermuda or to ensure the sole
residence of Newco in Bermuda.
5.1.4 At any such meeting, the presence of the EIS Director and all of the
Depomed Directors shall be required to constitute a quorum and,
subject to Clause 17 hereof, the affirmative vote of all of the
Directors present at a meeting (in person or by telephone) at which
such a quorum is present shall constitute an action of the
Directors. In the event of any meeting being inquorate, the meeting
shall be adjourned for a period of seven days. A
21
notice shall be sent to the EIS Director and the Depomed Directors
specifying the date, time and place where such adjourned meeting is
to be held and reconvened.
5.1.5 On the Closing Date, Depomed may appoint one of the Depomed
Directors to be the chairman of Newco. The chairman of Newco shall
hold office until:
(i) the first meeting of the Board following the exercise by EIS
of the Exchange Right, where the Exchange Right has been
exercised by EIS after two years following the Closing Date;
or
(ii) the first meeting of the Board following the expiry of 2 years
following the Closing Date where the Exchange Right has been
exercised by EIS within 2 years following the Closing Date
(in each case the "Chairman Status Board Meeting")
After the Chairman Status Board Meeting, each of EIS and Depomed,
beginning with EIS at the Chairman Status Board Meeting, shall have
the right, exercisable alternatively, of nominating one Director to
be chairman of Newco for a term of one year.
If the chairman is unable to attend any meeting of the Board held
prior to the Chairman Status Board Meeting, the Depomed Directors
shall be entitled to appoint another Depomed Director to act as
chairman in his place at the meeting.
If the chairman of Newco is unable to attend any meeting of the
Board held after the Chairman Status Board Meeting, the Directors
shall be entitled to appoint another Director to act as chairman of
Newco in his place at the meeting.
5.1.6 In case of an equality of votes at a meeting of the Board, the
chairman of Newco shall not be entitled to a second or casting
vote. In the event of continued deadlock, the Board shall resolve
the deadlock pursuant to the provisions set forth in Clause 18.
5.2 Management and R&D Committees:
------------------------------
5.2.1 The Board shall appoint a management committee (the "Management
Committee") to consist initially of four members, two of whom shall
be nominated by Elan and two of whom shall be nominated by Depomed,
and each of whom shall be entitled to one vote, whether or not
present at any Management Committee meeting. Decisions of the
Management Committee shall require unanimous approval of all the
nominees on the Management Committee.
22
5.2.2 Each of Elan and Depomed shall be entitled to remove any of its
nominees to the Management Committee and appoint a replacement in
place of any nominee so removed. The number of members of the
Management Committee may be altered if agreed to by a majority of
the Directors; provided that, each of Elan and Depomed shall be
entitled to appoint an equal number of members to the Management
Committee. The Management Committee shall be responsible for, inter
alia, devising, implementing and reviewing strategy for the Project.
5.2.3 The Management Committee shall appoint a research and development
committee (the "R&D Committee"), which shall initially be comprised
of four members, two of whom shall be nominated by Elan and two of
whom shall be nominated by Depomed, and each of whom shall have one
vote, whether or not present at an R&D Committee meeting. Decisions
of the R&D Committee shall require approval of at least one Elan
nominee on the R&D Committee and one Depomed nominee on the R&D
Committee.
5.2.4 Each of Elan and Depomed shall be entitled to remove any of its
nominees to the R&D Committee and appoint a replacement in place of
any nominee so removed. The number of members of the R&D Committee
may be altered if agreed to by a majority of the directors of Newco
provided that each of Elan and Depomed shall be entitled to appoint
an equal number of members to the R&D Committee.
5.2.5 The R&D Committee shall be responsible for:-
(i) designing that portion of the Business Plan that relates to
the Project for consideration by the Management Committee;
(ii) establishing a joint Project team consisting of an equal
number of team members from Elan and Depomed, including one
Project leader from each of Elan and Depomed; and
(iii) implementing such portion of the Business Plan that relates to
the Project, as approved by the Management Committee.
5.2.5 In the event of any dispute amongst the R&D Committee, the R&D
Committee shall refer such dispute to the Management Committee whose
decision on the dispute shall be binding on the R&D Committee.
If the Management Committee cannot resolve the matter after 15 days
or such other period as may be agreed by the Management Committee,
the dispute will be referred to a designated senior officer of each
of Elan and Depomed and thereafter, in the event of continued
deadlock, pursuant to the deadlock provisions to be set forth in
Clause 18, involving inter alia,
23
the referral of the dispute to an expert, whose decision, however,
will ultimately be non-binding on the Participants. This process
shall also apply to any dispute within the Management Committee.
5.2.6 Elan and Depomed shall permit Newco or its duly authorized
representative on reasonable notice and at any reasonable time
during normal business hours to have access to inspect and audit the
accounts and records of Elan or Depomed and any other book, record,
voucher, receipt or invoice relating to the calculation or the cost
of the R&D Program and to the accuracy of the reports which
accompanied them. Any such inspection of Elan's or Depomed's
records, as the case may be, shall be at the expense of Newco,
except that if such inspection reveals an overpayment in the amount
paid to Elan or Depomed, as the case may be, for the R&D Program
hereunder in any Financial Year of 5% or more of the amount due to
Elan or Depomed, as the case may be, then the expense of such
inspection shall be borne solely by Elan or Depomed, as the case may
be, instead of by Newco. Any surplus over the sum properly payable
by Newco to Elan or Depomed, as the case may be, shall be paid
promptly by Elan or Depomed, as the case may be, to Newco. If such
inspection reveals a deficit in the amount of the sum properly
payable to Elan or Depomed, as the case may be, by Newco, Newco
shall pay the deficit to Elan or Depomed, as the case may be.
CLAUSE 6
THE BUSINESS PLAN AND REVIEWS
6.1 The Directors shall meet together as soon as reasonably practicable after
the Closing Date and shall agree upon and approve the Business Plan for the
current Financial Year within 60 days of the Closing Date.
6.2 The Business Plan shall be reviewed and mutually agreed to by Elan
Corporation, Plc. and Depomed Inc. on a quarterly basis.
6.3 The Business Plan shall be subject to ongoing review by the Directors and
the approval of the EIS Director and a majority of the Depomed Directors on
a quarterly basis.
6.4 Neither Participant shall be obliged to provide funding to Newco in the
absence of quarterly approval of the Business Plan and a determination by
each Participant, in its sole discretion, that Subsequent Funding (as such
term is defined in the Funding Agreement) shall be provided for the
development of the Products.
24
CLAUSE 7
RESEARCH AND DEVELOPMENT WORK
7.1 Elan and Depomed, at their respective discretion, may undertake research
and development work related to the development and commercialization of
the Products, at the request of Newco and as articulated in the Business
Plan, in furtherance of the development and commercialisation of the
Products and cultivation of patent rights and know-how related to the Elan
Intellectual Property, Depomed Intellectual Property and Newco Intellectual
Property.
7.2 The cost of such development work shall be Elan's and Depomed's, as the
case may be, fully-burdened actual costs in respect thereof plus [**] of
such costs. Research and development work that is sub-contracted by Elan
or Depomed to third party providers shall be charged by Elan or Depomed to
Newco [**].
CLAUSE 8
COMMERCIALIZATION
8.1 Newco shall diligently pursue the research, development, prosecution and
commercialization of the Products, as provided in the Business Plan.
8.2 At any time during the development of the Products, Newco may, subject to
the Licenses and Clause 8.3. license the marketing rights to the Products
to one or more marketing partners, or otherwise commercialize the Products
under an alternative strategy to be agreed upon by Elan Corporation, Plc.
and Depomed Inc.
8.3 Newco shall be responsible for negotiating with third parties commercially
reasonable terms (e.g. royalties, milestones, fees, profit sharing,
manufacturing rights, supply terms etc.) for the rights to be granted, but
shall do so under the commercial strategy agreed with Elan and Depomed and
shall keep Elan and Depomed informed throughout the negotiation process.
At such time as Newco notifies Elan in writing that Newco in good faith
intends to commercialize a Product, Elan shall have a first option to
negotiate the terms of any agreement for the commercialization of such
Product, which option shall be exercised within 45 days of Elan's receipt
of such written notification from Newco (the "Elan/Newco Option").
If, despite good faith negotiations, Elan and Newco do not reach agreement
within 120 days from Elan's exercise of the Elan/Newco Option, then Newco
shall be free for a period of 6 months thereafter to enter into
negotiations with a third party (other than a Technological Competitor of
Elan or a Technological Competitor of Depomed) to agree to terms upon which
the third party would commercialize the
25
relevant Product in the Territory, which terms when taken as a whole, are
not more favourable to the third party than the principal terms of the last
written proposal offered by Newco to Elan or by Elan to Newco, as the case
may be.
If Newco has not entered into an agreement with a third party within the 6
month period described above, the Elan/Newco Option shall be deemed to have
re-commenced upon the same terms as set forth herein.
CLAUSE 9
OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS [**]
9.1. The Parties acknowledge and agree to be bound by the provisions of Clause
3.1 of the Elan License Agreement and Clause 3.1 of the Depomed License
Agreement which set forth the agreement between the parties thereto in
relation to the ownership of the Elan Intellectual Property, the Depomed
Intellectual Property and the Newco Intellectual property respectively.
9.2 The Parties acknowledge and agree to be bound by the provisions of Clause 4
of the Elan License Agreement and the provisions of Clause 4 of the Depomed
License Agreement which set forth the agreement between the parties thereto
in relation to [**], respectively.
CLAUSE 10
INTELLECTUAL PROPERTY RIGHTS
10.1 Patent Preparation, Prosecution and Maintenance:
------------------------------------------------
10.1.1 Elan, at its expense and sole discretion shall have the option:-
(i) to secure the grant of any patent applications within the
Elan Intellectual Property;
(ii) to defend all such applications against third party
oppositions; and
(iii) to maintain in force any issued letters patent within the
Elan Intellectual Property.
10.1.2 Depomed, at its expense and sole discretion shall have the option:-
(i) to secure the grant of any patent applications within the
Depomed Intellectual Property;
26
(ii) to defend all such applications against third party
oppositions; and
(iii) to maintain in force any issued letters patent within the
Depomed Intellectual Property.
10.1.3 Newco, at its expense and sole discretion shall have the option:-
(i) to secure the grant of any patent applications within the
Newco Intellectual Property;
(ii) to defend all such applications against third party
oppositions; and
(iii) to maintain in force any issued letters patent within the
Newco Intellectual Property.
10.1.4 In the event that either Elan or Depomed does not intend to seek
patent protection for either Elan Intellectual Property or Depomed
Intellectual Property respectively that relate to the Field in one
or more countries in the Territory or fails to file such an
application within a reasonable period of time, Newco shall have
the right, but not the obligation, at Newco's sole expense to file
and prosecute such patent application(s) in the joint names of
Newco and the relevant Party. Upon written request from Newco, the
party not seeking patent protection for its own intellectual
property shall execute all documents, forms and declarations and do
all things as shall be reasonably necessary to enable Newco to
exercise such option and right.
10.2 Enforcement:
------------
10.2.1 The Parties and Newco shall promptly inform each other in writing
of any unauthorized use or alleged unauthorized use within the Elan
Intellectual Property, Depomed Intellectual Property or the Newco
Intellectual Property by a third party of which it becomes aware
and provide the other Parties with any available evidence of such
infringement or misappropriation.
10.2.2 During the term of the License Agreements, Elan shall have the
first right but not the obligation to bring suit or otherwise take
action against any actual or alleged unauthorized use of the Elan
Intellectual Property. In the event that Elan takes such action,
Elan shall do so at its own cost and expense and all damages and
monetary awards recovered in or with respect to such action shall
be the property of Elan. At Elan's request, Depomed and Newco will
cooperate with any such action at Elan's cost and expense.
10.2.3 During the term of the License Agreements, Depomed shall have the
first right but not the obligation to bring suit or otherwise take
action against
27
any actual or alleged unauthorized use of the Depomed Intellectual
Property. In the event that Depomed takes such action, Depomed
shall do so at its own cost and expense and all damages and
monetary awards recovered in or with respect to such action shall
be the property of Depomed. At Depomed's request, Elan and Newco
will cooperate with any such action at Depomed's cost and expense.
10.2.4 During the term of the License Agreements, Newco shall have the
first right but not the obligation to bring suit or otherwise take
action against any actual or alleged unauthorized use of the Neweco
Intellectual Property. In the event that Newco takes such action,
Newco shall do so at its own cost and expense and all damages and
monetary awards recovered in or with respect to such action shall
be the property of Newco. At Newco's request, Elan and Depomed will
cooperate with any such action at Newco's cost and expense.
10.2.5 In the event that the owner of the intellectual property at issue
decides not to pursue such unauthorized users of its intellectual
property, within a reasonable period but in any event within
fifteen (15) days after receiving written notice of such alleged
infringement or misappropriation, then Newco may in its discretion
initiate such proceedings in its own name, at its expense and for
its own benefit. At Newco's request, the owner of the intellectual
property at issue will cooperate with such action at Newco's sole
cost and expense. Alternatively, the Parties may agree to institute
such proceedings in their joint names and shall reach agreement as
to the proportion in which they will share the proceeds of any such
proceedings, and the expense of any costs not recovered, or the
costs or damages payable to the third party.
10.3 Defense:
--------
10.3.1 In the event that a claim is brought against any Party by a third
party alleging that the sale, distribution or use of any of the
Products in the Territory infringes the intellectual property
rights of such third party, that Party shall promptly advise the
other Parties of such threat or suit.
10.3.2 Newco shall indemnify, defend and hold Elan or Depomed, as the case
may be, harmless against all actions, losses, claims, demands,
damages, costs and liabilities (including reasonable attorneys
fees) relating directly or indirectly to all such claims or
proceedings referred to in Clause 10.3.1 provided that Elan or
Depomed, as the case may be, shall not acknowledge to the third
party or to any other person the validity of any claims of such a
third party, and shall not compromise or settle any claim or
proceedings relating thereto without the prior written consent of
Newco, not to be unreasonably withheld or delayed. At its option,
Elan or Depomed, as the case may be, may elect to take over the
conduct of such proceedings from
28
Newco; provided that Newco's indemnification obligations shall
continue; the costs of defending such claim shall be borne by Elan
or Depomed, as the case may be; and such Party shall not compromise
or settle any such claim or proceeding without the prior written
consent of Newco, such consent not to be unreasonably withheld or
delayed.
10.4 For the avoidance of doubt, Newco shall not be entitled to enforce or
assert the EGTS Patents against [**].
CLAUSE 11
CROSS LICENSING/EXPLOITATION OF NEWCO INTELLECTUAL
PROPERTY OUTSIDE THE FIELD
11.1 Solely for the purpose of and insofar as is necessary, in each case, for
Elan to conduct research and development work on behalf of Newco, Newco
shall grant to Elan:
11.1.1 a non-exclusive, worldwide, royalty-free, fully paid-up license for
the Term to use the Newco Intellectual Property in the Fields; and
11.1.2 subject to the terms and conditions of the Depomed License, a non-
exclusive, worldwide, royalty-free, fully paid-up sublicense for
the Term to use the Depomed Intellectual Property in the [**] Field
and the [**] Field.
11.2 Solely for the purpose of and insofar as is necessary, in each case, for
Depomed to conduct research and development work on behalf of Newco, Newco
shall grant to Depomed:
11.2.1 a non-exclusive, worldwide, royalty-free, fully paid-up license for
the Term to use the Newco Intellectual Property in the Fields, and
11.2.2 the following sublicenses:
(1) subject to the terms and conditions of the Elan Licenses, a
non-exclusive, worldwide, royalty-free, fully paid-up
sublicense for the Term to use the Elan Corp CR Know How, Elan
Corp CR Patents, Nano Know How, the Nano Patents, the EGTS
Patents and the EGTS Know How in the Fields;
(2) subject to the terms and conditions of the Elan Licenses, a
non-exclusive, worldwide, royalty-free, fully paid-up
sublicense for the Term to use the [**] Know How in the [**]
Field.
29
11.3 Elan shall be entitled to exploit the Newco Intellectual Property that
relates predominantly to the Elan Intellectual Property outside the Fields
subject to the Parties negotiating an arms' length license agreement in
good faith (including all material provisions thereof, including as to
whether the license should be exclusive or non-exclusive), pursuant to
which Newco will grant Elan a license under the Newco Intellectual Property
that relates predominantly to the Elan Intellectual Property outside the
Fields on a product by product basis. The financial terms of the said
license agreement shall have regard, inter alia, to:
11.3.1 the amount of monies expended by Newco in acquiring or developing
such Newco Intellectual Property; and
11.3.2 the materiality of the contribution of such Newco Intellectual
Property by comparison to the further research and development work
to be conducted, and of the Elan Intellectual Property and the
Depomed Intellectual Property; and
11.3.3 the financial return likely to be earned by Elan from the proposed
exploitation outside the Fields; and
11.3.4 the impact of the proposed exploitation of such Newco Intellectual
Property outside the Fields on the exploitation of such Newco
Intellectual Property within the Fields.
11.4 Depomed shall be entitled to exploit the Newco Intellectual Property that
relates predominantly to the Depomed Intellectual Property outside the
Fields subject to the Parties negotiating an arms' length license agreement
in good faith (including all material provisions thereof, including as to
whether the license should be exclusive or non-exclusive), pursuant to
which Newco will grant Depomed a license under the Newco Intellectual
Property that relates predominantly to the Depomed Intellectual Property
outside the Fields on a product by product basis. The financial terms of
the said license agreement shall have regard, inter alia, to:
11.4.1 the amount of monies expended by Newco in acquiring or developing
such Newco Intellectual Property; and
11.4.2 the materiality of the contribution of such Newco Intellectual
Property by comparison to the further research and development work
to be conducted, and of the Depomed Intellectual Property and the
Elan Intellectual Property; and
11.4.3 the financial return likely to be earned by Depomed from the
proposed exploitation outside the Fields; and
11.4.4 the impact of the proposed exploitation of such Newco Intellectual
Property outside the Fields on the exploitation of such Newco
Intellectual
30
Property within the Fields.
CLAUSE 12
REGULATORY
12.1 Newco shall keep the other Parties promptly and fully advised of Newco's
regulatory activities, progress and procedures. Newco shall inform the
other Parties of any dealings it shall have with an RHA, and shall furnish
the other Parties with copies of all correspondence relating to the
Products. The Parties shall collaborate to obtain any required regulatory
approval of the RHA to market the Products.
12.2 Newco shall, at its own cost, file, prosecute and maintain any and all
Regulatory Applications for the Products in the Territory in accordance
with the Business Plan.
12.3 Subject to Clause 12.5, any and all Regulatory Approvals obtained hereunder
for any Product shall remain the property of Newco, provided that Newco
shall allow Elan and Depomed access thereto to enable Elan and Depomed to
fulfill their respective obligations and exercise their respective rights
under this Agreement.
12.4 It is hereby acknowledged that there are inherent uncertainties involved in
the registration of pharmaceutical products with the RHA's insofar as
obtaining approval is concerned and such uncertainties form part of the
business risk involved in undertaking the form of commercial collaboration
as set forth in this Agreement.
12.5 All regulatory approvals and the DMF (Drug Master File) relating to Elan
Intellectual Property shall be processed by and be the property of Elan and
at all times held in Elan's sole name. Elan will authorise Newco to
reference Elan's DMF, as described herein, with the FDA to the extent
necessary for Newco's regulatory purposes.
12.6 All regulatory approvals and the DMF (Drug Master File) relating to Depomed
Intellectual Property shall be processed by and be the property of Depomed
and at all times held in Depomed's sole name. Depomed will authorise Newco
to reference Depomed's DMF, as described herein, with the FDA to the extent
necessary for Newco's regulatory purposes.
CLAUSE 13
MANUFACTURING
31
13.1 Elan shall have the first right to manufacture and supply, and/or
subcontract the manufacture and supply, of the [**] Products and/or any
formulations which comprise the Elan Intellectual Property.
13.2 Subject to Clause 13.1, it is the expectation of the Parties that Newco
shall enter into a supply agreement with Elan or Depomed or a third party,
as the case may be, to allow for the commercial production of the [**]
Products and the [**] Products on behalf of Newco. In determining which of
Elan or Depomed or a third party shall provide such services, the
Management Committee shall, in good faith, consider the respective
infrastructure and experience of Elan, Depomed and the relevant third
parties.
13.3 Any supply agreement between Newco and Elan, Depomed or a third party
hereunder shall be negotiated and agreed not later than the date of
completion of Phase III (as such term is commonly used in connection with
FDA applications) of the R&D Plan. The terms of the said supply agreements
shall be on normal commercial terms, and shall be negotiated in good faith
by the Parties thereto.
13.4 If Elan does not exercise its first right hereunder to manufacture and
supply, and/or subcontract the manufacture and supply of the [**] Products
and/or any formulations which comprise the Elan Intellectual Property, then
Newco shall be free to enter into negotiations with a third party (other
than a Technological Competitor of Elan) to agree to terms upon which the
third party would be licensed by Elan (on licensing terms satisfactory to
Elan) and by Newco to the extent necessary (on licensing terms satisfactory
to Newco) to manufacture the [**] Products and/or any formulations which
comprise the Elan Intellectual Property in the Territory, which terms when
taken as a whole, are not more favorable to the third party than the
principal terms of the last written proposal offered by Newco to Elan or by
Elan to Newco, as the case may be.
CLAUSE 14
TECHNICAL SERVICES AND ASSISTANCE
14.1 Whenever commercially and technically feasible, Newco shall contract with
Depomed or Elan, as the case may be, to perform such other services as
Newco may require, other than those specifically dealt with hereunder or in
the License Agreements. In determining which Party should provide such
services, the Management Committee shall take into account the respective
infrastructure, capabilities and experience of Elan and Depomed. There
shall be no obligation upon either of Depomed or Elan to perform such
services.
14.2 Newco shall, if the Participants so agree, conclude an administrative
support agreement with Elan and/or Depomed on such terms as the Parties
thereto shall in
32
good faith negotiate. The administrative services shall include one or
more of the following administrative services as requested by Newco:
14.2.1 accounting, financial and other services;
14.2.2 tax services;
14.2.3 insurance services;
14.2.4 human resources services;
14.2.5 legal and company secretarial services;
14.2.6 patent and related intellectual property services; and
14.2.7 all such other services consistent with and of the same type as
those services to be provided pursuant to this Agreement, as may
be required.
The foregoing list of services shall not be deemed exhaustive and may be
changed from time to time upon written request by Newco.
14.3. The Parties agree that each Party shall effect and maintain comprehensive
general liability insurance in respect of all clinical trials and other
activities performed by them on behalf of Newco. The Participants and
Newco shall ensure that the industry standard insurance policies shall be
in place for all activities to be carried out by Newco.
14.4 If Elan or Depomed so requires, Depomed or Elan, as the case may be,
shall receive, at times and for periods mutually acceptable to the
Parties, employees of the other Party (such employees to be acceptable to
the receiving Party in the matter of qualification and competence) for
instruction in respect of the Elan Intellectual Property or the Depomed
Intellectual Property, as the case may be, as necessary to further the
Project.
14.5 The employees received by Elan or Depomed, as the case may be, shall be
subject to obligations of confidentiality no less stringent than those
set out in Clause 21 and such employees shall observe the rules,
regulations and systems adopted by the Party receiving the said employees
for its own employees or visitors.
CLAUSE 15
AUDITORS, BANKERS, ACCOUNTING REFERENCE DATE; SECRETARY; "TICK THE BOX"
33
15.1 Unless otherwise agreed by the Participants and save as may be provided to
the contrary herein:
15.1.1 the auditors of Newco shall be [**] of ▇▇▇▇▇▇▇▇, Bermuda;
15.1.2 the bankers of Newco shall be [**] or such other bank as may be
mutually agreed from time to time;
15.1.3 the accounting reference date of Newco shall be December 31st in
each Financial Year; and
15.1.4 the secretary of Newco shall be [**] or such other Person as may be
appointed by the Directors from time to time.
15.2 [**]
CLAUSE 16
TRANSFERS OF SHARES;
RIGHT OF FIRST OFFER; TAG ALONG RIGHTS
General:
--------
16.1 Until such time as the Common Stock shall be registered pursuant to the
Exchange Act and be publicly traded in an established securities market, no
Stockholder shall, directly or indirectly, sell or otherwise transfer
(each, a "Transfer") any Shares held by it except in as expressly permitted
by and accordance with the terms of this Agreement. Newco shall not, and
shall not permit any transfer agent or registrar for any Shares to,
transfer upon the books of Newco any Shares from any Stockholder to any
transferee, in any manner, except in accordance with this Agreement, and
any purported transfer not in compliance with this Agreement shall be void.
During the Research and Development Term, no Stockholder shall, directly or
indirectly, sell or otherwise Transfer any of its legal and/or beneficial
interest in the Shares held by it to any other Person. After completion of
the Research and Development Term, a Stockholder may Transfer Shares
provided such Stockholder complies with the provisions of Clauses 16.2 and
16.3.
Notwithstanding anything contained herein to the contrary, at all times,
EIS and/or Depomed shall have the right to Transfer any Shares to their
Affiliates provided, however, that such assignment does not result in
adverse tax consequences for any other Parties. EIS shall have the right to
Transfer any Shares to a Permitted Transferee; provided, that such Transfer
shall be subject to and that such Affiliates or other Permitted Transferee
to which such legal and/or beneficial interest in the Shares have been
transferred shall agree to be expressly
34
subject to and bound by all the limitations and provisions which are
embodied in this Agreement.
16.2 No Stockholder shall, except with the prior written consent of the other
Stockholder, create or permit to subsist any Encumbrance over or in, all or
any of the Shares held by it (other than by a Transfer of such Shares in
accordance with the provisions of this Agreement).
16.3 Rights of First Offer:
----------------------
If at any time after the end of the Research and Development Term a
Stockholder shall desire to Transfer any Shares owned by it (a "Selling
Stockholder"), in any transaction or series of related transactions other
than a Transfer to an Affiliate ora Permitted Transferee, then such Selling
Stockholder shall deliver prior written notice of its desire to Transfer (a
"Notice of Intention") (i) to Newco and (ii) to the Stockholders who are
not the Selling Stockholder (and any transferee thereof permitted
hereunder, if any), as applicable, setting forth such Selling Stockholder's
desire to make such Transfer, the number of Shares proposed to be
transferred (the "Offered Shares") and the proposed form of transaction
(the "Transaction Proposal"), together with any available documentation
relating thereto, if any, and the price at which such Selling Stockholder
proposes to Transfer the Offered Shares (the "Offer Price"). The "Right of
First Offer" provided for in this Clause 16 shall be subject to any "Tag
Along Right" benefiting a Stockholder which may be provided for by Clause
16, subject to the exceptions set forth therein.
Upon receipt of the Notice of Intention, the Stockholders who are not the
Selling Stockholder shall have the right to purchase at the Offer Price the
Offered Shares, exercisable by the delivery of notice to the Selling
Stockholder (the "Notice of Exercise"), with a copy to Newco, within 10
business days from the date of receipt of the Notice of Intention. If no
such Notice of Exercise has been delivered by the Stockholders who are not
the Selling Stockholder within such 10-business day period, or such Notice
of Exercise does not relate to all of the Offered Shares covered by the
Notice of Intention, then the Selling Stockholder shall be entitled to
Transfer all of the Offered Shares to the intended transferee. In the
event that all of the Offered Shares are not purchased by the non-selling
Stockholders, the Selling Stockholder shall sell the available Offered
Shares within 30 days after the delivery of such Notice of Intention on
terms no more favorable to a third party than those presented to the non-
selling Stockholders. If such sale does not occur, the Offered Shares
shall again be subject to the Right of First Offer set forth in Clause
16.3.
In the event that any of the Stockholders who are not the Selling
Stockholder exercises their right to purchase all of the Offered Shares (in
accordance with this Clause 16), then the Selling Stockholder shall sell
all of the Offered Shares to such Stockholder(s), in the amounts set forth
in the Notice of Intention, after not
35
less than 10 business days and not more than 25 business days from the date
of the delivery of the Notice of Exercise. In the event that more than one
of the Stockholders who are not the Selling Stockholders wish to purchase
the Offered Shares, the Offered Shares shall be allocated to such
Stockholders on the basis of their pro rata equity interests in Newco.
The rights and obligations of each of the Stockholders pursuant to the
Right of First Offer provided herein shall terminate upon the date that the
Common Stock is registered under Section 12(b) or 12(g) of the Exchange
Act.
At the closing of the purchase of all of the Offered Shares by the
Stockholders who are not the Selling Stockholder (scheduled in accordance
with Clause 16), the Selling Stockholder shall deliver certificates
evidencing the Offered Shares being sold, duly endorsed, or accompanied by
written instruments of transfer in form reasonably satisfactory to the
Stockholders who are not the Selling Stockholder, duly executed by the
Selling Stockholder, free and clear of any adverse claims, against payment
of the purchase price therefor in cash, and such other customary documents
as shall be necessary in connection therewith.
16.4 Tag Along Rights:
-----------------
Subject to Clause 16.3, a Stockholder (the "Transferring Stockholder")
shall not Transfer (either directly or indirectly), in any one transaction
or series of related transactions, to any Person or group of Persons, any
Shares, unless the terms and conditions of such Transfer shall include an
offer to the other Stockholders (the "Remaining Stockholders"), to sell
Shares at the same price and on the same terms and conditions as the
Transferring Stockholder has agreed to sell its Shares (the "Tag Along
Right").
In the event a Transferring Stockholder proposes to Transfer any Shares in
a transaction subject to this Clause 16.4, it shall notify, or cause to be
notified, the Remaining Stockholders in writing of each such proposed
Transfer. Such notice shall set forth: (i) the name of the transferee and
the amount of Shares proposed to be transferred, (ii) the proposed amount
and form of consideration and terms and conditions of payment offered by
the transferee (the "Transferee Terms") and (iii) that the transferee has
been informed of the Tag Along Right provided for in this Clause 16, if
such right is applicable, and the total number of Shares the transferee has
agreed to purchase from the Stockholders in accordance with the terms
hereof.
The Tag Along Right may be exercised by each of the Remaining Stockholders
by delivery of a written notice to the Transferring Stockholder (the "Co-
sale Notice") within 10 business days following receipt of the notice
specified in the preceding subsection. The Co-sale Notice shall state the
number of Shares owned by such Remaining Stockholder which the Remaining
Stockholder wishes to include in such Transfer; provided, however, that
without the written consent of
36
the Transferring Stockholder, the amount of such securities belonging to
the Remaining Stockholder included in such Transfer may not be greater than
such Remaining Stockholder's percentage beneficial ownership of Fully
Diluted Common Stock multiplied by the total number of shares of 7 Diluted
Common Stock to be sold by both the Transferring Stockholder and all
Remaining Stockholders. Upon receipt of a Co-sale Notice, the Transferring
Stockholder shall be obligated to transfer at least the entire number of
Shares set forth in the Co-sale Notice to the transferee on the Transferee
Terms; provided, however, that the Transferring Stockholder shall not
consummate the purchase and sale of any Shares hereunder if the transferee
does not purchase all such Shares specified in all Co-sale Notices. If no
Co-sale Notice has been delivered to the Transferring Stockholder prior to
the expiration of the 10 business day period referred to above and if the
provisions of this Section have been complied with in all respects, the
Transferring Stockholder shall have the right for a 45 day calendar day
period to Transfer Shares to the transferee on the Transferee Terms without
further notice to any other party, but after such 45-day period, no such
Transfer may be made without again giving notice to the Remaining
Stockholders of the proposed Transfer and complying with the requirements
of this Clause 16.
At the closing of any Transfer of Shares subject to this Clause 16, the
Transferring Stockholder, and the Remaining Stockholder, in the event such
Tag Along Right is exercised, shall deliver certificates evidencing such
securities as have been Transferred by each, duly endorsed, or accompanied
by written instruments of transfer in form reasonably satisfactory to the
transferee, free and clear of any adverse claim, against payment of the
purchase price therefor.
Notwithstanding the foregoing, this Clause 16 shall not apply to any sale
of Common Stock pursuant to an effective registration statement under the
Securities Act in a bona fide public offering.
CLAUSE 17
MATTERS REQUIRING STOCKHOLDERS' APPROVAL
17.1 In consideration of Depomed and Elan agreeing to enter into the License
Agreements, the Parties hereby agree that Newco shall not without the prior
unanimous approval of the EIS Director and the Depomed Directors:
17.1.1. make a material Newco determination outside the ordinary course of
business, including, among other things, acquisitions or
dispositions of intellectual property and licenses or sublicenses,
changes in the Business or the Newco budget as they relate to the
Licensed Technologies; enter into joint ventures and similar
arrangements as they relate to the Licensed Technologies and
changes to the Business Plan as they relate to the Licensed
Technologies;
37
17.1.2. issue any unissued Shares or unissued Common Stock Equivalents, or
create or issue any new shares (including a split of the Shares)
or Common Stock Equivalents, except as expressly permitted by the
Newco Bye-Laws;
17.1.3. alter any rights attaching to any class of share in the capital of
Newco or alter the Newco Bye-Laws;
17.1.4. consolidate, sub-divide or convert any of Newco's share capital or
in any way alter the rights attaching thereto;
17.1.5. dispose of all or substantially all of the assets of Newco;
17.1.6. do or permit or suffer to be done any act or thing whereby Newco
may be wound up (whether voluntarily or compulsorily), save as
otherwise expressly provided for in this Agreement;
17.1.7. enter into any contract or transaction except in the ordinary and
proper course of the Business on arm's length terms;
17.1.8. Subject to Clause 23.13, assign, license or sub-license any of the
Elan Intellectual Property, Depomed Intellectual Property, Newco
Intellectual Property;
17.1.9. amend or vary the terms of the Depomed License Agreement or the
Elan License Agreement;
17.1.10. permit a person other than Newco to own a regulatory approval
relating to the Product(s);
17.1.11. amend or vary the Business Plan or the Newco budget as they relate
to the Licensed Technologies;
17.1.12. alter the number of Directors.
17.1.13 change the domicile of Newco from, or discontinue Newco out of,
Bermuda;
17.1.14 register any Shares of Newco for public trading with any
governmental authority for public trading in any securities
market; and
17.1.15 declare or pay any dividend or make any distribution, directly or
indirectly, with respect to its capital stock; or issue, sell,
exchange, deliver, redeem, purchase or otherwise acquire or
dispose of any shares of its capital stock or other securities.
38
CLAUSE 18
DISPUTES
18.1 Should any dispute or difference arise between Elan and Depomed, or between
Elan or Depomed and Newco, during the period that this Agreement is in
force, other than a dispute or difference relating to (i) the
interpretation of any provision of this Agreement, (ii) the interpretation
or application of law, or (iii) the ownership of any intellectual property,
then any Party may forthwith give notice to the other Parties that it
wishes such dispute or difference to be referred to a designated senior
officer of each of Elan and Depomed.
18.2 In any event of a notice being served in accordance with Clause 18.1, each
of the Participants shall within 14 days of the service of such notice
prepare and circulate to the designated senior officer of each of Elan and
Depomed a memorandum or other form of statement setting out its position on
the matter in dispute and its reasons for adopting that position. Each
memorandum or statement shall be considered by the designated senior
officer of each of Elan and Depomed who shall endeavor to resolve the
dispute. If the designated senior officer of each of Elan and Depomed
agree upon a resolution or disposition of the matter, they shall each sign
a statement which sets out the terms of their agreement. The Participants
agree that they shall exercise the voting rights and other powers available
to them in relation to Newco to procure that the agreed terms are fully and
promptly carried into effect.
18.3 In the event the designated senior officers of each of Elan and Depomed are
unable to resolve a dispute or difference when it is referred to them under
Clause 18.1, the following procedures shall apply:
18.3.1 If the dispute relates to the interpretation of this Agreement or
any other Transaction Document or the compliance of the Parties
with their legal obligations thereunder, the provisions of Clause
23.8.2 shall govern.
18.3.2 If the dispute does not relate to the interpretation of this
Agreement or any other Transaction Document or the compliance of
the Parties with their legal obligations thereunder, the provisions
of Clause 18.4 shall govern.
18.4 The designated senior officers of each of Elan and Depomed shall, if they
are unable to resolve a dispute or difference when it is referred to them
under Clause 18.1, within sixty (60) days of such referral, refer the
matter to an independent expert in pharmaceutical product development and
marketing (including clinical development and regulatory affairs) jointly
selected by the designated senior officers of each of Elan and Depomed (the
"Expert").
39
In the event the designated senior officer of each of Elan and Depomed
cannot agree upon the designation of the Expert, the Participants shall
request the American Arbitration Association ("AAA"), sitting in the City
of New York to select the Expert. In each case, the Expert shall be
selected having regard to his suitability to determine the particular
dispute or difference on which the Expert is being requested to determine.
Unless otherwise agreed between the designated senior officer of each of
Elan and Depomed, the following rules shall apply to the appointment of the
Expert. The fees of the AAA and the Expert shall be shared equally by the
Participants. The Expert shall be entitled to inspect and examine all
documentation and any other material which the Expert may consider to be
relevant to the dispute. The Expert shall afford each Party a reasonable
opportunity (in writing or orally) of stating reasons in support of such
contentions as each Party may wish to make relative to the matters under
consideration. The Expert shall give notice in writing of his
determination to the Parties within such time as may be stipulated in his
terms of appointment or in the absence of such stipulation as soon as
practicable but in any event within four weeks from the reference of the
dispute or difference to him.
18.5 Any determination by the Expert of a dispute or difference shall not be
final and binding on the Parties.
CLAUSE 19
TERMINATION
19.1 This Agreement shall govern the operation and existence of Newco until (i)
terminated by written agreement of all Parties hereto or (ii) otherwise
terminated in accordance with this Clause 19.
19.2 For the purpose of this Clause 19, a "Relevant Event" is committed or
suffered by a Participant if:
19.2.1 it commits a breach of its material obligations under this
Agreement or the applicable License and fails to remedy it within
60 days of being specifically required in writing to do so by the
other Participant; provided, however, that if the breaching
Participant has proposed a course of action to rectify the breach
and is acting in good faith to rectify same but has not cured the
breach by the 60th day, such period shall be extended by such
period as is reasonably necessary to permit the breach to be
rectified; or
19.2.2 a distress, execution, sequestration or other process is levied or
enforced upon or sued out against a material part of its property
which is not discharged or challenged within 30 days; or
19.2.3 it is unable to pay its debts in the normal course of business; or
40
19.2.4 it ceases wholly or substantially to carry on its business,
otherwise than for the purpose of a reconstruction or amalgamation,
without the prior written consent of the other Participant (such
consent not to be unreasonably withheld); or
19.2.5 the appointment of a liquidator, receiver, administrator, examiner,
trustee or similar officer of such Participant or over all or
substantially all of its assets under the law of any applicable
jurisdiction, including without limitation, the United States of
America, Bermuda or Ireland; or
19.2.6 an application or petition for bankruptcy, corporate re-
organization, composition, administration, examination, arrangement
or any other procedure similar to any of the foregoing under the
law of any applicable jurisdiction, including without limitation,
the United States of America, Bermuda or Ireland, is filed, and is
not discharged within 60 days, or a Participant applies for or
consents to the appointment of a receiver, administrator, examiner
or similar officer of it or of all or a material part of its
assets, rights or revenues or the assets and/or the business of a
Participant are for any reason seized, confiscated or condemned.
19.4 If either Participant commits or suffers a Relevant Event, the other
Participant shall be entitled, within three months of the occurrence of the
Relevant Event, to require the defaulting Participant (the "Recipient
Participant") to sell on reasonable terms of payment to the non-defaulting
Participant (the "Proposing Participant") all (but not some only) of the
Shares, held or beneficially owned by the Recipient Participant for an
amount equal to [**] % of the fair market value of the Shares of the
Recipient Participant (the "Buyout Option").
19.5 The Proposing Participant shall notify the Recipient Participant of the
exercise of the Buyout Option, no later than 30 business days prior to the
proposed exercise thereof, by delivering written notice to the Recipient
Participant stating that the Buyout Option is exercised and the price at
which the Proposing Participant is willing to purchase the Shares of the
Recipient Participant.
19.6 In the event that the Participants do not agree upon a purchase price for
the Shares within five Business Days following the receipt by the Recipient
Participant of written notice from the Proposing Participant pursuant to
Clause 19.5 above, the Proposing Participant may contact the AAA, sitting
in New York City and request that an independent US-based arbitrator who is
knowledgeable of the pharmaceutical/biotechnology industry be appointed
within 10 Business Days. The AAA shall endeavor to select an arbitrator
who is technically knowledgeable in the pharmaceutical/biotechnology
industry (and who directly and through his affiliates, has no business
relationship with, or shareholding in, either the Proposing Participant or
the Recipient Participant). Promptly upon being notified of the
arbitrator's appointment, the Proposing Participant and the Recipient
41
Participant shall submit to the arbitrator details of their assessment of
the fair market value for the Shares of the Recipient Participant
together with such information as they think necessary to validate their
assessment. The arbitrator shall notify the Recipient Participant of [**]
% of the fair market value assessed by the Proposing Participant (the
"Proposing Participant Price") and shall notify the Proposing Participant
of [**] % of the fair market value assessed by the Recipient Participant
(the "Recipient Participant Price"). The Proposing Participant and the
Recipient Participant shall then be entitled to make further submissions
to the arbitrator within five Business Days explaining why the Recipient
Participant Price or the Proposing Participant Price, as the case may be,
is unjustified. The arbitrator shall thereafter meet with the Proposing
Participant and the Recipient Participant and shall thereafter choose
either the Recipient Participant Price or the Proposing Participant Price
(but not any other price) as the purchase price for the Shares (the
"Purchase Price") on the basis of which price the Expert determines to be
closer to [**] % of the fair market value for the Shares of the Recipient
Participant. The arbitrator shall use his best efforts to determine the
Purchase Price within 30 Business Days of his appointment. The Proposing
Participant and the Recipient Participant shall bear the costs of the
arbitrator equally provided that the arbitrator may, in his discretion,
allocate all or a portion of such costs to one Party. Any decision of the
arbitrator shall be final and binding.
19.7 The Proposing Participant shall purchase the Shares of the Recipient
Participant by delivery of the Purchase Price in cash no later than the
15th Business Day following determination of the Purchase Price by the
Expert.
19.8 The Shares of the Recipient Participant so transferred shall be sold by
the transferor as beneficial owner with effect from the date of such
transfer free from any lien, charge or encumbrance with all rights and
restrictions attaching thereto.
19.9 If the Proposing Participant exercises the Buyout Option, both parties
will negotiate in good faith to agree to additional reasonable provisions
and/or amendments to the License Agreements to protect the intellectual
property rights of the Recipient Party.
19.10 If either Participant commits a Relevant Event, the other Stockholder
shall have in addition to all other legal and equitable rights and
remedies hereunder, the right to terminate this Agreement upon 30 days'
written notice.
19.11 In the event of a termination of the Elan License Agreement and/or the
Depomed License Agreement, both parties will negotiate in good faith to
determine whether this Agreement should be terminated and if so, which
provisions should survive termination.
19.12 The provisions of Clauses 1.1, 3, 10, 16, 17, 18, 19 and 21 shall survive
the termination of this Agreement under this Clause 19; all other terms
and provisions
42
of this Agreement shall cease to have effect and be null and void upon
the termination of this Agreement.
CLAUSE 20
SHARE RIGHTS
The provisions regulating the rights and obligations attaching to the Common
Stock and the Preferred Stock are set out in the Newco Bye-laws.
CLAUSE 21
CONFIDENTIALITY
21.1 The Parties and/or Newco acknowledge and agree that it may be necessary,
from time to time, to disclose to each other confidential and/or
proprietary information, including without limitation, inventions, works of
authorship, trade secrets, specifications, designs, data, know-how and
other information, relating to the Field, the Products, present or future
products, the Newco Intellectual Property, the Elan Intellectual Property
or the Depomed Intellectual Property, as the case may be, methods,
compounds, research projects, work in process, services, sales suppliers,
customers, employees and/or business of the disclosing Party, whether in
oral, written, graphic or electronic form (collectively "Confidential
Information").
21.2 Any Confidential Information revealed by a Party to another Party shall be
maintained as confidential and shall be used by the receiving Party
exclusively for the purposes of fulfilling the receiving Party's rights and
obligations under this Agreement, and for no other purpose. Confidential
Information shall not include:
21.2.1 information that is generally available to the public;
21.2.2 information that is made public by the disclosing Party;
21.2.3 information that is independently developed by the receiving Party,
as evidenced by such Party's records, without the aid, application
or use of the disclosing Party's Confidential Information;
21.2.4 information that is published or otherwise becomes part of the
public domain without any disclosure by the receiving Party, or on
the part of the receiving Party's directors, officers, agents,
representatives or employees;
21.2.5 information that becomes available to the receiving Party on a non-
confidential basis, whether directly or indirectly, from a source
other than
43
the disclosing Party, which source did not acquire this information
on a confidential basis; or
21.2.6 information which the receiving Party is required to disclose
pursuant to:
(i) a valid order of a court or other governmental body or any
political subdivision thereof or as otherwise required by law,
rule or regulation; or
(ii) other requirement of law;
provided, however, that if the receiving Party becomes legally
required to disclose any Confidential Information, the receiving
Party shall give the disclosing Party prompt notice of such fact so
that the disclosing Party may obtain a protective order or
confidential treatment or other appropriate remedy concerning any
such disclosure. The receiving Party shall fully co-operate with
the disclosing Party in connection with the disclosing Party's
efforts to obtain any such order or other remedy. If any such order
or other remedy does not fully preclude disclosure, the receiving
Party shall make such disclosure only to the extent that such
disclosure is legally required; or
21.2.7 information which was already in the possession of the receiving
Party at the time of receiving such information, as evidenced by
its records, provided such information was not previously provided
to the receiving party from a source which was under an obligation
to keep such information confidential; or
21.2.8 information that is the subject of a written permission to
disclose, without restriction or limitation, by the disclosing
Party.
21.3 Each Party agrees to disclose Confidential Information of another Party
only to those employees, representatives and agents requiring knowledge
thereof in connection with their duties directly related to the fulfilling
of the Party's obligations under this Agreement, so long as such persons
are under an obligation of confidentiality no less stringent than as set
forth herein. Each Party further agrees to inform all such employees,
representatives and agents of the terms and provisions of this Agreement
and their duties hereunder and to obtain their consent hereto as a
condition of receiving Confidential Information. Each Party agrees that it
will exercise the same degree of care and protection to preserve the
proprietary and confidential nature of the Confidential Information
disclosed by a Party, as the receiving Party would exercise to preserve its
own Confidential Information. Each Party agrees that it will, upon request
of another Party, return all documents and any copies thereof containing
Confidential Information belonging to or disclosed by such other Party.
Each Party shall promptly notify
44
the other Parties upon discovery of any unauthorized use or disclosure of
the other Parties' Confidential Information.
21.4 Any breach of this Clause 21 by any employee, representative or agent of a
Party is considered a breach by the Party itself.
21.5 The provisions relating to confidentiality in this Clause 21 shall remain
in effect during the Term and for a period of seven years following the
termination of this Agreement.
21.6 The Parties agree that the obligations of this Clause 21 are necessary and
reasonable in order to protect the Parties' respective businesses, and each
Party expressly agrees that monetary damages would be inadequate to
compensate a Party for any breach by the other Party of its covenants and
agreements set forth herein. Accordingly, the Parties agree and
acknowledge that any such violation or threatened violation will cause
irreparable injury to a Party and that, in addition to any other remedies
that may be available, in law or in equity or otherwise, any Party shall be
entitled to obtain injunctive relief against the threatened breach of the
provisions of this Clause 21, or a continuation of any such breach by the
other Party, specific performance and other equitable relief to redress
such breach together with its damages and reasonable counsel fees and
expenses to enforce its rights hereunder, without the necessity of proving
actual or express damages.
CLAUSE 22
COSTS
22.1 Each Stockholder shall bear its own legal and other costs incurred in
relation to preparing and concluding this Agreement and the Definitive
Documents.
22.2 All other costs, legal fees, registration fees and other expenses relating
to the transactions contemplated hereby, including the costs and expenses
incurred in relation to the incorporation of Newco, shall be borne by
Newco.
CLAUSE 23
GENERAL
23.1 Good Faith:
-----------
Each of the Parties hereto undertakes with the others to do all things
reasonably within its power that are necessary or desirable to give effect
to the spirit and intent of this Agreement.
23.2 Further Assurance:
------------------
45
At the request of any of the Parties, the other Party or Parties shall (and
shall use reasonable efforts to procure that any other necessary parties
shall) execute and perform all such documents, acts and things as may
reasonably be required subsequent to the signing of this Agreement for
assuring to or vesting in the requesting Party the full benefit of the
terms hereof.
23.3 No Representation:
------------------
Each of the Parties hereto hereby acknowledges that in entering into this
Agreement it has not relied on any representation or warranty except as
expressly set forth herein or in any document referred to herein.
23.4 Force Majeure:
--------------
Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay is caused by
or results from causes beyond its reasonable control, including without
limitation, acts of God, fires, strikes, acts of war (whether war be
declared or not), insurrections, riots, civil commotions, strikes, lockouts
or other labor disturbances or intervention of any relevant government
authority, provided that the Party whose performance is delayed or
prevented shall continue to use good faith diligent efforts to mitigate,
avoid or end such delay or failure in performance as soon as practicable.
23.5 Relationship of the Parties:
----------------------------
Nothing contained in this Agreement is intended or is to be construed to
constitute Elan/EIS/EPIL and Depomed as partners, or Elan/EIS/EPIL as an
employee or agent of Depomed, or Depomed as an employee or agent of
Elan/EIS/EPIL.
No Party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of another
Party or to bind another Party to any contract, agreement or undertaking
with any third party.
23.6 Counterparts:
-------------
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which when
taken together shall constitute this Agreement.
23.7 Notices:
--------
Any notice to be given under this Agreement shall be sent in writing by
registered or recorded delivery post or reputable overnight courier such as
Federal Express or telecopied to:
▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Plc./EPIL at:
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇
Attention: Vice President & General Counsel
Elan Pharmaceutical Technologies,
a division of Elan Corporation, plc
Telephone: ▇▇▇-▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇-▇▇▇-▇▇▇▇
And
EIS at:
Elan International Services, Ltd.
▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
Bermuda
Attention: President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Depomed at:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
▇▇▇.
Attention: Chief Executive Officer
Telephone: ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇-▇▇▇▇
Newco at:
▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
Bermuda
Attention: Secretary
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address(es) as may from time to time be notified by any
Party to the others hereunder.
Any notice sent by mail shall be deemed to have been delivered within three
Business Days after dispatch or delivery to the relevant courier and any
notice sent by telecopy shall be deemed to have been delivered upon
confirmation of receipt. Notices of change of address shall be effective
upon receipt. Notices by telecopy shall also be sent by another method
permitted hereunder.
23.8 Governing Law; Jurisdiction:
----------------------------
23.8.1. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York except that the applicable corporate
laws of Bermuda shall apply to the issuance of the Shares and to the
authority and responsibilities of the Directors.
23.8.2. The Parties will attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by negotiation
between executives of the Parties. In the event that such negotiations do
not result in a mutually acceptable resolution, the Parties agree to
consider other dispute resolution mechanisms including mediation.
23.8.3 In the event that the Parties fail to agree on a mutually
acceptable dispute resolution mechanism under Clause 23.8.2 or in the event
that the dispute is not resolved pursuant to any dispute resolution
mechanism agreed by the Parties under Clause 23.8.2 within 6 months, the
dispute shall be finally settled by the courts of competent jurisdiction.
For the purposes of this Agreement the parties submit to the non-exclusive
jurisdiction of the courts of the State of New York.
23.9 Severability:
-------------
If any provision in this Agreement is agreed by the Parties to be, deemed
to be or becomes invalid, illegal, void or unenforceable under any law that
is applicable hereto, such provision will be deemed amended to conform to
applicable laws so as to be valid and enforceable or, if it cannot be so
amended without materially altering the intention of the Parties, it will
be deleted, with effect from the date of such agreement or such earlier
date as the Parties may agree, and the validity, legality and
enforceability of the remaining provisions of this Agreement shall not be
impaired or affected in any way.
48
23.10 Amendments:
-----------
No amendment, modification or addition hereto shall be effective or
binding on any Party unless set forth in writing and executed by a duly
authorized representative of all Parties.
23.11 Waiver:
-------
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any future breach or failure to perform or of
any other right arising under this Agreement.
23.12 Assignment:
-----------
None of the Parties shall be permitted to assign its rights or
obligations hereunder without the prior written consent of the other
Parties except as follows:
23.12.1 Elan, EIS, EPIL and/or Depomed shall have the right to assign
their rights and obligations hereunder to their Affiliates
provided, however, that such assignment does not result in
adverse tax consequences for any other Parties.
23.12.2 Subject to Clause 8.4 of the Elan License Agreement, Elan, EIS,
EPIL and/or Depomed shall have the right to assign their rights
and obligations hereunder to any other Person who acquires
substantially all of the its assets and business.
23.12.3 Elan, EIS and EPIL shall have the right to assign their rights
and obligations hereunder to a special purpose financing or
similar entity established by Elan or EIS.
23.13 Assignment of Newco Intellectual Property:
------------------------------------------
Upon one month's prior notice in writing from Elan to Newco and Depomed,
Newco shall assign the Newco Intellectual Property from Newco to a
wholly-owned subsidiary of Newco to be incorporated in Ireland, which
company shall be newly incorporated to facilitate such assignment.
23.14 Whole Agreement/No Effect on Other Agreements:
----------------------------------------------
This Agreement (including the Schedules attached hereto) and the
Definitive Documents set forth all of the agreements and understandings
between the Parties with respect to the subject matter hereof, and
supersedes and terminates all prior
49
agreements and understandings between the Parties with respect to the
subject matter hereof. There are no agreements or understandings with
respect to the subject matter hereof, either oral or written, between the
Parties other than as set forth in this Agreement and the Definitive
Documents.
In the event of any ambiguity or conflict arising between the terms of
this Agreement and those of the Newco Bye-Laws, the terms of this
Agreement shall prevail, except with respect to the rights and
obligations attaching to the Common Stock and the Preferred Stock, where
the Newco Bye-Laws shall prevail.
No provision of this Agreement shall be construed so as to negate, modify
or affect in any way the provisions of any other agreement between any of
the Parties unless specifically referred to, and solely to the extent
provided herein. In the event of a conflict between the provisions of
this Agreement and the provisions of the License Agreements, the terms of
this Agreement shall prevail unless this Agreement specifically provide
otherwise.
23.15 Successors:
-----------
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and permitted assigns.
50
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day
first set forth above.
SIGNED
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
for and on behalf of
ELAN CORPORATION, PLC
in the presence of: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------
SIGNED
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
for and on behalf of
ELAN PHARMA INTERNATIONAL LIMITED
in the presence of: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------
SIGNED
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
for and on behalf of
ELAN INTERNATIONAL SERVICES LTD.
in the presence of: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------
SIGNED
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------
for and on behalf of
DEPOMED, INC.
in the presence of: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------
SIGNED
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------
for and on behalf of
DEPOMED DEVELOPMENT, LTD.
in the presence of: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------
[JDOA]
51
SCHEDULE 3
TECHNOLOGICAL COMPETITORS OF ELAN
[**]
[Schedule lists Technological Competitors of Elan]
52
SCHEDULE 4
TECHNOLOGICAL COMPETITORS OF DEPOMED
[**]
[Schedule lists Technological Competitors of Depomed]
53