Option Agreement By and Among Axcan Holdings Inc., Axcan Lone Star Inc. and Mpex Pharmaceuticals, Inc. April 11, 2011
Exhibit 2.2
By and Among
Axcan Holdings Inc.,
Axcan Lone Star Inc.
and
Mpex Pharmaceuticals, Inc.
April 11, 2011
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This Option Agreement (this “Agreement”) is entered into and made effective as of the
11th day of April, 2011 (the “Effective Date”) by and among Mpex Pharmaceuticals, Inc., a Delaware
corporation having its principal place of business at 00000 Xxxxxxxx Xxxxxx Xxxx, Xxx Xxxxx, XX
00000 (the “Company”), Axcan Holdings Inc., a Delaware corporation having offices at 000 Xxxxxxxx
Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxx Xxxxxx 00000 (“Acquiror”), and Axcan Lone Star Inc., a
Delaware corporation and indirect wholly owned subsidiary of Acquiror (“Sub”, and collectively with
Acquiror, “Axcan”). The Company and Axcan are each referred to herein by name or as a “Party” or,
collectively, as “Parties.”
Whereas, the Company possesses proprietary technology and know-how related to the
Product (as defined below);
Whereas, after the Effective Date, the Company will effect the Divestiture (as
defined below) in accordance with Section 2.1;
Whereas, as of the Effective Date, the Company, Acquiror and Sub have entered into
that certain Development Agreement (the “Development Agreement”) with respect to the development
and pre-commercialization activities with respect to the Product;
Whereas, as of the Effective Date, the Company, Acquiror, Sub and the
Securityholders’ Representative Committee, have entered into the Merger Agreement (as defined
below) that provides for Acquiror’s acquisition of all of the Securities (as defined below) subject
to Axcan’s option to terminate the Merger Agreement pursuant to the terms and conditions set forth
in this Agreement; and
Now, therefore, in consideration of the premises and mutual covenants herein
contained, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree as follows:
ARTICLE 1
As used in this Agreement, the following terms shall have the meanings set forth in this ARTICLE 1,
and any other capitalized terms which are not otherwise defined herein shall have the respective
meanings given to them in the Merger Agreement:
1.1 “Acquiror” has the meaning assigned to such term in the Preamble.
1.2 “Aeroquin™ IP” means any and all intellectual property (including Patents, Information and
copyrights) owned or Controlled by the Company or its Affiliates as of the Effective Date or during
the Term that is reasonably necessary for making, using, selling,
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offering for sale or importation of the Product anywhere in the world and that is not
Development IP. “Aeroquin™ IP” shall include, without limitation, the Aeroquin™ trademark and any
and all Patents, Information, know-how, trade secrets, preclinical and clinical data, all
improvements related thereto, and copyrights, in each case associated with the Product, including
the Patents listed on Section 4.9.1 of the Disclosure Schedule.
1.3 “Affiliate” means any Person, whether de jure or de facto, which directly or indirectly
through one (1) or more intermediaries controls, is controlled by or is under common control with a
Party. A Person shall be deemed to “control” another Person if it (a) owns, directly or
indirectly, beneficially or legally, at least fifty percent (50%) of the outstanding voting
securities or capital stock (or such lesser percentage which is the maximum allowed to be owned by
a Person in a particular jurisdiction) of such other Person, or has other comparable ownership
interest with respect to any Person other than a corporation; or (b) has the power, whether
pursuant to contract, ownership of securities or otherwise, to direct the management and policies
of the Person.
1.4 “Agreement” has the meaning assigned to such term in the Preamble.
1.5 “Allowed Securities Issuances and Repurchases” has the meaning assigned to such term in
Section 5.1.3.
1.6 “Axcan” has the meaning assigned to such term in the Preamble.
1.7 “Business Day” means each day other than a Saturday or Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to close.
1.8 “Carveout Payments” has the meaning assigned to such term in Section 2.1.
1.9 “Carveout Plan” means the 2011 Mpex Pharmaceuticals, Inc. Management Incentive Plan.
1.10 “Clinical Milestone Payment” has the meaning assigned to such term in Section 3.3.
1.11 “Contemplated Bonuses” means any bonuses paid by the Company to its employees in
connection with, or as a result of, the transactions contemplated herein and the Merger Agreement,
including, without limitation, the Merger.
1.12 “Contract” has the meaning assigned to such term in Section 4.10.
1.13 “Control,” “Controls,” “Controlled” or “Controlling” means possession of the ability to
grant the licenses or sublicenses without violating the terms of any agreement or other arrangement
with any Third Party.
1.14 “Deferred Upfront Non-Contingent Payments” has the meaning assigned to such term in
Section 3.2.
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1.15 “Delivery Date” has the meaning assigned to such term in Section 2.3.1.
1.16 “Development IP” means any and all intellectual property (including Patents, Information
and copyrights) arising after the Effective Date and resulting directly or indirectly from the
Company’s performance of the Development Plan (as defined in the Development Agreement). For
clarity, the phrase “the Company’s performance” in the preceding sentence refers to both (a) the
performance of the Company between the Effective Date and the date of assumption of the Development
Agreement by Spinco (pursuant to Section 2.1 of the Development Agreement) and (b) the performance
of Spinco between the date of assumption of the Development Agreement by Spinco (pursuant to
Section 2.1 of the Development Agreement) and the end of the term of the Development Agreement (as
defined in the Development Agreement).
1.17 “Divestiture” means (a) the Company’s transfer, abandonment or other disposition of all
of the Divestiture Assets described in Section 1.18(i) and (b) the Company’s transfer of all of the
Divestiture Assets described in Section 1.18(ii) through (vi).
1.18 “Divestiture Assets” means [*].
1.19 “Divestiture Notice” has the meaning assigned to such term in Section 2.1.
1.20 “Dollars” or “$” means the legal tender of the U.S.
1.21 “Effective Date” has the meaning assigned to such term in the Preamble.
1.22 “Exchange Agent” has the meaning assigned to such term in Section 3.3.
1.23 “Executive Officers” means the Chief Executive Officer of the Company, or such other
person holding a similar position designated by the Company from time to time, and the President of
Acquiror, or such other person holding a similar position designated by Axcan from time to time.
1.24 “FDA” means the U.S. Food and Drug Administration, and any successor entity thereto.
1.25 “GSK Agreement” means that certain Research and Development Collaboration, Option and
License Agreement by and between Company and SmithKline Xxxxxxx Corporation (doing business as
GlaxoSmithKline) dated as of June 13, 2008, as amended.
1.26 “IND” has the meaning assigned to such term in Section 5.1.16.
1.27 “Information” means all tangible and intangible (i) information, techniques, technology,
practices, trade secrets, inventions (whether patentable or not), methods, knowledge, know-how,
skill, experience, data, results (including pharmacological, biological, chemical, biochemical,
toxicological and clinical test data and results), analytical and quality control data, results or
descriptions, software and algorithms and (ii) compositions of matter, cells, cell lines, assays,
animal models and physical, biological or chemical material. As used in the preceding
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sentence, “clinical test data” shall be deemed to include all information related to the
clinical or pre-clinical testing, including patient report forms, investigators’ reports,
biostatistical, pharmaco-economic and other related analyses, regulatory filings and
communications, and the like.
1.28 “License Agreement” means the License Agreement by and among Acquiror, Sub and the
Company as of the date hereof.
1.29 “Merger” means the action of Sub merging with and into the Company under the terms of the
Merger Agreement.
1.30 “Merger Agreement” means that certain Agreement and Plan of Merger dated as of the date
hereof by and among Acquiror, the Company, Sub and the Securityholders’ Representative Committee.
1.31 “Non-Contingent Payments” has the meaning assigned to such term in Section 3.2.
1.32 “Party” or “Parties” has the meaning assigned to such term in the Preamble.
1.33 “Patent” means (a) all patents and patent applications in any country or supranational
jurisdiction in the world, (b) any substitutions, divisions, continuations, continued prosecution
applications, continuations-in-part, provisional applications, reissues, renewals, registrations,
confirmations, validations, re-examinations, extensions (including pediatric extensions),
additions, restorations, supplementary protection certificates and the like of any such patents or
patent applications, and (c) foreign counterparts of any of the foregoing.
1.34 “Person” means any individual, partnership, joint venture, limited liability company,
corporation, firm, trust, association, unincorporated organization, governmental authority or
agency, or any other entity not specifically listed herein.
1.35 “Product” means the pharmaceutical product currently identified as Aeroquin™, consisting
of the levofloxacin compound that is formulated for delivery through the device currently
identified as the PARI eFlow® Device.
1.36 “Product INDs” has the meaning assigned to such term in Section 5.9.
1.37 “Prosecution and Maintenance” or “Prosecute and Maintain” means, with regard to a Patent,
the preparing, filing, prosecuting and maintenance of such Patent, as well as re-examinations,
reissues, and requests for patent term adjustments and patent term extensions with respect to such
Patent, together with the initiation or defense of interferences, the initiation or defense of
oppositions and other similar proceedings with respect to the particular Patent and any appeals
therefrom. For clarification, “Prosecution and Maintenance” or “Prosecute and Maintain” shall not
include any other enforcement actions taken with respect to a Patent.
1.38 “Redirection Letters” means letters from certain Company Stockholders provided to the
Exchange Agent, Acquiror, Sub and the Company that re-direct certain of the
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proceeds payable (via the Exchange Agent) to such Company Stockholder under this Agreement and
the Merger Agreement from such Company Stockholder to the Company or Spinco payroll account to fund
the Company’s or Spinco’s obligations arising under the Carveout Plan and the Contemplated Bonuses.
1.39 “Regulatory Approval” means any and all approvals, licenses, registrations, or
authorizations of any country, federal, supranational, state or local regulatory agency,
department, bureau or other government entity that are necessary for the Commercialization (as
defined in the Development Agreement) of the Product in the applicable jurisdiction. For clarity,
all NDAs and XXXx (each, as defined in the Development Agreement) are Regulatory Approvals.
1.40 “Regulatory Authority” means the FDA, and any health regulatory authority in any country
in the Territory (as defined in the Development Agreement) that is a counterpart to the FDA and
holds responsibility for granting regulatory marketing approval for the Product in such country,
and any successor(s) thereto, including the European Commission (as defined in the Development
Agreement).
1.41 “Related IP” means any and all intellectual property (including Patents, Information and
copyrights) (a) that is not Aeroquin IP or Development IP and (b) that is (i) owned or Controlled
by the Company or its Affiliates as of the Effective Date or during the period between the
Effective Date and the assumption of the Development Agreement by Spinco (pursuant to Section 2.1
of the Development Agreement) which is reasonably useful for making, using, selling, offering for
sale or importation of the Product anywhere in the world or (ii) owned or Controlled by Spinco or
its Affiliates as of the assumption of the Development Agreement by Spinco (pursuant to Section 2.1
of the Development Agreement) or during the term of the Development Agreement (as defined in the
Development Agreement) which is reasonably useful for making, using, selling, offering for sale or
importation of the Product anywhere in the world. For purposes of clarification, Related IP shall
in no event include any intellectual property of any bona fide third party that acquires Spinco
(whether by sale of stock, sale of assets, merger, consolidation or otherwise), regardless of
whether such intellectual property would otherwise fall within the foregoing definition. Moreover,
Related IP shall in no event include any intellectual property that is the subject of either (i) an
exclusive license granted by the Company to GSK pursuant to the GSK Agreement (as in effect as of
the date hereof) or (ii) an unexpired option for an exclusive license granted by the Company to GSK
pursuant to the GSK Agreement (as in effect as of the date hereof).
1.42 “Review Period” has the meaning assigned to such term in Section 2.3.2.
1.43 “Securities” means all outstanding shares of common stock and preferred stock of the
Company, all outstanding options, warrants, convertible notes, rights of conversion and other
rights to acquire capital stock of the Company, and all shares issuable upon exercise or conversion
of the preferred stock, options, warrants, convertible notes, rights of conversion and other rights
to acquire stock of the Company, outstanding from time to time, whether or not then currently
vested, exercisable or convertible.
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1.44 “Spinco” means an entity formed for the initial purpose of holding the Divestiture
Assets.
1.45 “Sub” has the meaning assigned to such term in the Preamble.
1.46 “Term” has the meaning assigned to such term in Section 6.1.
1.47 “Termination Right” has the meaning assigned to such term in Section 2.2.
1.48 “Termination Right Lapse Date” has the meaning assigned to such term in Section 2.4.
1.49 “Third Party” means any entity other than the Company, Acquiror, Sub or an Affiliate of
the Company, Acquiror or Sub.
1.50 “Upfront Non-Contingent Payments” has the meaning assigned to such term in Section 3.1.
1.51 “United States” or “U.S.” means the United States of America.
ARTICLE 2
2.1 Covenant to Divest. The Company agrees to effect the Divestiture as soon as
practicable following the Effective Date, and in any event by no later than June 1, 2011. As part
of the Divestiture, and in accordance with the Carveout Plan and Contemplated Bonuses to be funded
by certain of the Company Stockholders pursuant to the Redirection Letters contingent upon Axcan’s
payment of the Non-Contingent Payments, the Non-Contingent Holdback Consideration and the
Development Milestone Payment, as applicable, the Company and Spinco shall enforce the Redirection
Letters and, collectively, fund and distribute up to $[*] in accordance with the terms of the
Carveout Plan (the “Carveout Payments”) and the Contemplated Bonuses. Not less than ten (10)
Business Days before the Company’s anticipated date of effecting the Divestiture and subject to
Axcan’s confidentiality obligations set forth in the Confidentiality Agreements, the Company shall
provide Axcan with complete, unredacted copies of all of the documents, schedules, exhibits and
other instruments related thereto pursuant to which the Company proposes to effect the Divestiture.
The Company shall not execute such documents, schedules, exhibits or other instruments or take
other actions to effect the Divestiture until Axcan approves such documents and instruments in
writing, such approval not to be unreasonably withheld or delayed. The Company shall provide Axcan
with written notice of, and copies of all documents, schedules, exhibits and other instruments
executed in connection therewith, within two (2) Business Days following completion of the
Divestiture (the “Divestiture Notice”).
2.2 Termination Right. In exchange for the consideration set forth herein, the
Company hereby grants to Axcan the exclusive right, exercisable at any time during the Review
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Period, to terminate the Merger Agreement in accordance with Section 2.3 (the “Termination
Right”).
2.3 Exercise of Termination Right. Axcan may exercise the Termination Right as
follows:
2.3.1 Company Deliveries. Within fourteen (14) calendar days after the earlier
of (a) the Company’s delivery of the Divestiture Notice and (b) June 3, 2011, the Company
shall deliver (the date of such delivery being the “Delivery Date”) to Axcan a completed set
of customary disclosure schedules to, and all documents, schedules, exhibits and other
instruments necessary for evaluating the Merger and exercising the Termination Right (the
“Company Deliveries”).
2.3.2 Review Period. Axcan shall have a period of [*] calendar days (the
“Review Period”) from and after delivery of the Company Deliveries to review, comment on and
coordinate with the Company on finalizing as of the Termination Right Lapse Date the
disclosure schedules to the Merger Agreement, and Axcan shall have the right to exercise the
Termination Right and terminate the Merger Agreement, in its sole discretion, at any time
during the Review Period by written notice to the Company (the “Termination Notice”).
2.4 Effect of Non-Exercise or Waiver of Termination Right. If, and only if, Axcan
either (a) delivers to the Company a written waiver of all or any portion of the Review Period or
(b) allows the Review Period to expire without having delivered the Termination Notice, then the
closing condition set forth in Section 6.1(c) of the Merger Agreement shall be conclusively deemed
to be satisfied (the earlier to occur of (a) and (b), the “Termination Right Lapse Date”).
ARTICLE 3
3.1 Upfront Non-Contingent Payments. Axcan shall pay (a) a non-refundable,
non-creditable upfront payment of [*] Dollars ($[*]) to the Exchange Agent and (b) a
non-refundable, non-creditable upfront payment of [*] Dollars ($[*]) to an account designated by
the Securityholders’ Representative Committee to fund the Reserve (collectively, the “Upfront
Non-Contingent Payments”) by the later of (a) ten (10) calendar days after the Effective Date and
(b) two (2) Business Days after the Company has provided Axcan with evidence of the Stockholder
Approval.
3.2 Deferred Upfront Non-Contingent Payments. Axcan shall pay to the Exchange Agent
the following non-refundable deferred upfront payments: (a) [*] Dollars ($[*]) by the later of (i)
[*] and (ii) two (2) Business Days after the Company has provided Axcan with evidence of the
Stockholder Approval, (b) [*] Dollars ($[*]) by the later of (i) [*] and (ii) two (2) Business Days
after the Company has provided Axcan with evidence of the Stockholder Approval, (c) [*] Dollars
($[*]) by the later of (i) [*] and (ii) two (2) Business Days after the
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Company has provided Axcan with evidence of the Stockholder Approval and (d) thirteen million
five hundred thousand Dollars ($13,500,000) by the later of (i) November 1, 2013 and (ii) two (2)
Business Days after the Company has provided Axcan with evidence of the Stockholder Approval
(collectively, the “Deferred Upfront Non-Contingent Payments” and collectively with the Upfront
Non-Contingent Payments, the “Non-Contingent Payments”).
3.3 Clinical Milestone Payment. Axcan shall pay a one-time payment of two million
five hundred thousand Dollars ($2,500,000) (the “Clinical Milestone Payment”) to the Exchange Agent
upon the latest of (a) administration of the last dose to the last patient in the MPEX-207 Phase 3
Clinical Trial set forth in the Development Plan, (b) January 31, 2012 and (c) two (2) Business
Days after the Company has provided Axcan with evidence of the Stockholder Approval.
3.4 Methods of Payments. U.S. Bank National Association is the designated exchange
agent (the “Exchange Agent”) in connection with this Agreement to receive the funds from Axcan on
behalf of the Company Securityholders (to be promptly distributed based upon the respective
liquidation preferences and other terms and conditions set forth in Section 3 of Article IV(C) of
the Company’s Certificate of Incorporation, as amended). All payments due from Axcan hereunder
shall be paid in Dollars by wire transfer to a bank in the United States designated in writing by
the Exchange Agent (other than the Reserve, which shall be funded to an account designated by the
Securityholders’ Representative Committee). All payments to be made pursuant to the Carveout Plan
shall be funded to the Company or Spinco on behalf of certain of the Company Stockholders pursuant
to the Redirection Letters and paid in accordance with the terms of the Carveout Plan through the
Company’s or Spinco’s normal payroll procedures.
3.5 Taxes. If a law or regulation of any country requires withholding of taxes of any
type, levies or other charges with respect to any amounts payable hereunder to the Company
Securityholders, Axcan shall promptly pay such tax, levy, or charge for and on behalf of the
Company Securityholders to the proper governmental authority, and shall furnish the Company
Securityholders with documentation of such payment. Axcan shall have the right to deduct any such
tax, levy or charge actually paid from payment due the Company Securityholders or be promptly
reimbursed by the Company Securityholders if no further payments are due the Company
Securityholders. Axcan agrees to provide reasonable assistance to the Company Securityholders in
claiming exemption from such deductions or withholdings under a double taxation or similar
agreement or treaty from time to time in force and in minimizing the amount required to be so
withheld or deducted. The recipient of any transfer under this Agreement shall be solely
responsible for, and shall hold harmless the transferor of such property against, any sales, use,
value added, excise or other taxes applicable to such transfer.
3.6 Late Payments; Acceleration. In addition to any other applicable rights and
remedies, any amount owed by Axcan hereunder that is not paid within the applicable time period set
forth herein shall accrue interest at the rate of three percent (3%) above the then-applicable
London Interbank Offered Rate as quoted in the Wall Street Journal, or, if lower, the highest rate
permitted under applicable law. In the event that (a) Axcan fails to make any Non-Contingent
Payment(s) and/or the Clinical Milestone Payment in accordance with the timing and
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terms set forth in Sections 3.1-3.3, (b) the Company sends Axcan a written notice identifying
such payment breach and (c) Axcan does not pay or cause to be paid all overdue amounts to correct
such payment breach within thirty (30) calendar days thereafter, all unpaid Non-Contingent
Payment(s) and the Clinical Milestone Payment shall accelerate and become immediately due and
payable.
ARTICLE 4
The Company hereby makes to Axcan the representations and warranties contained in this ARTICLE
4 (except for the representations and warranties contained in Section 4.14), as of the Effective
Date, subject to such exceptions as are disclosed in the disclosure schedule of the Company
(referencing the appropriate section and paragraph numbers), provided, however, that any disclosure
made therein shall apply to another section or paragraph without repetition only where it is
reasonably apparent on the face of such disclosure that the disclosure would be applicable to such
other section or paragraph, which is attached hereto as Exhibit A and incorporated herein
by this reference (the “Disclosure Schedule”). Notwithstanding anything to the contrary, any and
all representations and warranties set forth in Sections 4.9. 4.10 and 4.11 relate exclusively to
the Product and/or the Aeroquin™ IP, as applicable.
4.1 Organization of the Company and Company Subsidiaries. Each of the Company and
Company Subsidiaries is a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite corporate power,
governmental licenses, authorizations, permits, consents and approvals to own its properties and
assets and to carry on its business as currently conducted. The Company and each Company
Subsidiary is duly qualified or licensed to do business and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its assets or properties
(whether owned, leased or licensed) or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so qualified and licensed or in good standing
has not had and will not have a Material Adverse Effect. The Company has made available to Axcan
(a) a true and correct copy of the Company Certificate of Incorporation and the Company Bylaws, as
amended to date, each in full force and effect on the date hereof (collectively, the “Charter
Documents”), and (b) the equivalent organizational documents for each Company Subsidiary, each as
amended to date. The Company is not in violation of any of the provisions of the Company Charter
Documents and no Company Subsidiary is in violation of its equivalent organizational documents.
Section 4.1 of the Disclosure Schedule lists the names of each director and the name and title of
each officer of the Company and of each of Company Subsidiary as of the date hereof. The
operations now being conducted by the Company are not now and have never been conducted by the
Company under any other name. Section 4.1 of the Disclosure Schedule also lists every state or
foreign jurisdiction in which the Company or any Company Subsidiary has employees or facilities.
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4.2.1 The authorized capital of the Company consists of [*] shares have been designated
Series D Preferred Stock, all of which are issued and outstanding as of the Effective Date.
The rights, privileges and preferences of the Series B-1 Preferred Stock, Series B-2
Preferred Stock, Series C-1 Preferred Stock, Series C-3 Preferred Stock and Series D
Preferred Stock are as stated in the Company Certificate of Incorporation. Section 4.2.1 of
the Disclosure Schedule sets forth the conversion prices or ratios with respect to the
Company Preferred Stock.
4.2.2 As of the date of this Agreement, except for (A) the conversion privileges of the
Series B-1 Preferred Stock, Series B-2 Preferred Stock, Series C-1 Preferred Stock, Series
C-3 Preferred Stock and Series D Preferred Stock, (B) the rights provided in Section 4 of
the Investor Rights Agreement, (C) warrants to purchase up to [*] shares of Series B
Preferred Stock, (D) [*] shares of Company Common Stock which have been granted to
employees, consultants or directors of the Company or a Company Subsidiary pursuant to the
Company’s Option Plan and (E) [*] shares of its Company Common Stock for direct issuances or
purchase upon exercise of Company Options to be granted in the future, under the Company
Option Plan (1) no subscription, warrant, option, convertible security, or other right
(contingent or otherwise) to purchase or otherwise acquire equity securities of the Company
is authorized or outstanding, and (2) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible securities, or other such rights or to
distribute to holders of any of its equity securities any evidence of indebtedness or asset.
Except as set forth on Section 4.2.2 of the Disclosure Schedule, there are no voting
trusts, proxies or other agreements or understandings to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is bound with
respect to the voting, registration, transfer or other disposition (including, without
limitation, rights of first refusal, rights of co-sale) of shares of the capital stock of,
or other equity interests in, the Company or any Company Subsidiary. No Company
Stockholder, and no Affiliate of any Company Stockholder, is indebted to the Company, and
the Company is not indebted to any Company Stockholder or any Affiliate thereof, other than
for payment of employee salaries and expense reimbursements incurred in the Ordinary Course
of Business.
4.2.3 All issued and outstanding shares of Company Capital Stock are, and all shares
which may be issued pursuant to the conversion of Company Preferred Stock or the exercise of
Company Options or Company Warrants, when issued in accordance with the applicable security,
will be, duly authorized, validly issued, fully paid and non-assessable and are free of any
Encumbrances in respect thereof. All issued and outstanding shares of Company Capital
Stock, Company Options and Company Warrants were issued in compliance with all applicable
state and federal securities Legal Requirements and in accordance with the requirements of
any Contracts to which the Company is a party. The outstanding shares of Company Capital
Stock have been issued in accordance with the registration or qualification provisions of
the Securities Act and any relevant state securities laws or pursuant to valid exemptions
therefrom.
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4.2.4 The Company has made available to Axcan accurate and complete copies of the
Company Option Plan, the Company’s standard form of stock option agreement and all exercise
documentation relating to Company Options and all agreements relating to the Company
Warrants and any other subscription rights, warrants, options, convertible securities, or
any other rights (contingent or otherwise) to purchase or acquire securities of the Company
obligate the Company to issue securities. No Company Option has been granted pursuant to an
agreement that deviates in any material respect from the standard form of stock option
agreement attached as an exhibit to the Company Option Plan and provided to Axcan, except
for the Company Option granted pursuant to the Stock Option Agreement, dated as of [*],
between the Company and [*]. Neither the Company Option Plan nor any such agreements and
exercise documentation have been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such Company Option Plan and agreements, in any
case from the form made available to Axcan.
4.2.5 The Company does not have the right nor is the Company under any obligation, nor
is the Company bound by any Contract pursuant to which it may have the right or become
obligated, to repurchase, redeem or otherwise acquire any outstanding shares of Company
Capital Stock, Company Options, Company Warrants, or any other securities of the Company.
4.2.6 The Company has never repurchased, redeemed or otherwise reacquired any shares of
Company Capital Stock or other securities of the Company, other than Company Options
forfeited by employees or consultants of the Company or capital stock repurchases from
employees or consultants of the Company in each case in connection with the termination of
their service with the Company. All such securities so reacquired by the Company were
reacquired in compliance with (i) all applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts.
4.3 Subsidiaries. Other than Mpex London Limited, the Company does not have any
Subsidiaries or affiliated companies and does not otherwise own or control any shares of capital
stock or any interest in, directly or indirectly, any other corporation, limited liability company,
partnership, association, joint venture or other business entity. The Company does not, directly or
indirectly, own any ownership, equity or voting interest in any other corporation, limited
liability company, partnership, association, joint venture or other business entity, nor does it
have any agreement or commitment to purchase any such interest. There are no other corporations,
limited liability companies, partnerships, associations, joint ventures or other business entities
that the Company is required or permitted to consolidate for financial reporting purposes under
GAAP. The Company has not agreed nor is the Company obligated to make, nor is the Company bound by
any Contract under which it may become obligated to make, any investment in or capital contribution
to any other corporation, limited liability company, partnership, association, joint venture or
other business entity.
4.4 Authority. The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby and thereby, including,
without limitation, the Merger, other than the Stockholder Approval. The execution,
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delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby including, without limitation, the Merger, have been duly authorized by all
necessary corporate action on the part of the Company and no further corporate action is required
on the part of the Company to authorize this Agreement and the transactions contemplated hereby,
including, without limitation, the Merger, other than the Stockholder Approval. The Stockholder
Approval is the only approval of holders of Company Capital Stock that is necessary to consummate
the Merger and the transactions contemplated thereby under Delaware Law. This Agreement has been
duly executed and delivered by the Company and constitutes the valid and binding obligation of the
Company enforceable against it in accordance with its terms, except as such enforceability may be
limited by principles of public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.
4.5 No Conflict. The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby, will not contravene,
conflict with or result in any violation of or default under (with or without notice or lapse of
time, or both) or give rise to a right of termination, cancellation, modification or acceleration
of, or the creation in any Person of the right to accelerate, terminate, modify or cancel, any
obligation or loss of any benefit, result in the creation or imposition of any Lien or Encumbrance
(other than Permitted Encumbrances) under or impair any material rights of the Company or any
Company Subsidiary or alter any material rights or obligations of a Third Party under (a) any
provision of the Charter Documents or the equivalent organizational documents of any of the
Company’s Subsidiaries, (b) any Material Contract or (c) any Legal Requirement applicable to the
Company or any Company Subsidiary other than the HSR Act and other than Legal Requirements where
such Conflict would not reasonably be expected to be material to the operation of the business of
the Company or any Company Subsidiary.
4.6 Consent. Except as set forth on Section 4.6 of the Disclosure Schedule, no
consent, notice, waiver, approval, order or authorization of, or registration, declaration or
filing with any Governmental Entity or any other Person is required with respect to, the Company in
connection with the execution and delivery of this Agreement, the Merger Agreement or the
consummation of the transactions contemplated thereby, except for (a) such consents, notices,
waivers, approvals, orders, authorizations, registrations, declarations and filings as may be
required under applicable securities laws, or (b) where the failure to obtain such consent, waiver,
approval, order or authorization, or to make such notifications, registrations, declarations or
filings would not reasonably be expected to be material to the operation of the business of the
Company.
4.7 Taxes
4.7.1 The Company and the Company Subsidiaries (a) have prepared and timely filed all
required U.S. federal, state, local and non-U.S. returns, estimates, information statements
and reports (“Returns”) relating to any and all material Taxes of the Company (including the
Company’s Subsidiaries) and such Returns are true and correct in all material respects and
have been or will be completed in accordance with all applicable Legal Requirements (b) will
prepare and timely file all Returns required to be
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12
filed by the Company or a Company Subsidiary prior to the Closing Date, and when filed,
such Returns shall be true and correct in all material respects and will be completed in
accordance with all applicable Legal Requirements, (c) have timely paid in full all Taxes
that the Company or a Company Subsidiary is required to pay except for Taxes being contested
in good faith in appropriate proceedings and for which adequate reserves have been
established on the Financial Statements and (d) will timely pay in full all Taxes that the
Company or a Company Subsidiary is required to pay prior to the Closing Date. Neither the
Company nor any Company Subsidiary currently is the beneficiary of any extension of time
within which to file any Return. No claim has ever been made in writing by an authority in
a jurisdiction where the Company or any Company Subsidiary does not file Returns that the
Company or any Company Subsidiary is or may be subject to taxation in that jurisdiction.
There are no security interests or other liens on any of the assets of the Company or any
Company Subsidiary that arose in connection with any failure (or alleged failure) to pay any
Tax, other than Permitted Encumbrances.
4.7.2 The Company and each Company Subsidiary has withheld or paid to the appropriate
authorities, with respect to its Employees, stockholders and other Third Parties, all Taxes
required to be so withheld or paid, including, without limitation, all U.S. federal, state
and non-U.S. income taxes and social security charges and similar fees, such as taxes and
fees under the Federal Insurance Contribution Act and Federal Unemployment Tax Act, and has
complied in all material respects with all associated reporting and recordkeeping
requirements.
4.7.3 Neither the Company nor any of the Company Subsidiaries has executed any waiver
of any statute of limitations on or agreed to or requested any extension of the period for
the assessment or collection of any material Tax which such waiver or extension is currently
in effect.
4.7.4 No audit or other examination of any Return of the Company or any of the Company
Subsidiaries is currently in progress, nor has the Company or any of the Company
Subsidiaries been notified in writing of any request for such an audit or other examination.
4.7.5 Neither the Company nor any of the Company Subsidiaries had as of the Balance
Sheet Date any liabilities for unpaid Taxes which were not reserved on the Financial
Statements. The Company has not incurred any Tax liability since the Balance Sheet Date
other than in the Ordinary Course of Business.
4.7.6 The Company has provided or made available to Axcan or its legal counsel copies
of all Returns for the Company and the Company Subsidiaries filed after December 31, 2004.
4.7.7 None of the assets of the Company or any of the Company Subsidiaries is treated
as “tax exempt use property,” within the meaning of Section 168(h) of the Code.
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4.7.8 Neither the Company nor any of the Company Subsidiaries has (a) ever been a
member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a
consolidated federal income Return other than an affiliated group consisting of the Company
and the Company Subsidiaries, (b) ever been a party to any Tax sharing, indemnification or
allocation agreement and (c) ever been subject to any liability for the Taxes of any Person
(other than Company or the Company Subsidiaries), under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law (including any arrangement
for group or consortium relief or similar arrangement). Neither the Company nor any Company
Subsidiary is a party to any joint venture, partnership, other arrangement or contract which
could be treated as a partnership for federal income Tax purposes.
4.7.9 The Company has never been, at any time, a “United States Real Property Holding
Corporation” within the meaning of Section 897(c)(2) of the Code.
4.7.10 Neither the Company nor any of the Company Subsidiaries has constituted either a
“distributing corporation” or a “controlled corporation” in a distribution of stock intended
to qualify for tax free treatment under Section 355 of the Code.
4.7.11 Neither the Company nor any Company Subsidiary has agreed or is required to make
any adjustments pursuant to Section 481(a) of the Code or any similar provision of state,
local or foreign Legal Requirement by reason of a change in accounting method initiated by
it or any other relevant party, and the IRS has not proposed any such adjustment or change
in accounting method in writing, nor does the Company or any Company Subsidiary have any
application pending with any Governmental Entity requesting permission for any changes in
accounting methods that relate to the business or assets of the Company or such Company
Subsidiary.
4.7.12 No closing agreement pursuant to Section 7121 of the Code (or any predecessor
provision) or any similar provision of any state, local or foreign Law has been entered into
by or with respect to the Company or any Company Subsidiary.
4.7.13 Neither the Company nor any Company Subsidiary has participated in a “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(1) or taken a
reporting position on a Return that, if not sustained, would be reasonably likely to give
rise to a penalty for substantial understatement of federal income Tax under Section 6662 of
the Code (or any similar provision of state, local or foreign law).
4.7.14 Except as set forth on Section 4.7.14 of the Disclosure Schedule, there is no
agreement, plan, arrangement or other Contract covering any current or former employee
(including any officer), consultant, independent contractor or director of the Company or
any Person under common control with the Company (within the meaning of Sections 414(b),
414(c), 414(m) and 414(o) of the Code, and the regulations thereunder) that, individually or
collectively, could give rise directly or indirectly to the
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14
payment of any amount or the provision of any benefit that would not be deductible
pursuant to Section 280G or Section 162 of the Code.
4.7.15 Neither the Company nor any Company Subsidiary will be required to include in
its taxable income in a period after the Closing Date any amount that is attributable to (a)
a transaction that is being accounted for under the installment method of Section 453 of the
Code or similar provision of state, local or foreign law, (b) the Company or any Company
Subsidiary being, or ceasing to be, part of an Affiliated Group or (c) any prepaid amount
received or other transaction or event that occurred prior to the Closing Date, other than
amounts, transactions or events occurring in the Ordinary Course of Business for which the
applicable income amount or Tax liability is reflected on the Financial Statements.
4.7.16 Neither the Company nor any Company Subsidiary has ever engaged in activities
constituting a trade or business or permanent establishment (as defined in the applicable
income tax treaty) in a foreign country, and neither the Company nor any Company Subsidiary
is required to file Returns or pay Taxes in a country other than the United States.
4.7.17 Other than Mpex London Limited, none of the Company Subsidiaries is organized
under the laws of any jurisdiction outside the United States.
4.7.18 Section 4.7.18 of the Disclosure Schedule lists all tax holidays and similar tax
benefits which have current applicability to the Company and each Company Subsidiary. The
Company and each Company Subsidiary is currently in compliance with the requirements for all
such tax holidays and similar tax benefits, and have been in compliance since such holiday
or benefit was originally claimed by such entity.
4.7.19 Section 409(A). No stock options, stock appreciation rights or other
equity-based awards issued or granted by the Company or any of the Company Subsidiaries are
subject to the requirements of Section 409A of the Code or is not in material compliance
with Section 409A of the Code.
4.8 Business Activities.
4.8.1 Other than as set forth on Section 4.8.1 of the Disclosure Schedule, there is no
Contract to which the Company or any of the Company Subsidiaries is a party which has the
effect of prohibiting or imposing any restriction on the right or ability of the Company or
any of the Company Subsidiaries (A) to compete with, or solicit any customer of, any other
Person, (B) to acquire any product or other asset or any services from any other Person, (C)
to solicit, hire or retain any Person as an employee, consultant or independent contractor,
(D) to develop, sell, supply, distribute, offer, support or service any product or any
technology or other asset to or for any other Person, (E) to perform services for any other
Person, (F) to transact business or deal in any other
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15
manner with any other Person, or (G) otherwise to engage in any line of business
related to the Product.
4.8.2 Neither the Company nor any of the Company Subsidiaries is currently engaging or
plans to engage in any research, development or commercialization efforts directed to
products that contain [*] for inhaled or oral use.
4.9.1 Disclosure of Patents. Section 4.9.1 of the Disclosure Schedule lists
all of the Patents owned by the Company or any Company Subsidiary included within the
Aeroquin™ IP, setting forth in each case the jurisdictions in which Issued Patents have been
issued and Patent Applications have been filed. Section 4.9.1 of the Disclosure Schedule
lists all of the Patents within the Aeroquin™ IP in which the Company or any Company
Subsidiary has any right, title or interest (including without limitation interest acquired
through a license or other right to use) other than those owned by the Company or any
Company Subsidiary, setting forth in each case the jurisdictions in which the Issued Patents
have been issued and Patent Applications (each as included within the Aeroquin™ IP) have
been filed, and the nature of the right, title or interest held by the Company or any
Company Subsidiary, provided however, such list need not include Patents licensed to the
Company or any Company Subsidiary under an agreement which does not specifically list the
Patents being licensed.
4.9.2 Disclosure of Trademarks. Section 4.9.2 of the Disclosure Schedule lists
all of the Registered Trademarks and domain names and domain name registrations owned by the
Company or any Company Subsidiary (each as included within the Aeroquin™ IP), setting forth
in each case the jurisdictions in which such Registered Trademarks and domain names and
domain name registrations have been registered and applications for registration have been
filed and all other Trademarks included within the Aeroquin™ IP owned by the Company or any
Company Subsidiary used in connection with the Product or in the conduct of the Company’s
business.
4.9.3 Disclosure of Registered Copyrights. Section 4.9.3 of the Disclosure
Schedule lists all of the Registered Copyrights owned by the Company or any Company
Subsidiary included within the Aeroquin™ IP, setting forth in each case the jurisdictions in
which such Copyrights have been registered and applications for copyright registration have
been filed, and lists all Company owned software, middleware and firmware distributed by the
Company or any Company Subsidiary included within the Aeroquin™ IP. Section 4.9.3 of the
Disclosure Schedule lists all of the Registered Copyrights included within the Aeroquin™ IP
in which the Company or any Company Subsidiary has any right, title or interest (including
without limitation interest acquired through a license or other right to use), other than
those owned by the Company or any Company Subsidiary and other than in Off-the-Shelf
Software, setting forth in each case the jurisdictions in which such Registered Copyrights
have been registered and applications for Copyright registration have been filed, and the
nature of the right, title or interest held by the Company or the Company Subsidiary,
provided
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16
however, such list need not include Registered Copyrights licensed to the Company or
any Company Subsidiary in an agreement which does not specifically identify the Copyrights
as being Registered Copyrights.
4.9.4 Ownership of and Right to Use Proprietary Right; No Encumbrances. The
Company is the sole and exclusive owner of and has good, valid and marketable title to, free
and clear of all IP Encumbrances, (i) all of the Company Owned Proprietary Rights included
within the Aeroquin™ IP identified in Sections 4.9.1-4.9.3 of the Disclosure Schedule, (ii)
except for Copyrights in Off-the-Shelf Software licensed to the Company and Copyrights
licensed to the Company as disclosed in the Disclosure Schedule, all Copyrights in software,
middleware, firmware and other works of authorship used or distributed by the Company, and
(iii) all Trade Secrets used by the Company in the conduct of its business other than those
Trade Secrets included in the Company Licensed Proprietary Rights. The Company and the
Company Subsidiaries have a valid, legally enforceable right to use, license, practice and
otherwise exploit all Company Licensed Proprietary Rights included within the Aeroquin™ IP
identified in Sections 4.9.1-4.9.3 of the Disclosure Schedule and all other Proprietary
Rights included within the Aeroquin™ IP used by the Company or any Company Subsidiary, other
than those owned by the Company (including without limitation interest acquired through a
license or other right to use). The Company and the Company Subsidiaries have sufficient
right, title and interest in and to Company Proprietary Rights included within the Aeroquin™
IP necessary to conduct the business of the Company in substantially the same manner as
currently conducted or as currently proposed to be conducted by the Company, including the
development, manufacture and sale of the Product on a worldwide basis in accordance with the
current plans of the Company (A) with no payment obligations to any Person or with respect
to any Company Proprietary Rights included within the Aeroquin™ IP other than as set forth
in any license agreement listed in Section 4.9.4 of the Disclosure Schedule and (B) to the
Company’s Knowledge, without infringing (directly, contributorily, by inducement or
otherwise), misappropriating or otherwise violating any Proprietary Rights included within
the Aeroquin™ IP of any other Person.
4.9.5 Disclosure of Proprietary Rights Agreements. Section 4.9.5 of the
Disclosure Schedule lists any agreement, contract, license or other arrangement (A) granting
any Person any right to make, have made, manufacture, use, sell, offer to sell, import,
export, or otherwise distribute the Product, with or without the right to sublicense the
same; (B) granting any license of, any covenant not to assert/xxx or other immunity from
suit under or any other rights to any Company Owned Proprietary Rights included within the
Aeroquin™ IP, with or without the right to sublicense the same, granted by the Company or
any Company Subsidiary or granted to the Company or any Company Subsidiary (other than
licenses granted to the Company or any Company Subsidiary for Off-the-Shelf Software); (C)
regarding joint development of the Product; (D) by which the Company or any Company
Subsidiary grants any ownership right or title to any Proprietary Rights included within the
Aeroquin™ IP or by which the Company or any Company Subsidiary is assigned or granted an
ownership interest in any Proprietary Rights included within the Aeroquin™ IP other than
agreements with
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17
employees and contractors that assign or grant to the Company or any Company Subsidiary ownership of
Proprietary Rights included within the Aeroquin™ IP developed in the course of providing
services by such employees and contractors; (E) under which the Company or any Company
Subsidiary grants or receives an option or right of first refusal relating to any
Proprietary Rights included within the Aeroquin™ IP; and (F) limiting the Company’s or any
Company Subsidiary’s ability to transact business in any market, field or geographical area
or with any Person, or that restricts the use, sale, transfer, delivery or licensing of
Company Proprietary Rights included within the Aeroquin™ IP or the Product, including
without limitation any covenant not to compete;
4.9.6 Royalties. Other than the [*], neither Company nor any Company
Subsidiary has any obligation to pay any royalties, license fees or other amounts or provide
or pay any other consideration to any Person by reason of the ownership, use, exploitation,
practice, sale or disposition of Company Proprietary Rights included within the Aeroquin™ IP
(or any tangible embodiment thereof) or the reproducing, making, using, selling, offering
for sale, distributing or importing the Product;
4.9.7 Indemnification. Neither the Company nor any Company Subsidiary has
entered into any contract, agreement, license or other arrangement to defend, indemnify or
hold harmless any Person against any charge of infringement of any Proprietary Rights
included within the Aeroquin™ IP, other than indemnification provisions contained in
standard sales agreements or agreements with customers or end users arising in the ordinary
course of the Company’s business; copies of such indemnification provisions have been made
available to Axcan or its counsel;
4.9.8 No Breach. Neither the Company nor any Company Subsidiary, nor, to the
Company’s Knowledge, any other Person is in breach of any contract, agreement, license or
other arrangement described in Sections 4.9.5-4.9.7 and neither the Company nor any Company
Subsidiary has notified any Person and no Person has notified the Company of any such
breach.
4.9.9 No Joint Ownership. The Company does not jointly own, license or claim
any right, title or interest with any other Person of any Company Owned Proprietary Rights
included within the Aeroquin™ IP. Except as included as part of the relationship with [*]
pursuant to the terms of the [*] and as set forth on Section 4.9.9 of the Disclosure
Schedule, no Person other than the Company owns, licenses or, to the Company’s Knowledge,
claims any right, title or interest in any Proprietary Right included within the Aeroquin™
IP.
4.9.10 No Employee Ownership. No current or former officer, manager, director,
stockholder, member, employee, consultant or independent contractor of the Company or any
Company Subsidiary has any right, title or interest in, to or under any Proprietary Rights
related to the Product that have not been either (a) irrevocably assigned or transferred to
the Company or any Company Subsidiary or (b) licensed (with the right to grant sublicenses)
to the Company or any Company Subsidiary under an exclusive, irrevocable, worldwide, royalty
free, fully paid and assignable license.
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18
4.9.11 No Challenges. Neither the Company nor any Company Subsidiary has
received any notice from any Person of any challenge or threatened challenge, nor is there
any pending proceeding, or, to the Company’s Knowledge, are there any facts which could give
rise to any such challenge, claim, demand or proceeding, which would adversely affect (a)
the Company’s or any Company Subsidiary’s right, title or interest in, to or under the
Company Proprietary Rights included within the Aeroquin™ IP, (b) any contract, agreement,
license or and other arrangement under which the Company or any Company Subsidiary receives
any right, title or interest under the Company Proprietary Rights included within the
Aeroquin™ IP or restricts in any material respect the use, manufacture, transfer, sale,
delivery or licensing by the Company or any Company Subsidiary of any Company Proprietary
Rights included within the Aeroquin™ IP or Proprietary Right related the Product, or (c) the
validity, enforceability or claim construction of any Patents included within the Aeroquin™
IP.
4.9.12 No Restrictions. Neither the Company nor any Company Subsidiary is
subject to any proceeding or outstanding decree, order, judgment or stipulation restricting
in any manner the use, transfer or licensing of the Company Proprietary Rights included
within the Aeroquin™ IP by the Company or any Company Subsidiary, the use, manufacture,
transfer, sale, importation or licensing of the Product, or which might affect the validity,
use or enforceability of any Company Proprietary Rights included within the Aeroquin™ IP.
4.9.13 No Infringement by Other Persons. No Person has infringed,
misappropriated or otherwise violated, and no Person is currently infringing,
misappropriating or otherwise violating, any Company Owned Proprietary Right included within
the Aeroquin™ IP or, to the Company’s Knowledge, any Company Licensed Proprietary Right
included within the Aeroquin™ IP that is exclusively licensed to the Company. There is no
unauthorized use, disclosure or misappropriation of the Company Proprietary Rights included
within the Aeroquin™ IP by any Person, including without limitation any current or former
officer, manager, director, stockholder, member, employee, consultant or independent
contractor of the Company or any Company Subsidiary. Section 4.9.13 of the Disclosure
Schedule accurately identifies in all material respects each written or electronic
communication or correspondence that has been sent or otherwise delivered by or to any party
to a Contract listed or required to be listed in Sections 4.9.5-4.9.8 of the Disclosure
Schedule, or any officers, directors, employees, partners, accountants, auditors, attorneys,
advisors, representatives and other agents of any such other party to such a Contract,
regarding any actual, alleged or suspected infringement or misappropriation of any Company
Owned Proprietary Right included within the Aeroquin™ IP or, to the Company’s Knowledge, any
Company Licensed Proprietary Right that is exclusively licensed to the Company and provides
a brief description of the current status of the matter referred to in such letter,
communication or correspondence.
4.9.14 Copyrights and Trademarks. All Registered Copyrights, Registered
Trademarks and domain names owned by the Company or any Company Subsidiary (each as related
to the Product) and all Registered Copyrights, Registered
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19
Trademarks and domain names exclusively licensed to the Company or any Company
Subsidiary (each as related to the Product) (A) have been duly filed or registered (as
applicable) with the applicable Governmental Entity, and maintained, including the timely
submission of all necessary filings and payment of fees in accordance with the legal and
administrative requirements or the appropriate jurisdictions, (B) have not lapsed, expired
or been abandoned and (C) except as set forth on Section 4.9.14 of the Disclosure Schedule,
have no opposition proceedings commenced in relation thereto in any jurisdictions in which
such procedures are available, nor does there exist any fact that could lead to any such
opposition.
4.9.15 Proceedings. There are no claims or actions, suits, litigation,
arbitration, proceedings (including any civil, criminal, administrative, investigative or
appellate proceeding), hearings, inquiries, audits, examinations or investigations
commenced, brought, conducted or heard by or before, or otherwise involving, any court or
other Governmental Entity or any arbitrator or arbitration panel asserting that: (A) any
Person bound by a Contract affecting or relating to the protection or disclosure of the
Company Proprietary Rights included within the Aeroquin™ IP has breached such Contract; (B)
any Person has acquired, disclosed or misused Company Proprietary Rights, Trade Secrets or
the Product in violation of any such Contract (each as included within the Aeroquin™ IP); or
(C) any Person has acquired, disclosed or misused Company Proprietary Rights, Trade Secrets
or the Product in violation of any Legal Requirement (each as included within the Aeroquin™
IP).
4.9.16 Patents. Neither the Company nor any Company Subsidiary has received
any notice of any inventorship challenge, interference, invalidity or unenforceability with
respect to Patents included within the Aeroquin™ IP. To the best of the Company’s
Knowledge, neither the conduct of the Company’s businesses as conducted on and prior to the
Effective Date with respect to the Product and as proposed to be conducted by the Company
with respect to the Product infringe, constitute contributory infringement, inducement to
infringe, misappropriation or unlawful use of Proprietary Rights of any Person. Neither the
Company nor any Company Subsidiary has received notice from any Person regarding an asserted
or threatened claim, nor to the Company’s Knowledge are there any facts which could give
rise to a claim nor has the Company or any Company Subsidiary received any notification,
that the business of the Company with respect to the Product infringes, constitutes
contributory infringement, inducement to infringe, misappropriation or unlawful use of
Proprietary Rights of any Person. No Person has notified the Company or any Company
Subsidiary in writing that the Company or any Company Subsidiary requires a license to any
of Person’s Proprietary Rights for the purpose of developing, making, using or selling the
Product. No claim or adversarial action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard
by or before, or otherwise involving, any court or other Governmental Entity or any
arbitrator or arbitration panel has been made, brought or threatened against the Company or
any Company Subsidiary, an employee of the Company or any Company Subsidiary, or any other
Person identified or required to be identified on Section 4.9 of the Disclosure
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Schedule (A) involving any Company Proprietary Right included within the Aeroquin™ IP
or (B) asserting that the Company or any Company Subsidiary, an employee of the Company or
any Company Subsidiary or any other Person has breached any Contract affecting or relating
to the protection or disclosure of the Product, or otherwise improperly disclosed, acquired
or misused a trade secret, that, if adversely determined, could reasonably be expected to
materially and adversely affect the development, manufacturing, use, distribution or sale of
the Product. With respect to the Product and the Proprietary Rights embodied in the
Product: (A) neither the Company nor any Company Subsidiary has ever infringed (directly,
contributorily, by inducement or otherwise), misappropriated or otherwise violated any
Proprietary Right related of any other Person, and (B) none of the parties to any of the
Contracts listed or required to be listed on Sections 4.9.1-4.9.20 of the Disclosure
Schedule has, pursuant to such Contract, with respect to their activities related to the
Company or any Company Subsidiary or the Product, infringed (directly, contributorily, by
inducement or otherwise), misappropriated or otherwise violated any Proprietary Right of any
other Person. Neither the Company or any Company Subsidiary has received any notification
that the Product (or the Proprietary Rights embodied in the Product) or the business of the
Company related to the Aeroquin™ IP infringes, constitutes contributory infringement,
inducement to infringe, misappropriation or unlawful use of Proprietary Rights of any
Person.
4.9.17 Trademarks and Copyrights. There does not exist any material fact with
respect to the Trademarks related to the Product that would (i) preclude the issuance of any
Registered Trademarks from any such trademark applications, or (ii) render any such
Trademarks invalid or unenforceable. The Company has taken all commercially reasonable and
customary measures and precautions necessary to protect and maintain Trademarks related to
the Product in which the Company or any Company Subsidiary has any right, title or interest
and otherwise to maintain and protect the full value of all such Trademarks. There does not
exist any material fact with respect to any Copyrights included within the Aeroquin™ IP that
would (i) preclude the issuance of any Registered Copyright from any such copyright
applications, or (ii) render any such Copyrights invalid or unenforceable.
4.9.18 Trade Secrets. The Company has taken all commercially reasonable and
customary measures and precautions necessary to protect and maintain the confidentiality of
all Trade Secrets related to the Product in which the Company or any Company Subsidiary has
any right, title or interest and otherwise to maintain and protect the full value of all
such Trade Secrets. Neither the Company nor any Company Subsidiary has not disclosed any
Trade Secrets related to the Product in which the Company has (or purports to have) any
right, title or interest (or any tangible embodiment thereof) to any Person without having
the recipient thereof execute a written agreement regarding the non-disclosure and non-use
thereof. All use, disclosure or appropriation of any Trade Secret related to the Product
not owned by the Company or any Company Subsidiary has been pursuant to the terms of a
written agreement between the Company or any Company Subsidiary and the owner of such Trade
Secret, or is otherwise lawful. Neither the Company nor any Company Subsidiary has received
any notice from a Third Party that there has been an unauthorized use or disclosure of any
Company Trade
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21
Secrets included within the Aeroquin™ IP. No Person that has received any Trade
Secrets included within the Aeroquin™ IP from the Company or any Company Subsidiary has
refused to provide to the Company or any Company Subsidiary, after the Company’s or any
Company Subsidiary’s request therefore, a certificate of return or destruction of any
documents or materials containing such Company Trade Secrets.
4.9.19 Employees. All current and former employees of the Company and each
Company Subsidiary, including without limitation those who are or were involved in, or who
have contributed to, the creation or development of any Proprietary Rights included within
(or that would, assuming such a written agreement has been executed and delivered to the
Company, be included within), the Aeroquin™ IP or the Product have executed and delivered to
the Company or a Company Subsidiary a written agreement (containing no exceptions to or
exclusions from the scope of its coverage) regarding the protection of proprietary
information and the irrevocable assignment to the Company or a Company Subsidiary of any
Proprietary Rights arising from services performed by such Persons, that is substantially
identical to the form of Confidential Information and Invention Assignment Agreement
previously delivered by the Company to Axcan. No current or former employee is in violation
of any term of any such agreement, including without limitation any patent disclosure
agreement or other employment contract or any other contract or agreement relating to the
relationship of any such employee with the Company or any Company Subsidiary.
4.9.20 Contractors. All current and former consultants and independent
contractors to the Company and each Company Subsidiary, including without limitation those
who are or were involved in, or who have contributed to, the creation or development of any
Proprietary Rights included within (or that would, assuming such a written agreement has
been executed and delivered to the Company or the Company Subsidiary, be included within)
the Aeroquin™ IP or the Product have executed and delivered to the Company a written
agreement (containing no exceptions to or exclusions from the scope of its coverage)
regarding the protection of proprietary information and the irrevocable assignment to the
Company or the Company Subsidiary of any Proprietary Rights arising from services performed
by such Persons, that is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously delivered by the Company to Axcan.
No current or former consultant or independent contractor is in violation of any term of
any such agreement, including without limitation any patent disclosure agreement or any
other contract or agreement relating to the relationship of any such consultant or
independent contractor with the Company or a Company Subsidiary.
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4.10 Agreements, Contracts and Commitments. For purposes of this Agreement,
“Contract” shall mean any written or oral contract, agreement, purchase or sale order, instrument,
license, commitment, undertaking or similar arrangement in each case relating to the Product or the
Aeroquin™ IP. Except as set forth on Sections 4.10.1-4.10.23 of the Disclosure Schedule, neither
the Company nor any of the Company Subsidiaries is a party to, or is bound by:
4.10.1 [intentionally omitted]
4.10.2 any employment or consulting agreement, contract or commitment with an employee
or individual consultant or salesperson (other than “at will” employment agreements entered
into in the Ordinary Course of Business that do not provide for severance payments, a notice
period upon termination, change of control payments or acceleration of obligations
(including vesting of options or otherwise)) involving future payments in excess of [*];
4.10.3 any agreement or plan, including, without limitation, any stock option plan,
stock appreciation rights plan or stock purchase plan (A) relating to the sale, issuance,
grant, exercise, award, purchase or redemption of any shares of Company Capital Stock or any
other securities of the Company or any of the Company Subsidiaries or any options, warrants,
convertible notes or other rights to purchase or otherwise acquire any such shares of stock,
other securities or options, warrants, or other rights therefor, or (B) any of the benefits
of which will be increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
4.10.4 any fidelity or surety bond or completion bond;
4.10.5 any lease of personal property having a value in excess of [*] individually or
[*] in the aggregate;
4.10.6 any agreement of guaranty;
4.10.7 any agreement, contract or commitment relating to capital expenditures and
involving future payments in excess of [*] individually or [*] in the aggregate;
4.10.8 any agreement, contract or commitment relating to the disposition or acquisition
of assets or any interest in any business enterprise outside the ordinary course of the
Company’s business;
4.10.9 any material mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing of money or
extension of credit;
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4.10.10 any purchase order or contract for the purchase of materials involving payments
in excess of [*] individually or [*] in the aggregate;
4.10.11 any partnership, dealer, distribution, joint marketing, joint venture, joint
development, strategic alliance, affiliate, or development agreement or similar agreement,
including, without limitation, any Contract pursuant to which the Company or any Company
Subsidiary grants or has granted to any person the right to manufacture, develop or market
the Product or any product containing levofloxacin compound;
4.10.12 any sales representative, original equipment manufacturer, manufacturing, value
added, remarketer, reseller, or independent software vendor, or other agreement for use or
distribution of the products, technology or services of the Company or any of the Company
Subsidiaries involving payments in excess of [*] individually or [*] in the aggregate;
4.10.13 any Contract limiting in any respect the right of the Company or any of the
Company Subsidiaries to engage or participate, or compete with any person, in any line of
business, market or geographic area, or to make use of any Proprietary Rights, or any
Contract granting most favored nation pricing, exclusive sales, distribution, marketing or
other exclusive rights, rights of first refusal, rights of first negotiation or similar
rights or terms to any person, or any Contract otherwise limiting the right of the Company
or any of the Company Subsidiaries to sell, distribute or manufacture the Product;
4.10.14 any Contract with any clinical research organization providing clinical trial
services for any clinical trial for any product containing inhaled levofloxacin compound;
4.10.15 any Contract that would require the consent of any Person in order to
consummate any of the transactions contemplated by this Agreement, the Development
Agreement, the Merger Agreement or the License Agreement;
4.10.16 any Contract (other than Contracts evidencing Company Options or Company
Warrants) (A) relating to the acquisition, issuance, voting, registration, sale or transfer
of any securities, (B) providing any Person with any preemptive right, right of
participation, right of maintenance or similar right with respect to any securities, or (C)
providing the Company with any right of first refusal with respect to, or right to
repurchase, redeem, put or call, any securities;
4.10.17 any Contract relating to the creation of any Encumbrance (other than Permitted
Encumbrances) with respect to any material asset of the Company or any Company Subsidiary;
4.10.18 any Contract providing for the sharing of revenues, profits, losses, costs,
assets or liabilities;
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4.10.19 any Contract (A) containing “standstill” or similar provisions relating to
transactions involving the acquisition, disposition or other transfer of assets or
securities of the Company or any Company Subsidiary, or (B) providing any right of first
negotiation, right of first refusal or similar right to any Person;
4.10.20 any material Contract related to the Product not already required to be listed
in Section 4.10;
4.10.21 any Contract with any Governmental Entity (a “Government Contract”) or any
material federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity that is required for the operation in
all material respects of the Company’s business;
4.10.22 any settlement or litigation “standstill” agreement; or
4.10.23 any other Contract, if a breach of such Contract or the termination of such
Contract would reasonably be expected to have or result in a Material Adverse Effect.
True and complete copies of each Contract disclosed in the Disclosure Schedule or required to
be disclosed pursuant to this Section 4.10 (each a “Material Contract” and collectively, the
“Material Contracts”) have been made available to Axcan. Each Material Contract to which the
Company or any of the Company Subsidiaries is a party or any of its properties or assets (whether
tangible or intangible) is subject is a legally valid and binding agreement of the Company or its
Subsidiary, enforceable against the Company or the Company Subsidiaries in accordance with its
terms, and is in full force and effect with respect to the Company or its Subsidiary, subject to
(i) Laws of general application relating to bankruptcy, insolvency, moratorium or similar Laws
affecting creditors’ rights and the relief of debtors and (ii) rules of Law and general principles
of equity governing specific performance, injunctive relief and other equitable remedies
(regardless of whether such enforceability is considered in a proceeding in equity or at law). The
Company and the Company Subsidiaries are in material compliance with and have not materially
breached, violated or defaulted under, or received written notice or notice via electronic mail
that it has materially breached, violated or defaulted under, any of the terms or conditions of any
such Material Contract. To the Knowledge of the Company, no party obligated to the Company
pursuant to any such Material Contract has breached, violated or defaulted under such Material
Contract, or taken any action or failed to act, such that, with the lapse of time, giving of notice
or both, such action or failure to act would constitute such a breach, violation or default under
such Material Contract by any such other party. There is no event or circumstance that with notice
or lapse of time, or both, would be reasonably likely to (i) constitute a default by the Company or
any Company Subsidiary or (to the knowledge of the Company) any other party under any Material
Contract, (ii) result in a material violation or breach of any of the provisions of any Material
Contract by the Company or any Company Subsidiary or (to the knowledge of the Company) any other
party, (iii) give the Company or any Company Subsidiary or (to the knowledge of the Company) any
other Person the right to declare a default or exercise any remedy under any Material Contract,
(iv) give the Company or any Company Subsidiary or (to the knowledge of the Company) any other
Person
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the right to receive or require a rebate, chargeback, penalty or change in delivery schedule under
any Material Contract, (v) give the Company or any Company Subsidiary or (to the knowledge of the
Company) any other Person the right to accelerate the maturity or performance of any Material
Contract, or (vi) give the Company or any Company Subsidiary or (to the knowledge of the Company)
any other Person the right to cancel, terminate or modify any Material Contract.
Except as set forth in Sections 4.10.1-4.10.23 of the Disclosure Schedule, each Contract with
a clinical research organization providing clinical trial services is terminable and may be
discontinued by the Company at will (upon delivery of notice of not more than 90 calendar days)
without penalty or cost (other than reimbursement for previously incurred or committed expenses) in
connection with the termination by the Company of the applicable research program to which such
Contract relates or the preclinical or clinical development program to which such Contract relates.
Each of the Contracts entered into to establish a clinical trial at any clinical site conforms in
form substantially with the standard form used by the Company as of the date of such Contract. To
the knowledge of the Company, there has not been any Material Adverse Effect to any clinical trial
conducted by the Company or any Company Subsidiary resulting in whole or in part from the breach of
any such Contracts by the clinical site or sponsor participating therein under any such Contracts.
Sections 4.10.1-4.10.23 of the Disclosure Schedule sets forth all Company Contracts that relate to
the Company’s license and development rights to the Product (the “Product Contracts”), and all such
Product Contracts are valid, binding and enforceable (except as to the effect, if any, of (i)
applicable bankruptcy and other similar laws affecting the rights of creditors generally and (ii)
Legal Requirements governing specific performance, injunctive relief and other equitable remedies)
in accordance with their terms against the Company, and, to the knowledge of the Company, each
other party thereto, and are in full force and effect; neither the Company nor any Company
Subsidiary has received any notice or other communication (in writing or, to the knowledge of the
Company, otherwise) regarding any actual or possible violation or breach of, or default under any
Product Contract, and the Company has not waived any of its material rights under any Product
Contract; the Company has made available accurate and complete copies of each written Product
Contract to Axcan; and neither the execution, delivery or performance of this Option Agreement, the
Development Agreement and the Merger Agreement, nor the transactions contemplated thereunder will
constitute or give rise to a default under any Product Contract or require the Consent of any other
party to any Product Contract, except for those Consents included in the list on Sections
4.10.1-4.10.23 of the Disclosure Schedule.
4.11.1 The Company and each Company Subsidiary has all material permits, licenses,
certificates, franchises, permissions, variances, clearances, registrations, designations,
qualifications or authorizations issued, granted, given or otherwise made available by or
under the authority of any Governmental Entity or pursuant to any Legal Requirement required
for the operation of the business of the Company, in each case as related to the Product and
the Aeroquin™ IP and as currently conducted and as proposed to be conducted and such
Authorizations are in full force and effect. All regulatory filings made with respect to
the Product, have been accurate and
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complete and have complied in all material respects with all applicable Legal
Requirements. All clinical trials of the Product, have been and are being conducted by the
Company or any Company Subsidiary according to the applicable Legal Requirements in all
material respects, together with appropriate monitoring of clinical investigator trial sites
for their compliance. The Company has provided to Axcan copies of all regulatory filings
and all material communications related to the Aeroquin™ IP between representatives of the
Company or any Company Subsidiary and any regulatory agency or other Governmental Entity.
4.11.2 The Product has been and is being developed, tested, manufactured, labeled,
stored and distributed in compliance in all material respects with all applicable Legal
Requirements, including those relating to investigational use, premarket clearance, good
manufacturing practices, good clinical practices, good laboratory practices, recordkeeping,
filing of reports and security.
4.11.3 The Company has made available to Axcan (i) accurate and complete copies of each
IND related to the Product and each similar state or foreign regulatory filing made on
behalf of the Company related to the Product, including all related supplements, amendments
and annual reports, and (ii) all material correspondence received from the FDA or any other
Governmental Entity that concerns the Product. The Company has accurately described in all
material respects to Axcan the nature and content of all material verbal communications with
representatives of the FDA and any other Governmental Entities that could reasonably be
expected to materially affect the prospect for approval of the Product.
4.11.4 Based on the facts and circumstances Known by the Company as of the Effective
Date, the Company believes that EU Approval and US Approval could reasonably be obtained on
the schedule, and for the target patient population contemplated by, the Development Plan
(as defined in the Development Agreement) in effect as of the Effective Date, a copy of
which is attached as Exhibit A to the Development Agreement.
4.11.5 The Company has made available to Axcan in an accurate and complete manner, (i)
all clinical data from completed clinical trials (including all adverse events) known to the
Company regarding the Product and (ii) a complete set of adverse events and serious adverse
events known to the Company related to currently ongoing clinical trials as of [*].
4.11.6 As related to the Product, neither the Company nor any Company Subsidiary has
made an untrue statement of a material fact or fraudulent statement to the FDA or any other
Governmental Entity, failed to disclose a material fact required to be disclosed to the FDA
or any other Governmental Entity, or committed an act, made a statement or failed to make a
statement, that (in any such case) establishes a basis for the FDA to invoke its policy
respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,”
set forth in 56 Fed. Reg. 46191 (September 10, 1991) or for any other Governmental Entity to
invoke any similar policy. Neither the Company
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nor any Company Subsidiary has (as related to the Product), and no officer, employee or
agent of the Company or any Company Subsidiary or principal investigator or sub-investigator
of any clinical investigation sponsored by the Company or any Company Subsidiary has, on
account of actions taken for or on behalf of the Company or any Company Subsidiary as
related to the Product, been convicted of any crime under 21 U.S.C. Section 335a(a) or any
similar state or foreign Legal Requirement or under 21 U.S.C. Section 335a(b) or any similar
state or foreign Legal Requirement.
4.11.7 The Product has not been recalled, suspended or discontinued as a result of any
action by the FDA or any other Governmental Entity. No clinical trial of the Product has
been suspended, put on hold or terminated prior to completion, and no IND for the Product
has been suspended, withdrawn, rejected or refused, in each case, as a result of any action
by the FDA or any other Governmental Entity or voluntarily by the Company based on serious
adverse effects on human health. Neither the Company nor any Company Subsidiary nor any of
its collaborators has received any written notice or other communication indicating that the
FDA or any other Governmental Entity has commenced or threatened to initiate any action to
withdraw approval, terminate clinical development, request the recall of the Product, or to
enjoin or place any material restriction on the production, sale, marketing, reimbursement
or testing of the Product.
4.12 Litigation.
4.12.1 There is no claim or action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard
by or before, or otherwise involving, any court or other Governmental Entity or any
arbitrator or arbitration panel pending or threatened against the Company or any Company
Subsidiary, their properties (tangible or intangible) or, any of their officers or
directors, or affecting its business or any of its assets.
4.12.2 To the Knowledge of the Company, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that would reasonably be expected to give rise to or
serve as a basis for the commencement of any claim or action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or appellate
proceeding), hearing, inquiry, audit, examination or investigation commenced, brought,
conducted or heard by or before, or otherwise involving, any court or other Governmental
Entity or any arbitrator or arbitration panel against the Company or any Company Subsidiary.
4.12.3 (i) There is no Order to which the Company or any Company Subsidiary, or any of
the material assets owned or used by the Company or any Company Subsidiary, is subject; (ii)
to the Knowledge of the Company, none of the Stockholders is subject to any Order that
relates to the business of the Company or to any of the material assets owned or used by the
Company or any Company Subsidiary; and (iii) to the knowledge of the Company, no officer or
key employee of the Company is subject to any Order that prohibits such officer or employee
from engaging in or continuing any
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conduct, activity or practice relating to the business of the Company or any Company
Subsidiary.
4.13 Compliance with Laws. As related to the Product, the Company and each Company
Subsidiary has materially complied with all Legal Requirements applicable to it and is not in
violation of, and has not received any written notices of violation with respect to such Legal
Requirements, including any applicable licenses and permits for the export of the Product. As
related to the Product, neither the Company nor any Company Subsidiary has been advised in writing
that it is not conducting business in compliance with all applicable Legal Requirements, including,
without limitation, the rules and regulations of the Food and Drug Administration of the U.S.
Department of Health and Human Services or any other Governmental Entity. The studies, tests and
preclinical or clinical trials conducted by or at the direction of or sponsored by the Company or
any Company Subsidiary as related to the Product were and, if still pending, are being, conducted
in all material respects in accordance with all Legal Requirements, experimental protocols,
procedures and controls (including, without limitation, those administered by the FDA or any other
Governmental Entity) pursuant to, where applicable, accepted professional scientific standards. As
related to the Product, neither the Company nor any Company Subsidiary has received any notices or
correspondence from the FDA or any other Governmental Entity mandating the termination, suspension
or material modification of any Company Studies or Trials. As related to the Product, the Company
and the Company Subsidiaries have established and administer a compliance program (including a
written compliance policy) applicable to the Company and each Company Subsidiary, to assist the
Company, each Company Subsidiary and their directors, officers and employees in complying with
applicable regulatory guidelines (including, without limitation, those administered by the FDA and
any other Governmental Entity).
4.14 Representations and Warranties of Axcan. Axcan (meaning, for purposes of this
Section, Acquiror with respect to itself and Sub with respect to itself) hereby represents,
warrants and covenants to the Company, as of the Effective Date, that:
4.14.1 Axcan is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof;
4.14.2 Axcan has taken all necessary action on its part to authorize the execution and
delivery of this Agreement and the performance of its obligations hereunder;
4.14.3 this Agreement has been duly executed and delivered on behalf of Axcan, and constitutes
a legal, valid, binding obligation, enforceable against it in accordance with the terms hereof;
4.14.4 the execution, delivery and performance of this Agreement by Axcan does not conflict
with any agreement, instrument or understanding, oral or written, to which it is a party or by
which it is bound, nor violate any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over Axcan;
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4.14.5 no government authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, under any applicable laws, rules or regulations currently in
effect, is or will be necessary for, or in connection with, the transaction contemplated by this
Agreement or any other agreement or instrument executed in connection herewith, or for the
performance by it of its obligations under this Agreement and such other agreements except as may
be required under the Merger Agreement, as applicable, or to obtain HSR clearance; and
4.14.6 Axcan has or will have sufficient funds to enable Axcan to consummate the transactions
contemplated hereby, the Merger Agreement and the Development Agreement, including all payments
hereunder and thereunder and fees and expenses of Axcan relating to the transactions contemplated
hereby and thereby when due.
ARTICLE 5
5.1 Covenants of the Company. From and after the date of this Agreement and
continuing until the earlier of (a) the end of the Term and (b) the termination of this Agreement,
except to the extent (i) expressly provided in this Agreement, the Development Agreement or the
Merger Agreement, (ii) as consented to in advance in writing by Axcan [*], (iii) [*] relating to
assets, liabilities and employees that will not remain with the Company following the Divestiture
(including Cash) or (iv) for actions taken to effect the Divestiture, the Company shall conduct its
business and operations in the Ordinary Course of Business, and shall use reasonable efforts to
preserve intact its current business organization, keep available the services of its current
officers and employees and maintain its relations and goodwill with all suppliers, customers,
landlords, creditors, employees and other Persons having business relationships with the Company.
By way of example and not limitation, the Company shall not, and the Company shall not permit any
Company Subsidiary to, do any of the following (subject to the exceptions set forth in clauses (i)
through (iv) of the preceding sentence):
5.1.1 Charter Documents. Cause or permit any amendments to the Company
Certificate of Incorporation or the Company Bylaws or any Company Subsidiary’s certificate
of incorporation or bylaws or equivalent organizational or governing documents;
5.1.2 Dividends; Changes in Capital Stock. Declare, set aside, or pay any
dividend on or make any other distribution (whether in cash, stock or property) in respect
of any of its capital stock (or other equity interests), or split, subdivide, combine or
reclassify any of its capital stock (or other equity interests) or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution for shares of
its capital stock (or other equity interests), or repurchase, redeem or otherwise acquire,
directly or indirectly, any shares of its capital stock (or other equity interests);
provided, however, notwithstanding the above, the Company may: (i) repurchase, redeem or
acquire Company Capital Stock from former employees, non-employee directors and consultants
in accordance with agreements providing for the repurchase of shares in
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connection with any termination of service as in effect on the Effective Date so long
as any such repurchase, redemption or acquisition shall not be funded by Development Cash,
(ii) distribute cash to Spinco, (iii) distribute Cash at the Company’s discretion and (iv)
distribute Spinco capital stock to Company Stockholders;
5.1.3 Issuance of Securities. Issue, deliver or sell or authorize or propose
the issuance, delivery or sale of, or purchase or propose the purchase of any shares of
capital stock (or other equity interests) or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other Contracts of any character obligating it to
issue any such shares (or other interests) or other convertible securities, other than: (i)
the issuance of shares of Company Capital Stock pursuant to the exercise in accordance with
their terms of Company Options, Company Warrants or other rights outstanding as of the
Effective Date; and (ii) in the case of the Company only, the repurchase of any shares of
Company Capital Stock from former employees, non-employee directors and consultants in
accordance with Contracts (as defined in the Merger Agreement rather than as defined herein)
providing for the repurchase of shares in connection with any termination of service
(collectively, the “Allowed Securities Issuances and Repurchases”);
5.1.4 Dispositions. Sell, lease, license or otherwise dispose of or encumber
(other than Permitted Encumbrances) any of its properties or assets, other than the
Divesture and sales in the Ordinary Course of Business consistent with its past practice or
enter into any Contract with respect to the foregoing;
5.1.5 Indebtedness. Other than with respect to any Indebtedness owed to Axcan
or its Affiliates, incur any Indebtedness, or guarantee or endorse, or otherwise as an
accommodation become responsible for, any obligation in excess of [*] of any Person, or make
any loans or cash advances in excess of [*] to any Person, or enter into or amend any
Contract, agreement, commitment or arrangement to effect any of the matters prohibited by
this Section 5.1.5;
5.1.6 Capital Expenditures. Make any capital expenditures, capital additions
or capital improvements in excess of [*] individually or [*] in the aggregate, in each case,
other than as provided for in the Development Plan (as defined in the Development
Agreement);
5.1.7 Insurance. Except as contemplated by Section 5.10 of the Merger
Agreement, materially change the amount of any insurance coverage naming the Company or any
Company Subsidiary as a beneficiary or loss payee to be cancelled or terminated;
5.1.8 Employee Benefit Plans; Severance; Pay Increases. (i) Adopt or amend any
employee severance or compensation benefit plan, including any stock issuance or stock
option plan, or amend any compensation, benefit, entitlement, grant or award provided or
made under any such plan, except in each case as required under ERISA, applicable Legal
Requirements or as necessary to maintain the qualified status of
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such plan under the Code, or (ii) pay any material bonus to any employee or
non-employee director or consultant or materially increase the salaries, wage rates or fees
of its employees or consultants (other than in the Ordinary Course of Business or pursuant
to plans, policies or Contracts in effect on the Effective Date or the Contemplated
Bonuses), or (iii) except as required by applicable Legal Requirement or the terms of an
agreement existing on the Effective Date or contemplated hereby or disclosed hereunder,
increase the compensation, bonus or other benefits payable or to become payable to any of
the Company’s or Company Subsidiaries’ officers, directors or employees, grant any severance
or termination pay or rights to, or enter into any employment or severance agreement with,
any of the Company’s or Company Subsidiaries’ officers, directors or employees, increase any
benefits payable under existing severance or termination pay policies or employment
agreements, except for compensation and benefits increases in the Ordinary Course of
Business;
5.1.9 Lawsuits; Settlements. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where the Company in good faith determines that
failure to commence suit would result in the material impairment of a valuable aspect of its
business, or (iii) for a breach of this Agreement, the Merger Agreement or the Development
Agreement;
5.1.10 Acquisitions. Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its business;
5.1.11 Accounting. Change accounting methods or practices or revalue any of
its assets (including writing down the value of inventory or writing off notes or accounts
receivable otherwise than in the Ordinary Course of Business), except in each case as
required by changes in GAAP or Legal Requirements;
5.1.12 Billing and Collection Practices. Accelerate collection of any accounts
receivable or delay payment of any accounts payable, except in the Ordinary Course of
Business or with respect to payments that the Company or Company Subsidiary is contesting in
good faith;
5.1.13 Encumbrances. Except in the Ordinary Course of Business, place or allow
the creation of any Encumbrance (other than a Permitted Encumbrance) on any material assets
of the Company;
5.1.14 Liquidation; Reorganization. Adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any Company Subsidiary (other than, with respect to the
Company, the Merger and the Divestiture);
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5.1.15 Taxes. File any Return, make, revoke or change any Tax election or
settle or compromise any Tax liability; amend any Return; change (or make a request to any
taxing authority to change) any aspect of the Company’s or Company Subsidiaries’ methods of
accounting or methods of reporting income or deductions for Tax purposes, or accounting
practices or policies from those employed in the preparation of the most recent Returns
filed prior to the Effective Date; file any combined, consolidated or unitary Return with
Spinco; or take any action which may cause a reduction in (i) the tax attributes of the
Company or any Company Subsidiary, including but not limited to, net operating losses,
orphan drug tax credits and R&D tax credits, as such attributes exist as of the Effective
Date, or (ii) tax deductions arising as a result of any compensatory payments or stock
option exercises occurring in contemplation of the transactions described herein, on the
Effective Date, or after the Effective Date; or enter into any Tax allocation agreement, Tax
sharing agreement, Tax indemnity agreement or closing or similar agreement;
5.1.16 IND. Transfer or grant a right of reference to any Investigational New
Drug Application (“IND”) or similar state or foreign regulatory filing of the Company;
5.1.17 Intellectual Property. Permit (as part of a settlement or otherwise)
(i) any of the Company’s Trade Secrets that are material to the business or operations of
the Company to be disclosed, other than under appropriate non-disclosure agreements, (ii)
any of the Company Patents, Registered Copyrights or Registered Trademarks that is material
to the business or operations of the Company to be abandoned or allowed to lapse, or (iii)
any other material Intellectual Property rights of the Company to become unavailable to the
Company on the same terms and conditions as such rights were available to the Company as of
the Effective Date;
5.1.18 Real Property. Purchase or lease any real property.
5.1.19 Governmental Authorizations. Terminate or fail to renew any
Governmental Authorization that is required for continued operations;
5.1.20 Collective Bargaining Agreements. Enter into any collective bargaining
agreement or union contract with any labor organization or union;
5.1.21 Material Contracts. Terminate, cancel, or agree to any material and
adverse change in, or enter into, any Material Contract, except in the Ordinary Course of
Business;
5.1.22 Joint Ventures. Enter into any joint venture agreements, partnership
agreement or other similar agreement;
5.1.23 Certain Licenses. Except for activities conducted pursuant to the
Development Agreement or the GSK Agreement, conduct, participate in, license, or fund,
directly or indirectly, alone or with a Third Party, research or development with respect
to, or commercialize any quinolone antibiotic product for inhaled use;
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5.1.24 Contracts. Execute or otherwise enter into any Contract, that if in
existence on the Effective Date, would be disclosed in the Disclosure Schedule pursuant to
Section 4.10, except as permitted by Section 4.7.2 of the Development Agreement;
5.1.25 Other. Take or agree to take or otherwise cause to be taken, any of the
actions described in this Section 5.1.
5.2.1 The Parties acknowledge that Axcan and the Company have previously executed
Confidential Disclosure Agreements dated [*] and [*] (the “Confidentiality Agreements”)
which shall continue in full force and effect in accordance with their respective terms.
5.2.2 On the Effective Date, the Parties shall jointly issue a public announcement of
the execution of this Agreement, the Merger Agreement, the Development Agreement and the
License Agreement in such form as separately agreed upon between the Parties. Neither Party
shall issue any press release or make any other public disclosure regarding this Agreement,
the Merger Agreement, the Development Agreement or the License Agreement, or the Parties’
activities hereunder or thereunder, or any results or data arising hereunder or thereunder,
except (a) with the other Party’s prior written consent (which consent shall not be
unreasonably withheld), (b) as reasonably necessary to comply with all applicable national
securities exchange listing requirements or laws, rules or regulations or (c) as otherwise
permitted in accordance with this Section 5.2 and the Merger Agreement. Each Party agrees
to provide to the other Party a copy of any public announcement or disclosure regarding this
Agreement, the Merger Agreement, the Development Agreement or the License Agreement or the
subject matter hereof or thereof as soon as reasonably practicable under the circumstances
prior to such public announcement’s or disclosure’s scheduled release, and, absent
extraordinary circumstances, at least three (3) Business Days prior to such public
announcement’s or disclosure’s scheduled release. Each Party shall have the right to
expeditiously review and recommend changes to any such announcement or disclosure and,
except as otherwise required by laws, rules or regulations, the Party whose announcement has
been reviewed shall remove any Confidential Information of the reviewing Party that the
reviewing Party reasonably deems to be inappropriate for disclosure. The principles to be
observed by the Parties in any such permitted public disclosures with respect to this
Agreement, the Merger Agreement, the Development Agreement or the License Agreement shall
be: accuracy and completeness, the requirements of confidentiality under this Section 5.2
and the Merger Agreement, and the normal business practice in the pharmaceutical and
biotechnology industries for disclosures by companies comparable to the Parties.
Notwithstanding the foregoing, to the extent information regarding this Agreement, the
Merger Agreement, the Development Agreement or the License Agreement has already been
publicly disclosed other than through any act or omission of a Party in breach of this
Agreement, the Merger Agreement, the Development Agreement or the License Agreement, either
Party may
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subsequently disclose the same information to the public without the consent of the
other Party. Each Party shall be permitted to disclose the terms of this Agreement, the
Merger Agreement, the Development Agreement or the License Agreement, in each case under
appropriate confidentiality provisions substantially equivalent to those of this Agreement
and the Merger Agreement, to any actual or potential acquirers, merger partners, and
professional advisors.
5.3 Regulatory Approvals.
5.3.1 The Company shall, if required under the Antitrust Laws and requested by Axcan,
(i) no later than sixty (60) calendar days following the execution of this Agreement, make
the initial filing required from the Company under the HSR Act in connection with the
consummation of the Merger and the other transactions contemplated hereby; and (ii) as
promptly as practicable following the execution of this Agreement, execute and file or, if
appropriate, join in the execution and filing of, the applications, notifications, and other
documents required for the lawful consummation of the Merger and the other transactions
contemplated hereby under the Antitrust Laws of the jurisdictions identified in Section 5.3
of the Disclosure Schedule. Axcan shall (x) on the same day as the Company makes the
initial filing, if any, required under clause (i) above, make Axcan’s initial filing under
the HSR Act in connection with the consummation of the Merger and the other transactions
contemplated hereby; and (y) as promptly as practicable following the execution of this
Agreement, execute and file or, if appropriate, join in the execution and filing of, the
applications, notifications, and other documents relating to all filings that Axcan requests
the Company to make under clause (ii) above. [*] shall pay all filing fees associated with
the above filings, applications, or notifications, if any; provided, however, in the event a
filing is required under the HSR Act solely because [*], such fees shall be [*]. If
requested by Axcan, the Company shall use commercially reasonable efforts to promptly
obtain, and to cooperate with Axcan to promptly obtain, all authorizations, approvals,
clearances, consents, actions, or non-actions of any Governmental Entity in connection with
the above filings, applications, or notifications; provided, that Axcan shall use
commercially reasonable efforts to promptly obtain the same. The Company shall promptly
inform Axcan of any material communication between the Company (including its
representatives, counsel, or consultants) and any Governmental Entity regarding any of the
transactions contemplated hereby. If the Company or any Affiliate of the Company receives
any formal or informal request for supplemental information or documentary material from any
Governmental Entity with respect to the Merger or the other transactions contemplated
hereby, then the Company shall make, or cause to be made, as soon as reasonably practicable,
a response in compliance with such request. Axcan, as the purchaser, shall, if it so
elects, lead all efforts to obtain any clearance, waiver, approval or authorization from any
Governmental Entity that is necessary to enable the parties to consummate the Merger or the
other transactions contemplated hereby and by the Merger Agreement, but shall consider in
good faith the views of the Company.
5.3.2 Axcan shall promptly inform the Company of any material communication between
Axcan (including its representatives, counsel, or consultants)
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and any Governmental Entity regarding any of the transactions contemplated hereby. If
Axcan or any Affiliate of Axcan receives any formal or informal request for supplemental
information or documentary material from any Governmental Entity with respect to the
transactions contemplated hereby, then Axcan shall make, or cause to be made, as soon as
reasonably practicable, a response in compliance with such request. Axcan shall direct, in
its sole discretion, the making of such response, but shall consider in good faith the views
of the Company.
5.3.3 The Company and Axcan shall, to the extent permissible, promptly furnish the
other with copies of notices or other communications between the Company (including its
representatives, counsel and any Company Subsidiary) or Axcan (including its
representatives, counsel and Subsidiaries), as the case may be, and any Third Party and/or
Governmental Entity with respect to such transactions. The Company and Axcan shall keep
each other timely apprised of any inquiries or requests for additional information from any
Governmental Entity pursuant to any Antitrust Law, to the extent permissible, and shall
comply promptly with any such reasonable inquiry or request. The Company, on the one hand,
and Axcan, on the other hand, shall permit counsel for the other reasonable opportunity to
review in advance, to the extent permissible, and consider in good faith the views of the
other in connection with, any proposed written communication to any Governmental Entity
relating to the transactions contemplated by this Agreement. To the extent permitted by the
relevant Governmental Entity, each of Company, the Axcan, and their respective Subsidiaries
and Affiliates shall permit each other (including each other’s representatives, counsel, or
consultants) to attend meetings with a Governmental Entity relating to the transactions
contemplated by this Agreement; provided however the Company shall not participate in any
discussion or meeting with the relevant Governmental Entity to the extent such discussion or
meeting involves an unrelated transaction or confidential information of a third party.
5.4 No Negotiations. From and after the Effective Date and continuing until the
earlier of: (a) the end of the Term; (b) the termination of this Agreement; or (c) the Closing of
the Merger, the Company shall not (and the Company shall ensure that none of the Company
Subsidiaries and none of the Representatives of the Company or any of the Company Subsidiaries
shall), directly or indirectly: (a) solicit, facilitate or encourage the initiation of any inquiry,
proposal or offer from any Person (other than Axcan) relating to a possible Acquisition
Transaction; (b) participate in any discussions or negotiations or enter into any agreement with,
or provide any non-public information to, any Person (other than Axcan) relating to or in
connection with a possible Acquisition Transaction; or (c) consider, entertain or accept any
proposal or offer from any Person (other than Axcan) relating to a possible Acquisition
Transaction. The Company shall promptly notify Axcan in writing of any inquiry, proposal or offer
relating to a possible Acquisition Transaction (including the identity of the Person making or
submitting such inquiry, proposal or offer, and the terms thereof) that is received by or on behalf
of the Company, any Company Subsidiary or any of the stockholders of the Company during the period
referred to in the preceding sentence. “Acquisition Transaction” shall mean any transaction (other
than and not including Allowed Securities Issuances, Repurchases and matters related to the
Divestiture) involving: (a) the sale, license, disposition or acquisition of all or a substantial
portion of the business or assets of the Company or any Company Subsidiary; (b)
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the issuance, disposition or acquisition of (i) any capital stock or other equity security of
the Company or any Company Subsidiary, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock or other equity security of the Company or
any Company Subsidiary, or (iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock or other equity security of the Company or
any Company Subsidiary; or (c) any merger, consolidation, share exchange, business combination,
reorganization, recapitalization or similar transaction involving the Company or any Company
Subsidiary.
5.5 Covenant of Axcan. From and after the date of this Agreement and continuing until
the earlier of (a) the end of the Term and (b) the termination of this Agreement, Axcan shall not,
without the prior written consent of the Company, undertake any action the primary intent and
purpose of which is (i) to delay the US Approval or EU Approval without good reason (it being
understood that inability or unwillingness to pay alone shall not constitute “good reason” and
that, by way of example and without limitation, material safety issues and/or flawed trials shall
constitute “good reason”), or (ii) to materially reduce the patient size of the MPEX-207 and/or
MPEX-209 Phase 3 Clinical Trials (as set forth in the Development Plan) without good reason. It
shall not be a breach of the foregoing covenant for Axcan to take an action that would reasonably
be expected to result in a delay of US Approval or EU Approval or in a reduction of the patient
size of the MPEX-207 and/or MPEX-209 Phase 3 Clinical Trials (as set forth in the Development Plan)
if Axcan takes such action with good reason or with a different primary intent or purpose.
5.6.1 Primary Prosecution Rights. As between the Parties and subject to
Section 5.6.2, Axcan shall have the right, at its expense, to control the Prosecution and
Maintenance, using counsel of its choice, of all Patents within the Aeroquin™ IP and
Development IP (the “Product Patents”).
5.6.2 Secondary Prosecution Rights. At Axcan’s reasonable request and expense
(including authorities’ fees and attorneys’ fees), the Company will assist Axcan in
obtaining any patent term extensions of the Product Patents in the Territory or to file new
Patent applications in the Territory. If Axcan determines not to (i) timely expand the
Product Patents by filing additional applications in any country, or (ii) continue to
prosecute any Patent application with the Product Patents, then the Company shall have the
right to make such filings or continue such prosecution. Axcan shall provide the Company
notice within 30 calendar days prior to any applicable filing deadline if it determines to
discontinue prosecution of any Patent application within the Product Patents.
5.7 Right to Consult. Axcan shall copy the Company, or have the Company copied, on
all correspondence to and from patent offices relating to the Product Patents that it is
prosecuting, or causing to be prosecuted, in order, and sufficiently in advance of due dates, such
that the Company can reasonably comment on such correspondence. Axcan shall consider the Company’s
comments in good faith. Axcan shall also provide the Company a draft copy of each
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patent application to be filed by it relating to the Product Patents in order, and
sufficiently in advance, to obtain and incorporate comments from the Company’s patent counsel.
Axcan shall provide to the Company a copy of each office action for a Product Patent, sufficiently
in advance of the response due date, to obtain substantive comment of the Company’s patent counsel.
In addition, Axcan and the Company will work together to develop a freedom to operate strategy and
program for the Product in the Territory.
5.8.1 Duty to Notify of Competitive Infringement. If any Party learns of an
infringement, unauthorized use, misappropriation or threatened infringement or other such
activity by a Third Party with respect to the Aeroquin™ IP or Development IP (“Competitive
Infringement”), such Party shall promptly notify the other Party and shall provide such
other Party with available evidence of such Competitive Infringement.
5.8.2 Enforcement. With Axcan’s consent (not to be unreasonably withheld or
delayed), the Company shall have the first right, but not the obligation, to institute,
prosecute, and control any action or proceeding with respect to Competitive Infringement by
counsel of its own choice, and Axcan shall have the right, at its own expense, to be
represented in that action by counsel of its own choice. If the Company fails to bring any
such action or proceeding within a period of ninety (90) calendar days after first being
notified of such Competitive Infringement, then Axcan shall have the right, but not the
obligation, to bring and control any such action by counsel of its own choice, and the
Company shall have the right to be represented in any such action by counsel of its own
choice at its own expense.
5.8.3 Share of Recoveries. If one Party brings any such action or proceeding
in accordance with this Section 5.8 (the “Initiating Party”), the second Party (the
“Non-Initiating Party”) agrees to be joined as a party plaintiff where necessary and to give
the first Party reasonable assistance and authority to file and prosecute the suit. The
costs and expenses of the Initiating Party bringing suit under this Section 5.8 shall be
borne by the Initiating Party, and any damages or other monetary awards recovered shall be
shared as follows:
(a) Company Recovery. In the event the Company is the Initiating Party in an
action, the Company shall be entitled to retain the full amount recovered in any such action.
(b) Axcan Recovery. In the event Axcan is the Initiating Party in an action, the
amount of such recovery actually received by Axcan shall first be applied to the out-of-pocket
costs of such action; and any remaining proceeds shall be allocated between the Parties such
that Axcan retains [*]-percent ([*]%) and the Company retains [*]-percent ([*]%) of such
amount.
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(c) Settlement or Consent Judgment. A settlement or consent judgment or other
voluntary final disposition of a suit under this Section 5.8 may be entered into by an
Initiating Party only with the prior written consent of the Non-Initiating Party.
5.9 IND Agency. At the time of the assumption of the Development Agreement by Spinco,
the Company shall appoint Spinco as its agent under all INDs for the Product (the “Product INDs”)
for the sole purpose of Spinco’s performance of its obligations pursuant to the Development
Agreement. At Axcan’s request at any time after conclusion of the ninety (90) calendar day cure
period set forth in Section 4.4.1 of the Development Agreement, if the Company has not cured such
Mpex Failure Event (as defined in the Development Agreement) to Axcan’s reasonable satisfaction and
no dispute is ongoing pursuant to Section 4.4.2 of the Development Agreement, the Company shall
revoke Spinco’s agency under the Product INDs and shall appoint Axcan or its designee as the
Company’s agent under the Product INDs for the purpose of Developing (as defined in the Development
Agreement) the Product.
ARTICLE 6
6.1 Term; Expiration. This Agreement shall become effective as of the Effective Date
and, unless earlier terminated pursuant to the other provisions of this ARTICLE 6, shall expire
upon the earliest of (a) termination of the Development Agreement, (b) the Termination Right Lapse
Date and (c) Axcan’s delivery of the Termination Notice pursuant to Section 2.3.2 (the “Term”).
6.2 Termination by the Parties. Notwithstanding Section 6.1 above, either Party may,
without prejudice to any other remedies available to it at law or in equity, terminate this
Agreement and the Merger Agreement in the event the other Party shall have materially breached any
of its representations or warranties or shall have materially breached or defaulted in the
performance of any of its material obligations hereunder, provided, however, that if such breach or
default is curable, then such Party shall have thirty (30) calendar days after written notice
thereof was provided by the other Party to the beaching Party, such notice describing with
particularity and in detail the alleged material breach, to cure such breach. Any such termination
of this Agreement and the Merger Agreement under this Section 6.2 shall become effective upon
notice of the breach or default or, if applicable, at the end of such thirty (30) day period,
unless such breach or default was cured prior to the expiration of such thirty (30) day period.
The right of the Parties to terminate this Agreement and the Merger Agreement as provided in this
Section 6.2 shall not be affected in any way by such Party’s waiver or failure to take action with
respect to any previous default. Notwithstanding anything to the contrary herein, if (i) the
Company is such breaching or defaulting party, (ii) any such breach or default is curable, and
(iii) the Review Period would have otherwise elapsed during any such cure period, then the Review
Period shall automatically be extended to the end of such cure period.
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(a) In the event of the expiration or any termination of this Agreement (other than pursuant
to Section 6.1(b)), notwithstanding anything contained herein to the contrary, all rights granted
to Axcan under the terms of this Agreement shall terminate, except that the provisions of Section
5.2 (Confidentiality; Public Disclosure), Section 5.8 (Enforcement of Aeroquin™ IP) and Section
7.11 (Remedies; Specific Performance) shall survive the expiration or termination of this Agreement
for any reason, in accordance with their respective terms and conditions, and for the duration
stated, or, where no duration is stated, indefinitely.
(b) In the event of the expiration or any termination of this Agreement pursuant to Section
6.1(b), notwithstanding anything contained herein to the contrary, Section 2.1 (Covenant to Divest,
as it relates to the Carveout Payments), Section 5.5 (Covenant of Axcan), Section 5.8 (Enforcement
of Aeroquin™ IP), Section 5.9 (IND Agency) and Section 7.11 (Remedies; Specific Performance) shall
survive the expiration or termination of this Agreement for any reason, in accordance with their
respective terms and conditions, and for the duration stated, or, where no duration is stated,
indefinitely.
(c) Termination, relinquishment or expiration of this Agreement for any reason shall be
without prejudice to any rights that shall have accrued to the benefit of any Party prior to such
termination, relinquishment or expiration including the payment obligations under ARTICLE 3 hereof
and any and all damages arising from any breach hereunder. Such termination, relinquishment or
expiration shall not relieve any Party from obligations which are expressly indicated to survive
termination of this Agreement.
(d) The provisions of ARTICLE 3 as well as any applicable definitions in ARTICLE 1 or
miscellaneous provisions in ARTICLE 7, shall survive the termination or expiration of this
Agreement, the Merger Agreement and/or the Development Agreement, for any reason, in accordance
with their respective terms and conditions, and for the duration stated, and where no duration is
stated, shall survive indefinitely.
ARTICLE 7
7.1 Dispute Resolution. Unless otherwise set forth in this Agreement, in the event of
a dispute arising under this Agreement between the Parties, either Party shall have a right to
refer such dispute to the respective Executive Officers, and such Executive Officers shall attempt
in good faith to resolve such dispute. If the Parties are unable to resolve a given dispute
pursuant to this Section 7.1 within thirty (30) calendar days of referring such dispute to the
Executive Officers, either Party may have the given dispute settled by binding arbitration pursuant
to Section 7.2.
7.2 Arbitration Request. If a Party intends to begin an arbitration to resolve a
dispute arising under this Agreement, such Party shall provide written notice (the “Arbitration
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40
Request”) to the other Party of such intention and the issues for resolution. From the date
of the Arbitration Request and until such time as the dispute has become finally settled, the
running of the time periods as to which Party must cure a breach of this Agreement becomes
suspended as to any breach that is the subject matter of the dispute.
7.3 Additional Issues. Within twenty (20) Business Days after the receipt of the
Arbitration Request, the other Party may, by written notice, add additional issues for resolution.
7.4 No Arbitration of Patent/Confidentiality Issues. Unless otherwise agreed by the
Parties, disputes relating to Patents or non-disclosure, non-use or maintenance of Confidential
Information shall not be subject to arbitration, and shall be submitted to a court of competent
jurisdiction.
7.5 Arbitration Procedure. The Arbitration shall be held in the continental United
States under the rules of the American Arbitration Association (“AAA”). The arbitration shall be
conducted by three (3) arbitrators who are knowledgeable in the subject matter at issue in the
dispute. One (1) arbitrator will be selected by the Company, one (1) arbitrator will be selected
by Axcan, and the third arbitrator will be selected by mutual agreement of the two (2) arbitrators
selected by the Parties. The arbitrators may proceed to an award, notwithstanding the failure of
either Party to participate in the proceedings. The arbitrators shall, within fifteen (15)
calendar days after the conclusion of the arbitration hearing, issue a written award and statement
of decision describing the essential findings and conclusions on which the award is based,
including the calculation of any damages awarded. The arbitrators shall be authorized to award
compensatory damages, but shall not be authorized to award non-economic damages or punitive,
special, consequential, or any other similar form of damages, or to reform, modify or materially
change this Agreement. The arbitrators also shall be authorized to grant any temporary,
preliminary or permanent equitable remedy or relief the arbitrators deem just and equitable and
within the scope of this Agreement, including an injunction or order for specific performance. The
award of the arbitrators shall be the sole and exclusive remedy of the Parties (except for those
remedies set forth in this Agreement), the Parties hereby expressly agree to waive the right to
appeal from the decisions of the arbitrators, and there shall be no appeal to any court or other
authority (government or private) from the decision of the arbitrators. Judgment on the award
rendered by the arbitrators may be enforced in any court having competent jurisdiction thereof,
subject only to revocation on grounds of fraud or clear bias on the part of the arbitrators.
Notwithstanding anything contained in this Section 7.5 to the contrary, each Party shall have the
right to institute judicial proceedings against the other Party or anyone acting by, through or
under such other Party, in order to enforce the instituting Party’s rights hereunder through
specific performance, injunction or similar equitable relief.
7.6 Costs. Each Party shall bear its own attorneys’ fees, costs, and disbursements
arising out of the arbitration, and shall pay an equal share of the fees and costs of the
arbitrators; provided, however, that the arbitrators shall be authorized to determine whether a
Party is the prevailing Party, and if so, to award to that prevailing Party reimbursement for its
reasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees
and expenses, photocopy charges and travel expenses).
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7.7 Preliminary Injunctions. Notwithstanding anything in this Agreement to the
contrary, a Party may seek a temporary restraining order or a preliminary injunction from any court
of competent jurisdiction in order to prevent immediate and irreparable injury, loss, or damage on
a provisions basis, pending the decision of the arbitrators on the ultimate merits of any dispute.
7.8 Confidentiality. All proceedings and decisions of the arbitrators shall be deemed
Confidential Information of each of the Parties.
7.9 Governing Law. This Agreement and any dispute arising from the performance or
breach hereof shall be governed by and construed and enforced in accordance with the laws of the
State of Delaware without reference to conflicts of laws principles.
7.10 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of
law, or otherwise by any Party without the prior written consent of the other Party, and any such
assignment without such prior written consent shall be null and void. Any change of control,
merger, consolidation or otherwise or sale of substantially all of the assets of a Party shall be
deemed an assignment or delegation of this Agreement. Notwithstanding the foregoing, either Party
may assign this Agreement to any direct or indirect wholly owned subsidiary of such Party without
the prior consent of other Party; provided, however, that such Party shall remain liable for all of
its obligations under this Agreement. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective
successors and assigns.
7.11 Remedies; Specific Performance. The Parties acknowledge and agree that, other
than with respect to cash payments provided for in ARTICLE 3: (a) monetary damages would not
adequately compensate an injured Party for the breach of this Agreement by the other Party, (b)
this Agreement shall be specifically enforceable, (c) any breach of this Agreement shall be the
proper subject of a temporary or permanent injunction or restraining order and (d) a Party shall
seek such equitable remedies in any suit for breach, along with any other remedies that the Party
may seek, [*].
7.12 Notices. Any notice or request required or permitted to be given under or in
connection with this Agreement shall be deemed to have been sufficiently given if in writing and
personally delivered or sent by certified mail (return receipt requested), facsimile transmission
(receipt verified), or overnight express courier service (signature required), prepaid, to the
Party for which such notice is intended, at the address set forth for such Party below:
If to the Company, addressed to:
|
Mpex Pharmaceuticals, Inc. | |
00000 Xxxxxxxx Xxxxxx Xxxx | ||
Xxx Xxxxx, XX 00000 | ||
Attention: President | ||
Facsimile: (000) 000-0000 |
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with a copy to:
|
DLA Piper LLP (US) | |
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000 | ||
Xxx Xxxxx, XX 00000 | ||
Attention: Xxxx X. Xxxxxxxxxx | ||
Facsimile: (000) 000-0000 | ||
If to Axcan, addressed to:
|
Axcan Holdings Inc. | |
000 Xxxxxxxx Xxxxxxxxx Xxxxxxxxx | ||
Xxxxxxxxxxx, Xxx Xxxxxx 00000 | ||
Attention: Xxxxx Xxxxxxx | ||
Facsimile: (000) 000-0000 | ||
with a copy to:
|
Axcan Holdings Inc. | |
000 Xxxxxxxx Xxxxxxxxx Xxxxxxxxx | ||
Xxxxxxxxxxx, Xxx Xxxxxx 00000 | ||
Attention: Xxxxx Xxxxxxx | ||
Facsimile: (000) 000-0000 | ||
with a copy to:
|
Ropes & Xxxx LLP | |
Prudential Tower | ||
000 Xxxxxxxx Xxxxxx | ||
Xxxxxx, XX 00000-0000 | ||
Attention: Xxxx X. Xxxxxxxxxx | ||
Facsimile: (000) 000-0000 |
or to such other address for such Party as it shall have specified by like notice to the other
Parties, provided that notices of a change of address shall be effective only upon receipt thereof.
If delivered personally or by facsimile transmission, the date of delivery shall be deemed to be
the date on which such notice or request was given. If sent by overnight express courier service,
the date of delivery shall be deemed to be the next business day after such notice or request was
deposited with such service. If sent by certified mail, the date of delivery shall be deemed to be
the third (3rd) business day after such notice or request was deposited with the U.S.
Postal Service.
7.13 Waiver. Neither Party may waive or release any of its rights or interests in
this Agreement except in writing. The failure of either Party to assert a right hereunder or to
insist upon compliance with any term or condition of this Agreement shall not constitute a waiver
of that right or excuse a similar subsequent failure to perform any such term or condition. No
waiver by either Party of any condition or term in any one or more instances shall be construed as
a continuing waiver of such condition or term or of another condition or term.
7.14 Severability. If any provision hereof should be held invalid, illegal or
unenforceable in any jurisdiction, the Parties shall negotiate in good faith a valid, legal and
enforceable substitute provision that most nearly reflects the original intent of the Parties and
all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the Parties hereto as nearly as may be
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possible. Such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.
7.15 Further Assurances. Subject to the limitations set forth in Section 5.3, each of
the Parties agrees to use its commercially reasonable efforts, and to cooperate with each other
Party hereto, to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, appropriate or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated hereby, and including to execute and
deliver such other instruments and do and perform such other acts and things as may be necessary or
reasonably desirable for effecting completely the consummation of the transactions contemplated
hereby.
7.16 Entire Agreement. This Agreement, together with the Schedules and Exhibits
hereto and the Development Agreement and License Agreement, set forth all the covenants, promises,
agreements, warranties, representations, conditions and understandings between the Parties hereto
and supersede and terminate all prior agreements and understanding between the Parties except for
the Confidentiality Agreements. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between the Parties other
than as set forth herein and therein. No subsequent alteration, amendment, change or addition to
this Agreement shall be binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties.
7.17 Headings; Interpretation. Headings used herein are for convenience only and
shall not in any way affect the construction of or be taken into consideration in interpreting this
Agreement. Further, in this Agreement: (a) the word “including” shall be deemed to be followed by
the phrase “without limitation” or like expression; (b) the singular shall include the plural and
vice versa; (c) masculine, feminine and neuter pronouns and expressions shall be interchangeable;
and (d) references to the Company’s business shall be deemed to refer to the business of the
Company and the Company Subsidiaries.
7.18 Parties in Interest. All of the terms and provisions of this Agreement shall be
binding upon, and shall inure to the benefit of and be enforceable by the Parties hereto and their
respective successors, heirs, administrators and permitted assigns. For the avoidance of doubt, at
the Effective Time, the Surviving Corporation shall assume all of Sub’s obligations, and succeed to
all of Sub’s rights, that survive the termination of this Agreement.
7.19 Construction of Agreement. The terms and provisions of this Agreement represent
the results of negotiations between the Parties and their representatives, each of which has been
represented by counsel of its own choosing, and neither of which has acted under duress or
compulsion, whether legal, economic or otherwise. Accordingly, the terms and provisions of this
Agreement shall be interpreted and construed in accordance with their usual and customary meanings,
and each of the Parties hereto hereby waives the application in connection with the interpretation
and construction of this Agreement of any rule of law to the effect that ambiguous or conflicting
terms or provisions contained in this Agreement shall be interpreted or construed against the Party
whose attorney prepared the executed draft or any earlier draft of this Agreement.
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7.20 Third Party Beneficiaries. The Company Securityholders shall be intended
third-party beneficiaries of this Agreement with the right to enforce the terms of this Agreement
against Axcan.
7.21 Counterparts. This Agreement may be signed in counterparts, each and every one
of which shall be deemed an original, notwithstanding variations in format or file designation
which may result from the electronic transmission, storage and printing of copies of this Agreement
from separate computers or printers. Facsimile signatures and signatures transmitted via PDF shall
be treated as original signatures.
* — * — * — *
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IN WITNESS WHEREOF, the Parties have caused this Option Agreement to be executed by their duly
authorized representatives as of the Effective Date.
MPEX PHARMACEUTICALS, INC. | ||||
By:
|
/s/ Xxxxxx Xxxxxxx
|
|||
Name:
|
Xxxxxx Xxxxxxx | |||
Title:
|
President and Chief Executive Officer | |||
AXCAN HOLDINGS INC. | ||||
By:
|
/s/ Xxxxx Xxxxxx
|
|||
Name:
|
Xxxxx Xxxxxx | |||
Title:
|
Senior VP, Chief Financial Officer and Treasurer | |||
AXCAN LONE STAR INC. | ||||
By:
|
/s/ Xxxxx Xxxxxx
|
|||
Name:
|
Xxxxx Xxxxxx | |||
Title:
|
Senior VP, Chief Financial Officer and Treasurer |
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EXHIBIT A
DISCLOSURE SCHEDULE
[See attached.]
* | Confidential treatment requested. |