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Exhibit 4.1
AGREEMENT WITH THE COMPANY'S STOCKHOLDERS
Agreement dated as of _______ __, ____ among Alkermes, Inc. (the
"Parent"), a Pennsylvania corporation, Advanced Inhalation Research, Inc. (the
"Company"), a Delaware corporation, and the stockholders (the "Company
Stockholders") of the Company. Each of the Company Stockholders, the Company and
the Parent is referred to herein as a "Party" and collectively as the "Parties."
The Parent and the Company, along with Alkermes Acquistion Sub, Inc.
(the "Acquisition Sub"), a Delaware corporation and a newly-formed, wholly owned
subsidiary of the Parent, are entering into an Agreement and Plan of Merger
concurrently herewith (the "Merger Agreement"). Capitalized terms used herein
without definition are used herein as defined in the Merger Agreement.
The Merger Agreement contemplates a transaction in which the
Acquisition Sub shall be merged with and into the Company, the Company
Stockholders (except those exercising their appraisal rights) shall receive
Parent Common Stock as the Merger Consideration and all of the Company Common
Stock shall be canceled.
The Parent, the Acquisition Sub and the Company make certain
representations, warranties and covenants in the Merger Agreement which will
survive the Closing for purposes of potential indemnification. The Parent and
the Company Stockholders wish to provide for post-Closing indemnification
against breaches of the Company's representations, warranties and covenants and
to make certain other covenants among themselves.
The Merger Agreement requires, as a condition to the closing of the
Merger, that certain agreements among the Company and the Company Stockholders
be terminated immediately prior to the Effective Time. The Company and the
Company Stockholders, therefore, wish to terminate such agreements effective
immediately prior to the Effective Time.
Now, therefore, in consideration of the premises and the mutual
promises herein made, intending to be legally bound, the Parties hereby agree as
follows.
1. Definitions.
"Expiration Date" shall have the meaning set forth in Section 4(c).
"Holder" has the meaning set forth in Section 5(a)(iii).
"Losses" has the meaning set forth in Section 4(a).
"Merger Agreement" has the meaning set forth in the preface above.
"Party" has the meaning set forth in the preface above.
"Registrable Securities" has the meaning set forth in Section 5(a).
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"Requisite Company Stockholders" means the Company Stockholders holding
a majority in interest of the total number of shares of Parent Common Stock that
all of the Company Stockholders receive pursuant to the Merger Agreement.
"Stockholders' Representatives" has the meaning set forth in Section
2. Representations and Warranties of the Company Stockholders. Each of the
Company Stockholders represents and warrants to the Parent that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement, and will be correct and complete on the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 2) with respect to himself, herself or itself.
(a) Organization of Certain Company Stockholders. If the Company
Stockholder is a corporation, partnership, limited liability company, limited
liability partnership or other entity, the Company Stockholder is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation.
(b) Authorization. The Company Stockholder has full power and authority
(including, if the Company Stockholder is a corporation, partnership, limited
liability company, limited liability partnership or other entity, full corporate
or partnership power and authority) to execute and deliver this Agreement and to
perform his, her or its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Company Stockholder, enforceable in
accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement by the Company Stockholder, nor the performance by the Company
Stockholder of his, her or its obligations hereunder, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any government, governmental agency or
court to which the Company Stockholder is subject (and, if the Company
Stockholder is a corporation, partnership, limited liability company, limited
liability partnership or other entity, any provision of its charter, bylaws,
partnership agreement or other governing documents), or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which the Company Stockholder is a party or by which he,
she or it is bound or to which any of his, her or its assets is subject.
(d) Investment. The Company Stockholder (i) understands that the Parent
Common Stock has not been registered under the Securities Act, or under any
state securities laws and is being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (ii) is
acquiring the Parent Common Stock solely for his, her or its own account for
investment purposes, and not with a view to the distribution thereof, (iii)
understands that an investment in the Parent involves substantial risks,
including loss of the entire amount of such investment, and (iv) has received
certain information concerning the Parent and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in acquiring and holding the Parent Common Stock.
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(e) Company Shares. The Company Stockholder holds of record the number
of shares of Company Common Stock Shares set forth next to his, her or its name
on Schedule 2(e) attached hereto.
3. Post-Closing Covenants. The Parties agree, as follows, with respect
to the period following the Closing.
(a) General. In case, at any time after the Closing, any further action
is necessary to carry out the purposes of the Merger Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents), as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefore under Section 4 or 5
below). The Company Stockholders acknowledge and agree that from and after the
Closing Date, the Parent, by operation of law, will be entitled to possession of
all documents, books, records (including tax records), agreements, and financial
data of any sort owned by and relating to the Company.
(b) No Sales of Parent Common Stock Pending Earnings Release. Each
Holder who is an "affiliate" (as defined in Rule 1-02 of Regulation S-X
promulgated under the Securities Act) of Parent or of the Surviving Corporation
will not sell any shares of Parent Common Stock until after the Parent announces
its consolidated results which include at least thirty (30) days of consolidated
operations of the Parent and its subsidiaries including the Surviving
Corporation via a publicly disseminated press release. The Parent will promptly
notify each such Holder of the day that it makes such announcement.
4. Indemnification.
(a) Obligation of the Company Stockholders to Indemnify. Subsequent to
the Effective Time, the Company Stockholders shall, subject to the terms,
conditions and limitations set forth in Section 4(c), severally, and not
jointly, indemnify and hold harmless the Parent and the Surviving Corporation
(and their respective directors, officers, employees, agents, affiliates and
assigns) from and against all losses, liabilities, damages, deficiencies, costs
or expenses, including interest and penalties imposed or assessed by any
judicial or administrative body and reasonable attorneys' fees, whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing pursuant to this Section 4
("Losses") based upon, arising out of or otherwise in respect of, any inaccuracy
in or breach of any representation, warranty or covenant of the Company
contained in the Merger Agreement, herein or in any certificate delivered
pursuant thereto.
(i) The Parent shall notify the Stockholders' Representatives (as
hereinafter defined) in writing of each Loss, including a brief description of
the nature and amount thereof. In the event that the amount is unliquidated, the
Parent shall make a good faith estimate of the amount of the Loss. If, within
sixty (60) days after the submission of a Loss to the Stockholders'
Representatives the Parent has not received written notice executed by the
Stockholders' Representatives accepting and agreeing to the amount, the amount
of such Loss shall be referred to an arbitrator chosen by agreement of the
Stockholders' Representatives and the Parent. If no agreement is reached
regarding selection of the arbitrator within thirty (30) days after written
request from either Party to the other, the Parent or the Stockholders'
Representatives may submit the matter
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in dispute to the American Arbitration Association, to be settled by arbitration
in Boston, Massachusetts in accordance with the commercial arbitration rules of
such Association, as modified by this Section 4. The Parent and the
Stockholders' Representatives agree to act in good faith to mutually select an
arbitrator. If there is a prevailing party in such dispute, the fees and
expenses of any arbitration shall be borne by the other party; or if there is no
prevailing party, then by the Company Stockholders and the Parent in such
proportions as shall be determined by the arbitrator; or if there is no such
determination, then such fees and expenses shall be borne equally by the Company
Stockholders and the Parent. The determination of the arbitrator as to the
amount, if any, of the Loss and related expenses that is properly allowable
shall be conclusive and binding upon the parties hereto and judgment may be
entered thereon in any court having jurisdiction thereof.
(b) Obligation of the Parent and the Acquisition Sub to Indemnify .
Subsequent to the Effective Time, both the Parent and the Acquisition Sub,
subject to the terms, conditions and limitations set forth in Section 4(c),
shall, jointly and severally, indemnify and hold harmless the Company
Stockholders (and their respective directors, officers, employees, agents,
affiliates and assigns) from and against any Losses based upon, arising out of
or otherwise in respect of, any inaccuracy in or breach of any representation,
warranty or covenant of the Parent or the Acquisition Sub contained in the
Merger Agreement, herein or in any certificate delivered pursuant hereto.
(c) Limitations on Indemnification . Notwithstanding the foregoing, the
right to indemnification under this Section 4 shall be subject to the following
terms:
(i) No indemnification shall be payable pursuant to Section 4(a)
or Section 4(b) unless and until the amount of all claims for indemnification
pursuant to the applicable Section exceeds $500,000 in the aggregate, whereupon
indemnification pursuant to such Section shall be payable for all such claims
amounts, including the first $500,000 thereof; provided, however, that such
limitation shall not apply to a breach of the representation and warranty in
Section 2.20 of the Merger Agreement.
(ii) No indemnification shall be payable pursuant to Section 4(a)
or Section 4(b) after one hundred eighty (180) days after the Effective Time
(the "Expiration Date"), except with respect to (1) claims made prior to the
Expiration Date, (2) any breach of any representations set forth in Sections 2.8
or 3.6 of the Merger Agreement for which the Expiration Date shall be the end of
the applicable statute of limitations, and (3) all representation and warranties
with respect to Year 2000 Compliance for which the Expiration Date shall be
February 1, 2001.
(iii) Notwithstanding any other provision of this Agreement and
the Merger Agreement, the maximum aggregate liability of the Company
Stockholders to the Parent and the Surviving Corporation, under this Section 4
or otherwise, shall be, at any point in time, ten percent (10%) of the Aggregate
Merger Consideration Value, where the "Aggregate Merger Consideration Value"
means the value of 3.8 million shares of Parent Common Stock (as determined
based on the closing price of Parent Common Stock on the Nasdaq National Market
on the Closing Date); provided, however, this limitation shall not apply with
respect to claims made pursuant to Section 5(f) of this Agreement.
(iv) Notwithstanding any other provision of this Agreement, the
maximum liability of any Company Stockholder to the Parent and the Surviving
Corporation under
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this Section 4 or otherwise, at any point in the time is ten percent (10%) of
the product of (A) the fraction, the numerator of which is the number of shares
of the Company Common Stock held by such Company Stockholder at the Effective
Time and the denominator of which is the number of total outstanding shares of
Company Common Stock at the Effective Time and (B) the Aggregate Merger
Consideration Value; provided, however, this limitation shall not apply with
respect to claims made pursuant to Section 5(f) of this Agreement.
(v) In determining the amount of any indemnity, there shall be
taken into account any Tax benefit, insurance proceeds or similar recovery or
offset realized, directly or indirectly, by the Party to be indemnified.
(d) Notice and Defense of Claims . Promptly after receipt of notice of
any claim, liability or expense for which a Party seeks indemnification
hereunder, such Party shall give written notice thereof to the indemnifying
Party (or, in the case of a claim under Section 4(a), to the Stockholders'
Representatives), but such notification shall not be a condition to
indemnification hereunder except to the extent of actual prejudice to the
indemnifying Party. The notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of the Merger Agreement under which the
liability or obligation is asserted. If, within thirty (30) days after receiving
such notice, the indemnifying Party or the Stockholders' Representatives give
written notice to the indemnified Party stating that they intend to defend
against such claim, liability or expense at its own cost and expense, then
defense of such matter, including selection of counsel (subject to the consent
of the indemnified Party which consent shall not be unreasonably withheld),
shall be by the indemnifying Party and the indemnified Party shall make no
payment on such claim, liability or expense as long as the indemnifying Party is
conducting a good faith and diligent defense. The indemnifying Party shall not
be liable to indemnify any person for any settlement of any such action effected
without the written consent of the indemnifying party, which consent shall not
be unreasonably withheld. Notwithstanding the foregoing, the indemnified Party
shall at all times have the right to fully participate in such defense at its
own expense directly or through counsel; provided, however, if the named parties
to the action or proceeding include both the indemnifying Party and the
indemnified Party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified Party shall be paid by the indemnifying
Party. If no such notice of intent to dispute and defend is given by the
indemnifying Party or the Stockholders' Representatives, or if such diligent
good faith defense is not being or ceases to be conducted, the indemnified Party
shall, at the expense of the indemnifying Party, undertake the defense of such
claim, liability or expense with counsel selected by the indemnified Party, and
shall have the right to compromise or settle the same exercising reasonable
business judgment. The indemnified Party shall make available all information
and assistance that the indemnifying Party or the Stockholders' Representatives
may reasonably request and shall cooperate with the indemnifying Party in such
defense.
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5. Registration of Parent Shares.
(a) Form S-3. The Parent represents that it is eligible to use Form S-3
under the Securities Act to effect registration of shares of Parent Common Stock
issued to the Company Stockholders pursuant to Sections 1.6(b)(i) and (iii) of
the Merger Agreement (the "Registrable Securities") for resale by the Company
Stockholders. The Parent will use its best efforts to effect the registration
and qualification of the Registrable Securities and in connection therewith, the
Parent shall:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") within sixty (60) days of the Closing Date, and use its best
efforts to cause to become effective as soon as possible thereafter, a
registration statement on Form S-3 (or any successor or other appropriate form)
under the Securities Act of 1933, as amended (the "Securities Act") permitting
the Registrable Securities to be offered for resale by the Company Stockholders;
(ii) prepare and file with the Commission, such amendments and
supplements to such registration statement and the prospectus used in connection
therewith, as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities until the earlier of such time as all
of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the Company Stockholders set forth in such
registration statement or until December 31, 2001;
(iii) furnish to each Company Stockholder, who is a holder of such
Registrable Securities (each individually a "Holder") and to any underwriter of
such Registrable Securities, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto, such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus) or filed
under Rule 424(b) or Rule 424(c) under the Securities Act, in conformity with
the requirements of the Securities Act, such documents incorporated by reference
in such registration statement or prospectus, and such other documents, as any
Holder or any such underwriter may reasonably request;
(iv) use its best efforts (1) to list all Registrable Securities
covered by such registration statement on The Nasdaq National Market, and (2) to
register or qualify all Registrable Securities covered by such registration
statement under such "blue sky" or other securities law of such jurisdictions as
any Holder or any underwriter of such Registrable Securities will reasonably
request, and do any and all other acts and things which may be necessary to
enable any Holder or any underwriter to consummate the disposition in such
jurisdictions of the Registrable Securities covered by such registration
statement, except that the Parent shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any such
jurisdiction;
(v) promptly notify the Holders, at any time of the occurrence,
of any event as a result of which the portion of the prospectus included in such
registration statement which contains information furnished by or relating to
the Parent, as then in effect, includes an untrue
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statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing and, at the request of a Holder,
prepare and furnish to such Holder a reasonable number of copies of a supplement
to, or an amendment of, such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; and
(vi) The Parent may require each Holder to furnish the Parent such
information regarding himself, herself or itself and the distribution of such
Registrable Securities as the Parent may from time to time reasonably request in
writing and as will be required by law or by the Commission in connection with
any registration.
(b) Compliance with Securities Laws. Each of the Holders acknowledges
that he, she or it will be subject to applicable provisions of the Securities
Act and the Exchange Act.
(c) Exchange Act Reports and Availability of Rule 144. During the
period from the Closing Date until the date which is five years following the
Closing Date, the Parent shall use its best efforts to (i) timely file all
reports required to be filed by the Parent under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and (ii) take such other action and
coordinate with the Holders to ensure that Rule 144 shall be available to the
Holders for the purpose of disposing of their Registrable Securities.
(d) Discontinuation of Disposition of Registrable Securities. Each
Holder will, upon receipt of any notice from the Parent of the occurrence of any
event of the kind described in Section 5(a)(v) hereof, discontinue disposition
of Registrable Securities pursuant to the registration statement covering such
Registrable Securities until Holder's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 5(a)(v) herein, which supplemented
or amended prospectus shall be made available to Holder as soon as practicable.
The period of time during which the Parent is obligated to maintain the
effectiveness of a registration statement under Section 5(a)(ii) above shall be
extended by the number of days of any such discontinuance.
(e) Obligation of the Parent and the Acquisition Sub to Indemnify. The
Parent agrees to indemnify and hold harmless each Holder or any Person who
participates as an underwriter in the offering or sale of such Registrable
Securities, each officer and director of each underwriter, and each other
Person, if any, who "controls" each Holder or any such underwriter within the
meaning of the Securities Act against any losses, claims, damages, liabilities
and expenses, joint or several, to which such Person may be subject under the
Securities Act or otherwise insofar as such losses, claims, damages, liabilities
(or actions or proceedings in respect thereof) or expenses arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Registrable
Securities were registered under the Securities Act, any preliminary prospectus
or final prospectus included therein or filed under Rule 424(b) under the
Securities Act, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Parent will reimburse each such
Person for any legal or any other expenses
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reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided, however, that the
Parent will not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus or final prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the Parent
by any Holder or any such underwriter or any Person who "controls" any such
Holder or underwriter for use in the preparation thereof, (ii) any breach by any
Holder of the covenant set forth in Section 5(d) hereof. Such indemnity will
remain in full force and effect regardless of any investigation made by, or on
behalf of, any Holder or any such underwriter and will survive the transfer of
such Registrable Securities by Holder.
(f) Obligation of the Company Stockholders to Indemnify. Each Holder
severally, and not jointly, and in proportion to the Registrable Securities
actually sold by such Holder thereunder, agrees to indemnify and hold harmless
the Parent, each director and each officer of the Parent, and each controlling
person within the meaning of the Securities Act of any of the foregoing who will
sign such registration statement, against any losses, claims, damages,
liabilities and expenses, joint or several, to which such Person may be subject
under the Securities Act or otherwise insofar as such losses, claims, damages,
liabilities (or actions or proceedings in respect thereof) or expenses arise out
of, or are based upon, (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus included therein or filed under Rule 424(b) under
the Securities Act, or any amendment or supplement thereto, or any document
incorporated by reference therein, (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (iii) any breach by any Holder of the
covenant set forth in Section 5(d) hereof or (iv) any failure by any Holder to
deliver a prospectus as required under the Securities Act or any state
securities laws. Holder will reimburse each such Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that Holder will be liable in any such case only to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus or final prospectus, amendment or supplement, in
reliance upon and in conformity with written information specifically furnished
to the Parent by Holder or any Person who "controls" such Holder for use in the
preparation thereof. Such indemnity will remain in full force and effect
regardless of any investigation made by or on behalf of the Parent and will
survive the transfer of such Registrable Securities by Holder.
(g) Notice and Defense of Claims. Promptly after receipt of notice of
any claim, liability or expense arising out of the registration or sale of the
Registrable Securities for which a Party seeks indemnification hereunder, such
Party shall give written notice thereof to the indemnifying Party (or, in the
case of a claim under Section 5(f), to the Stockholders' Representatives), but
such notification shall not be a condition to indemnification hereunder except
to the extent of actual prejudice to the indemnifying Party. The notice shall
state the information then available regarding the amount and nature of such
claim, liability or expense. If within thirty
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(30) days after receiving such notice the indemnifying Party or the
Stockholders' Representatives give written notice to the indemnified Party
stating that they intend to defend against such claim, liability or expense at
its own cost and expense, then defense of such matter, including selection of
counsel (subject to the consent of the indemnified Party which consent shall not
be unreasonably withheld), shall be by the indemnifying Party and the
indemnified Party shall make no payment on such claim, liability or expense as
long as the indemnifying Party is conducting a good faith and diligent defense.
The indemnifying Party shall not be liable to indemnify any person for any
settlement of any such action effected without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the indemnified Party shall, at all times, have
the right to fully participate in such defense at its own expense directly or
through counsel; provided, however, if the named parties to the action or
proceeding include both the indemnifying Party and the indemnified Party and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the expense of separate counsel
for the indemnified Party shall be paid by the indemnifying Party. If no such
notice of intent to dispute and defend is given by the indemnifying Party or the
Stockholders' Representatives, or if such diligent, good faith defense is not
being or ceases to be conducted, the indemnified Party shall, at the expense of
the indemnifying Party, undertake the defense of such claim, liability or
expense with counsel selected by the indemnified Party, and shall have the right
to compromise or settle the same exercising reasonable business judgment. The
indemnified Party shall make available all information and assistance that the
indemnifying Party or the Stockholders' Representatives may reasonably request
and shall cooperate with the indemnifying Party in such defense.
(h) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable to an indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying Party, in lieu of indemnifying such indemnified
Party hereunder, shall contribute to the amount paid or payable by such
indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying Party, on the one hand, and of the indemnified Party, on the other,
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying Party and of the
indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying Party or by the indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(i) Other Securities Laws. Indemnification and contribution similar to
that specified in the paragraphs (c), (d) and (f) of this Section 5 (with
appropriate modifications) will be given by the Parent and each Holder with
respect to any required registration or other qualification of such Registrable
Securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.
(j) Covenant to Register Option Securities. The Parent will use its
best efforts to effect the registration of shares of Parent Common Stock
issuable upon exercise of options to acquire Parent Common Stock issued pursuant
to Section 1.6.(b)(ii) of the Merger Agreement (the "Option Securities"). The
Parent will prepare and file with the Commission within sixty (60) days of the
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Closing Date, and use best efforts to cause to become effective as soon as
possible thereafter, a registration statement on Form S-3 (or any other
appropriate form) under the Securities Act. The Parent will prepare and file
with the Commission, such amendments and supplements to such registration
statement and the prospectus used in connection therewith, as may be necessary
to keep such registration statement effective until the earlier of such time as
all of such Option Securities have been disposed of in accordance with the
intended method of disposition set forth in such registration statement or until
May 31, 2002. The Parent will use its efforts to list all Option Securities
covered by such registration statement on the Nasdaq National Market.
Notwithstanding anything to the contrary herein, the provisions of Sections 5(d)
through 5(i) of this Agreement shall not apply with respect to the registration
of such Option Securities.
6. M.I.T. and the M.I.T. Holders.
(a) The Massachusetts Institute of Technology ("MIT") represents and
warrants that the Company has satisfied all of its obligations arising or
occurring up to the date hereof under the Patent License Agreement between the
Company and MIT dated August 15, 1997, as amended (the "M.I.T. Agreement") or,
if any such obligations have not been satisfied, are hereby waived.
(b) The Holders listed on Schedule 6 hereto (the "M.I.T. Holders"),
hereby (i) acknowledge that the Dilutive Issuance Threshold has been met and
satisfied pursuant to the terms of the M.I.T. Agreement, (ii) each M.I.T.
Holder's pro rata ownership rights under Section 4.1(b) of the M.I.T. Agreement
were satisfied in full, and (iii) waive any and all past, present and future
rights, both accrued and unaccrued, under Section 4.1(b) of the M.I.T.
Agreement.
7. Termination of Certain Existing Agreements.
(a) Stockholders' Agreement. The Company and the undersigned Company
Stockholders agree that the certain Stockholders' Agreement dated July 31, 1997,
as amended, shall be hereby further amended so that such Stockholders' Agreement
shall automatically terminate in its entirety immediately prior to the Effective
Time, without any further action on the part of the Company or such Company
Stockholders.
(b) Co-Sale Agreement. The Company and the undersigned Company
Stockholders who are parties to that certain Co-Sale Agreement dated July 31,
1997, as amended, agree that such Co-Sale Agreement shall be hereby further
amended so that such Co-Sale Agreement shall automatically terminate in its
entirety effective immediately prior to the Effective Time, without any further
action on the part of the Company or such Company Stockholders.
(c) Investors' Rights Agreement. The Company and the undersigned
Company Stockholders who are parties to that certain Amended and Restated
Investors' Rights Agreement dated as of November 28, 1998 agree that such
Amended and Restated Investors' Rights Agreement shall be hereby further amended
so that such Amended and Restated Investors' Rights Agreement, including the
provisions of Sections 3 and 6 thereof, shall terminate in its entirety
effective immediately prior to the Effective Time, without any further action on
the part of the Company or such Company Stockholders.
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(d) Management Rights Letters. The Company, Polaris Venture Partners,
L.P. and Polaris Venture Partners Founders' Fund, L.P. agree that those certain
Management Rights Letters dated July 31, 1997, April 6, 1998 and June 29, 1998
among such parties shall hereby be amended so that such Management Rights
Letters shall terminate in their entirety effective immediately prior to the
Effective Time, without any further action on the part of any such party.
8. Stockholders' Representatives.
(a) Appointment and Acceptance. Each Company Stockholder hereby
appoints Xxxxx X. Xxxxxxx and Xxxxxxxx XxXxxxx to act as his or her
representatives (the "Stockholders' Representatives") as contemplated by this
Agreement in connection with all matters relating to the Merger. Without
limiting the generality of the foregoing, the Stockholders' Representatives are
authorized to represent the Company Stockholders in connection with (i) any
indemnification claim against or by the Company Stockholders pursuant to the
Merger Agreement and this Agreement; (ii) the administration of the Merger
Agreement and this Agreement and any disputes or issues that arise hereunder or
thereunder. The Stockholders' Representatives hereby accept such appointment and
agree to serve as the Stockholders' Representatives as contemplated by this
Agreement.
(b) Indemnification Claims. The Stockholders' Representatives may, but
are not obligated to enforce, collect or recover any claim as to which indemnity
may be sought on behalf of the Company Stockholders under this Agreement and the
Merger Agreement. The Stockholders' Representatives shall in no event have any
obligation for the payment of, or the collection of, any amounts to which the
Company Stockholders may be entitled under this Agreement or the Merger
Agreement, except for in their capacity as Company Stockholders.
(c) Limitation on Powers. Notwithstanding anything in this Agreement to
the contrary, the Stockholders' Representatives shall not have the authority to
waive, or agree to any amendment to, the Company Stockholders' rights under the
Merger Agreement or this Agreement except that the settlement of a bona fide
dispute relating to the rights to which the Company Stockholders are entitled
shall not constitute a "waiver" or "amendment" of any rights subject to this
paragraph (c).
(d) Power of Attorney. Subject to Section 8(c) above, the Stockholders'
Representatives shall have full power and authority for the Company
Stockholders, on his or her behalf and in his or her name, place and xxxxx, to
take any and all actions that the Stockholders' Representatives may deem
necessary or desirable under the Merger Agreement and this Agreement, in its
absolute discretion, as fully as the Company Stockholders could do if present.
The Company Stockholders hereby grant each Stockholders' Representative, acting
individually after the approval of a matter by the Stockholders' Representatives
as provided herein, an irrevocable power of attorney, in the name, place and
stead of the Company Stockholders, to execute and deliver any agreements,
waivers, stock certificates or other documents, to commence and defend
litigation and other proceedings, and to take such other actions as are
necessary or desirable to enforce or protect the Company Stockholders' rights
under the Merger Agreement and this Agreement and to implement decisions made or
actions taken by the Stockholders' Representatives.
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(e) Ratification. Any action taken by the Stockholders' Representatives
or any Stockholders' Representative pursuant to and in compliance with this
Agreement is hereby ratified, confirmed and approved by the Company
Stockholders.
(f) Reliance; Irrevocability. It is anticipated that the Stockholders'
Representatives, Parent, and the other Company Stockholders will all act, or
refrain from acting, in reliance upon this Section 8, and in consideration of
that reliance, and the mutual covenants expressed in this Section 8, the powers
of the Stockholders' Representatives are, and shall be deemed, coupled with an
interest and irrevocable, and shall not terminate upon, or be affected by, the
dissolution, death, incompetency or other disability of the Company
Stockholders.
(g) Action by the Stockholders' Representatives.
(i) Only by Mutual Consent. The Stockholders' Representatives may
act only by mutual consent; provided, however, that each Stockholders'
Representatives may individually implement actions approved by mutual consent.
(ii) Reliance on Documents. The Stockholders' Representatives
shall be entitled to rely upon any order, judgment, award, certification,
demand, notice, instrument or other writing delivered to it under this Agreement
or the Merger Agreement without being required to determine the authenticity or
the correctness of any fact stated therein or the propriety or validity of the
service thereof. The Stockholders' Representatives may act in reliance upon any
instrument or signature believed by it to be genuine and may assume that any
persons purporting to give notice or receipt of advice or make any statement or
execute any document in connection with the provisions hereof have been duly
authorized to do so.
(iii) Retaining Third-Parties. The Stockholders' Representatives
may engage such third parties at such cost as the Stockholders' Representatives
shall in their sole discretion deem necessary or appropriate for the adequate
performance of their duties hereunder and may rely on the advice of such third
parties with respect to matters within their professional or expert competence.
(h) Release and Indemnification.
(i) Release and Indemnification. No Stockholders' Representative
shall be liable to the Company Stockholders for any acts or omissions as
Stockholders' Representatives except for his or her own bad faith or willful
misconduct. Except with respect to claims based upon such bad faith or willful
misconduct that are successfully asserted against such Stockholders'
Representative, the Company Stockholders shall jointly and severally indemnify
and hold harmless each Stockholders' Representative from and against any and all
damages, losses, liabilities, claims, actions, costs and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Agreement or the Merger Agreement and the performance of his or her
duties hereunder. Such Stockholders' Representative shall not be liable for any
mistake of fact or of law or any error of judgment. Each Stockholders'
Representative and the Stockholders' Representatives are authorized to comply
with and obey laws, orders, judgments, decrees, and regulations of any
governmental authority, court, tribunal, or arbitrator. If a Stockholders'
Representative complies with any such law, order, judgment, decree, or
regulation, such
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Stockholders' Representative shall not be liable to the Company Stockholders or
to any other person even if such law, order, judgment, decree or regulation is
subsequently reversed, modified, annulled, set aside, vacated, found to have
been entered without jurisdiction, or found to be in violation or beyond the
scope of any constitution or law. If (A) a Stockholders' Representative is
uncertain as to the Stockholders' Representatives' duties or rights hereunder,
(B) has received any notice, advice, direction or other document from any other
party with respect to this Agreement or the Merger Agreement which, in the
Stockholders' Representative's opinion, is in conflict with any of the
provisions of this Agreement or the Merger Agreement, or (C) is aware that a
dispute has arisen with respect to this Agreement and the Merger Agreement, each
Stockholders' Representative and the Stockholders' Representatives shall be
entitled, without liability to the Company Stockholders, to use their best
efforts to perform their duties under this Agreement, the Merger Agreement until
the Stockholders' Representatives are directed otherwise in writing by an order,
decree, or judgment of a court of competent jurisdiction which has been finally
affirmed on appeal or which by lapse of time or otherwise is no longer subject
to appeal or by an arbitrator's determination as provided in this Agreement.
(ii) Period of Indemnity. The aforesaid indemnities shall remain in
full force and effect against any of the parties for a period equal to the
applicable statute of limitation for such claim; provided, however, that if
prior to the expiration of such period any claim for indemnification has been
asserted but not fully determined, such period will be extended as to such
claim, until it is finally concluded. All rights, protections and indemnities
contemplated herein shall be available to each Stockholders' Representative with
respect to actions or omissions while a Stockholders' Representative despite
such Stockholders' Representative's resignation or removal as a Stockholders'
Representative.
(iii) Satisfaction of Indemnification Obligations. The obligations of
the Company Stockholders to indemnify the Stockholders' Representatives shall be
satisfied in the same manner as indemnification claims made by the Parent
against the Company Stockholders are satisfied. If a Stockholders'
Representative is entitled to indemnification after all such amounts are
exhausted, each Company Stockholder (other than the indemnified Stockholders'
Representative(s)) shall be individually liable in an amount equal to the amount
of indemnification multiplied by a fraction, the numerator of which this the
number of share of Common Stock owned by such Company Stockholder and the
denominator of which is the number of shares of Common Stock owned by all of the
Company Stockholders (other than the indemnified Stockholders'
Representative(s)).
(i) Resignation and Removal; Appointment of Successors.
(i) Resignation. Any Stockholders' Representative may resign at any
time by giving 30 days written notice thereof to the other Stockholders'
Representative.
(ii) Filling Vacancies. If any Stockholders' Representative shall
resign, be removed or become incapable of acting, or if a vacancy in the office
of Stockholder Representative shall otherwise occur, the remaining Stockholders'
Representative shall appoint a successor to take the place of such Stockholders'
Representative and fill such vacancy. Such successor Stockholders'
Representative shall execute a counterpart to this Agreement and thereupon,
without any further act, deed or conveyance, shall become vested with all the
rights, powers and
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duties of the retiring Stockholders' Representative. If both Stockholders'
Representatives resign or are otherwise unable to act, the Company Stockholders
may appoint new Stockholders' Representatives to the Stockholders'
Representatives by a plurality vote at a meeting of, or written consent by,
Company Stockholders holding a majority of the shares of Company Common Stock.
9. Termination. This Agreement shall terminate if and only if the
Merger Agreement is terminated prior to the Closing in accordance with and
pursuant to the terms thereof.
10. Miscellaneous.
(a) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors, heirs and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and except for the
Merger Agreement supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his,
her or its rights, interests or obligations hereunder without the prior written
approval of the Parent and the Requisite Company Stockholders; provided,
however, that the Parent may assign any or all of its rights and interests
hereunder in connection with any merger, consolidation or sale of all or
substantially all of its assets.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (and then received
two business days thereafter) if it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Company: Advanced Inhalation Research, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
If to the Company Stockholders: At the address set forth in the Company's
records
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If to the Parent: Alkermes, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
Copy to: Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Xx., Esquire
Facsimile: (000) 000-0000
If to the Stockholders' Representatives Xxxxx X. Xxxxxxx
President
Advanced Inhalation Research
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxxxxx XxXxxxx
Polaris Venture Partners
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the Commonwealth of Pennsylvania without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Pennsylvania or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Pennsylvania.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parent and the Requisite Company Stockholders. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the
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remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.
(j) Expenses. Each of the Parties will bear his, her or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby (except as otherwise
provided herein).
(k) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
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