Settlement Agreement
Exhibit 10.1
A. Background
Edison Pharmaceuticals, Inc. (“Edison”) and Penwest Pharmaceuticals Co. (“Penwest”) entered
into a Collaboration and License Agreement dated as of July 16, 2007 (the “Agreement”) and the Loan
Agreement (as defined in Section B(6) below). Capitalized terms used in this Settlement Agreement
and not defined herein have the meanings set forth in the Agreement. The parties have had
disagreements concerning the level of funding provided to Edison by Penwest, the supporting
documentation for Edison FTEs dedicated to the Research Program and the interpretation of the
Agreement relating to FTEs, and whether an “Event of Default” has occurred requiring repayment of
the loan made by Penwest to Edison under the Loan Agreement as described below.
The parties have agreed to resolve the disagreements set forth above in this Settlement
Agreement, which is intended to be a binding agreement.
B. Agreement
Edison and Penwest, wishing to resolve the dispute set forth in Section A, hereby agree as
follows:
1. Research Funding. Penwest will not pay Edison any further amounts for research
funding or development costs under the Agreement and, except as set forth below, Edison will not be
obligated to perform any further research services under Section 2.2 of the Agreement. Edison
acknowledges that Penwest has paid to Edison all amounts owed under Section 2.6 and Section 5.2 of
the Agreement for all work done to date and Penwest acknowledges (i) that Edison has performed all
services required to date and in connection with all payments received, and (ii) that Penwest is
not entitled to a refund of any amounts paid to date as a result of the amount of Edison research
services provided, the lack of supporting documentation, or the interpretation of the Agreement
relating to Edison FTEs other than the Specified Amount as set forth in Section B(5) hereof,
provided that the foregoing is not intended to cover the credit set forth in
Section 2.2.2 to the extent applicable.
2. EPI 761. Penwest agrees to perform the remaining two (2) toxicity studies to
assess the Compound currently being evaluated (currently EPI 761) within fourteen (14) weeks of the
date hereof, as such period may be extended by Penwest due to circumstances outside of Penwest’s
reasonable control. Edison will provide reasonable assistance to Penwest to conduct such remaining
toxicity studies. Upon completion of these studies, Penwest (i) shall provide Edison a copy of all
results from the toxicity studies (including any underlying source data in Penwest’s possession)
and (ii) shall have the right to evaluate such Compound for selection as a Future Compound in
accordance with Section 2.3.3 of the Agreement and to elect to develop such ESC as a Future
Compound within sixty (60) days after completion of these studies. If Penwest elects to develop
such ESC as a Future Compound, Edison will be deemed to have satisfied the Minimum ESC Requirement.
If Penwest does not elect to develop such ESC, whether
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Edison has satisfied the Minimum ESC Requirement will be determined in accordance with the
Agreement.
3. Mutual Release. In consideration of the agreements and mutual obligations executed
herein, each of Penwest and Edison hereby agrees to fully release and forever discharge the other
party hereto and their respective subsidiaries, divisions, parents, affiliated companies,
successors and assigns, and all of their respective officers, directors, shareholders, employees,
contractors, agents, and representatives, from any claim, whether known or unknown, relating to the
foregoing dispute identified in Section A above; provided, however, that nothing in this Settlement
Agreement shall operate to release any party hereto from (a) any obligation or representation set
forth in this Settlement Agreement, or (b) any claims arising from the commission or alleged
commission of any fraud by such party.
4. California Civil Code Section 1542. The parties acknowledge that they have been
advised by legal counsel and are familiar with the provisions of California Civil Code Section
1542, which provides as follows:
“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known
by him must have materially affected his settlement with the debtor.”
The parties hereto, being aware of said code section, agree to expressly waive any rights they
may have thereunder, or under any similar provision under the laws of any other jurisdiction, as
well as under any other statute or common law principles of similar effect with respect to the
release set forth in Section B(3) above.
5. Offset Against Milestones and Royalties. Penwest may offset the “Specified Amount”
(as defined below) against fifty percent (50%) of any milestone payments owed by Penwest after the
date of this Settlement Agreement under Section 6.1 of the Agreement and any royalty payments owed
under Section 7.1 of the Agreement. The Specified Amount is $550,000. For example, upon Penwest’s
selection of a Future Compound for development under the Collaboration pursuant to Section 2.3.3,
Penwest may offset fifty percent (50%) of the $500,000 payment, resulting in a net payment to
Edison of $250,000, with $300,000 of the Specified Amount remaining for offset against milestones
or royalties payable thereafter. The amount of any offset when added together with all prior
offsets shall not exceed the Specified Amount, subject to the provisions of Section 6 below.
6. Loan Repayment. Simultaneously with the execution of the Agreement, Penwest and
Edison entered into a Loan Agreement dated as of July 16, 2007 (the “Loan Agreement”) pursuant to
which Penwest loaned $1,000,000 to Edison (plus interest accrued but unpaid pursuant to the terms
of the Loan Agreement, the “Loan Amount”). A disagreement has arisen with regard to whether an
“Event of Default” has occurred due to Edison’s failure to meet the Minimum ESC Requirement.
Penwest and Edison have agreed that the Loan Amount shall be repaid as follows: after the entire
Specified
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Amount has been offset pursuant to the terms of Section B(5) above, the Loan Amount may be
offset by Penwest against fifty percent (50%) of any milestone payments owed by Penwest after the
date of this Settlement Agreement under Section 6.1 and any royalty payments owed under Section
7.1, it being understood that such reduction shall be applied to the Loan Amount as if such
reduction were a permitted prepayment and in accordance with Section 2(e) of the Loan Agreement.
The Loan Amount is otherwise due and payable by Edison according to original terms under the Loan
Agreement, including without limitation the continued accrual of interest on the outstanding
principal balance of the Loan as set forth in the Loan Agreement. For clarity, Penwest hereby
forever waives any and all Events of Default (as such term is defined in the Loan Agreement)
occurring on or before the date hereof.
7. No Other Modification of Agreements. Except as otherwise expressly set forth in
this Settlement Agreement, the terms of the Agreement and the Loan Agreement remain in full force
and effect.
C. Miscellaneous
1. No Admission of Liability. The parties hereto understand and acknowledge that this
Settlement Agreement constitutes a compromise and settlement. Except as otherwise set forth
herein, no action taken by the parties hereto, or any of them, either previously or in connection
with this Settlement Agreement shall be deemed or construed to be (a) an admission of the truth or
falsity of any claims heretofore made or (b) an acknowledgment or admission by any party of any
fault or liability whatsoever to the other party or to any third party.
2. Authority. The parties hereto each represent that they have the full legal right,
power and authority (both corporate or otherwise) to execute, deliver and perform this Settlement
Agreement, that all corporate action necessary for the execution, delivery and performance of this
Settlement Agreement has been duly taken, that they are not under any disability to sign it and
that each party has consulted with its own attorney or counsel before executing this Settlement
Agreement. Each party warrants and represents that there are no liens or claims of lien or
assignments in law or equity or otherwise of or against any of the claims or causes of action
released herein.
3. Severability. In the event that any provision hereof becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this Settlement Agreement
shall continue in full force and effect without said provision.
4. Entire Agreement. This Settlement Agreement, along with the Agreement and the Loan
Agreement, represent the entire agreement and understanding between the parties concerning the
obligations set forth herein and supersede and replace any and all prior agreements and
understandings concerning the subject matter hereof.
5. No Oral Modification. This Settlement Agreement may only be amended in writing
signed by the parties.
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6. Governing Law. This Settlement Agreement shall be governed by, subject to and
construed in accordance with the laws of the State of Delaware.
7. Counterparts. This Settlement Agreement may be executed in counter-parts, and each
counterpart shall have the same force and effect as an original and shall constitute an effective,
binding agreement on the part of each of the undersigned.
8. Voluntary Execution of Agreement. This Settlement Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of the parties hereto,
with the full intent of releasing all claims. The parties acknowledge that:
| (i) | They have read this Settlement Agreement; | ||
| (ii) | They have been represented in the preparation, negotiation, and execution of this Settlement Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel; | ||
| (iii) | They understand the terms and consequences of this Settlement Agreement and of the releases it contains; and | ||
| (iv) | They are fully aware of the legal and binding effect of this Settlement Agreement. |
| EDISON PHARMACEUTICALS, INC. | PENWEST PHARMACEUTICALS CO. | |||||||||||||
By:
|
/s/ Xxx Xxxxxx | By: | /s/ Xxxxxxxx X. Good | |||||||||||
Title:
|
Title: | |||||||||||||
Date:
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May 5, 2009 | Date: | May 5, 2009 | |||||||||||
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