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Exhibit 10.12
Execution Copy
FUNDING AGREEMENT
AMONG
ELAN PHARMA INTERNATIONAL LIMITED,
ELAN CORPORATION, PLC
AND
ELAN INTERNATIONAL SERVICES, LTD.
AND
ATHERSYS, INC.
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CONTENTS
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CLAUSE 1 SUBSEQUENT FUNDING
CLAUSE 2 TERMINATION
CLAUSE 3 MISCELLANEOUS
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FUNDING AGREEMENT made this 21st day of October, 1999
AMONG:
(1) ELAN PHARMA INTERNATIONAL LIMITED, a private limited company
incorporated under the laws of Ireland having its registered office at
WIL House, Shannon Business Park, Shannon, County Clare, Ireland, and,
ELAN CORPORATION, PLC, a public limited company under the laws of
Ireland, and each having its registered office at Lincoln House,
Lincoln Place, Dublin 2, Ireland ("collectively, ELAN");
(2) ELAN INTERNATIONAL SERVICES, LTD., an exempted limited liability
company incorporated under the laws of Bermuda, and having its
registered office at Clarendon House, 2 Church St., Hamilton, Bermuda
("EIS"); and
(3) ATHERSYS, INC., a corporation incorporated under the laws of Delaware
and having its principal place of business at 11000 Cedar Avenue,
Cleveland, Ohio 44106, United States of America ("ATHERSYS").
RECITALS:
A. EIS and Athersys have formed a Bermuda private limited company to be
known as Athersys Newco Ltd., an exempt Bermuda company, incorporated
on the 18th day of October, 1999 ("NEWCO").
B. Elan is beneficially entitled to the use of certain patents which have
been granted or are pending in relation to Medipad Technology.
C. Athersys is beneficially entitled to the use of certain patents that
have been granted or are pending in relation to its RAGE Technology.
D. As of the date hereof, Elan has entered into a license agreement with
Newco, and Athersys has entered into a license agreement with Newco, in
connection with the license to Newco of the Elan Intellectual Property
and the Athersys Intellectual Property, respectively.
E. Elan and Athersys have agreed to co-operate in the research,
development and commercialization of the Products based on their
respective technologies.
F. As of the date hereof, Elan, EIS, Athersys and Newco have entered into
a Subscription, Joint Development and Operating Agreement dated as of
the date hereof (the "JDOA") for the purpose of recording the terms and
conditions of the research, development and commercialization of the
Products and governing certain aspects of the affairs of and their
dealings with Newco. The parties have agreed that capitalized terms
when used in these
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Recitals and in this Agreement shall bear the same meanings as ascribed
to such terms in the JDOA.
CLAUSE 1
SUBSEQUENT FUNDING
1.1 It is estimated that Newco will require an additional U.S. $5,000,000
to commence development of the Products based upon the Athersys
Intellectual Property, the Elan Intellectual Property and/or the Newco
Technology (the "SUBSEQUENT FUNDING"). Within 36 months of the Closing
Date, EIS and Athersys may provide to Newco, each by way of either (i)
a capital contribution without the issuance of additional shares or
(ii) a loan, as EIS and Athersys may agree, up to an aggregate maximum
amount of U.S. $5,000,000, such funding to be provided on a pro rata
basis in accordance with their respective ownership interest in Newco,
taking into account all classes of share ownership (i.e., initially,
80.1% by Athersys and 19.9% by EIS).
1.2 The Subsequent Funding shall be provided by EIS and Athersys at such
times that shall be provided for the development of the Products as
provided in the Business Plan or as otherwise approved by the Newco
Directors, including the Newco Director designated by EIS (or after the
Exchange Right, by all of the Newco Directors designated by EIS). The
Subsequent Funding shall be funded on the following terms and subject
to the following conditions:
1.2.1 The minimum amount of each disbursement of the Subsequent
Funding shall be U.S.$250,000 (except in the event that an
amount less than U.S.$250,000 remains available for funding,
in which case such lesser amount may be funded);
1.2.2 There shall be no Event of Default (as defined in the
Convertible Note and the Senior Note) under the Convertible
Note or the Senior Note on the date of the Subsequent Funding
(except to the extent that any Event of Default has been
waived by EIS); and
1.2.3 Such funding shall be provided in accordance with the Business
Plan and the Research and Development Plan or as otherwise
approved by the Newco Board of Directors (including at least
one Newco Director designated by EIS and one Newco Director
designated by Athersys); and
1.2.4 Such funding shall be subject to the receipt by Elan or EIS of
any required approvals under the Mergers and Takeovers
(Control) Acts 1978-1996 (the "IRISH MERGERS ACT").
1.3 In the event that Elan or EIS is unable to obtain any required approval
under the Irish Mergers Act within 45 days after a determination of the
necessity of such funding by the Newco Directors, the parties hereto
shall work together in good faith, each in its sole discretion, to
agree on an alternative funding mechanism.
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1.4 Each request for Subsequent Funding shall be delivered from Newco to
each of Athersys and EIS, which notice shall set forth:
(i) the amount of the Subsequent Funding requested and the portion
of such amount to be contributed or lent, as the case may be,
by each of Athersys and EIS;
(ii) the date requested to fund such amount (which date (A) shall
not be fewer than 15 days following the date of the request
for such subsequent Funding and (B) with respect to Athersys,
shall not be a date earlier than Athersys receives a
disbursement under the Note to permit funding of its share of
the Subsequent Funding, if applicable); and
(iii) a reasonably detailed narrative and summary of the uses and
application thereof.
1.5 Subject to the following paragraph, the first available net income
received by Newco, in respect of amounts, if any of third party
licensing fees, royalties, milestone payments or other amounts
thereafter in respect of the marketing or licensing of products and/or
intellectual property, shall be repaid or distributed to Athersys and
EIS in proportion to their respective equity interests in Newco until
such time as the full amounts of the Subsequent Funding have been
repaid or distributed to Athersys and EIS. Such amounts shall be repaid
or distributed at such time or times as approved by the Newco Board of
Directors (including the approval of at least one Newco Director
designated by EIS and one Newco Director designated by Athersys).
In the event that EIS exercises its right to convert the Convertible
Exchangeable Preferred Stock rather than exercising the Exchange Right,
then, in such event, the net income in respect of amounts, if any, of
third party licensing fees, royalties, milestone payments or other
amounts received by Newco thereafter in respect of the marketing or
licensing of products and/or intellectual property, shall be applied to
(w) repayment of the Subsequent Funding or distribution of the full
amounts thereunder to Athersys and EIS, as the case may be, (x) as to
the next U.S. $15,000,000 of such net income, 100% to Athersys, and (y)
as to any amounts in excess of (w) and (x), above, to the parties in
proportion to their respective equity interests in Newco. Such amounts
shall be distributed at such time or times that the Newco Board of
Directors (with the approval of at least one Newco Director designated
by EIS and one Newco Director designated by Athersys) shall deem to be
appropriate.
CLAUSE 2
TERMINATION
2.1 This Agreement shall govern the funding methodology of EIS and Athersys
with respect to Newco until (i) terminated by written agreement of all
parties hereto or (ii) all of the Subsequent Funding amounts due under
this Agreement have been repaid or distributed, as
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the case may be.
CLAUSE 3
MISCELLANEOUS
3.1 GOOD FAITH:
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Each of the parties hereto undertakes with the others to do all things
reasonably within its power that are necessary or desirable to give
effect to the spirit and intent of this Agreement.
3.2 FURTHER ASSURANCE:
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At the request of any of the parties, the other party or parties shall
(and shall use reasonable efforts to procure that any other necessary
parties shall) execute and perform all such documents, acts and things
as may reasonably be required subsequent to the signing of this
Agreement for assuring to or vesting in the requesting party the full
benefit of the terms hereof.
3.3 RELIANCE ON REPRESENTATIONS AND WARRANTIES:
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Each of the parties hereto hereby acknowledges that in entering into
this Agreement it has not relied on any representation or warranty
except as expressly set forth herein or in any document referred to
herein.
3.4 FORCE MAJEURE:
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Neither party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay is caused
by or results from causes beyond its reasonable control, including
without limitation, acts of God, fires, strikes, acts of war (whether
war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances or intervention of any
relevant government authority, but any such delay or failure shall be
remedied by such party as soon as practicable.
3.5 RELATIONSHIP OF THE PARTIES:
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Nothing contained in this Agreement is intended or is to be construed
to constitute Elan or EIS, on one hand, and Athersys, on the other
hand, as partners, or Elan or EIS as an employee or agent of Athersys,
or Athersys as an employee or agent of Elan or EIS.
No party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of another
party or to bind another party to any contract, agreement or
undertaking with any third party.
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3.6 COUNTERPARTS:
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This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute one agreement. This
Agreement may be signed and delivered to the other party by facsimile
transmission; such transmission shall be deemed a valid signature.
3.7 NOTICES:
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All notices, demands and requests of any kind to be delivered to any
party in connection with this Agreement shall be in writing and shall
be deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier or by registered or certified
mail, return receipt requested and postage prepaid, or by facsimile
transmission, addressed as follows:
Elan at:
Lincoln House, Lincoln Place, Dublin 2
Ireland
Attention: Vice President & General Counsel
Elan Pharmaceutical Technologies,
a division of Elan Corporation, plc
Telephone: 353-1-709-4000
Fax: 353-1-709-4124
with a copy to:
Brock Silverstein LLC
800 Third Avenue, 21st Floor
New York, NY 10022
Attention: David Robbins, Esq.
Telephone 212-371-2000
Fax: 212-371-5500
EIS at:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths FL04
Bermuda
Attention: President
Telephone: 441-292-9169
Fax: 441-292-2224
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with a copy to:
Brock Silverstein LLC
800 Third Avenue, 21st Floor
New York, NY 10022
Attention: David Robbins, Esq.
Telephone 212-371-2000
Fax: 212-371-5500
Athersys at:
11000 Cedar Avenue
Cleveland, Ohio 44106
Attention: President and Chief Executive Officer
Telephone: (216) 231-9911
Facsimile: (216) 231-0905
with a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Christopher M. Kelly, Esq.
Telephone: 216-586-3939
Fax: 216-579-0212
Each party, by written notice given to the other in accordance with
this Section 3.7 may change the address to which notices, other
communication or documents are to be sent to such party. All notices,
other communications or documents shall be deemed to have been duly
given when received. Any such notice or communication shall be deemed
to have been effectively given, (a) in the case of personal delivery,
on the date of such delivery, (b) in the case of nationally-recognized
overnight courier, on the second business day after the date when sent,
(c) in the case of mailing, on the fifth business day following that
day on which the piece of mail containing such communication is posted,
and (d) in the case of facsimile transmission, on the date of
transmission.
3.8 GOVERNING LAW:
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This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York, without giving effect to
principles of conflicts of laws. Any dispute hereunder shall be
adjudicated in a forum set forth in the JDOA.
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3.9 SEVERABILITY:
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In case any provision of this Agreement is deemed to be invalid,
illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not be in any way affected or impaired
thereby.
3.10 AMENDMENTS:
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This Agreement may not be modified or amended, or any of the provisions
hereof waived, except by written agreement of the Company and EIS.
3.11 WAIVER:
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No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any future breach or failure to perform or of
any other right arising under this Agreement.
3.12 ASSIGNMENT:
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None of the parties shall be permitted to assign its rights or
obligations hereunder without the prior written consent of the other
parties except as follows:
3.12.1 Elan, EIS and/or Athersys shall have the right to assign
their rights and obligations hereunder to their respective
Affiliates, PROVIDED, HOWEVER, that such assignment does not
result in adverse tax consequences for any other parties
PROVIDED, HOWEVER, that the assigning party shall remain
liable for its obligations hereunder after such assignment
3.12.2 Elan and EIS shall have the right to assign their rights
hereunder to a special purpose financing or similar vehicle
established by Elan or EIS; PROVIDED, HOWEVER, that the
assigning party shall remain liable for its obligations
hereunder after such assignment.
3.12.3 Elan, EIS and/or Athersys shall have the right to assign or
otherwise transfer their rights and obligations hereunder in
connection with a sale of all or substantially all of the
business of such party, whether by merger, sale of stock,
sale of assets or otherwise.
3.13 ENTIRE AGREEMENT:
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This Agreement, the Confidentiality Agreement and the other Transaction
Documents contain the entire understanding of the parties with respect
to the subject matter hereof and supersede and terminate all prior
agreement and understanding among the parties with respect thereto.
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3.14 SUCCESSORS:
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This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns
3.15 EXPENSES:
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Each of the parties shall be responsible for its own costs and expenses
incurred in connection with the transactions contemplated hereby.
3.16 HEADINGS; REFERENCES:
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The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Agreement. Unless the context requires otherwise,
references to "Sections" in this Agreement are references to Section of
this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused their
respective duly authorized representatives to have executed this Funding
Agreement on the day first set forth above.
SIGNED
BY: /s/ Kevin Insley
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for and on behalf of
ELAN PHARMA INTERNATIONAL LIMITED
in the presence of: /s/ Kim Burgess
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SIGNED
BY: /s/ Kevin Insley
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for and on behalf of
ELAN CORPORATION, plc
in the presence of: /s/ Kim Burgess
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SIGNED
BY: /s/ Kevin Insley
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for and on behalf of
ELAN INTERNATIONAL SERVICES, LTD.
in the presence of: /s/ Kim Burgess
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SIGNED
BY: /s/ Gil Van Bokkelen
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for and on behalf of
ATHERSYS, INC.
in the presence of: /s/ James J. Kovach
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