SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 18, 1999
SHEFFIELD PHARMACEUTICALS, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 1-12584 13-3808303
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification
Number)
425 South Woodsmill Road, St. Louis, Missouri 63017
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(Address of Principal executive offices) (Zip Code)
(314) 579-9899
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Registrant's telephone number, including area code
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(Former Name or Former Address; if Changed Since Last Report)
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Item 5. Other Events.
On October 18, 1999, Sheffield Pharmaceuticals, Inc. (the
"Company") consummated a license and financing transaction with Elan
International Services, Ltd. ("Elan") (an affiliate of Elan Corporation plc, an
Irish pharmaceutical company) in accordance with the terms of the binding letter
of intent dated September 30, 1999 (the "Letter of Intent").
As part of the transaction, the Company has formed a Bermuda
subsidiary ("Newco") and entered into several agreements with Elan, including a
Securities Purchase Agreement dated October 18, 1999 (the "Purchase Agreement")
a Subscription, Joint Development and Operating Agreement dated October 18, 1999
(the "Operating Agreement"), and a Registration Rights Agreement dated October
18, 1999 (the "Registration Rights Agreement"). Elan and the Company have also
licensed certain of their intellectual property rights to Newco relating to
certain pulmonary drug delivery systems pursuant to license agreements. Copies
of the Purchase Agreement, the Operating Agreement, the Registration Rights
Agreement and the license agreements are attached hereto as exhibits and are
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
(4.5) Certificate of Designations defining the powers, designations,
rights, preferences, limitations and restrictions applicable
to the Company's Series D Cumulative Convertible Exchangeable
Preferred Stock.
(4.6) Certificate of Designations defining the powers, designations,
rights, preferences, limitations and restrictions applicable
to the Company's Series E Convertible Non-Exchangeable
Preferred Stock.
(4.7) Certificate of Designations defining the powers, designations,
rights, preferences, limitations and restrictions applicable
to the Company's Series F Convertible Exchangeable Preferred
Stock.
(10.25) Securities Purchase Agreement, dated as of October 18, 1999,
by and between the Company and Elan (portions of this exhibit
are omitted and were filed separately with the Securities and
Exchange Commission pursuant to the Company's application
requesting confidential treatment in accordance with Rule
24b-2 as promulgated under the Securities Exchange Act of
1934, as amended).
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(10.26) Subscription, Joint Development and Operating Agreement dated
as of October 18, 1999 by and among Elan Pharma International
Limited, Elan, the Company and Newco. (portions of this
exhibit are omitted and were filed separately with the
Securities and Exchange Commission pursuant to the Company's
application requesting confidential treatment in accordance
with Rule 24b-2 as promulgated under the Securities Exchange
Act of 1934, as amended).
(10.27) License Agreement dated October 19, 1999 by and between the
Company and Newco (portions of this exhibit are omitted and
were filed separately with the Securities and Exchange
Commission pursuant to the Company's application requesting
confidential treatment in accordance with Rule 24b-2 as
promulgated under the Securities Exchange Act of 1934, as
amended).
(10.28) License Agreement dated October 20, 1999 by and between Elan
Pharma International Limited and Newco (portions of this
exhibit are omitted and were filed separately with the
Securities and Exchange Commission pursuant to the Company's
application requesting confidential treatment in accordance
with Rule 24b-2 as promulgated under the Securities Exchange
Act of 1934, as amended).
(10.29) Registration Rights Agreement dated as of October 18, 1999 by
and between Elan and the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SHEFFIELD PHARMACEUTICALS INC.
Date: November 2, 1999 By: /s/ Loren Peterson
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Loren Peterson
President and
Chief Executive Officer
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CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES D CUMULATIVE CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK
OF
SHEFFIELD PHARMACEUTICALS, INC.
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Pursuant to Section 151 of
the General Corporation Law of the State of Delaware
Sheffield Pharmaceuticals, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were duly
adopted by the Board of Directors of the Corporation at a meeting duly called
and held on October 15, 1999 pursuant to authority of the Board of Directors as
required by Section 151 of the General Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board" or the "Board
of Directors") by the provisions of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), out of the 3,000,000 shares of
preferred stock of the Corporation authorized in Article FOURTH of the
Certificate of Incorporation (the "Preferred Stock"), there hereby is created a
series of Preferred Stock consisting of 21,000 shares, which series shall have
the following powers, designations, preferences and relative, participating,
optional or other rights, and the following qualifications, limitations and
restrictions (in addition to the powers, designations, rights, and the
qualifications, limitations and restrictions, set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock).
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ARTICLE 1
DESIGNATION AND AMOUNT
The shares of such series shall be designated as "Series D
Cumulative Convertible Exchangeable Preferred Stock" (the "Series D Preferred
Stock") and the authorized number of shares constituting such series shall be
21,000 shares. The par value of the Series D Preferred Stock shall be $.01 per
share. The stated value of the Series D Preferred Stock shall be One Thousand
Dollars ($1,000) per share (the "Stated Value").
ARTICLE 2
DEFINITIONS
The terms defined in this Article whenever used in this
Certificate of Designations have the following respective meanings:
(a) "AMEX" means the American Stock Exchange.
(b) "Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the State of New York are authorized or
obligated to close.
(c) "Common Shares" or "Common Stock" means shares of common
stock, $.01 par value, of the Corporation.
(d) "Conversion Date" means any day on which all or any
portion of shares of the Series D Preferred Stock is converted in accordance
with the provisions hereof.
(e) "Conversion Notice" has the meaning set forth in Section
6.1.
(f) "Conversion Price" has the meaning set forth in Section
6.1.
(g) "Corporation" means Sheffield Pharmaceuticals, Inc., a
Delaware corporation, and any successor or resulting corporation by way of
merger, consolidation, sale or exchange of all or substantially all of the
Corporation's assets, or otherwise.
(h) "Current Market Price" on any date of determination means
the closing price of a Common Share on such day as reported on the AMEX, or, if
such security is not listed or admitted to trading on the AMEX, on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the average of
the closing bid and ask prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any Nasdaq member firm of the National
Association of Securities Dealers, Inc. selected from time to time by the Board
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of Directors of the Corporation for that purpose, or a price determined in good
faith by the Board of Directors of the Corporation as being equal to the fair
market value thereof, as the case may be.
(i) "Dividend Notes" have the meaning set forth in Section
4.1.
(j) "Dividend Payment Date" has the meaning set forth in
Section 4.1.
(k) "Dividend Period" has the meaning set forth in Section
4.1.
(l) "Dividend Shares" means the shares of Series D Preferred
Stock issued as dividends on outstanding shares of Series D Preferred Stock in
accordance with Article 4 hereof.
(m) "Dollars" or "$" means currency of the United States of
America.
(n) "Exchange Date" has the meaning set forth in Section 7.01.
(o) "Exchange Note" has the meaning set forth in Section 7.02.
(p) "Exchange Notice" has the meaning set forth in Section
7.01.
(q) "Holder" or "Holders" means Elan International Services,
Ltd., a Bermuda corporation, any successor thereto, or any Person(s) to whom the
Series D Preferred Stock is subsequently transferred in accordance with the
provisions hereof.
(r) "Issue Date" means the date of original issuance of the
applicable share of Series D Preferred Stock.
(s) "Junior Securities" has the meaning set forth in Article
3.
(t) "Liquidation Preference" has the meaning set forth in
Section 5.1(b).
(u) "Newco" means Sheffield Newco Ltd. a Bermuda exempted
limited liability company incorporated under the laws of Bermuda.
(v) "Newco Capital Stock" means all outstanding shares of
Newco Common Stock and all securities convertible or exchangeable into shares of
Newco Common Stock (including, Newco Preferred Stock).
(w) "Newco Common Stock" means the ordinary shares of the
common stock, par value $1.00 per share, of Newco.
(x) "Newco Preferred Stock" means the preferred stock, par
value $1.00 per share, of Newco.
(y) "Original Holder" means Elan International Services, Ltd,
a Bermuda
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exempted limited liability company incorporated under the laws of Bermuda and
its affiliates (as that term is defined under the Securities Exchange Act of
1934, as amended).
(z) "Original Issue Date" means the date of the initial
issuance of shares of Series D Preferred Stock.
(aa) "Pari Passu Securities" has the meaning set forth in
Article 3.
(bb) "Person" means an individual, a corporation, a
partnership, an association, a limited liability company, a unincorporated
business organization, a trust or other entity or organization, and any
government or political subdivision or any agency or instrumentality thereof.
(cc) "Rights" has the meaning set forth in Section 6.2(e).
(dd) "Securities Purchase Agreement" means the Securities
Purchase Agreement, dated as of October 18, 1999, between the Corporation and
Elan International Services, Ltd.
(ee) "Stated Value" has the meaning set forth in Article 1.
(ff) "Trading Day" means any day on which purchases and sales
of securities authorized for quotation on the AMEX are reported thereon or, if
the Common Stock is not listed or admitted to trading on the AMEX, a day on
which the principal national securities exchange on which the Common Stock is
listed or admitted to trading is open for the transaction of business, or, if
the Common Stock is not so listed or admitted to trading on any national
securities exchange, a day on which the Nasdaq National Market (or any successor
thereto) or such other system then in use is open for the transaction of
business, or, if the Common Stock is not quoted by any such organization, any
day other than a Saturday, Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.
ARTICLE 3
RANK
The Series D Preferred Stock shall rank (i) prior to the Common
Stock; (ii) prior to any class or series of capital stock of the Corporation
hereafter created other than Pari Passu Securities (collectively, with the
Common Stock, the "Junior Securities"); (iii) pari passu with the Corporation's
Series C Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock"); (iv) pari passu with the Corporation's Series E Convertible
Non-Exchangeable Preferred Stock (the "Series E Preferred Stock"); (v) pari
passu with the Corporation's Series F Convertible Non-Exchangeable Preferred
Stock (the "Series F Preferred Stock"); and (vi) pari passu with any class or
series of capital stock of the Corporation hereafter created specifically
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ranking on parity with the Series D Preferred Stock (collectively, with the
Series C Preferred Stock, the Series E Preferred Stock and the Series F
Preferred Stock, the "Pari Passu Securities").
ARTICLE 4
DIVIDENDS
SECTION 4.1
(a) (i) Subject to Article 6, the Holder shall be entitled to
receive, out of funds legally available for the payment of dividends, dividends
at the rate of 7.0% per annum (computed on the basis of a 360-day year) (the
"Dividend Rate") on the Stated Value of each outstanding share of Series D
Preferred Stock payable on and as of the most recent Dividend Payment Date with
respect to each Dividend Period. Dividends on the Series D Preferred Stock shall
be cumulative from the date of issue or the most recent Dividend Payment Date
upon which dividends have been paid on the Series D Preferred Stock by the
Corporation.
(ii) Dividends on the Series D Preferred Stock shall be
payable in equal semi-annual installments on April 18 and October 18 of each
year (each, a "Dividend Payment Date"), commencing April 18, 2000 and ending
October 18, 2005, to the holders of record of shares of the Series D Preferred
Stock, as they appear on the stock records of the Corporation at the close of
business on any record date, not more than 60 days or less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors. For the purposes hereof, "Dividend Period," in respect of any share
of Series D Preferred Stock, shall mean the period commencing on April 18, 2000
and, thereafter, the semiannual period commencing on and including the day after
the immediately preceding Dividend Payment Date and ending on and including the
immediately subsequent Dividend Payment Date. Accrued and unpaid dividends for
any past Dividend Period may be declared and paid at any time, without reference
to any Dividend Payment Date, to holders of record on such date, not more than
15 days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(iii) Dividends on the outstanding shares of Series D
Preferred Stock shall be paid through the issuance of duly and validly
authorized and issued, fully paid and non-assessable shares of Series D
Preferred Stock to be issued at the rate of one (1) share of Series D Preferred
Stock for each $1,000 of dividend due and payable. No fractional shares of the
Series D Preferred Stock shall be issued as Dividend Shares. Instead of any
fractional shares of Series D Preferred Stock which would otherwise be issuable
as Dividend Shares, the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to $1,000 times the fractional
interest.
(b) The Holder shall not be entitled to any dividends in excess
of the cumulative dividends, as herein provided, on the Series D Preferred
Stock. Except as provided in this Article 4, no interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series D Preferred Stock that may be in arrears.
(c) In the event that, after the first anniversary of the
Original Issue Date, the payment of any Dividend Shares upon the Series D
Preferred Stock to the Original Holder would result in the Original Holder's
fully-diluted ownership of Common Stock (assuming the conversion into Common
Stock of all options, warrants and other securities convertible or exchangeable
into Common Stock beneficially owned by the Original Holder) to exceed 49.9% of
the then outstanding
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Common Stock, such excess dividends shall be paid to the Original Holder through
issuance by the Corporation of promissory notes with an aggregate principal
amount equal to each dividend payment amount then payable (collectively, the
"Dividend Notes"). Each Dividend Note shall be issued in substantially the form
attached as Exhibit B to this Certificate of Designations. It shall be a
condition to the Corporation's obligation to issue Dividend Notes in respect of
any such excess dividends that the Original Holder deliver to the Corporation,
at least 15 days before the applicable Dividend Payment Date, a certificate (i)
certifying that the Dividend Shares otherwise issuable on such Dividend Payment
Date shall cause the Original Holder's beneficial ownership to exceed such 49.9%
amount and (ii) demonstrating the calculation of the principal amount of the
Dividend Note to be issued in lieu of the applicable excess Dividend Shares.
ARTICLE 5
LIQUIDATION PREFERENCE
SECTION 5.1
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of ninety (90) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any Junior
Securities of the Corporation upon liquidation, dissolution or winding up unless
prior thereto, the Holders, subject to Article 5, shall have received the
Liquidation Preference (as defined in Article 5.1(b)) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the Holders and holders of shares of Pari Passu
Securities shall be insufficient to permit the payment to such holders of the
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preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series D Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the preferential amounts payable on each such share
bears to the aggregate preferential amounts payable on all such shares.
(b) For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series D Preferred Stock shall mean an amount equal to
(i) the Stated Value thereof, plus (ii) the aggregate of all accrued and unpaid
dividends on such share of Series D Preferred Stock until the most recent
Dividend Payment Date; provided that, in the event of an actual liquidation,
dissolution or winding up of the Corporation, the amount referred to in clause
(ii) above shall be calculated by including accrued and unpaid stock dividends
to the actual date of such liquidation, dissolution or winding up, rather than
the applicable Dividend Payment Due Date referred to above.
ARTICLE 6
CONVERSION OF SERIES D PREFERRED STOCK
SECTION 6.1 Conversion.
(a) Holders of shares of the Series D Preferred Stock shall have
the right, exercisable at any time after the second anniversary of the Original
Issue Date and prior to the sixth anniversary of the Original Issue Date, to
convert all or any such shares of the Series D Preferred Stock into the number
of shares of Common Stock (calculated as to each conversion to the nearest
1/100th of a share) determined by dividing (1) the aggregate Liquidation
Preference of the shares of Series D Preferred Stock to be converted by (2)
$4.86 (the "Conversion Price"). Upon conversion, no adjustment or payment will
be made for dividends, but if any holder surrenders a share of the Series D
Preferred Stock for conversion after the close of business on the record date
for the payment of a dividend and prior to the opening of business on the next
Dividend Payment Date, then, notwithstanding such conversion, the dividend
payable on such Dividend Payment Date will be paid to the registered holder of
such share on such record date. In such event, such share, when surrendered for
conversion during the period between the close of business on any dividend
payment record date and the opening of business on the corresponding Dividend
Payment Date, must be accompanied by payment of an amount equal to the dividend
payable on such Dividend Payment Date on the share so converted.
(b) Any holder of a share or shares of the Series D Preferred
Stock electing to convert such share or shares thereof shall deliver the
certificate or certificates therefor to the principal office of the Corporation
or any transfer agent for the Common Stock, with the form of notice of election
to convert attached as Exhibit C to this Certificate of Designations (the
"Conversion Notice"), fully completed and duly executed and (if such required by
the Corporation or any conversion agent) accompanied by instruments of transfer
in form satisfactory to the Corporation and to any conversion agent, duly
executed by the registered Holder of his duly authorized attorney. The
conversion right with respect to any such shares shall be deemed to have been
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exercised at the date upon which the certificates therefore accompanied by such
duly executed notice of election and instruments of transfer and such taxes,
stamps, funds, or evidence of payment shall have been so delivered, and the
Person or Persons entitled to receive the shares of the Common Stock issuable
upon such conversion shall be treated for all purposes as the record Holder or
Holders of such shares of the Common Stock upon said date.
(c) From and after the delivery of the Conversion Notice in
respect of any conversion of shares of Series D Preferred Stock, all such shares
of Series D Preferred Stock shall be deemed to have been converted into shares
of Common Stock as of the applicable Conversion Date at the applicable
conversion rate, all stock dividends on such shares of the Series D Preferred
Stock shall cease to accrue, and all rights of the Holders thereof as holders of
Series D Preferred Stock, except the right to receive all accrued and unpaid
stock dividends to such Conversion Date at the applicable rate for such shares
of Series D Preferred Stock and the right to receive certificates representing
shares of Common Stock issuable upon the conversion of such shares (including,
without limitation, with respect to such stock dividends, as applicable), shall
cease and terminate, such shares of Series D Preferred Stock shall not
thereafter be transferred (except with the consent of the Corporation) and such
shares shall not be deemed to be outstanding for any purpose whatsoever.
(d) No fractional shares of the Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of the
Series D Preferred Stock. If more than one share of the Series D Preferred Stock
shall be surrendered for conversion at one time by the same holder, the number
of full shares of the Common Stock which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of the
Series D Preferred Stock so surrendered. Instead of any fractional shares of the
Common Stock which would otherwise be issuable upon conversion of any shares of
the Series D Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the Current
Market Price for the Common Stock on the last Trading Day preceding the
applicable date of conversion.
(e) Each Conversion Notice under this Section 6.1 shall request
the conversion of at least 500 shares of Series D Preferred Stock or the
remaining balance of Series D Preferred Stock held by the converting Holder,
whichever is less.
SECTION 6.2 Adjustments. The Conversion Price and the number of shares
issuable upon conversion of the Series D Preferred Stock are subject to
adjustment from time to time as follows:
(a) Merger, Sale of Assets, Etc. Notwithstanding any other
limitation whatsoever contained herein, if at any time while the Series D
Preferred Stock, or any portion thereof, is outstanding there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Corporation with or into another corporation in which the
Corporation is the surviving entity but the shares of the Corporation's capital
stock outstanding immediately prior to the merger are converted by virtue of the
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merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of the Corporation's properties and
assets as, or substantially as, an entirety to any other Person, then as a part
of such reorganization, merger, consolidation, sale or transfer lawful provision
shall be made so that the Holder shall thereafter be entitled to receive upon
conversion of the Series D Preferred Stock, during the period specified herein,
the number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale or
transfer that the Holder would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if the Series D
Preferred Stock had been converted immediately before such reorganization,
merger, consolidation, sale or transfer, all subject to further adjustment as
provided in this Section 6.2(a). The foregoing provisions of this Section 6.2(a)
shall similarly apply to successive reclassification, changes, consolidations,
mergers, mandatory share exchanges and sales and transfers. If the per share
consideration payable to the holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Board of Directors) shall be made in the application of the provisions of
this Certificate of Designations with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Certificate
of Designations shall be applicable after that event, as near as reasonably may
be, in relation to any shares or other property deliverable after that event
upon conversion of the Series D Preferred Stock.
(b) Reclassification, Etc. If the Corporation, at any time while
the Series D Preferred Stock, or any portion thereof, remains outstanding, shall
change any of the securities as to which conversion rights under this
Certificate of Designations exist into the same or a different number of
securities of any other class or classes, the Series D Preferred Stock shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the conversion rights under this Certificate of
Designations immediately prior to such reclassification or other change and the
Conversion Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Certificate of Designations.
(c) Split, Subdivision or Combination of Shares. If the
Corporation at any time while the Series D Preferred Stock, or any portion
thereof, remains outstanding shall split, subdivide or combine the securities as
to which conversion rights under this Certificate of Designations exist, into a
different number of securities of the same class, the Conversion Price shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock and Other Securities or
Property. If while the Series D Preferred Stock, or any portion hereof, remains
outstanding, the holders of the securities as to which conversion rights under
this Certificate of Designations exist at the time shall have received, or, on
or after the record date fixed for the determination of eligible stockholders of
the Corporation, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities or property (other than
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cash) of the Corporation by way of dividend, then and in each case, the Series D
Preferred Stock shall represent the right to acquire, upon conversion, in
addition to the number of shares of the security receivable upon conversion of
the Series D Preferred Stock, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Corporation that the Holder
would hold on the date of such conversion had it been the holder of record of
the security receivable upon conversion of the Series D Preferred Stock on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and/or additional
stock available by it as aforesaid during such period, giving effect to all
adjustments called for during such period by the provisions of this Section 6.2.
(e) Repurchases or Redemptions of Common Stock or Options. If the
Corporation at any time while shares of Series D Preferred Stock are
outstanding, shall repurchase or redeem any outstanding shares of Common Stock
or rights, options or warrants granting the holder thereof the right to acquire
shares of Common Stock (collectively, the "Rights") in a single transaction or a
series of related transactions involving an aggregate repurchase or redemption
price in excess of $500,000 at a price (on a per share basis) which is greater
than 150% of the Current Market Price as of the day prior to such repurchase or
redemption, the Conversion Price shall thereupon be adjusted by multiplying the
Conversion Price in effect immediately prior to the applicable repurchase or
redemption by a fraction (i) the numerator of which shall be the Conversion
Price in effect immediately prior to such repurchase or redemption and (ii) the
denominator of which shall be the fair market value of the consideration paid by
the Corporation for each share of Common Stock (or each share of Common Stock
issuable upon exercise of the Right(s) subject to such repurchase or redemption)
in such repurchase or redemption.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 6.2, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
(g) Cumulative Adjustments. No adjustment in the Conversion Price
shall be required until cumulative adjustments result in a concomitant change of
1% or more of the Conversion Price as in effect prior to the last adjustment of
the Conversion Price; provided, however, that any adjustments which by reason of
this Section 6.2 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
6.2 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. No adjustment to the Conversion Price shall be made
for cash dividends.
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ARTICLE 7
EXCHANGE RIGHTS
SECTION 7.01 Optional Exchange. (a) Original Holders of at least a
majority of the then outstanding shares of Series D Preferred Stock shall have
the right, by written notice delivered to the Corporation in the form of notice
of election to exchange attached to this Certificate of Designations as Exhibit
D (the "Exchange Notice"), fully completed and duly executed by the requisite
Original Holders, to require the Corporation to exchange all outstanding shares
of Series D Preferred Stock and all outstanding Dividend Notes as of any
Dividend Payment Date (such date being the "Exchange Date") for the greater of
(i) 7,224 shares of Newco Preferred Stock, subject to adjustment for split,
stock dividends and similar events occurring in respect of Newco Capital Stock
after the Original Issue Date, or (ii) a number of shares of Newco Capital Stock
which, together with the shares of Newco Capital Stock issued to the Original
Holder on the Original Issue Date, equals fifty percent (50%) of the then
outstanding Newco Capital Stock as of the Exchange Date, with such capital stock
to be delivered to all Holders on a pro rata basis based on their respective
holdings of Series D Preferred Stock on the Exchange Date. The Exchange Notice
shall be delivered at least 30 days prior to the Exchange Date. Upon receipt of
the Exchange Notice, the Corporation shall promptly notify all Holders of its
receipt of thereof and all Holders will promptly deliver the certificate or
certificates therefor to the principal office of the Corporation or any transfer
agent for the Common Stock for cancellation.
(b) From and after the delivery of the Exchange Notice, all
shares of Series D Preferred Stock (including Dividend Shares) shall be deemed
to have been exchanged for the greater of (i) 7,224 shares of Newco Preferred
Stock, subject to adjustment for split, stock dividends and similar events
occurring in respect of Newco Capital Stock after the Original Issue Date, or
(ii) a number of shares of Newco Capital Stock which, together with the shares
of Newco Capital Stock issued to the Original Holder on the Original Issue Date,
equals fifty percent (50%) of the then outstanding Newco Capital Stock as of the
Exchange Date, all stock dividends on such shares of the Series D Preferred
Stock shall cease to accrue, all interest on the Dividend Notes shall cease to
accrue, and all rights of the Holders thereof as holders of Series D Preferred
Stock and Dividend Notes, except the right to receive all accrued and unpaid
stock dividends on the Series D Preferred Stock to the Exchange Date at the
applicable rate for such shares of such shares of Series D Preferred Stock, and
the right to receive all accrued and unpaid interest on the Dividend Note to the
Exchange Date at the applicable rate for such notes, and the right to receive
certificates representing the applicable shares of Newco Capital Stock issuable
in respect of the exchange, shall cease and terminate, such shares of Series D
Preferred Stock and Dividend Notes shall not thereafter be transferred (except
with the consent of the Corporation) and such shares shall not be deemed to be
outstanding for any purpose whatsoever.
(c) The rights of Holders under this Article 7 shall terminate
and such Holders shall not be entitled to exchange shares of Series D Preferred
Stock under this Article 7 upon the earlier of (i) the sixth anniversary of the
Original Issue Date and (ii) the delivery to the Corporation of a Conversion
Notice pursuant to this Section 6.1.
SECTION 7.02. Mandatory Exchange. On or before the first anniversary of
the Original Issue Date, the Corporation shall notify each Holder, in writing,
(i) that the issuance of the Series D Preferred Stock, and the issuance and
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<PAGE>
listing upon the American Stock Exchange ("AMEX") of the shares of Common Stock
issuable upon conversion of the Series D Preferred Stock, has been approved or
ratified by the stockholders of the Corporation in accordance with the General
Corporation Law of the State of Delaware and the rules and regulation of the
AMEX or (ii) that such approval or ratification is not required by the
applicable rules of the AMEX. In the event that the Corporation fails to provide
such written notice on or before the first anniversary of the Original Issue
Date, (A) all outstanding shares of Series D Preferred Stock shall be deemed
exchanged for promissory note(s) in substantially the form of Exhibit A attached
to this Certificate of Designations (the "Exchange Notes"), in the respective
principal amounts equal to the aggregate Liquidation Preference of all shares of
Series D Preferred Stock held by each respective Holder as of the date of such
exchange and (B) from and after the first anniversary of the Original Issue
Date, all shares of Series D Preferred Stock (including Dividend Shares) shall
be deemed to have been exchanged for Exchange Notes, all dividends on the Series
D Preferred Stock shall cease to accrue, and all rights of Holders thereof as
holders of Series D Preferred Stock shall cease and terminate and all shares of
Series D Preferred Stock shall not be deemed outstanding for any purpose
whatsoever, except the right to receive the Exchange Notes issuable to them as
determined above.
ARTICLE 8
VOTING RIGHTS
The holders of the Series D Preferred Stock shall have no voting
rights, except as otherwise provided by the General Corporation Law of the State
of Delaware ("DGCL") and in this Article 8, and in Article 9 below.
The Corporation shall provide each Holder of Series D Preferred Stock
with prior notification of any meeting of the shareholders of the Corporation
(and copies of proxy materials and other information sent to shareholders). In
the event of any taking by the Corporation of a record of its shareholders for
the purpose of determining shareholders who are entitled to receive payment of
any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such action is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the Holders of the Series
D Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the Holders of at least a majority of the shares of the Series D
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series D Preferred Stock
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<PAGE>
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL Holders
of the Series D Preferred Stock are entitled to vote on a matter with Holders of
Common Stock, voting together as one class, each share of Series D Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such shares are convertible as of the record date for
the taking of such vote of shareholders. Holders of the Series D Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled as of right under the DGCL, which notice
would be provided pursuant to the Corporation's bylaws and the DGCL.
ARTICLE 9
PROTECTIVE PROVISIONS
So long as shares of Series D Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the Holders of at least a majority of the
then outstanding shares of Series D Preferred Stock:
(a) create any new class or series of capital stock having a
preference superior to the Series D Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up of the Corporation ("Senior
Securities") or alter or change the rights, preferences or privileges of any
Senior Securities so as to affect adversely the Series D Preferred Stock; or
(b) amend or alter whether by merger, consolidation or otherwise,
any of the provisions of the Certificate of Incorporation (including this
Certificate of Designations) that would change the preferences, rights or
privileges with respect to the Series D Preferred Stock so as to affect the
Series D Preferred Stock adversely.
In the event holders of at least a majority of the then outstanding
shares of Series D Preferred Stock agree to allow the Corporation to amend or
alter the preferences, rights or privileges of the shares of Series D Preferred
Stock, pursuant to subsection (b) above, so as to affect adversely the Series D
Preferred Stock, then the Corporation will deliver notice of such approved
change to the Holders of the Series D Preferred Stock that did not agree to such
amendment or change (the "Dissenting Holders") and the Dissenting Holders shall
have the right for a period of thirty (30) days to convert pursuant to Section
6.1 of this Certificate of Designations as they exist prior to such alteration
or continue to hold their shares of Series D Preferred Stock. The Holders'
rights under this Article 9 shall terminate on the sixth anniversary of the
Original Issue Date.
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<PAGE>
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Loss, Theft, Destruction of Series D Preferred Stock. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction or mutilation of shares of Series D Preferred Stock and, in the case
of any such loss, theft or destruction, upon receipt of indemnity or security
reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series D Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series D Preferred Stock, new shares of Series
D Preferred Stock of like date and tenor.
SECTION 10.2 Who Deemed Absolute Owner. The Corporation may deem the
Person in whose name the Series D Preferred Stock shall be registered upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series D Preferred Stock for the purpose of receiving payment of
dividends on the Series D Preferred Stock, for the conversion of the Series D
Preferred Stock and for all other purposes, and the Corporation shall not be
affected by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Series D Preferred Stock to the extent of the sum or sums so paid or the
conversion so made.
SECTION 10.3 Register. The Corporation shall keep at its principal
office a register in which the Corporation shall provide for the registration of
the Series D Preferred Stock. Upon any transfer of the Series D Preferred Stock
in accordance with the provisions hereof, the Corporation shall register such
transfer on the Series D Preferred Stock register.
SECTION 10.4 Withholding. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
D Preferred Stock.
SECTION 10.5 Headings. The headings of the Articles and Sections of
this Certificate of Designations are inserted for convenience only and do not
constitute a part of this Certificate of Designations. IN WITNESS WHEREOF, the
Corporation has caused this Certificate of Designations, Preferences and Rights
to be signed by Loren G. Peterson, its President and Chief Executive Officer,
and attested by Scott A. Hoffmann, its Secretary, on this 18th day of October,
1999.
SHEFFIELD PHARMACEUTICALS, INC.
By:/s/ Loren G. Peterson
---------------------------------------
Loren G. Peterson
President and Chief Executive Officer
Attested:
By: /s/ Scott A. Hoffman
-----------------------
Scott A. Hoffmann
Secretary
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<PAGE>
Exhibit A
FORM OF EXCHANGE NOTE
SHEFFIELD PHARMACEUTICALS, INC.
U.S. $___________ ____________, 20__
The undersigned, Sheffield Pharmaceuticals, Inc., a Delaware corporation
("Sheffield"), for value received, hereby promises to pay to the order of
____________________________ (the "Investor") or its permitted assigns (the
"Holder"), at such place as may be designated by the Holder to Sheffield, the
sum of ______________________ dollars ($___________), plus interest on the
unpaid principal balance at the rate specified below, in accordance with the
provisions set forth herein. During the term of this Note, interest shall accrue
at the rate of 7.0% per annum (calculated on the basis of a year of 360 days
comprised of 12 30-day months). Accrued interest shall be payable (i) quarterly
in arrears on the first day of January, April, July and October of each year and
(ii) in-kind through the issuance of additional notes in like tenor to this Note
(the "Interest Notes"). The full principal amount of this Note and all Interest
Notes, including any accrued interest thereon, shall be due and payable on
October 18, 2005 (the "Maturity Date"). This Note is originally being issued in
exchange for shares of Series D Preferred Stock, par value $.01 per share, of
Sheffield (the "Series D Preferred Stock"), the rights of which are designated
in the Certificate of Designations of the Series D Preferred Stock of Sheffield
(the "Certificate of Designations"), and pursuant to a certain Securities
Purchase Agreement, dated October 18, 1999 (the "Original Issue Date"), between
Sheffield and Elan International Services, Ltd. (the "Purchase Agreement"). All
Notes issued in exchange for shares of Series D Preferred Stock, including the
Interest Notes, or upon transfer or exchange of other Notes are referred to
herein as the "Notes."
All capitalized terms used in this Note and not otherwise defined herein shall
have the meaning assigned to such terms in the Certificate of Designations.
The following is a statement of the rights of the Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees:
1. Mandatory Exchange.
(a) Upon the delivery by holders of at least a majority of the
then outstanding principal balance of Notes of written notice delivered to
Sheffield in the form of notice of election to exchange attached as Annex A to
this Note (the "Exchange Notice"), the Holder of this Note shall be required to
surrender this Note in exchange for a pro rata portion of the greater of (i)
7,224 shares of Newco Preferred Stock, subject to adjustment for split, stock
dividends and similar events occurring after the Original Issue Date, or (ii) a
number of shares of Newco Capital Stock which,
<PAGE>
together with the shares of Newco Capital Stock issued to the Original Holder on
the Original Issue Date, equals fifty percent (50%) of the then outstanding
Newco Capital Stock as of the Exchange Date.
(b) From and after the delivery of the Exchange Notice, this Note
shall be deemed to have been exchanged for a pro rata portion of the greater of
(i) 7,224 shares of Newco Preferred Stock, subject to adjustment for split,
stock dividends and similar events occurring after the Original Issue Date, or
(ii) a number of shares of Newco Capital Stock which, together with the shares
of Newco Capital Stock issued to the Original Holder on the Original Issue Date,
equals fifty percent (50%) of the then outstanding Newco Capital Stock as of the
Exchange Date, all interest on the Note shall cease to accrue, and all rights of
the Holder as a holder of the Note, except the right to receive all accrued and
unpaid interest to such Exchange Date at the applicable rate for such Note and
the right to receive certificates representing shares of Newco Capital Stock
issuable upon the exchange of the Note (including, without limitation, with
respect to such Notes issued as interest paid in kind stock), shall cease and
terminate, the Note shall not thereafter be transferred (except with the consent
of Sheffield) and the Note shall not be deemed to be outstanding for any purpose
whatsoever.
2. Exchange or Replacement of Note.
(a) The Holder, at its option, may in person or by duly
authorized attorney surrender this Note for exchange, at the office or agency of
Sheffield and receive in exchange therefor a new Note in the same aggregate
principal amount as the unpaid principal amount of the Note so surrendered, each
such new Note to be dated as of the date to which interest has been paid on the
Note so surrendered and payable to the Holder or its assignee, as the Holder may
designate in writing (subject to the restrictions on transfer set forth in this
Note and in the Purchase Agreement).
(b) Upon receipt by Sheffield of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note, and (in case of loss,
theft or destruction) of indemnity reasonably satisfactory to it, and upon
reimbursement to Sheffield of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Note, if mutilated, Sheffield shall make
and deliver a new Note of like tenor in lieu of this Note. Any Note made and
delivered in accordance with this paragraph shall be dated the date hereof.
3. Amendments. This Note may not be amended, modified or waived in any
respect unless set forth in writing and signed by the Holder, in the case of any
change hereto, including any change in the amount or timing of any payment to be
made hereunder or any adverse change in conversion rights hereunder. Any such
amendment, modification or waiver shall be binding upon each future holder of
this Note.
4. Costs and Expenses. Sheffield agrees to pay all reasonable costs
and expenses, including reasonable attorneys' fees, incurred by the Holder in
collecting or enforcing this Note.
5. No Waivers. No delay by the Holder in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise.
<PAGE>
6. Events of Default
The occurrence of any of the following events shall constitute an
event of default (an "Event of Default"):
(a) A default in the payment of the principal amount of this
Note, when and as the same shall become due and payable;
(b) a default in the payment of any accrued and unpaid interest
on this Note, when and as the same shall become due and payable;
(c) a default in the performance, or a breach of any other
covenant or agreement of Sheffield in this Note on any other Transaction
Document (as defined in the Purchase Agreement), and continuance of such default
or breach for a period of 10 days after the Holder has notified Sheffield of its
occurrence;
(d) any representation, warranty, or certification made by
Sheffield pursuant to this Note or any other Transaction Document shall prove to
have been false or misleading as of the date made in any material respect; or
(e) (i) the entry of a decree or order by a court having
jurisdiction adjudging Sheffield bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of Sheffield, and the continuance of any such decree or order unstayed and in
effect for a period of 60 days; (ii) the commencement by Sheffield of a
voluntary case under United States bankruptcy law, as now or hereafter
constituted, or the consent by Sheffield to the institution of bankruptcy or
insolvency proceedings against it; (iii) the filing by Sheffield of a petition
or answer or consent seeking reorganization or relief under United States
bankruptcy law; (iv) the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, or similar official of Sheffield or of any substantial
part of its property which is not discharged within 30 days; (v) the making by
Sheffield of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by Sheffield in furtherance of any such action.
7. Remedies in the Event of Default
(a) In the case of any Event of Default by Sheffield, the
principal amount of this Note and accrued and unpaid interest thereon shall, in
addition to all other rights and remedies of the Holder hereunder and under
applicable law, be and become immediately due and payable.
(b) Sheffield hereby waives grace, demand and presentment for
payment, notice of nonpayment, protest and notice of protest, diligence, filing
suit, and all other notice and promises to pay the Holder its costs of
collection of all amounts due hereunder, including reasonable attorneys' fees.
<PAGE>
(c) Upon the occurrence and during the continuation of any Event
of Default or breach of this Note by Sheffield this Note shall bear interest at
the interest rate otherwise in effect hereunder plus 3% per annum (but in any
event not in excess of the maximum rate of interest permitted by applicable
law).
8. Seniority
This Note shall constitute senior indebtedness of Sheffield, and
Sheffield shall not incur any indebtedness for money borrowed which shall rank
senior to, or pari passu with, this Note without the prior consent of the
holders of a majority in principal amount of the Notes; provided, that nothing
contained herein shall be construed as to prevent Sheffield from incurring and
paying obligations in the ordinary course of business, in accordance with past
practice.
9. Miscellaneous
(a) The Investor may assign this Note to its affiliates (as such
term is defined in the Securities Exchange Act of 1934, as amended). This Note
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, subject to
compliance by such assignee with the representations and warranties contained in
Section 3(a) of the Purchase Agreement.
(b) All notices, demands and requests of any kind to be delivered
to the other party in connection with this Note 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 airmail,
return receipt requested and postage prepaid, addressed as follows:
to Sheffield:
Sheffield Pharmaceuticals, Inc.
South Winton Court
3136 Winton Road South
Suite 306
Rochester, NY 14623
Attn: Chairman
and
Sheffield Pharmaceuticals, Inc.
425 South Woodsmill Road
St. Louis, Missouri 63017-3441
Attention: Chief Executive Officer
<PAGE>
with a copy to:
Olshan Grundman Frome, Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attention: Daniel J. Gallagher
to Holder:
at the address provided to Sheffield by the Holder.
Each party, by written notice given to the other in accordance with this Section
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 received (i) in the case of personal delivery, on
the date of such delivery, (ii) in the case of nationally-recognized overnight
courier, on the second business day after the date when sent and (iii) in the
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
(c) This Note shall be governed by and construed in accordance
with the laws of the state of New York, without reference to the principles of
conflicts of laws thereof.
<PAGE>
IN WITNESS WHEREOF, Sheffield has caused this Note to be issued as of the date
first set forth hereinabove.
SHEFFIELD PHARMACEUTICALS, INC.
By:________________________________
Name:
Title:
<PAGE>
Annex A
to Exchange Note
FORM OF EXCHANGE NOTICE
TO: Sheffield Pharmaceuticals, Inc.
Attention: Chief Financial Officer
The undersigned owner(s) of Exchange Notes ("Notes") issued by
Sheffield Pharmaceuticals, Inc. (the "Corporation") hereby irrevocably
exercise(s) its option to cause the Corporation to exchange $________ of
outstanding principal balance of the Notes for a pro rata portion of the greater
of (i) 7,224 shares of preferred stock, par value $1.00 per share, of Sheffield
Newco, Limited, a Bermuda corporation ("Newco"), subject to adjustment for
split, stock dividends and similar events occurring after the Original Issue
Date, or (ii) a number of shares of Newco Capital Stock which, together with the
shares of Newco Capital Stock issued to the Original Holder on the Original
Issue Date, equals fifty percent (50%) of the then outstanding Newco Capital
Stock as of the Exchange Date, in accordance with the terms of the Note
originally issued in exchange for shares of Series D Cumulative Convertible
Exchangeable Non-Redeemable Preferred Stock, par value $.01 per share of, the
Corporation issued pursuant to the Certificate of Designations of the Series D
Preferred Stock. The undersigned hereby instructs the Corporation to advise all
other holders of Notes, if any, of this exercise by the undersigned owner(s).
The undersigned directs that the Newco Capital Stock issuable and certificates
therefor deliverable to the undersigned upon such exchange be issued in the name
of and delivered to the undersigned unless a different name has been indicated
below. All capitalized terms used and not defined herein have the respective
meanings assigned to them in the Notes.
Dated:
--------------------------------
by:_____________________________
Name:
Title:
Please print name and address
(including zip code number) :
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<PAGE>
Exhibit B
FORM OF DIVIDEND NOTE
SHEFFIELD PHARMACEUTICALS, INC.
U.S. $___________ ____________, 20__
The undersigned, Sheffield Pharmaceuticals, Inc., a Delaware corporation
("Sheffield"), for value received, hereby promises to pay to the order of
____________________________ (the "Investor") or its permitted assigns (the
"Holder"), at such place as may be designated by the Holder to Sheffield, the
sum of ______________________ dollars ($___________), plus interest on the
unpaid principal balance at the rate specified below, in accordance with the
provisions set forth herein. During the term of this Note, interest shall accrue
at the rate of 7.0% per annum (calculated on the basis of a year of 360 days
comprised of 12 30-day months). Accrued interest shall be payable (i) quarterly
in arrears on the first day of January, April, July and October of each year and
(ii) in-kind through the issuance of additional notes in like tenor to this Note
(the "Interest Notes"). The full principal amount of this Note and all Interest
Notes, including any accrued interest thereon, shall be due and payable on
October 18, 2005 (the "Maturity Date"). This Note is originally being issued as
payment of dividends due on shares of Series D Preferred Stock, par value $.01
per share, of Sheffield (the "Series D Preferred Stock"), the rights of which
are designated in the Certificate of Designations of the Series D Preferred
Stock of Sheffield (the "Certificate of Designations"), and pursuant to a
certain Securities Purchase Agreement, dated October 18, 1999 (the "Original
Issue Date"), between Sheffield and Elan International Services, Ltd. (the
"Purchase Agreement"). All Notes issued as payment of dividends due on shares of
Series D Preferred Stock, including the Interest Notes, or upon transfer or
exchange of other Notes are referred to herein as the "Notes."
All capitalized terms used in this Note and not otherwise defined herein shall
have the meaning assigned to such terms in the Certificate of Designations.
The following is a statement of the rights of the Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees:
1. Mandatory Exchange.
<PAGE>
(a) Upon the delivery by holders of at least a majority of the
then outstanding shares of Series D Preferred Stock of written notice delivered
to Sheffield in the form of notice of election to exchange attached to the
Certificate of Designations as Exhibit D (the "Exchange Notice"), the Holder of
this Note shall be required to surrender this Note in exchange for a pro rata
portion of the greater of (i) 7,224 shares of Newco Preferred Stock, subject to
adjustment for split, stock dividends and similar events occurring after the
Original Issue Date, or (ii) a number of shares of Newco Capital Stock which,
together with the shares of Newco Capital Stock issued to the Original Holder on
the Original Issue Date, equals fifty percent (50%) of the then outstanding
Newco Capital Stock as of the Exchange Date.
(b) From and after the delivery of the Exchange Notice, this Note
shall be deemed to have been exchanged for a pro rata portion of the greater of
(i) 7,224 shares of Newco Preferred Stock, subject to adjustment for a split,
stock dividends and similar events occurring after the Original Issue Date, or
(ii) a number of shares of Newco Capital Stock which, together with the shares
of Newco Capital Stock issued to the Original Holder on the Original Issue Date,
equals fifty percent (50%) of the then outstanding Newco Capital Stock as of the
Exchange Date, all interest on the Note shall cease to accrue, and all rights of
the Holder as a holder of the Note, except the right to receive all accrued and
unpaid interest to such Exchange Date at the applicable rate for such Note and
the right to receive certificates representing shares of Newco Capital Stock
issuable upon the exchange of the Note (including, without limitation, with
respect to such Notes issued as interest paid in kind stock), shall cease and
terminate, the Note shall not thereafter be transferred (except with the consent
of Sheffield) and the Note shall not be deemed to be outstanding for any purpose
whatsoever.
2. Exchange or Replacement of Note.
(a) The Holder, at its option, may in person or by duly
authorized attorney surrender this Note for exchange, at the office or agency of
Sheffield and receive in exchange therefor a new Note in the same aggregate
principal amount as the unpaid principal amount of the Note so surrendered, each
such new Note to be dated as of the date to which interest has been paid on the
Note so surrendered and payable to the Holder or its assignee, as the Holder may
designate in writing (subject to the restrictions on transfer set forth in this
Note and in the Purchase Agreement).
(b) Upon receipt by Sheffield of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note, and (in case of loss,
theft or destruction) of indemnity reasonably satisfactory to it, and upon
reimbursement to Sheffield of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Note, if mutilated, Sheffield shall make
and deliver a new Note of like tenor in lieu of this Note. Any Note made and
delivered in accordance with this paragraph shall be dated the date hereof.
3. Amendments. This Note may not be amended, modified or waived in any
respect unless set forth in writing and signed by the Holder, in the case of any
change hereto, including any change in the amount or timing of any payment to be
made hereunder or any adverse change in conversion rights hereunder. Any such
amendment, modification or waiver shall be binding upon each future holder of
this Note.
<PAGE>
4. Costs and Expenses. Sheffield agrees to pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the Holder in
collecting or enforcing this Note.
5. No Waivers. No delay by the Holder in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise.
6. Events of Default
The occurrence of any of the following events shall constitute an event
of default (an "Event of Default"):
(a) A default in the payment of the principal amount of this
Note, when and as the same shall become due and payable;
(b) a default in the payment of any accrued and unpaid interest
on this Note, when and as the same shall become due and payable;
(c) a default in the performance, or a breach of any other
covenant or agreement of Sheffield in this Note on any other Transaction
Document (as defined in the Purchase Agreement), and continuance of such default
or breach for a period of 10 days after the Holder has notified Sheffield of its
occurrence;
(d) any representation, warranty, or certification made by
Sheffield pursuant to this Note or any other Transaction Document shall prove to
have been false or misleading as of the date made in any material respect; or
(e) (i) the entry of a decree or order by a court having
jurisdiction adjudging Sheffield bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of Sheffield, and the continuance of any such decree or order unstayed and in
effect for a period of 60 days; (ii) the commencement by Sheffield of a
voluntary case under United States bankruptcy law, as now or hereafter
constituted, or the consent by Sheffield to the institution of bankruptcy or
insolvency proceedings against it; (iii) the filing by Sheffield of a petition
or answer or consent seeking reorganization or relief under United States
bankruptcy law; (iv) the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, or similar official of Sheffield or of any substantial
part of its property which is not discharged within 30 days; or (v) the making
by Sheffield of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by Sheffield in furtherance of any such action;
<PAGE>
7. Remedies in the Event of Default
(a) In the case of any Event of Default by Sheffield, the
principal amount of this Note and accrued and unpaid interest thereon shall, in
addition to all other rights and remedies of the Holder hereunder and under
applicable law, be and become immediately due and payable. (b) Sheffield hereby
waives grace, demand and presentment for payment, notice of nonpayment, protest
and notice of protest, diligence, filing suit, and all other notice and promises
to pay the Holder its costs of collection of all amounts due hereunder,
including reasonable attorneys' fees.
(c) Upon the occurrence and during the continuation of any Event
of Default or breach of this Note by Sheffield this Note shall bear interest at
the interest rate otherwise in effect hereunder plus 3% per annum (but in any
event not in excess of the maximum rate of interest permitted by applicable
law).
8. Seniority
This Note shall constitute senior indebtedness of Sheffield, and
Sheffield shall not incur any indebtedness for money borrowed which shall rank
senior to, or pari passu with, this Note without the prior consent of the
holders of a majority in principal amount of the Notes; provided, that nothing
contained herein shall be construed as to prevent Sheffield from incurring and
paying obligations in the ordinary course of business, in accordance with past
practice.
9. Miscellaneous
(a) The Investor may assign this Note to its affiliates (as such
term is defined in the Securities Exchange Act of 1934, as amended). This Note
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, subject to
compliance by such assignee with the representations and warranties contained in
Section 3(e) of the Purchase Agreement.
(b) All notices, demands and requests of any kind to be delivered
to the other party in connection with this Note 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 airmail,
return receipt requested and postage prepaid, addressed as follows:
to Sheffield:
Sheffield Pharmaceuticals, Inc.
South Winton Court
3136 Winton Road South
Suite 306
Rochester, NY 14623
Attn: Chairman
and
<PAGE>
Sheffield Pharmaceuticals, Inc.
425 South Woodsmill Road
St. Louis, Missouri 63017-3441
Attention: Chief Executive Officer
with a copy to:
Olshan Grundman Frome, Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attention: Daniel J. Gallagher
to Holder:
at the address provided to Sheffield by the Holder.
Each party, by written notice given to the other in accordance with this Section
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 received (i) in the case of personal delivery, on
the date of such delivery, (ii) in the case of nationally-recognized overnight
courier, on the second business day after the date when sent and (iii) in the
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
(c) This Note shall be governed by and construed in accordance
with the laws of the state of New York, without reference to the principles of
conflicts of laws thereof.
<PAGE>
IN WITNESS WHEREOF, Sheffield has caused this Note to be issued as of the date
first set forth hereinabove.
SHEFFIELD PHARMACEUTICALS, INC.
By:________________________________
Name:
Title:
<PAGE>
Exhibit C
FORM OF CONVERSION NOTICE
TO: Sheffield Pharmaceuticals, Inc.
Attention: Chief Financial Officer
The undersigned owner of shares of Series D Cumulative
Convertible Exchangeable Preferred Stock, par value $.01 per share (the "Series
D Preferred Stock") issued by Sheffield Pharmaceuticals, Inc. (the
"Corporation") hereby irrevocably exercises its option to convert __________
shares of the Series D Preferred Stock into shares of the common stock, $.01 par
value, of the Corporation ("Common Stock"), in accordance with the terms of the
Certificate of Designations of the Series D Preferred Stock. The undersigned
hereby instructs the Corporation to convert the number of shares of the Series D
Preferred Stock specified above into shares of Common Stock in accordance with
the provisions of Article 6 of such Certificate of Designations. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion, the Series D Preferred Stock recertificated, if any, not being
surrendered for conversion hereby, together with any check in payment for
fractional Common Stock, be issued in the name of and delivered to the
undersigned unless a different name has been indicated below. All capitalized
terms used and not defined herein have the respective meanings assigned to them
in such Certificate of Designations.
Dated:_______________
--------------------------------
by:_____________________________
Name:
Title:
Fill in for registration of Series D Preferred Stock:
Please print name and address
(including zip code number) :
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<PAGE>
Exhibit D
FORM OF EXCHANGE NOTICE
TO: Sheffield Pharmaceuticals, Inc.
Attention: Chief Financial Officer
The undersigned owner(s) of shares of Series D Cumulative
Convertible Exchangeable Preferred Stock, par value $.01 per share (the "Series
D Preferred Stock") issued by Sheffield Pharmaceuticals, Inc. (the
"Corporation") hereby irrevocably exercise(s) its option to cause the
Corporation to exchange ________ shares of Series D Preferred Stock for a pro
rata portion of the greater of (i) 7,224 shares of preferred stock, par value
$1.00 per share, of Sheffield Newco, Limited, a Bermuda corporation ("Newco"),
subject to adjustment for split, stock dividends and similar events occurring
after the Original Issue Date, or (ii) a number of shares of Newco Capital Stock
which, together with the shares of Newco Capital Stock issued to the Original
Holder on the Original Issue Date, equals fifty percent (50%) of the then
outstanding Newco Capital Stock as of the Exchange Date, in accordance with the
terms of the Certificate of Designations of the Series D Preferred Stock. The
undersigned hereby instructs the Corporation to advise all other holders of
Series D Preferred Stock, if any, of this exercise by the undersigned owner(s).
The undersigned directs that the Newco Capital Stock issuable and certificates
therefor deliverable to the undersigned upon such exchange be issued in the name
of and delivered to the undersigned unless a different name has been indicated
below. All capitalized terms used and not defined herein have the respective
meanings assigned to them in such Certificate of Designations.
Dated: __________________
--------------------------------
by:_____________________________
Name:
Title:
Fill in for registration of Series D Preferred Stock:
Please print name and address
(including zip code number) :
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CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES E CUMULATIVE CONVERTIBLE NON-EXCHANGEABLE
PREFERRED STOCK
OF
SHEFFIELD PHARMACEUTICALS, INC.
---------------
Pursuant to Section 151 of
the General Corporation Law of the State of Delaware
Sheffield Pharmaceuticals, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were duly
adopted by the Board of Directors of the Corporation at a meeting duly called
and held on October 15, 1999 pursuant to authority of the Board of Directors as
required by Section 151 of the General Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board" or the "Board
of Directors") by the provisions of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), out of the 3,000,000 shares of
preferred stock of the Corporation authorized in Article FOURTH of the
Certificate of Incorporation (the "Preferred Stock"), there hereby is created a
series of Preferred Stock consisting of 9,000 shares, which series shall have
the following powers, designations, preferences and relative, participating,
optional or other rights, and the following qualifications, limitations and
restrictions (in addition to the powers, designations, rights, and the
qualifications, limitations and restrictions, set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock).
<PAGE>
ARTICLE 1
DESIGNATION AND AMOUNT
The shares of such series shall be designated as "Series E
Cumulative Convertible Non-Exchangeable Preferred Stock" (the "Series E
Preferred Stock") and the authorized number of shares constituting such series
shall be 9,000 shares. The par value of the Series E Preferred Stock shall be
$.01 per share. The stated value of the Series E Preferred Stock shall be One
Thousand Dollars ($1,000) per share (the "Stated Value").
ARTICLE 2
DEFINITIONS
The terms defined in this Article whenever used in this
Certificate of Designations have the following respective meanings:
(a) "AMEX" means the American Stock Exchange.
(b) "Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
(c) "Common Shares" or "Common Stock" means shares of common
stock, $.01 par value, of the Corporation.
(d) "Conversion Date" means any day on which all or any portion
of shares of the Series E Preferred Stock is converted in accordance with the
provisions hereof.
(e) "Conversion Notice" has the meaning set forth in Section 6.1.
(f) "Conversion Price" has the meaning set forth in Section 6.1.
(g) "Corporation" means Sheffield Pharmaceuticals, Inc., a
Delaware corporation, and any successor or resulting corporation by way of
merger, consolidation, sale or exchange of all or substantially all of the
Corporation's assets, or otherwise.
<PAGE>
(h) "Current Market Price" on any date of determination means the
closing price of a Common Share on such day as reported on the AMEX, or, if such
security is not listed or admitted to trading on the AMEX, on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the average of
the closing bid and ask prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any Nasdaq member firm of the National
Association of Securities Dealers, Inc. selected from time to time by the Board
of Directors of the Corporation for that purpose, or a price determined in good
faith by the Board of Directors of the Corporation as being equal to the fair
market value thereof, as the case may be.
(i) "Dividend Notes" have the meaning set forth in Section 4.1.
(j) "Dividend Payment Date" has the meaning set forth in Section
4.1.
(k) "Dividend Period" has the meaning set forth in Section 4.1.
(l) "Dividend Shares" means the shares of Series E Preferred
Stock issued as dividends on outstanding shares of Series E Preferred Stock in
accordance with Article 4 hereof.
(m) "Dollars" or "$" means currency of the United States of
America.
(n) "Exchange Note" has the meaning set forth in Section 7.01.
(o) "Holder" or "Holders" means Elan International Services,
Ltd., a Bermuda corporation, any successor thereto, or any Person(s) to whom the
Series E Preferred Stock is subsequently transferred in accordance with the
provisions hereof.
(p) "Issue Date" means the date of original issuance of the
applicable share of Series E Preferred Stock.
(q) "Junior Securities" has the meaning set forth in Article 3.
(r) "Liquidation Preference" has the meaning set forth in Section
5.1(b).
(s) "Original Holder" means Elan International Services, Ltd, a
Bermuda exempted limited liability company incorporated under the laws of
Bermuda and its affiliates (as that term is defined under the Securities
Exchange Act of 1934, as amended).
(t) "Original Issue Date" means the date of the initial issuance
of shares of Series E Preferred Stock.
(u) "Pari Passu Securities" has the meaning set forth in Article
3.
(v) "Person" means an individual, a corporation, a partnership,
an association, a limited liability company, a unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(w) "Rights" has the meaning set forth in Section 6.2(e).
-3-
<PAGE>
(x) "Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of October 18, 1999, between the Corporation and Elan
International Services, Ltd.
(y) "Stated Value" has the meaning set forth in Article 1.
(z) "Trading Day" means any day on which purchases and sales of
securities authorized for quotation on the AMEX are reported thereon or, if the
Common Stock is not listed or admitted to trading on the AMEX, a day on which
the principal national securities exchange on which the Common Stock is listed
or admitted to trading is open for the transaction of business, or, if the
Common Stock is not so listed or admitted to trading on any national securities
exchange, a day on which the Nasdaq National Market (or any successor thereto)
or such other system then in use is open for the transaction of business, or, if
the Common Stock is not quoted by any such organization, any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
ARTICLE 3
RANK
The Series E Preferred Stock shall rank (i) prior to the Common
Stock; (ii) prior to any class or series of capital stock of the Corporation
hereafter created other than Pari Passu Securities (collectively, with the
Common Stock, the "Junior Securities"); (iii) pari passu with the Corporation's
Series C Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock"); (iv) pari passu with the Corporation's Series D Convertible
Exchangeable Preferred Stock (the "Series D Preferred Stock"); (v) pari passu
with the Corporation's Series F Convertible Non-Exchangeable Preferred Stock
(the "Series F Preferred Stock"); and (vi) pari passu with any class or series
of capital stock of the Corporation hereafter created specifically ranking on
parity with the Series E Preferred Stock (collectively, with the Series C
Preferred Stock, the Series D Preferred Stock and the Series F Preferred Stock,
the "Pari Passu Securities").
ARTICLE 4
DIVIDENDS
SECTION 4.1
(a) (i) Subject to Article 6, the Holder shall be entitled to
receive, out of funds legally available for the payment of dividends, dividends
at the rate of 9.0% per annum (computed on the basis of a 360-day year) (the
"Dividend Rate") on the Stated Value of each outstanding share of Series E
Preferred Stock payable on and as of the most recent Dividend Payment Date with
respect to each Dividend Period. Dividends on the Series E Preferred Stock shall
be cumulative from the date of issue or the most recent Dividend Payment Date
upon which dividends have been paid on the Series E Preferred Stock by the
Corporation.
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<PAGE>
(ii) Dividends on the Series E Preferred Stock shall be
payable in equal semi-annual installments on April 18 and October 18 of each
year (each, a "Dividend Payment Date"), commencing April 18, 2000 and ending
October 18, 2005, to the holders of record of shares of the Series E Preferred
Stock, as they appear on the stock records of the Corporation at the close of
business on any record date, not more than 60 days or less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors. For the purposes hereof, "Dividend Period," in respect of any share
of Series E Preferred Stock, shall mean the period commencing on April 18, 2000
and, thereafter, the semiannual period commencing on and including the day after
the immediately preceding Dividend Payment Date and ending on and including the
immediately subsequent Dividend Payment Date. Accrued and unpaid dividends for
any past Dividend Period may be declared and paid at any time, without reference
to any Dividend Payment Date, to holders of record on such date, not more than
15 days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(iii) Dividends on the outstanding shares of Series E
Preferred Stock shall be paid through the issuance of duly and validly
authorized and issued, fully paid and non-assessable shares of Series E
Preferred Stock to be issued at the rate of one (1) share of Series E Preferred
Stock for each $1,000 of dividend due and payable. No fractional shares of the
Series E Preferred Stock shall be issued as Dividend Shares. Instead of any
fractional shares of Series E Preferred Stock which would otherwise be issuable
as Dividend Shares, the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to $1,000 times the fractional
interest.
(b) The Holder shall not be entitled to any dividends in excess
of the cumulative dividends, as herein provided, on the Series E Preferred
Stock. Except as provided in this Article 4, no interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series E Preferred Stock that may be in arrears.
(c) In the event that, after the first anniversary of the
Original Issue Date, the payment of any Dividend Shares upon the Series E
Preferred Stock to the Original Holder would result in the Original Holder's
fully-diluted ownership of Common Stock (assuming the conversion into Common
Stock of all options, warrants and other securities convertible or exchangeable
into Common Stock beneficially owned by the Original Holder) to exceed 49.9% of
the then outstanding Common Stock, such excess dividends shall be paid to the
Original Holder through issuance by the Corporation of promissory notes with an
aggregate principal amount equal to each dividend payment amount then payable
(collectively, the "Dividend Notes"). Each Dividend Note shall be issued in
substantially the form attached as Exhibit A to this Certificate of
Designations. It shall be a condition to the Corporation's obligation to issue
Dividend Notes in respect of any such excess dividends that the Original Holder
deliver to the Corporation, at least 15 days before the applicable Dividend
Payment Date, a certificate (i) certifying that the Dividend Shares otherwise
issuable on such Dividend Payment Date shall cause the Original Holder's
beneficial ownership to exceed such 49.9% amount and (ii) demonstrating the
calculation of the principal amount of the Dividend Note to be issued in lieu of
the applicable excess Dividend Shares.
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<PAGE>
ARTICLE 5
LIQUIDATION PREFERENCE
SECTION 5.1
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of ninety (90) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any Junior
Securities of the Corporation upon liquidation, dissolution or winding up unless
prior thereto, the Holders, subject to Article 5, shall have received the
Liquidation Preference (as defined in Article 5.1(b)) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the Holders and holders of shares of Pari Passu
Securities shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series E Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the preferential amounts payable on each such share
bears to the aggregate preferential amounts payable on all such shares.
(b) For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series E Preferred Stock shall mean an amount equal to
(i) the Stated Value thereof, plus (ii) the aggregate of all accrued and unpaid
dividends on such share of Series E Preferred Stock until the most recent
Dividend Payment Date; provided that, in the event of an actual liquidation,
dissolution or winding up of the Corporation, the amount referred to in clause
(ii) above shall be calculated by including accrued and unpaid stock dividends
to the actual date of such liquidation, dissolution or winding up, rather than
the applicable Dividend Payment Due Date referred to above.
-6-
<PAGE>
ARTICLE 6
CONVERSION OF SERIES E PREFERRED STOCK
SECTION 6.1 Conversion.
(a) Holders of shares of the Series E Preferred Stock shall have
the right, exercisable at any time after the second anniversary of the Original
Issue Date and prior to the sixth anniversary of the Original Issue Date, to
convert all or any such shares of the Series E Preferred Stock into the number
of shares of Common Stock (calculated as to each conversion to the nearest
1/100th of a share) determined by dividing (1) the aggregate Liquidation
Preference of the shares of Series E Preferred Stock to be converted by (2)
$3.89 (the "Conversion Price"). Upon conversion, no adjustment or payment will
be made for dividends, but if any holder surrenders a share of the Series E
Preferred Stock for conversion after the close of business on the record date
for the payment of a dividend and prior to the opening of business on the next
Dividend Payment Date, then, notwithstanding such conversion, the dividend
payable on such Dividend Payment Date will be paid to the registered holder of
such share on such record date. In such event, such share, when surrendered for
conversion during the period between the close of business on any dividend
payment record date and the opening of business on the corresponding Dividend
Payment Date, must be accompanied by payment of an amount equal to the dividend
payable on such Dividend Payment Date on the share so converted.
(b) Any holder of a share or shares of the Series E Preferred
Stock electing to convert such share or shares thereof shall deliver the
certificate or certificates therefor to the principal office of the Corporation
or any transfer agent for the Common Stock, with the form of notice of election
to convert attached as Exhibit C to this Certificate of Designations (the
"Conversion Notice"), fully completed and duly executed and (if such required by
the Corporation or any conversion agent) accompanied by instruments of transfer
in form satisfactory to the Corporation and to any conversion agent, duly
executed by the registered Holder of his duly authorized attorney. The
conversion right with respect to any such shares shall be deemed to have been
exercised at the date upon which the certificates therefore accompanied by such
duly executed notice of election and instruments of transfer and such taxes,
stamps, funds, or evidence of payment shall have been so delivered, and the
Person or Persons entitled to receive the shares of the Common Stock issuable
upon such conversion shall be treated for all purposes as the record Holder or
Holders of such shares of the Common Stock upon said date.
(c) From and after the delivery of the Conversion Notice in
respect of any conversion of shares of Series E Preferred Stock, all such shares
of Series E Preferred Stock shall be deemed to have been converted into shares
of Common Stock as of the applicable Conversion Date at the applicable
conversion rate, all stock dividends on such shares of the Series E Preferred
Stock shall cease to accrue, and all rights of the Holders thereof as holders of
Series E Preferred Stock, except the right to receive all accrued and unpaid
stock dividends to such Conversion Date at the applicable rate for such shares
of Series E Preferred Stock and the right to receive certificates representing
shares of Common Stock issuable upon the conversion of such shares (including,
without limitation, with respect to such stock dividends, as applicable), shall
cease and terminate, such shares of Series E Preferred Stock shall not
thereafter be transferred (except with the consent of the Corporation) and such
shares shall not be deemed to be outstanding for any purpose whatsoever.
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<PAGE>
(d) No fractional shares of the Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of the
Series E Preferred Stock. If more than one share of the Series E Preferred Stock
shall be surrendered for conversion at one time by the same holder, the number
of full shares of the Common Stock which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of the
Series E Preferred Stock so surrendered. Instead of any fractional shares of the
Common Stock which would otherwise be issuable upon conversion of any shares of
the Series E Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the Current
Market Price for the Common Stock on the last Trading Day preceding the
applicable date of conversion.
(e) Each Conversion Notice under this Section 6.1 shall request
the conversion of at least 500 shares of Series E Preferred Stock or the
remaining balance of Series E Preferred Stock held by the converting Holder,
whichever is less.
SECTION 6.2 Adjustments. The Conversion Price and the number of shares
issuable upon conversion of the Series E Preferred Stock are subject to
adjustment from time to time as follows:
(a) Merger, Sale of Assets, Etc. Notwithstanding any other
limitation whatsoever contained herein, if at any time while the Series E
Preferred Stock, or any portion thereof, is outstanding there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Corporation with or into another corporation in which the
Corporation is the surviving entity but the shares of the Corporation's capital
stock outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of the Corporation's properties and
assets as, or substantially as, an entirety to any other Person, then as a part
of such reorganization, merger, consolidation, sale or transfer lawful provision
shall be made so that the Holder shall thereafter be entitled to receive upon
conversion of the Series E Preferred Stock, during the period specified herein,
the number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale or
transfer that the Holder would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if the Series E
Preferred Stock had been converted immediately before such reorganization,
merger, consolidation, sale or transfer, all subject to further adjustment as
provided in this Section 6.2(a). The foregoing provisions of this Section 6.2(a)
shall similarly apply to successive reclassification, changes, consolidations,
mergers, mandatory share exchanges and sales and transfers. If the per share
consideration payable to the holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Board of Directors) shall be made in the application of the provisions of
this Certificate of Designations with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Certificate
of Designations shall be applicable after that event, as near as reasonably may
be, in relation to any shares or other property deliverable after that event
upon conversion of the Series E Preferred Stock.
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<PAGE>
(b) Reclassification, Etc. If the Corporation, at any time while
the Series E Preferred Stock, or any portion thereof, remains outstanding, shall
change any of the securities as to which conversion rights under this
Certificate of Designations exist into the same or a different number of
securities of any other class or classes, the Series E Preferred Stock shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the conversion rights under this Certificate of
Designations immediately prior to such reclassification or other change and the
Conversion Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Certificate of Designations.
(c) Split, Subdivision or Combination of Shares. If the
Corporation at any time while the Series E Preferred Stock, or any portion
thereof, remains outstanding shall split, subdivide or combine the securities as
to which conversion rights under this Certificate of Designations exist, into a
different number of securities of the same class, the Conversion Price shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock and Other Securities or
Property. If while the Series E Preferred Stock, or any portion hereof, remains
outstanding, the holders of the securities as to which conversion rights under
this Certificate of Designations exist at the time shall have received, or, on
or after the record date fixed for the determination of eligible stockholders of
the Corporation, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities or property (other than
cash) of the Corporation by way of dividend, then and in each case, the Series E
Preferred Stock shall represent the right to acquire, upon conversion, in
addition to the number of shares of the security receivable upon conversion of
the Series E Preferred Stock, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Corporation that the Holder
would hold on the date of such conversion had it been the holder of record of
the security receivable upon conversion of the Series E Preferred Stock on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and/or additional
stock available by it as aforesaid during such period, giving effect to all
adjustments called for during such period by the provisions of this Section 6.2.
(e) Repurchases or Redemptions of Common Stock or Options. If the
Corporation at any time while shares of Series E Preferred Stock are
outstanding, shall repurchase or redeem any outstanding shares of Common Stock
or rights, options or warrants granting the holder thereof the right to acquire
shares of Common Stock (collectively, the "Rights") in a single transaction or a
series of related transactions involving an aggregate repurchase or redemption
price in excess of $500,000 at a price (on a per share basis) which is greater
than 150% of the Current Market Price as of the day prior to such repurchase or
redemption, the Conversion Price shall thereupon be adjusted by multiplying the
Conversion Price in effect immediately prior to the applicable repurchase or
redemption by a fraction (i) the numerator of which shall be the Conversion
Price in effect immediately prior to such repurchase or redemption and (ii) the
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<PAGE>
denominator of which shall be the fair market value of the consideration paid by
the Corporation for each share of Common Stock (or each share of Common Stock
issuable upon exercise of the Right(s) subject to such repurchase or redemption)
in such repurchase or redemption.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 6.2, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
(g) Cumulative Adjustments. No adjustment in the Conversion Price
shall be required until cumulative adjustments result in a concomitant change of
1% or more of the Conversion Price as in effect prior to the last adjustment of
the Conversion Price; provided, however, that any adjustments which by reason of
this Section 6.2 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
6.2 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. No adjustment to the Conversion Price shall be made
for cash dividends.
ARTICLE 7
EXCHANGE RIGHTS
SECTION 7.01 Mandatory Exchange. On or before the first anniversary of
the Original Issue Date, the Corporation shall notify each Holder, in writing,
(i) that the issuance of the Series E Preferred Stock, and the issuance and
listing upon the American Stock Exchange ("AMEX") of the shares of Common Stock
issuable upon conversion of the Series E Preferred Stock, has been approved or
ratified by the stockholders of the Corporation in accordance with the General
Corporation Law of the State of Delaware and the rules and regulation of the
AMEX or (ii) that such approval or ratification is not required by the
applicable rules of the AMEX. In the event that the Corporation fails to provide
such written notice on or before the first anniversary of the Original Issue
Date, (A) all outstanding shares of Series E Preferred Stock shall be deemed
exchanged for promissory note(s) in substantially the form of Exhibit B attached
to this Certificate of Designations (the "Exchange Notes"), in the respective
principal amounts equal to the aggregate Liquidation Preference of all shares of
Series E Preferred Stock held by each respective Holder as of the date of such
exchange and (B) from and after the first anniversary of the Original Issue
Date, all shares of Series E Preferred Stock (including Dividend Shares) shall
be deemed to have been exchanged for Exchange Notes, all dividends on the Series
E Preferred Stock shall cease to accrue, and all rights of Holders thereof as
holders of Series E Preferred Stock shall cease and terminate and all shares of
Series E Preferred Stock shall not be deemed outstanding for any purpose
whatsoever, except the right to receive the Exchange Notes issuable to them as
determined above.
-10-
<PAGE>
ARTICLE 8
VOTING RIGHTS
The holders of the Series E Preferred Stock shall have no voting
rights, except as otherwise provided by the General Corporation Law of the State
of Delaware ("DGCL") and in this Article 8, and in Article 9 below.
The Corporation shall provide each Holder of Series E Preferred Stock
with prior notification of any meeting of the shareholders of the Corporation
(and copies of proxy materials and other information sent to shareholders). In
the event of any taking by the Corporation of a record of its shareholders for
the purpose of determining shareholders who are entitled to receive payment of
any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such action is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the Holders of the Series
E Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the Holders of at least a majority of the shares of the Series E
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series E Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL Holders
of the Series E Preferred Stock are entitled to vote on a matter with Holders of
Common Stock, voting together as one class, each share of Series E Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such shares are convertible as of the record date for
the taking of such vote of shareholders. Holders of the Series E Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled as of right under the DGCL, which notice
would be provided pursuant to the Corporation's bylaws and the DGCL.
ARTICLE 9
PROTECTIVE PROVISIONS
So long as shares of Series E Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the Holders of at least a majority of the
then outstanding shares of Series E Preferred Stock:
(a) create any new class or series of capital stock having a
preference superior to the Series E Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up of the Corporation ("Senior
-11-
<PAGE>
Securities") or alter or change the rights, preferences or privileges of any
Senior Securities so as to affect adversely the Series E Preferred Stock; or
(b) amend or alter whether by merger, consolidation or otherwise,
any of the provisions of the Certificate of Incorporation (including this
Certificate of Designations) that would change the preferences, rights or
privileges with respect to the Series E Preferred Stock so as to affect the
Series E Preferred Stock adversely.
In the event holders of at least a majority of the then outstanding
shares of Series E Preferred Stock agree to allow the Corporation to amend or
alter the preferences, rights or privileges of the shares of Series E Preferred
Stock, pursuant to subsection (b) above, so as to affect adversely the Series E
Preferred Stock, then the Corporation will deliver notice of such approved
change to the Holders of the Series E Preferred Stock that did not agree to such
amendment or change (the "Dissenting Holders") and the Dissenting Holders shall
have the right for a period of thirty (30) days to convert pursuant to Section
6.1 of this Certificate of Designations as they exist prior to such alteration
or continue to hold their shares of Series E Preferred Stock. The Holders'
rights under this Article 9 shall terminate on the sixth anniversary of the
Original Issue Date.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Loss, Theft, Destruction of Series E Preferred Stock. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction or mutilation of shares of Series E Preferred Stock and, in the case
of any such loss, theft or destruction, upon receipt of indemnity or security
reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series E Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series E Preferred Stock, new shares of Series
E Preferred Stock of like date and tenor.
SECTION 10.2 Who Deemed Absolute Owner. The Corporation may deem the
Person in whose name the Series E Preferred Stock shall be registered upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series E Preferred Stock for the purpose of receiving payment of
dividends on the Series E Preferred Stock, for the conversion of the Series E
Preferred Stock and for all other purposes, and the Corporation shall not be
affected by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Series E Preferred Stock to the extent of the sum or sums so paid or the
conversion so made.
SECTION 10.3 Register. The Corporation shall keep at its principal
office a register in which the Corporation shall provide for the registration of
the Series E Preferred Stock. Upon any transfer of the Series E Preferred Stock
in accordance with the provisions hereof, the Corporation shall register such
transfer on the Series E Preferred Stock register.
-12-
<PAGE>
SECTION 10.4 Withholding. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
E Preferred Stock.
SECTION 10.5 Headings. The headings of the Articles and Sections of
this Certificate of Designations are inserted for convenience only and do not
constitute a part of this Certificate of Designations.
-13-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations, Preferences and Rights to be signed by Loren G. Peterson, its
President and Chief Executive Officer, and attested by Scott A. Hoffmann, its
Secretary, on this 18th day of October, 1999.
SHEFFIELD PHARMACEUTICALS, INC.
By:/s/ Loren G. Peterson
---------------------------------------
Loren G. Peterson
President and Chief Executive Officer
Attested:
By: /s/ Scott A. Hoffman
------------------------
Scott A. Hoffmann
Secretary
<PAGE>
Exhibit A
FORM OF DIVIDEND NOTE
SHEFFIELD PHARMACEUTICALS, INC.
U.S. $___________ ____________, 20__
The undersigned, Sheffield Pharmaceuticals, Inc., a Delaware corporation
("Sheffield"), for value received, hereby promises to pay to the order of
____________________________ (the "Investor") or its permitted assigns (the
"Holder"), at such place as may be designated by the Holder to Sheffield, the
sum of ______________________ dollars ($___________), plus interest on the
unpaid principal balance at the rate specified below, in accordance with the
provisions set forth herein. During the term of this Note, interest shall accrue
at the rate of 9.0% per annum (calculated on the basis of a year of 360 days
comprised of 12 30-day months). Accrued interest shall be payable (i) quarterly
in arrears on the first day of January, April, July and October of each year and
(ii) in-kind through the issuance of additional notes in like tenor to this Note
(the "Interest Notes"). The full principal amount of this Note and all Interest
Notes, including any accrued interest thereon, shall be due and payable on
October 18, 2005 (the "Maturity Date"). This Note is originally being issued as
payment of dividends due on shares of Series E Preferred Stock, par value $.01
per share, of Sheffield (the "Series E Preferred Stock"), the rights of which
are designated in the Certificate of Designations of the Series E Preferred
Stock of Sheffield (the "Certificate of Designations"), and pursuant to a
certain Securities Purchase Agreement, dated October 18, 1999 (the "Original
Issue Date"), between Sheffield and Elan International Services, Ltd. (the
"Purchase Agreement"). All Notes issued as payment of dividends due on shares of
Series E Preferred Stock, including the Interest Notes, or upon transfer or
exchange of other Notes are referred to herein as the "Notes."
All capitalized terms used in this Note and not otherwise defined herein shall
have the meaning assigned to such terms in the Certificate of Designations.
The following is a statement of the rights of the Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees:
1. Exchange or Replacement of Note.
(a) The Holder, at its option, may in person or by duly
authorized attorney surrender this Note for exchange, at the office or agency of
Sheffield and receive in exchange therefor a new Note in the same aggregate
principal amount as the unpaid principal amount of the Note so surrendered, each
<PAGE>
such new Note to be dated as of the date to which interest has been paid on the
Note so surrendered and payable to the Holder or its assignee, as the Holder may
designate in writing (subject to the restrictions on transfer set forth in this
Note and in the Purchase Agreement).
(b) Upon receipt by Sheffield of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note, and (in case of loss,
theft or destruction) of indemnity reasonably satisfactory to it, and upon
reimbursement to Sheffield of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Note, if mutilated, Sheffield shall make
and deliver a new Note of like tenor in lieu of this Note. Any Note made and
delivered in accordance with this paragraph shall be dated the date hereof.
2. Amendments. This Note may not be amended, modified or waived in any
respect unless set forth in writing and signed by the Holder, in the case of any
change hereto, including any change in the amount or timing of any payment to be
made hereunder or any adverse change in conversion rights hereunder. Any such
amendment, modification or waiver shall be binding upon each future holder of
this Note.
3. Costs and Expenses. Sheffield agrees to pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the Holder in
collecting or enforcing this Note.
4. No Waivers. No delay by the Holder in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise.
5. Events of Default
The occurrence of any of the following events shall constitute an event
of default (an "Event of Default"):
(a) A default in the payment of the principal amount of this
Note, when and as the same shall become due and payable;
(b) a default in the payment of any accrued and unpaid interest
on this Note, when and as the same shall become due and payable;
(c) a default in the performance, or a breach of any other
covenant or agreement of Sheffield in this Note on any other Transaction
Document (as defined in the Purchase Agreement), and continuance of such default
or breach for a period of 10 days after the Holder has notified Sheffield of its
occurrence;
(d) any representation, warranty, or certification made by
Sheffield pursuant to this Note or any other Transaction Document shall prove to
have been false or misleading as of the date made in any material respect; or
<PAGE>
(e) (i) the entry of a decree or order by a court having
jurisdiction adjudging Sheffield bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of Sheffield, and the continuance of any such decree or order unstayed and in
effect for a period of 60 days; (ii) the commencement by Sheffield of a
voluntary case under United States bankruptcy law, as now or hereafter
constituted, or the consent by Sheffield to the institution of bankruptcy or
insolvency proceedings against it; (iii) the filing by Sheffield of a petition
or answer or consent seeking reorganization or relief under United States
bankruptcy law; (iv) the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, or similar official of Sheffield or of any substantial
part of its property which is not discharged within 30 days; or (v) the making
by Sheffield of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by Sheffield in furtherance of any such action;
6. Remedies in the Event of Default
(a) In the case of any Event of Default by Sheffield, the
principal amount of this Note and accrued and unpaid interest thereon shall, in
addition to all other rights and remedies of the Holder hereunder and under
applicable law, be and become immediately due and payable.
(b) Sheffield hereby waives grace, demand and presentment for
payment, notice of nonpayment, protest and notice of protest, diligence, filing
suit, and all other notice and promises to pay the Holder its costs of
collection of all amounts due hereunder, including reasonable attorneys' fees.
(c) Upon the occurrence and during the continuation of any Event
of Default or breach of this Note by Sheffield this Note shall bear interest at
the interest rate otherwise in effect hereunder plus 3% per annum (but in any
event not in excess of the maximum rate of interest permitted by applicable
law).
7. Seniority
This Note shall constitute senior indebtedness of Sheffield, and
Sheffield shall not incur any indebtedness for money borrowed which shall rank
senior to, or pari passu with, this Note without the prior consent of the
holders of a majority in principal amount of the Notes; provided, that nothing
contained herein shall be construed as to prevent Sheffield from incurring and
paying obligations in the ordinary course of business, in accordance with past
practice.
8. Miscellaneous
(a) The Investor may assign this Note to its affiliates (as such
term is defined in the Securities Exchange Act of 1934, as amended). This Note
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, subject to
compliance by such assignee with the representations and warranties contained in
Section 3(e) of the Purchase Agreement.
<PAGE>
(b) All notices, demands and requests of any kind to be delivered to
the other party in connection with this Note 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 airmail,
return receipt requested and postage prepaid, addressed as follows:
to Sheffield:
Sheffield Pharmaceuticals, Inc.
South Winton Court
3136 Winton Road South
Suite 306
Rochester, NY 14623
Attention: Chairman
and
Sheffield Pharmaceuticals, Inc.
425 South Woodsmill Road
St. Louis, Missouri 63017-3441
Attention: Chief Executive Officer
with a copy to:
Olshan Grundman Frome, Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attention: Daniel J. Gallagher
to Holder:
at the address provided to Sheffield by the Holder.
Each party, by written notice given to the other in accordance with this Section
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 received (i) in the case of personal delivery, on
the date of such delivery, (ii) in the case of nationally-recognized overnight
courier, on the second business day after the date when sent and (iii) in the
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
(c) This Note shall be governed by and construed in accordance with
the laws of the state of New York, without reference to the principles of
conflicts of laws thereof.
<PAGE>
IN WITNESS WHEREOF, Sheffield has caused this Note to be issued as of the date
first set forth hereinabove.
SHEFFIELD PHARMACEUTICALS, INC.
By:________________________________
Name:
Title:
<PAGE>
Exhibit B
FORM OF EXCHANGE NOTE
SHEFFIELD PHARMACEUTICALS, INC.
U.S. $___________ ____________, 20__
The undersigned, Sheffield Pharmaceuticals, Inc., a Delaware corporation
("Sheffield"), for value received, hereby promises to pay to the order of
____________________________ (the "Investor") or its permitted assigns (the
"Holder"), at such place as may be designated by the Holder to Sheffield, the
sum of ______________________ dollars ($___________), plus interest on the
unpaid principal balance at the rate specified below, in accordance with the
provisions set forth herein. During the term of this Note, interest shall accrue
at the rate of 9.0% per annum (calculated on the basis of a year of 360 days
comprised of 12 30-day months). Accrued interest shall be payable (i) quarterly
in arrears on the first day of January, April, July and October of each year and
(ii) in-kind through the issuance of additional notes in like tenor to this Note
(the "Interest Notes"). The full principal amount of this Note and all Interest
Notes, including any accrued interest thereon, shall be due and payable on
October 18, 2005 (the "Maturity Date"). This Note is originally being issued in
exchange for shares of Series E Preferred Stock, par value $.01 per share, of
Sheffield (the "Series E Preferred Stock"), the rights of which are designated
in the Certificate of Designations of the Series E Preferred Stock of Sheffield
(the "Certificate of Designations"), and pursuant to a certain Securities
Purchase Agreement, dated October 18, 1999 (the "Original Issue Date"), between
Sheffield and Elan International Services, Ltd. (the "Purchase Agreement"). All
Notes issued in exchange for shares of Series E Preferred Stock, including the
Interest Notes, or upon transfer or exchange of other Notes are referred to
herein as the "Notes."
<PAGE>
All capitalized terms used in this Note and not otherwise defined herein shall
have the meaning assigned to such terms in the Certificate of Designations.
The following is a statement of the rights of the Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees:
1. Exchange or Replacement of Note.
(a) The Holder, at its option, may in person or by duly authorized
attorney surrender this Note for exchange, at the office or agency of Sheffield
and receive in exchange therefor a new Note in the same aggregate principal
amount as the unpaid principal amount of the Note so surrendered, each such new
Note to be dated as of the date to which interest has been paid on the Note so
surrendered and payable to the Holder or its assignee, as the Holder may
designate in writing (subject to the restrictions on transfer set forth in this
Note and in the Purchase Agreement).
(b) Upon receipt by Sheffield of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Note, and (in case of loss,
theft or destruction) of indemnity reasonably satisfactory to it, and upon
reimbursement to Sheffield of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Note, if mutilated, Sheffield shall make
and deliver a new Note of like tenor in lieu of this Note. Any Note made and
delivered in accordance with this paragraph shall be dated the date hereof.
2. Amendments. This Note may not be amended, modified or waived in any
respect unless set forth in writing and signed by the Holder, in the case of any
change hereto, including any change in the amount or timing of any payment to be
made hereunder or any adverse change in conversion rights hereunder. Any such
amendment, modification or waiver shall be binding upon each future holder of
this Note.
3. Costs and Expenses. Sheffield agrees to pay all reasonable costs and
expenses, including reasonable attorneys' fees, incurred by the Holder in
collecting or enforcing this Note.
4. No Waivers. No delay by the Holder in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise.
5. Events of Default
The occurrence of any of the following events shall constitute an event
of default (an "Event of Default"):
(a) A default in the payment of the principal amount of this Note,
when and as the same shall become due and payable;
<PAGE>
(b) a default in the payment of any accrued and unpaid interest on
this Note, when and as the same shall become due and payable;
(c) a default in the performance, or a breach of any other covenant
or agreement of Sheffield in this Note on any other Transaction Document (as
defined in the Purchase Agreement), and continuance of such default or breach
for a period of 10 days after the Holder has notified Sheffield of its
occurrence;
(d) any representation, warranty, or certification made by Sheffield
pursuant to this Note or any other Transaction Document shall prove to have been
false or misleading as of the date made in any material respect; or
(e) (i) the entry of a decree or order by a court having
jurisdiction adjudging Sheffield bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of Sheffield, and the continuance of any such decree or order unstayed and in
effect for a period of 60 days; (ii) the commencement by Sheffield of a
voluntary case under United States bankruptcy law, as now or hereafter
constituted, or the consent by Sheffield to the institution of bankruptcy or
insolvency proceedings against it; (iii) the filing by Sheffield of a petition
or answer or consent seeking reorganization or relief under United States
bankruptcy law; (iv) the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, or similar official of Sheffield or of any substantial
part of its property which is not discharged within 30 days; (v) the making by
Sheffield of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by Sheffield in furtherance of any such action.
6. Remedies in the Event of Default
(a) In the case of any Event of Default by Sheffield, the principal
amount of this Note and accrued and unpaid interest thereon shall, in addition
to all other rights and remedies of the Holder hereunder and under applicable
law, be and become immediately due and payable.
(b) Sheffield hereby waives grace, demand and presentment for
payment, notice of nonpayment, protest and notice of protest, diligence, filing
suit, and all other notice and promises to pay the Holder its costs of
collection of all amounts due hereunder, including reasonable attorneys' fees.
(c) Upon the occurrence and during the continuation of any Event of
Default or breach of this Note by Sheffield this Note shall bear interest at the
interest rate otherwise in effect hereunder plus 3% per annum (but in any event
not in excess of the maximum rate of interest permitted by applicable law).
<PAGE>
7. Seniority
This Note shall constitute senior indebtedness of Sheffield, and
Sheffield shall not incur any indebtedness for money borrowed which shall rank
senior to, or pari passu with, this Note without the prior consent of the
holders of a majority in principal amount of the Notes; provided, that nothing
contained herein shall be construed as to prevent Sheffield from incurring and
paying obligations in the ordinary course of business, in accordance with past
practice.
8. Miscellaneous
(a) The Investor may assign this Note to its affiliates (as such
term is defined in the Securities Exchange Act of 1934, as amended). This Note
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, subject to
compliance by such assignee with the representations and warranties contained in
Section 3(a) of the Purchase Agreement.
(b) All notices, demands and requests of any kind to be delivered to
the other party in connection with this Note 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 airmail,
return receipt requested and postage prepaid, addressed as follows:
to Sheffield:
Sheffield Pharmaceuticals, Inc.
South Winton Court
3136 Winton Road South
Suite 306
Rochester, NY 14623
Attention: Chairman
and
Sheffield Pharmaceuticals, Inc.
425 South Woodsmill Road
St. Louis, Missouri 63017-3441
Attention: Chief Executive Officer
with a copy to:
Olshan Grundman Frome, Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attention: Daniel J. Gallagher
<PAGE>
to Holder:
at the address provided to Sheffield by the Holder.
Each party, by written notice given to the other in accordance with this Section
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 received (i) in the case of personal delivery, on
the date of such delivery, (ii) in the case of nationally-recognized overnight
courier, on the second business day after the date when sent and (iii) in the
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
(c) This Note shall be governed by and construed in accordance with
the laws of the state of New York, without reference to the principles of
conflicts of laws thereof.
<PAGE>
IN WITNESS WHEREOF, Sheffield has caused this Note to be issued as of the date
first set forth hereinabove.
SHEFFIELD PHARMACEUTICALS, INC.
By:________________________________
Name:
Title:
<PAGE>
Exhibit C
FORM OF CONVERSION NOTICE
TO: Sheffield Pharmaceuticals, Inc.
Attention: Chief Financial Officer
The undersigned owner of shares of Series E Cumulative Convertible
Preferred Stock, par value $.01 per share (the "Series E Preferred Stock")
issued by Sheffield Pharmaceuticals, Inc. (the "Corporation") hereby irrevocably
exercises its option to convert __________ shares of the Series E Preferred
Stock into shares of the common stock, $.01 par value, of the Corporation
("Common Stock"), in accordance with the terms of the Certificate of
Designations of the Series E Preferred Stock. The undersigned hereby instructs
the Corporation to convert the number of shares of the Series E Preferred Stock
specified above into shares of Common Stock in accordance with the provisions of
Article 6 of such Certificate of Designations. The undersigned directs that the
Common Stock issuable and certificates therefor deliverable upon conversion, the
Series E Preferred Stock recertificated, if any, not being surrendered for
conversion hereby, together with any check in payment for fractional Common
Stock, be issued in the name of and delivered to the undersigned unless a
different name has been indicated below. All capitalized terms used and not
defined herein have the respective meanings assigned to them in such Certificate
of Designations.
Dated:__________________
--------------------------------
by:_____________________________
Name:
Title:
Fill in for registration of Series E Preferred Stock:
Please print name and address
(including zip code number):
- --------------------------
- --------------------------
- --------------------------
- --------------------------
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES F CONVERTIBLE NON-EXCHANGEABLE
PREFERRED STOCK
OF
SHEFFIELD PHARMACEUTICALS, INC.
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Pursuant to Section 151 of
the General Corporation Law of the State of Delaware
Sheffield Pharmaceuticals, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were duly
adopted by the Board of Directors of the Corporation at a meeting duly called
and held on October 15, 1999 pursuant to authority of the Board of Directors as
required by Section 151 of the General Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board" or the "Board
of Directors") by the provisions of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), out of the 3,000,000 shares of
preferred stock of the Corporation authorized in Article FOURTH of the
Certificate of Incorporation (the "Preferred Stock"), there hereby is created a
series of Preferred Stock consisting of 5,000 shares, which series shall have
the following powers, designations, preferences and relative, participating,
optional or other rights, and the following qualifications, limitations and
restrictions (in addition to the powers, designations, rights, and the
qualifications, limitations and restrictions, set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock).
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ARTICLE 1
DESIGNATION AND AMOUNT
The shares of such series shall be designated as "Series F
Convertible Non-Exchangeable Preferred Stock" (the "Series F Preferred Stock")
and the authorized number of shares constituting such series shall be 5,000
shares. The par value of the Series F Preferred Stock shall be $.01 per share.
The stated value of the Series F Preferred Stock shall be One Thousand Dollars
($1,000) per share (the "Stated Value").
ARTICLE 2
DEFINITIONS
The terms defined in this Article whenever used in this Certificate
of Designations have the following respective meanings:
(a) "AMEX" means the American Stock Exchange.
(b) "Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
(c) "Common Shares" or "Common Stock" means shares of common
stock, $.01 par value, of the Corporation.
(d) "Conversion Date" means any day on which all or any portion
of shares of the Series F Preferred Stock is converted in accordance with the
provisions hereof.
(e) "Conversion Notice" has the meaning set forth in Section 6.1.
(f) "Conversion Price" has the meaning set forth in Section 6.1.
(g) "Corporation" means Sheffield Pharmaceuticals, Inc., a
Delaware corporation, and any successor or resulting corporation by way of
merger, consolidation, sale or exchange of all or substantially all of the
Corporation's assets, or otherwise.
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(h) "Current Market Price" on any date of determination means the
closing price of a Common Share on such day as reported on the AMEX, or, if such
security is not listed or admitted to trading on the AMEX, on the principal
national security exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the average of
the closing bid and ask prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any Nasdaq member firm of the National
Association of Securities Dealers, Inc. selected from time to time by the Board
of Directors of the Corporation for that purpose, or a price determined in good
faith by the Board of Directors of the Corporation as being equal to the fair
market value thereof, as the case may be.
(i) "Dollars" or "$" means currency of the United States of
America.
(j) "Holder" or "Holders" means Elan International Services,
Ltd., a Bermuda corporation, any successor thereto, or any Person(s) to whom the
Series F Preferred Stock is subsequently transferred in accordance with the
provisions hereof.
(k) "Issue Date" means the date of original issuance of the
applicable share of Series F Preferred Stock.
(l) "Junior Securities" has the meaning set forth in Article 3.
(m) "Liquidation Preference" has the meaning set forth in Section
5.1(b).
(n) "Original Holder" means Elan International Services, Ltd, a
Bermuda exempted limited liability company incorporated under the laws of
Bermuda and its affiliates (as that term is defined under the Securities
Exchange Act of 1934, as amended).
(o) "Original Issue Date" means the date of the initial issuance
of shares of Series F Preferred Stock.
(p) "Pari Passu Securities" has the meaning set forth in Article
3.
(q) "Person" means an individual, a corporation, a partnership,
an association, a limited liability company, a unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(r) "Rights" has the meaning set forth in Section 6.2(e).
(s) "Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of October 18, 1999, between the Corporation and Elan
International Services, Ltd.
(t) "Stated Value" has the meaning set forth in Article 1.
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(u) "Trading Day" means any day on which purchases and sales of
securities authorized for quotation on the AMEX are reported thereon or, if the
Common Stock is not listed or admitted to trading on the AMEX, a day on which
the principal national securities exchange on which the Common Stock is listed
or admitted to trading is open for the transaction of business, or, if the
Common Stock is not so listed or admitted to trading on any national securities
exchange, a day on which the Nasdaq National Market (or any successor thereto)
or such other system then in use is open for the transaction of business, or, if
the Common Stock is not quoted by any such organization, any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
ARTICLE 3
RANK
The Series F Preferred Stock shall rank (i) prior to the Common
Stock; (ii) prior to any class or series of capital stock of the Corporation
hereafter created other than Pari Passu Securities (collectively, with the
Common Stock, the "Junior Securities"); (iii) pari passu with the Corporation's
Series C Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock"); (iv) pari passu with the Corporation's Series E Convertible
Non-Exchangeable Preferred Stock (the "Series E Preferred Stock"); (v) pari
passu with the Corporation's Series D Convertible Exchangeable Preferred Stock
(the "Series D Preferred Stock"); and (vi) pari passu with any class or series
of capital stock of the Corporation hereafter created specifically ranking on
parity with the Series F Preferred Stock (collectively, with the Series C
Preferred Stock, the Series E Preferred Stock and the Series D Preferred Stock,
the "Pari Passu Securities").
ARTICLE 4
DIVIDENDS
SECTION 4.1
(a) Subject to Article 6, the Holder shall be entitled to
receive, out of funds legally available for the payment of dividends, dividends
on a pari passu basis with the holders of Common Stock. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend payment
or payments on the Series F Preferred Stock that may be in arrears.
(b) No dividends or distributions may be paid with respect to the
Common Stock, and the Company shall not repurchase, redeem or otherwise acquire
any Common Stock, unless such dividends, distribution or repurchase, redemption
or acquisition payment are paid on a pro rata basis to holders of Series F
Preferred Stock, on an as converted basis, at the same time and upon the same
terms as such payments with respect to the Common Stock.
ARTICLE 5
LIQUIDATION PREFERENCE
SECTION 5.1
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
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involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of ninety (90) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any Junior
Securities of the Corporation upon liquidation, dissolution or winding up unless
prior thereto, the Holders, subject to Article 5, shall have received the
Liquidation Preference (as defined in Article 5.1(b)) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the Holders and holders of shares of Pari Passu
Securities shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series F Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the preferential amounts payable on each such share
bears to the aggregate preferential amounts payable on all such shares.
(b) For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series F Preferred Stock shall mean an amount equal to
the Stated Value thereof plus the aggregate of all accrued and unpaid dividends
on such share of Series F Preferred Stock.
ARTICLE 6
CONVERSION OF SERIES F PREFERRED STOCK
SECTION 6.1 Conversion.
(a) Holders of shares of the Series F Preferred Stock shall have
the right, exercisable at any time after the second anniversary of the Original
Issue Date and prior to the sixth anniversary of the Original Issue Date, to
convert all or any such shares of the Series F Preferred Stock into the number
of shares of Common Stock (calculated as to each conversion to the nearest
1/100th of a share) determined by dividing (1) the aggregate Liquidation
Preference of the shares of Series F Preferred Stock to be converted by (2)
$3.40 (the "Conversion Price").
(b) Any holder of a share or shares of the Series F Preferred
Stock electing to convert such share or shares thereof shall deliver the
certificate or certificates therefor to the principal office of the Corporation
or any transfer agent for the Common Stock, with the form of notice of election
to convert attached as Exhibit A to this Certificate of Designations (the
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"Conversion Notice"), fully completed and duly executed and (if such required by
the Corporation or any conversion agent) accompanied by instruments of transfer
in form satisfactory to the Corporation and to any conversion agent, duly
executed by the registered Holder of his duly authorized attorney. The
conversion right with respect to any such shares shall be deemed to have been
exercised at the date upon which the certificates therefore accompanied by such
duly executed notice of election and instruments of transfer and such taxes,
stamps, funds, or evidence of payment shall have been so delivered, and the
Person or Persons entitled to receive the shares of the Common Stock issuable
upon such conversion shall be treated for all purposes as the record Holder or
Holders of such shares of the Common Stock upon said date.
(c) From and after the delivery of the Conversion Notice in
respect of any conversion of shares of Series F Preferred Stock, all such shares
of Series F Preferred Stock shall be deemed to have been converted into shares
of Common Stock as of the applicable Conversion Date at the applicable
conversion rate, all stock dividends on such shares of the Series F Preferred
Stock shall cease to accrue, and all rights of the Holders thereof as holders of
Series F Preferred Stock, except the right to receive all accrued and unpaid
stock dividends to such Conversion Date at the applicable rate for such shares
of Series F Preferred Stock and the right to receive certificates representing
shares of Common Stock issuable upon the conversion of such shares (including,
without limitation, with respect to such stock dividends, as applicable), shall
cease and terminate, such shares of Series F Preferred Stock shall not
thereafter be transferred (except with the consent of the Corporation) and such
shares shall not be deemed to be outstanding for any purpose whatsoever.
(d) No fractional shares of the Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of the
Series F Preferred Stock. If more than one share of the Series F Preferred Stock
shall be surrendered for conversion at one time by the same holder, the number
of full shares of the Common Stock which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of the
Series F Preferred Stock so surrendered. Instead of any fractional shares of the
Common Stock which would otherwise be issuable upon conversion of any shares of
the Series F Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the Current
Market Price for the Common Stock on the last Trading Day preceding the
applicable date of conversion.
(e) Each Conversion Notice under this Section 6.1 shall request
the conversion of at least 500 shares of Series F Preferred Stock or the
remaining balance of Series F Preferred Stock held by the converting Holder,
whichever is less.
SECTION 6.2 Adjustments. The Conversion Price and the number of shares
issuable upon conversion of the Series F Preferred Stock are subject to
adjustment from time to time as follows:
(a) Merger, Sale of Assets, Etc. Notwithstanding any other
limitation whatsoever contained herein, if at any time while the Series F
Preferred Stock, or any portion thereof, is outstanding there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
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subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Corporation with or into another corporation in which the
Corporation is the surviving entity but the shares of the Corporation's capital
stock outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of the Corporation's properties and
assets as, or substantially as, an entirety to any other Person, then as a part
of such reorganization, merger, consolidation, sale or transfer lawful provision
shall be made so that the Holder shall thereafter be entitled to receive upon
conversion of the Series F Preferred Stock, during the period specified herein,
the number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale or
transfer that the Holder would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if the Series F
Preferred Stock had been converted immediately before such reorganization,
merger, consolidation, sale or transfer, all subject to further adjustment as
provided in this Section 6.2(a). The foregoing provisions of this Section 6.2(a)
shall similarly apply to successive reclassification, changes, consolidations,
mergers, mandatory share exchanges and sales and transfers. If the per share
consideration payable to the holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Board of Directors) shall be made in the application of the provisions of
this Certificate of Designations with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Certificate
of Designations shall be applicable after that event, as near as reasonably may
be, in relation to any shares or other property deliverable after that event
upon conversion of the Series F Preferred Stock.
(b) Reclassification, Etc. If the Corporation, at any time while
the Series F Preferred Stock, or any portion thereof, remains outstanding, shall
change any of the securities as to which conversion rights under this
Certificate of Designations exist into the same or a different number of
securities of any other class or classes, the Series F Preferred Stock shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the conversion rights under this Certificate of
Designations immediately prior to such reclassification or other change and the
Conversion Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Certificate of Designations.
(c) Split, Subdivision or Combination of Shares. If the
Corporation at any time while the Series F Preferred Stock, or any portion
thereof, remains outstanding shall split, subdivide or combine the securities as
to which conversion rights under this Certificate of Designations exist, into a
different number of securities of the same class, the Conversion Price shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock and Other Securities or
Property. If while the Series F Preferred Stock, or any portion hereof, remains
outstanding, the holders of the securities as to which conversion rights under
this Certificate of Designations exist at the time shall have received, or, on
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or after the record date fixed for the determination of eligible stockholders of
the Corporation, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities or property (other than
cash) of the Corporation by way of dividend, then and in each case, the Series F
Preferred Stock shall represent the right to acquire, upon conversion, in
addition to the number of shares of the security receivable upon conversion of
the Series F Preferred Stock, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Corporation that the Holder
would hold on the date of such conversion had it been the holder of record of
the security receivable upon conversion of the Series F Preferred Stock on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and/or additional
stock available by it as aforesaid during such period, giving effect to all
adjustments called for during such period by the provisions of this Section 6.2.
(e) Repurchases or Redemptions of Common Stock or Options. If the
Corporation at any time while shares of Series F Preferred Stock are
outstanding, shall repurchase or redeem any outstanding shares of Common Stock
or rights, options or warrants granting the holder thereof the right to acquire
shares of Common Stock (collectively, the "Rights") in a single transaction or a
series of related transactions involving an aggregate repurchase or redemption
price in excess of $500,000 at a price (on a per share basis) which is greater
than 150% of the Current Market Price as of the day prior to such repurchase or
redemption, the Conversion Price shall thereupon be adjusted by multiplying the
Conversion Price in effect immediately prior to the applicable repurchase or
redemption by a fraction (i) the numerator of which shall be the Conversion
Price in effect immediately prior to such repurchase or redemption and (ii) the
denominator of which shall be the fair market value of the consideration paid by
the Corporation for each share of Common Stock (or each share of Common Stock
issuable upon exercise of the Right(s) subject to such repurchase or redemption)
in such repurchase or redemption.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 6.2, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
(g) Cumulative Adjustments. No adjustment in the Conversion Price
shall be required until cumulative adjustments result in a concomitant change of
1% or more of the Conversion Price as in effect prior to the last adjustment of
the Conversion Price; provided, however, that any adjustments which by reason of
this Section 6.2 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
6.2 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. No adjustment to the Conversion Price shall be made
for cash dividends.
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ARTICLE 7
VOTING RIGHTS
The holders of the Series F Preferred Stock shall have no voting
rights, except as otherwise provided by the General Corporation Law of the State
of Delaware ("DGCL") and in this Article 7, and in Article 8 below.
The Corporation shall provide each Holder of Series F Preferred Stock
with prior notification of any meeting of the shareholders of the Corporation
(and copies of proxy materials and other information sent to shareholders). In
the event of any taking by the Corporation of a record of its shareholders for
the purpose of determining shareholders who are entitled to receive payment of
any dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such action is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the Holders of the
Series F Preferred Stock, voting separately as a class or series as applicable,
is required to authorize a given action of the Corporation, the affirmative vote
or consent of the Holders of at least a majority of the shares of the Series F
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series F Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL Holders
of the Series F Preferred Stock are entitled to vote on a matter with Holders of
Common Stock, voting together as one class, each share of Series F Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which such shares are convertible as of the record date for
the taking of such vote of shareholders. Holders of the Series F Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled as of right under the DGCL, which notice
would be provided pursuant to the Corporation's bylaws and the DGCL.
ARTICLE 8
PROTECTIVE PROVISIONS
So long as shares of Series F Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the Holders of at least a majority of the
then outstanding shares of Series F Preferred Stock:
(a) create any new class or series of capital stock having a
preference superior to the Series F Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up of the Corporation ("Senior
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Securities") or alter or change the rights, preferences or privileges of any
Senior Securities so as to affect adversely the Series F Preferred Stock; or
(b) amend or alter whether by merger, consolidation or otherwise,
any of the provisions of the Certificate of Incorporation (including this
Certificate of Designations) that would change the preferences, rights or
privileges with respect to the Series F Preferred Stock so as to affect the
Series F Preferred Stock adversely.
In the event holders of at least a majority of the then outstanding
shares of Series F Preferred Stock agree to allow the Corporation to amend or
alter the preferences, rights or privileges of the shares of Series F Preferred
Stock, pursuant to subsection (b) above, so as to affect adversely the Series F
Preferred Stock, then the Corporation will deliver notice of such approved
change to the Holders of the Series F Preferred Stock that did not agree to such
amendment or change (the "Dissenting Holders") and the Dissenting Holders shall
have the right for a period of thirty (30) days to convert pursuant to Section
6.1 of this Certificate of Designations as they exist prior to such alteration
or continue to hold their shares of Series F Preferred Stock. The Holders'
rights under this Article 8 shall terminate on the sixth anniversary of the
Original Issue Date.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Loss, Theft, Destruction of Series F Preferred Stock. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction or mutilation of shares of Series F Preferred Stock and, in the case
of any such loss, theft or destruction, upon receipt of indemnity or security
reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series F Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series F Preferred Stock, new shares of Series
F Preferred Stock of like date and tenor.
SECTION 9.2 Who Deemed Absolute Owner. The Corporation may deem the
Person in whose name the Series F Preferred Stock shall be registered upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series F Preferred Stock for the purpose of receiving payment of
dividends on the Series F Preferred Stock, for the conversion of the Series F
Preferred Stock and for all other purposes, and the Corporation shall not be
affected by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Series F Preferred Stock to the extent of the sum or sums so paid or the
conversion so made.
SECTION 9.3 Register. The Corporation shall keep at its principal
office a register in which the Corporation shall provide for the registration of
the Series F Preferred Stock. Upon any transfer of the Series F Preferred Stock
in accordance with the provisions hereof, the Corporation shall register such
transfer on the Series F Preferred Stock register.
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SECTION 6.4 Withholding. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
F Preferred Stock.
SECTION 6.5 Headings. The headings of the Articles and Sections of this
Certificate of Designations are inserted for convenience only and do not
constitute a part of this Certificate of Designations.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations,
Preferences and Rights to be signed by Loren G. Peterson, its President and
Chief Executive Officer, and attested by Scott A. Hoffmann, its Secretary, on
this 18th day of October, 1999.
SHEFFIELD PHARMACEUTICALS, INC.
By:/s/ Loren G. Peterson
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Loren G. Peterson
President and Chief Executive Officer
Attested:
By: /s/ Scott A. Hoffman
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Scott A. Hoffmann
Secretary
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Exhibit C
FORM OF CONVERSION NOTICE
TO: Sheffield Pharmaceuticals, Inc.
Attention: Chief Financial Officer
The undersigned owner of shares of Series F Convertible
Non-Exchangeable Preferred Stock, par value $.01 per share (the "Series F
Preferred Stock") issued by Sheffield Pharmaceuticals, Inc. (the "Corporation")
hereby irrevocably exercises its option to convert __________ shares of the
Series F Preferred Stock into shares of the common stock, $.01 par value, of the
Corporation ("Common Stock"), in accordance with the terms of the Certificate of
Designations of the Series F Preferred Stock. The undersigned hereby instructs
the Corporation to convert the number of shares of the Series F Preferred Stock
specified above into shares of Common Stock in accordance with the provisions of
Article 6 of such Certificate of Designations. The undersigned directs that the
Common Stock issuable and certificates therefor deliverable upon conversion, the
Series F Preferred Stock recertificated, if any, not being surrendered for
conversion hereby, together with any check in payment for fractional Common
Stock, be issued in the name of and delivered to the undersigned unless a
different name has been indicated below. All capitalized terms used and not
defined herein have the respective meanings assigned to them in such Certificate
of Designations.
Dated: _________________
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by:_____________________________
Name:
Title:
Fill in for registration of Series F Preferred Stock:
Please print name and address
(including zip code number) :
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of October 18, 1999 between Elan
International Services, Ltd., a Bermuda exempted limited liability company
incorporated under the laws of Bermuda ("EIS"), and Sheffield Pharmaceuticals,
Inc., a Delaware corporation (the "Company").
R E C I T A L S:
A. The Company desires to issue and sell to EIS, and EIS
desires to purchase from the Company, for aggregate consideration of $12,015,000
(the "Original Series D Issue Price"), 12,015 shares of a newly-created series
of cumulative convertible exchangeable preferred stock, par value $0.01 per
share, of the Company (the "Series D Preferred Stock"), which shall be issued to
EIS pursuant to a Certificate of Designations in the form attached hereto as
Exhibit A (the "Series D Certificate of Designations"), at a per share purchase
price of $1,000.
B. The Company desires to issue and sell to EIS, and EIS
desires to purchase from the Company, for aggregate consideration that shall not
exceed $4,005,000 (the "Original Series E Issue Price"), up to 4,005 shares of a
newly-created series of cumulative convertible non-exchangeable preferred stock,
par value $0.01 per share, of the Company (the "Series E Preferred Stock"),
which, if issued, shall be issued to EIS pursuant to a Certificate of
Designations in the form attached hereto as Exhibit B (the "Series E Certificate
of Designations"), at a per share purchase price of $1,000.
C. The Company desires to issue and sell to EIS, and EIS
desires to purchase from the Company, for aggregate consideration of $5,000,000
(the "Original Series F Issue Price"), (i) 5,000 shares of a newly-created
series of the Company's convertible, non-exchangeable preferred stock, par value
$0.01 per share, of the Company (the "Series F Preferred Stock"), which shall be
issued to EIS pursuant to a Certificate of Designations in the form attached
hereto as Exhibit C (the "Series F Certificate of Designations", and together
with the Series D Certificate of Designations and the Series E Certificate of
Designations, the "Certificates of Designations") and (ii) a warrant to acquire
150,000 shares (subject to adjustment) of the common stock, par value $0.01 per
share, of the Company (the "Sheffield Common Stock"), at an exercise price of
$6.00 per share, pursuant to a warrant certificate in the form attached hereto
as Exhibit D (the "Warrant", and together with the Series D Preferred Stock, the
Series E Preferred Stock and the Series F Preferred, collectively, the
"Securities").
D. The Company has previously caused to be formed Sheffield
Newco, Ltd., a Bermuda exempted limited liability company incorporated under the
laws of Bermuda ("Newco"). The Company will acquire from Newco, for an aggregate
purchase price of $12,015,000, (i) 12,000 shares of Newco's voting common stock
(the "Newco Common Stock"), representing 100% of the outstanding shares of such
class of stock, and (ii) 7,224 shares of Newco's non-voting, convertible
preferred stock (the "Newco Preferred Stock"), representing, on a fully diluted
basis, 30.1% of the outstanding shares of such class of stock. EIS will acquire
from Newco, for an aggregate purchase price of $2,985,000, 4,776 shares of Newco
Preferred Stock, representing, on a fully diluted basis, 19.9% of the
outstanding shares of such class of stock. Newco has entered into license
arrangements (the "License Arrangements") with Elan Pharma International
Limited, an Irish private company ("EPIL"), and with the Company for the purpose
of developing and commercializing certain medical products as set forth in the
documents that evidence the License Arrangements.
<PAGE>
E. The parties intend, as provided herein, that all of the
proceeds from the sale of (i) the Series D Preferred Stock shall be applied by
the Company solely to fund the Company's initial investment in Newco and (ii)
the Series E Preferred Stock shall be applied by the Company solely to fund the
Company's subsequent development funding obligations in connection with Newco,
in each case, as provided herein and as set forth in the Subscription, Joint
Development and Operating Agreement, dated as of the date hereof, by and between
Newco, Elan Pharma International Limited, EIS and the Company (the "Development
Agreement").
F. The Company and EIS are executing and delivering on the
date hereof a Registration Rights Agreement (the "Sheffield Registration Rights
Agreements") in respect of the purchase of the Series D Preferred Stock, Series
E Preferred Stock, Series F Preferred Stock and the Sheffield Common Stock
underlying the Securities and any other shares of Sheffield capital stock
(including shares of preferred stock issued as dividends upon the Series D
Preferred Stock or Series E Preferred Stock) that may, at any time, be acquired
or owned by EIS or its affiliates.
G. The Company, EIS and Newco are executing and delivering on
the date hereof a Registration Rights Agreement (the "Newco Registration Rights
Agreements"), in respect of the purchase of Newco Common Stock and Newco
Preferred Stock by the Company and EIS. This Agreement, the Securities, the
Certificates of Designations, the Development Agreement, the Sheffield
Registration Rights Agreements, the Newco Registration Rights Agreements, the
Dividend Notes (as defined below) and each other document, promissory notes or
instrument executed and delivered, or to be executed and delivered as
contemplated hereby or thereby, in connection with the transactions contemplated
hereby, (the "Transaction Documents").
A G R E E M E N T:
The parties agree as follows:
SECTION 1. Closings. (a) Time and Place. The closing of the
transactions contemplated hereby (the "Closing") shall occur on the date hereof
(the "Closing Date") at such place as the parties may agree.
(b) Issuance of Securities. At the Closing, (x) the Company
shall issue and sell to EIS, and EIS shall purchase from the Company (i) 12,015
shares of Series D Preferred Stock for an aggregate purchase price of
$12,015,000 and (ii) 5,000 shares of Series F Preferred Stock and the Warrant
for an aggregate purchase price of $4,397,500 and the surrender and cancellation
of the Promissory Note, dated September 30, 1999, issued by the Company to EIS
in the principal amount of $600,000.
(c) Delivery. At the Closing, EIS shall pay the purchase price
for the Series D Preferred Stock, the Series F Preferred Stock and the Warrant
by wire transfer to an account or accounts designated by the Company and the
parties hereto shall execute and deliver to each other, as applicable: (i) a
certificate or certificates for the shares of Series D Preferred Stock; (ii) the
Warrant; (iii) a certificate or certificates for the shares of the Series F
Preferred Stock; (iv) certificates as to the incumbency of the officers
executing this Agreement; and (v) each of the other documents or instruments
executed in connection herewith. In addition, at the Closing, the Company shall
cause to be delivered to EIS an opinion of counsel in form and substance
satisfactory to EIS.
(d) Additional Closings - Series E Preferred Stock. EIS shall
be obligated, subject to the conditions set forth in Section 6, during the first
36 months immediately after the Closing Date, to purchase from the Company all
or a portion of 4,005 shares of the Series E Preferred Stock for a purchase
price per share of $1,000, in accordance with Section 6 hereof.
(e) Exemption from Registration. The Securities will be issued
under an exemption or exemptions from registration under the Securities Act of
1933, as amended (the "Securities Act"); accordingly, the certificate or
certificates evidencing the Securities, and any shares of Sheffield Common
Stock, Newco Common
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<PAGE>
Stock or Newco Preferred Stock issuable upon the exercise, exchange or
conversion of any of the Securities shall, upon issuance, contain the following
legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT UNDER ANY
CIRCUMSTANCES BE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE ACT OF AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAWS.
(f) Registration Rights Agreement. On the date hereof, the
Company and EIS shall execute and deliver (i) the Sheffield Registration Rights
Agreement, covering the resale by EIS of the Sheffield Common Stock issuable
upon conversion, exercise or exchange of any of the Securities and (ii) the
Newco Registration Rights Agreement, covering the resale by EIS and the Company
of the Newco Common Stock issuable, directly or indirectly, upon exchange of any
of the Securities.
SECTION 2. Representations and Warranties of the Company. (a)
Organization. The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own and lease its properties, to carry on its business as
presently conducted and as proposed to be conducted and to consummate the
transactions contemplated hereby. As of the date hereof, the Company is
qualified and in good standing to do business in jurisdictions set forth on
Schedule 2(a), which constitute all of the jurisdictions in which the nature of
the business conducted or the property owned by it requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the business, prospects, properties or condition (financial or otherwise) of
the Company (a "Material Adverse Effect").
(b) Capitalization. As of the date hereof, (i) the authorized
capital stock of the Company consists of (A) 60,000,000 shares of Sheffield
Common Stock, par value $0.01 per share and (B) 3,000,000 shares of Preferred
Stock, par value $0.01 per share, (w) 23,000 shares of which have been
designated as Series C Cumulative Preferred Stock, par value $0.01 per share
("Series C Preferred Stock"), (x) 21,000 shares of which have been designated
Series D Preferred Stock, (y) 9,000 shares of which have been designated as
Series E Preferred Stock and (z) 5,000 shares of which have been designated as
Series F Preferred Stock. As of the date hereof, 27,296,346 shares of Sheffield
Common Stock were issued and outstanding; 12,556 shares of Series C Preferred
Stock were issued and outstanding; and no shares of Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock were issued and
outstanding.
(ii) Except as listed in Schedule 2(b), as of the date hereof,
there are no options, warrants or other rights outstanding to purchase or
otherwise acquire, or any securities convertible into, any of the Company's
authorized capital stock. Other than as set forth in this Agreement and as
described in Schedule 2(b), there are no agreements, arrangements or
understandings concerning the voting, acquisition or disposition of any of the
Company's outstanding securities to which the Company is a party or of which it
is otherwise aware entered into since June 30, 1998. Other than as set forth in
Schedule 2(b) or in the Registration Rights Agreements, since June 30, 1998 the
Company has not entered into any agreement to register any of the Company's
outstanding securities under the U.S. federal securities laws relating to
securities that have not already been registered under the Securities Act.
(iii) All of the outstanding shares of capital stock of the
Company have been issued in accordance with applicable state, federal and
foreign laws and regulations governing the sale and purchase of securities, all
of such shares have been duly and validly issued and all such shares are fully
paid and non-assessable, and none of such shares carries preemptive or similar
rights.
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<PAGE>
(c) Authorization of Transaction Documents. The Company has
full corporate power and authority to execute and deliver this Agreement and
each of the other Transaction Documents, and to perform its obligations
hereunder and thereunder. The execution, delivery and performance by the Company
of the Transaction Documents (including the issuance and sale of the Securities)
have been authorized by all requisite corporate actions by the Company; and the
Transaction Documents, including the issuance and sale of the Securities, have
been duly executed and delivered by the Company and are the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
(d) No Violation. The execution, delivery and performance by
the Company of the Transaction Documents (including the issuance and sale of the
Securities and the issuance of all securities issuable upon the conversion,
exchange or exercise of any of the Securities), and compliance with the
provisions thereof, will not (i) violate any provision of applicable law,
statute, rule or regulation applicable to the Company or any ruling, writ,
injunction, order, judgment or decree of any court, arbitrator, administrative
agency or other governmental body applicable to the Company or any of their
respective properties or assets or (ii) conflict with or result in a breach of
any of the terms, conditions or provisions of, or constitute (with notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of, any
Encumbrance (as defined below) upon any of the properties or assets of the
Company under its Certificate of Incorporation, as amended, its Certificates of
Designations (in the various forms to be filed as provided herein) or By-laws,
or any material contract to which the Company is a party, except where such
violation, conflict or breach would not, individually or in the aggregate, have
a Material Adverse Effect. As used herein, "Encumbrance" shall mean any liens,
charges, encumbrances, equities, claims, options, proxies, pledges, security
interests, or other similar rights of any nature, except for such conflicts,
breaches or defaults which would not, individually or in the aggregate, have a
Material Adverse Effect.
(e) Approvals. Except as set forth on Schedule 2(e), no
material permit, authorization, consent or approval of or by, or any
notification of or filing with, any person or entity (governmental or otherwise)
is required in connection with the execution, delivery or performance of the
Transaction Documents, including the issuance and sale of the Securities and the
securities issuable upon the conversion, exchange or exercise of any of the
Securities, by the Company. Except as set forth on Schedule 2(e), there is no
approval of the Company's stockholders required under any applicable statute,
rule or regulation in connection with the execution and delivery the Transaction
Documents or the consummation of the transactions contemplated thereby,
including the filing of the Certificates of Designations, the issuance of the
Securities and the securities issuable upon the conversion, exchange or exercise
of any of the Securities and the listing of the shares of Sheffield Common Stock
issuable upon the conversion, exercise or exchange of any of the Securities on
the American Stock Exchange.
(f) Filings, Taxes and Financial Statements. (i) The Company
has filed its annual report on Form 10-K for the year ended December 31, 1998
(the "Annual Report"), its related proxy materials and the quarterly report on
Form 10-Q for the quarter ended June 30, 1999 (the "Quarterly Report," together
with the Annual Report, including all exhibits and schedules required to be
filed in connection therewith, the "SEC Filings") with the Securities and
Exchange Commission, the American Stock Exchange, Inc., and any other required
person or entity (governmental or otherwise) in a timely manner and as otherwise
required by applicable laws and regulations, including the federal securities
laws. The audited financial statements of the Company for the fiscal year ended
December 31, 1998 included in the Annual Report (the "Audited Financial
Statements"), and the Company's unaudited balance sheet for the period ending
June 30, 1999, together with the accompanying statements of operations and cash
flows including the notes thereto in the Quarterly Report (the "June Financial
Statements"; collectively, with the Audited Financial Statements, the "Financial
Statements") are accurate and complete in all material respects and fairly
present the financial condition of the Company as at the dates thereof and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as may be
otherwise indicated in such financial statements or the notes thereto), subject,
in the case of the June Financial Statements, to normal year-end audit
adjustments (which shall not be material in the aggregate) and the absence of
footnote disclosures.
(ii) The Company has filed in a timely manner all material
federal, state, local and foreign tax returns, reports and filings
(collectively, "Returns"), including income, franchise,
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<PAGE>
property and other taxes, and has paid or accrued the appropriate amounts
reflected on such Returns. None of the Returns have been, or as of the date
hereof and to the knowledge of the Company, are currently being, audited or
challenged, nor has the Company received any notice of challenge nor have any of
the amounts or other data included in the Returns been challenged or reviewed by
any governmental authority.
(iii) Except as disclosed in the SEC Filings or listed in
Schedule 2(f), which sets forth a true and accurate list and description of any
employee benefit plans maintained or sponsored by the Company or to which the
Company is required to make contributions, the Company does not maintain,
sponsor, and is not required to make contributions to or otherwise have any
liability with respect to any pension, profit sharing, thrift or other
retirement plan, employee stock ownership plan, deferred compensation, stock
ownership, stock purchase, performance share, bonus or other incentive plan,
severance plan, health or group insurance plan, welfare plan, or other similar
plan, agreement, policy or understanding (whether written or oral), whether or
not such plan is intended to be qualified under Section 401(a) of the Code,
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, which plan covers any employee or former employee of
the Company.
(g) Absence of Changes. Except as set forth on Schedule 2(g),
since June 30, 1999 there has not been (a) any material adverse change in the
business, properties, condition (financial or otherwise), operations or
prospects of the Company; (b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the business,
properties, condition (financial or otherwise), operations or prospects of the
Company; (c) any declaration, setting aside or payment of any dividend or other
distribution or payment (whether in cash, stock or property) in respect of the
capital stock of the Company (other than in respect of the Company's outstanding
Series C Preferred Stock), or any redemption or other acquisition of such stock
by the Company; (d) any disposal or lapse of any trade secret, invention,
patent, trademark, trademark registration, service mark, service mark
registration, copyright, copyright registration, or any application therefor or
filing in respect thereof that had a Material Adverse Effect; (e) loss of the
services of any of the key officers or key employees of the Company that had a
Material Adverse Effect; (f) other than with EIS, its subsidiaries and
affiliates, any incurrence of or entry into any liability, mortgage, lien,
commitment or transaction, including without limitation, any borrowing (or
assumption or guarantee thereof) or guarantee of a third party's obligations, or
capital expenditure (or lease in the nature of a conditional purchase of capital
equipment) in excess of $100,000; or (g) any material change by the Company in
accounting methods or principles or (h) any change in the assets, liabilities,
condition (financial or otherwise), results or operations or prospects of the
Company from those reflected on the Quarterly Report, except changes in the
ordinary course of business that have not, individually or in the aggregate, had
a Material Adverse Effect.
(h) No Liabilities. Except as set forth in the Quarterly
Report attached hereto, the Company has not incurred or suffered any liability
or obligation, matured or unmatured, contingent or otherwise, except in the
ordinary course of business that have individually or in the aggregate, had a
Material Adverse Effect.
(i) Properties and Assets; Etc. (i) The SEC Filings disclose
all patents and other intellectual property material to the business and
operations of the Company and all applications therefore and licenses,
sublicenses or agreements in respect thereof which the Company owns or has the
right to use or to which the Company is a party (the "Proprietary Rights"). The
Proprietary Rights are adequate for the conduct of the Company's business.
Except as set forth in the SEC Filings, the agreements evidencing the License
Arrangements, the licenses of Proprietary Rights to or from Systemic Pulmonary
Delivery, Ltd. or where the absence of which would not have a Material Adverse
Effect, (A) the Company is the sole and exclusive owner of all rights, title and
interest to all Proprietary Rights free and clear of all liens, claims, charges,
equities, rights of use, encumbrances and restrictions whatsoever, (B) the
Company does not have knowledge of any basis for any claim of infringement or
misappropriation contesting the validity or Company's right to use any
Proprietary Rights; (C) all of such patents, trademark registrations, service
mark registrations, trade name registrations and copyrights and copyright
registrations, whether foreign or domestic, have been duly issued and have not
been canceled, abandoned, or otherwise terminated; and (D) all of the Company's
patent applications, trademark applications, service mark applications, trade
name applications and copyright applications have been duly filed.
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<PAGE>
(ii) Each of the contracts listed as an exhibit to the
Company's SEC Filings is a legal and valid agreement binding upon each of the
parties thereto and is in full force and effect except where the expiration or
termination have not, individually or in the aggregate, had a Material Adverse
Effect. To the best knowledge of the Company, there is no breach or default by
any party thereunder that had a Material Adverse Effect. Such contracts
constitute all material agreements, arrangements or understandings required to
be included as an exhibit in such reports under Item 601 of the Securities and
Exchange Commission Regulations.
(iii) The Company has and maintains adequate and sufficient
insurance, including liability, casualty and products liability insurance,
covering risks associated with its business, properties and assets, including
insurance that is customary for companies similarly situated.
(iv) The Company, its business and properties and assets are
in compliance, in all material respects, with all applicable laws and
regulations, including without limitation, those relating to (a) health, safety
and employee relations, (b) environmental matters, including the discharge of
any hazardous or potentially hazardous materials into the environment, and (c)
the development, commercialization and sale of pharmaceutical and biotechnology
products, including all applicable regulations of the U.S. Food and Drug
Administration and comparable foreign regulatory authorities.
(j) Legal Proceedings, etc. Except as set forth on Schedule
2(j), there is no legal, administrative, arbitration or other action or
proceeding or governmental investigation pending or, to the Company's best
knowledge, threatened against the Company, or any director, officer or employee
of the Company, which is required to be described in the SEC Filings and is not
so described. The Company is not in violation of, or default under, any material
laws, judgments, injunctions, orders or decrees of any court, governmental
department, commission, agency, instrumentality or arbitrator applicable to its
business.
(k) Disclosure. The Company's SEC Filings and periodic reports
subsequently filed under Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the representations and warranties set forth
herein and the Transaction Documents, when viewed collectively, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements contained herein and therein not misleading in
light of circumstances in which they were made.
(l) Brokers or Finders. The Company has not retained any
investment banker, broker or finder in connection with the transactions
contemplated by the Transaction Documents, other than Tucker Anthony Cleary
Gull, the fee of which are payable solely by the Company.
SECTION 3. Representation and Warranties of EIS. EIS hereby
represents and warrants to the Company as follows:
(a) Organization. EIS is a corporation duly organized, validly
existing and in good standing under the laws of Bermuda and has all requisite
corporate power and authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be conducted and to
consummate the transactions contemplated hereby. EIS is qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted or the property owned by it requires such qualification, except where
the failure to so qualify would not reasonably be expected to have a material
adverse effect on the business or condition (financial or otherwise) of EIS.
(b) Authorization of Agreement. EIS has full legal right,
power and authority to enter into this Agreement and perform its obligations
hereunder, which have been duly authorized by all requisite corporate action.
This Agreement and the purchase of the Securities are the valid and binding
obligations of EIS, enforceable against them in accordance with their terms.
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<PAGE>
(c) No Conflicts. The execution, delivery and performance by
EIS of this Agreement, the purchase and acceptance of the Securities and
compliance with provisions hereof by EIS, will not (i) violate any provisions of
applicable law, statute, rule or regulation applicable to EIS or any ruling,
writ, injunction, order, judgment or decree of any court, arbitration,
administrative agency or other governmental body applicable to EIS or any of its
properties or assets or (ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with notice or lapse of time
to both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of EIS under its Certificate of Incorporation or
By-laws or any material contract to which EIS is party, except where such
violation, conflict or breach would not, individually or in the aggregate, have
a material adverse effect on EIS.
(d) Approvals. No permit, authorization, consents or approval
of or by, or any notification of or filing with, any person or entity
(governmental or otherwise) is required in connection with the execution,
delivery or performance of this Agreement (including the funding and acceptance
thereof) by EIS.
(e) Investment Representations. (i) EIS is an "accredited
investor" as defined in Rule 501(a) of Regulation D. EIS is sophisticated in
transactions of this type and capable of evaluating the merits and risks of the
transactions described herein and in the other Transaction Documents, has the
capacity to protect its own interests, has reviewed the SEC Filings, and is
aware of the risk factors relating to an investment in the Company as disclosed
in such filings. EIS has not been formed solely for the purpose of entering into
the transactions described herein and therein and is acquiring the Securities
for investment for its own account, not as a nominee or agent, and not with the
view to distribute or sell any part thereof; provided, that EIS shall be
permitted to convert, exchange or exercise such Securities and/or transfer them
as permitted herein and under applicable law. EIS has been afforded the
opportunity to ask questions of, and receive information about, the Company and
its business and prospects, from management and representatives of the Company,
and has relied on its own independent judgment in making a judgment about an
investment in the Securities.
(ii) Nothing contained in this Section 3(e) shall limit any of
the Company's representations or warranties or limit EIS's recourse in respect
thereof.
(iii) EIS has not retained any investment banker, broker or
finder in connection with the transactions contemplated by the Transaction
Documents.
SECTION 4. Covenants of the Company. (a) Non-disclosure. From
and after the date hereof, neither the Company nor EIS shall disclose to any
person or entity (other than its directors, officers and agents who need to know
such information in connection with the transactions described herein and the
other Transaction Documents, each of whom shall be informed of this
confidentiality provision and in respect of whose breaches the Company shall be
responsible) the content of this Agreement or any of the other Transaction
Documents or the substance of the transactions described herein, without the
prior written consent of the other party (which consent shall not be
unreasonably withheld or delayed), except to the extent required by applicable
laws, regulations or administrative or judicial processes in respect of press
releases, periodic reports or other public disclosure prepared in good faith by
the Company or EIS; provided, that EIS and the Company shall each provide the
other with a reasonable opportunity to review such releases or reports prior to
release. This Section 4(a) shall not be construed to prohibit disclosure of any
information which has not been previously determined to be confidential by EIS
or the Company, or which shall have become publicly disclosed (other than by
breach obligations of the Company or EIS hereunder).
(b) Fully-diluted Stock Ownership. (i) Notwithstanding any
other provision of this Agreement, in the event that EIS shall have determined
that at any time it (together with its affiliates, if applicable) holds or has
the right to receive Sheffield Common Stock (or securities or rights, options or
warrants exercisable, exchangeable or convertible for or into Sheffield Common
Stock) representing in the aggregate in excess of 19.9% of the outstanding
Sheffield Common Stock (assuming any such exercise, exchange or conversion, but
not the exercise, exchange or conversion of any other similar securities) or EIS
has otherwise determined that Elan would be required to equity account for its
investment in Sheffield, EIS shall have the right (but not the obligation), in
its sole discretion, rather than acquiring such securities from the Company, to
exchange such number of securities as are
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necessary so that Elan shall not have to equity account, for non-voting,
convertible, liquidation preferred stock of the Company on terms mutually
acceptable to the Company and EIS such that EIS will not be required to account
for its investments under the equity method. In the event that EIS shall
undertake to exercise such right, EIS shall retain the additional right to
assign all or a portion of such convertible securities (including Sheffield
Common Stock issuable upon conversion thereof) to its affiliates. Each of EIS
and the Company shall use commercially reasonable efforts to effect such
transactions and any required subsequent conversions or adjustments to EIS's
securities position, on a quarterly basis, within 15 business days of the end of
each of EIS's fiscal quarter.
(ii) In the event that, after the first anniversary of the
date hereof, the payment to EIS of any dividend in kind upon the Series D
Preferred Stock or the Series E Preferred Stock would result in EIS's
fully-diluted ownership of Sheffield Common Stock to exceed 49.9%, such excess
dividends (I.E., dividends paid in kind, the payment of which would result in
EIS's fully-diluted ownership of Sheffield Common Stock exceeding 49.9%) shall
be paid to EIS through the issuance by the Company to EIS, in lieu of dividends,
of promissory notes with an aggregate principal amount equal to the amount of
such excess dividend that would otherwise be paid in kind (collectively, the
"Dividend Notes"). The Dividend Notes shall (i) bear interest of 7.0% per annum,
compounded semi-annually, compounding to commence six months after issuance,
which shall be payable through the issuance of additional Notes of like tenor
and (ii) mature and become immediately due and payable in full in cash on the
sixth anniversary of the date thereof.
(c) Certain Preemptive Rights. For a period of four years from
and after the date hereof, EIS shall be entitled to participate in any
convertible or exchangeable debt, equity, warrant or convertible securities
financing (the "Preemptive Right") undertaken by the Company (each, a "Capital
Raising"), in order that EIS may maintain its then current PRO RATA percentage
equity ownership interest (on a fully diluted basis) of the Company.
Notwithstanding the foregoing, the Preemptive Right shall terminate and be of no
further force and effect at such time as equity ownership interest of EIS and
its affiliates in the Company falls below 5%, on a fully-diluted basis. Such
participation by EIS shall be on terms no less attractive to EIS than those
offered to any other potential investor in a Capital Raising financing;
provided, that such Preemptive Right shall not apply to (i) any BONA FIDE
offering to the public pursuant to the Securities Act, or (ii) an offering of
securities solely in connection with (A) an acquisition of assets, merger,
consolidation or similar transaction with an unaffiliated third party, or (B) an
employee stock option plan.
(d) Use of Proceeds. The Company shall use all of the
aggregate proceeds of the sale of the Series D Preferred Stock and the Series E
Preferred Stock solely for the purpose of meeting its capitalization and funding
commitments to Newco.
SECTION 5. Additional Covenants of the Parties. (a) Right of
Conversion. (i) EIS may, pursuant to the Series D Certificate of Designations,
after the second anniversary of the date hereof and prior to the sixth
anniversary of the date hereof, convert the Series D Preferred Stock into
Sheffield Common Stock as set forth in the Series D Certificate of Designations
(the "Series D Conversion Right").
(ii) EIS may, pursuant to the Series E Certificate of
Designations, after the second anniversary of the date hereof and prior to the
sixth anniversary of the date hereof, convert the Series E Preferred Stock into
Sheffield Common Stock as set forth in the Series E Certificate of Designations
(the "Series E Conversion Right", and together with the Series D Conversion
Right, collectively, the "Conversion Rights").
(b) Rights of Exchange. (i) NEWCO EQUITY EXCHANGE RIGHT. (A)
EIS may, at its option and in accordance with the Series D Certificate of
Designations, exchange in whole the originally issued shares of Series D
Preferred Stock, any Series D Preferred Stock issued as a dividend upon
outstanding Series D Preferred Stock, and all outstanding Dividend Notes held by
EIS, its subsidiaries and affiliates, for all shares of Newco Preferred Stock
issued by Newco to the Company pursuant to the Development Agreement, thereby
increasing EIS's fully-diluted ownership of outstanding Newco Common Stock to
[REDACTED], on a fully converted basis, assuming the conversion of such
exchanged shares of Newco Preferred Stock and all shares of Newco Preferred
Stock previously issued to EIS as described in Recital D above (the "Equity
Exchange Right"). After the exercise of the Equity Exchange Right and the
receipt by EIS of Newco Preferred Stock convertible, together with all shares of
Newco Preferred Stock previously issued to EIS, into [REDACTED] of the
outstanding Newco Common Stock, (I) the shares of Series D Preferred
-8-
<PAGE>
Stock exchanged shall be cancelled and no longer entitle the holder thereof to
any rights with respect to the Company, and (II) all Dividend Notes shall be
immediately cancelled.
(B) The Equity Exchange Right shall terminate upon
the earlier of (x) exercise of the Series D Conversion Right by EIS and (y) the
sixth anniversary of the date hereof.
(C) If EIS exercises the Equity Exchange Right, EIS
shall, at its option, either (i) cause to be paid to the Company within thirty
days of the consummation of such equity exchange an amount equal to [REDACTED]
of the aggregate amount provided to Newco (by or on behalf of the Company and
EIS and their respective affiliates and subsidiaries) to fund the agreed upon
initial research and development budget of Newco (the "Development Funding")
from and after the Closing Date and prior to the date of exercise of the Equity
Exchange Right, (ii) surrender to the Company for cancellation shares of the
Series E Preferred Stock with an aggregate liquidation preference equal to
[REDACTED] of the aggregate amount of Development Funding provided to Newco (by
or on behalf of the Company and EIS and their respective affiliates and
subsidiaries) from and after the Closing Date and prior to the date of exercise
of the Equity Exchange Right, or (iii) elect to satisfy such obligation with a
combination of the payment methods set forth in clauses (i) and (ii) above.
(ii) SHEFFIELD DEBT EXCHANGE. All shares of Series D Preferred
Stock (including all shares issued as dividends thereon), all shares of Series E
Preferred (including all shares issued as dividends thereon) and all outstanding
Dividend Notes shall be exchanged by the Company for one or more promissory
notes with an aggregate principal amount equal to the sum of (A) the aggregate
principal amount of all outstanding Dividend Notes and all accrued and unpaid
interest thereon, (B) the aggregate liquidation preference of all shares of
Series D Preferred Stock (including all shares issued as dividends thereon and
all accrued but unpaid dividends thereon) and (C) the aggregate liquidation
preference of all shares of Series E Preferred Stock (including all shares
issued as dividends thereon and all accrued but unpaid dividends thereon) (the
"Debt Exchange"), unless on or before the first anniversary of the Closing Date,
the Company has provided to EIS (and any permitted transferee of EIS) written
evidence that (I) the issuance of the Series D Preferred Stock and the Series E
Preferred Stock and the issuance and listing upon the American Stock Exchange
("AMEX") of the shares of Sheffield Common Stock to be issued upon the
conversion of the Series D Preferred Stock and the Series E Preferred Stock has
been approved or ratified by the stockholders of the Company in accordance with
the General Corporation Law of the State of Delaware and the rules and
regulations of the AMEX or (II) that such approval or ratification is not
required by the applicable rules of the AMEX. The promissory notes to be issued
upon the consummation of the Debt Exchange shall be in the form attached to the
Series D Certificate of Designations, the Series E Certificate of Designations
and the Dividend Notes.
(c) Further Assurances. From and after the date hereof, each
of the parties hereto agree to do or cause to be done such further acts and
things and deliver or cause to be delivered to each other such additional
assignments, agreements, powers and instruments, as each may reasonably require
or deem advisable, to carry into effect the purposes of this Agreement and the
other Transaction Documents or to better to assure and confirm unto each other
their respective rights, powers and remedies hereunder and thereunder.
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<PAGE>
SECTION 6. Series E Preferred Stock. (a) Issuance. (i) As of
the date hereof and until the date which is the 36 month anniversary of the date
hereof, EIS shall be required, at the Company's option as exercised by written
notice to EIS, to purchase shares of Series E Preferred Stock, to be issued
pursuant to the Series E Certificate of Designations, for aggregate
consideration of up to $4,005,000, at a price per share of $1,000 and
[REDACTED].
(b) Conditions to the Purchase of Series E Preferred Stock. It
shall be a condition to EIS's obligation to purchase the Series E Preferred
Stock that (A) each of the representations and warranties set forth in Section 2
of this Agreement shall be true and correct in all material respects as if the
date hereof were the proposed funding date thereof; provided, that any reference
to the Quarterly Report shall refer to the most recent quarterly report on Form
10-Q and/or any report filed pursuant to Section 13 of the Exchange Act,
required to be filed by the Company under applicable law immediately prior to
such funding date and SEC Filings shall refer to all filings required to be made
by the Company under applicable law on or prior to such date, (B) there shall be
no default or breach in any material respect by the Company or Newco of a
material obligation under any of the Transaction Documents or any other
agreement between the Company or Newco or any of its affiliates, on the one
hand, and EIS or any of their affiliates, on the other hand, and [REDACTED].
SECTION 7. Survival and Indemnification. (a) Survival Period.
The representations and warranties of the Company and EIS contained herein shall
survive for a period of one year from and after the date hereof.
(b) Indemnification. In addition to all rights and remedies
available to the parties hereunder at law or in equity, each party hereto (in
such capacity, an "Indemnifying Party") shall indemnify each other party hereto,
and its respective affiliates, and its respective affiliates' stockholders,
officers, directors, employees, agents, representatives, successors and assigns
(collectively, the "Indemnified Person"), and save and hold each Indemnified
Person harmless from and against and pay on behalf of or reimburse each such
Indemnified Person, as and when incurred, for any and all loss, liability,
demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty,
fine or expense, whether or not arising out of any claims by or on behalf of
such Indemnified Person or any third party, including interest, penalties,
reasonable attorneys' fees and expenses and all amounts paid in investigation,
defense or settlement of any of the foregoing (collectively, "Losses"), that any
such Indemnified Person may suffer, sustain, incur or become subject to, as a
result of, in connection with, relating, or incidental, to or by virtue of:
(i) any misrepresentation or breach of warranty on
the part of the Indemnifying Party under Section 2 or 3 of this Agreement; or
(ii) any nonfulfillment, default or breach of any
covenant or agreement on the part of the Indemnifying Party under Section 4, 5
or 6 of this Agreement.
(c) Maximum Recovery. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Company be liable for
indemnification under this Section 7, the Transaction Documents, or otherwise,
in an amount in excess of [REDACTED] in the aggregate. No Indemnified Party
shall assert any such claim unless Losses in respect thereof incurred by any
Indemnified Party, when aggregated with all previous Losses hereunder, equal or
exceed $50,000; and after the $50,000 threshold is reached, each Indemnified
Person shall be entitled to be indemnified for the amount of all claims arising
hereunder in excess of $50,000.
(d) Exception. Notwithstanding the foregoing, and subject to
the following sentence, upon judicial determination that is final and no longer
appealable that the act or omission giving rise to the indemnification set forth
above resulted primarily out of or was based primarily upon the Indemnified
Person's negligence (unless such Indemnified Person's negligence was based upon
the Indemnified Person's reliance in good faith upon any of the representations,
warranties, covenants or promises made by the Indemnifying Party herein) the
Indemnifying Party shall not be responsible for any Losses sought to be
indemnified in connection therewith, and the Indemnifying Party shall be
entitled to recover from the Indemnified Person all amounts previously paid in
full or partial satisfaction of such indemnity, together with all costs and
expenses (including reasonable attorney's fees)
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<PAGE>
of the Indemnifying Party reasonably incurred in connection with the Indemnified
Party's claim for indemnity, together with interest at the rate per annum
publicly announced by Morgan Guaranty Trust Company as its prime rate from the
time of payment of such amounts to the Indemnified Person until repayment to the
Indemnifying Party.
(e) Investigation. All indemnification rights hereunder shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to the extent provided in Section 7(b) above,
irrespective of any investigation, inquiry or examination made for or on behalf
of the Indemnified Person or the acceptance of any certificate or opinion.
(f) Contribution. If the indemnity provided for in this
Section 7 is in whole or in part unavailable to any Indemnified Person due to
Section 7(b) being declared unenforceable by a court of competent jurisdiction
based upon reasons of public policy, so that Section 7(b) shall be insufficient
to hold each such Indemnified Person harmless from Losses which would otherwise
be indemnified hereunder, then the Indemnifying Party and the Indemnified Person
shall each contribute to the amount paid or payable for such Loss in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnifying Party on the one hand and the Indemnified Person on the
other, but also the relative fault of the Indemnifying Party and be in addition
to any liability that the Indemnifying Party may otherwise have. Subject to
Section 7(g) hereunder, the indemnity, contribution and expense reimbursement
obligations that the Indemnifying Party has under this Section 7 shall survive
the expiration of the Transaction Documents. The parties hereto further agree
that the indemnification and reimbursement commitments set forth in this
Agreement shall apply whether or not the Indemnified Person is a formal party to
any such lawsuit, claims or other proceedings.
(g) Limitation. No claim shall be brought by an Indemnified
Person in respect of any misrepresentation or breach of warranty under this
Agreement after one year from and after the date hereof; and any claim for
nonfulfillment, default or breach of any covenant shall be brought within one
year of the date that such Indemnified Person became aware or should have become
aware of the nonfulfillment, default or breach. Except as set forth in the
previous sentence and in Section 7(c) above, this Section 7 is not intended to
limit the rights or remedies otherwise available to any party hereto with
respect to this Agreement or the other Transaction Documents.
SECTION 8. Notices. 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 or hand
delivered or if sent by an internationally-recognized overnight delivery service
or by registered or certified airmail, return receipt requested and postage
prepaid, addressed as follows:
(i) if to the Company:
Sheffield Pharmaceuticals, Inc.
South Winton Court
3136 Winton Road South
Suite 306
Rochester, NY 14623
Attention: Chairman
and
Sheffield Pharmaceuticals, Inc.
425 South Woodsmill Road
St. Louis, Missouri 63017-3441
Attention: Chief Executive Officer
with a copy to:
Olshan Grundman Frome, Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attention: Daniel J. Gallagher
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<PAGE>
(ii) if to EIS:
Elan International Services, Ltd.
Flatts, Smiths Parish
Bermuda, FL04
Attention: Director
with a copy to:
Brock Silverstein LLC
800 Third Avenue, 21st Floor
New York, New York 10022
Attention: Scott Rosenblatt
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 8. Any such notice or communication shall be deemed to have been
received (i) in the case of personal or hand delivery, on the date of such
delivery, (ii) in the case of an internationally-recognized overnight delivery
service, on the second business day after the date when sent and (iii) in the
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
SECTION 9. Entire Agreement. This Agreement and the other
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto.
SECTION 10. Amendments. This Agreement may not be modified or
amended, or any of the provisions hereof waived, except by written agreement of
the Company and EIS.
SECTION 11. Counterparts and Facsimile. The Transaction
Documents 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. Each of the Transaction
Documents may be signed and delivered to the other party by facsimile
transmission.
SECTION 12. Headings. 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.
SECTION 13. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws. Each of the parties hereby
irrevocably submits to the jurisdiction of any New York State or United States
Federal court sitting in the county, city and state of New York over any action
or proceeding arising out of or relating to this Agreement or the other
Transaction Documents; and each hereby waives the defense of an inconvenient
forum for the maintenance of such an action.
SECTION 14. Expenses. Each of the parties hereto shall be
responsible for its own costs and expenses incurred in connection with the
transactions contemplated hereby and by the other Transaction Documents.
SECTION 15. Public Releases; Etc. The parties shall reasonably
agree upon the contents of any press release or releases and other public
disclosure in respect of the transactions contemplated hereby, and except as may
otherwise be required by applicable law or judicial or administrative process or
which the Company concludes in good faith is required by applicable securities
laws and regulations.
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<PAGE>
SECTION 16. Schedules, etc. All statements contained in any
exhibit or schedule delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, are an integral part of
this Agreement and shall be deemed representations and warranties hereunder.
SECTION 17. Assignments. 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, subject to
compliance with the representations and warranties contained in Section 3(e) of
this Agreement. This Agreement, the Transaction Documents, and the Securities
may be assigned by EIS to its affiliates and subsidiaries.
SECTION 18. Currency. All references to "$" or dollars herein
shall mean United States dollars.
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Securities Purchase Agreement as of the date first written above.
SHEFFIELD PHARMACEUTICALS, INC.
By: /s/ Loren G. Peterson
-------------------------
Name:
Title:
ELAN INTERNATIONAL SERVICES, LTD.
By:/s/ Kevin Insley
---------------------------
Name:
Title:
SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT
ELAN PHARMA INTERNATIONAL LIMITED
ELAN INTERNATIONAL SERVICES, LTD.
AND
SHEFFIELD PHARMACEUTICALS, INC.
AND
SHEFFIELD NEWCO, LTD.
<PAGE>
INDEX
CLAUSE 1 DEFINITIONS
CLAUSE 2 NEWCO'S BUSINESS
CLAUSE 3 REPRESENTATIONS AND WARRANTIES
CLAUSE 4 AUTHORIZATION AND CLOSING
CLAUSE 5 DIRECTORS; MANAGEMENT AND R&D COMMITTEES
CLAUSE 6 THE BUSINESS PLAN AND REVIEWS
CLAUSE 7 RESEARCH AND DEVELOPMENT
CLAUSE 8 COMMERCIALIZATION
CLAUSE 9 SUBLICENSE AND ASSIGNMENT RIGHTS
CLAUSE 10 OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS/NONCOMPETITION
CLAUSE 11 INTELLECTUAL PROPERTY RIGHTS
CLAUSE 12 CROSS LICENSING/EXPLOITATION OF PRODUCTS OUTSIDE FIELD
CLAUSE 13 REGULATORY
CLAUSE 14 MANUFACTURING
CLAUSE 15 TECHNICAL SERVICES AND ASSISTANCE
CLAUSE 16 AUDITORS, BANKERS, REGISTERED OFFICE,
ACCOUNTING REFERENCE DATE; SECRETARY; COUNSEL
CLAUSE 17 TRANSFER OF SHARES; RIGHTS OF FIRST OFFER; TAG ALONG RIGHTS
CLAUSE 18 MATTERS REQUIRING PARTICIPANTS' APPROVAL
<PAGE>
CLAUSE 19 DISPUTES
CLAUSE 20 TERMINATION
CLAUSE 21 SHARE RIGHTS
CLAUSE 22 CONFIDENTIALITY
CLAUSE 23 COSTS
CLAUSE 24 GENERAL
iii
<PAGE>
THIS SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT made this 18th day
of October, 1999
BETWEEN:
(1) ELAN PHARMA INTERNATIONAL LIMITED, a public limited company
incorporated under the laws of Ireland, and having its registered
office at WIL House, Shannon Business Park, Shannon, County Clare,
Ireland ("EPIL")
(2) ELAN INTERNATIONAL SERVICES, LTD., a private limited company
incorporated under the laws of Bermuda, and having its registered
office at Clarendon House, 2 Church St., Hamilton, Bermuda ("EIS");
(3) SHEFFIELD PHARMACEUTICALS, INC. a corporation duly incorporated and
validly existing under the laws of Delaware and having its principal
place of business at 425 South Woodsmill Road, Suite 270, St. Louis, MO
63017, United States of America; and
(4) SHEFFIELD NEWCO, LTD., a private limited company incorporated under the
laws of Bermuda, and having its registered office at Clarendon House, 2
Church St., Hamilton, Bermuda ("Newco").
RECITALS:
A. Newco desires to issue and sell to the Stockholders (as defined below),
and the Stockholders desire to purchase from Newco, for aggregate
consideration of $7,500,000 apportioned between them as set forth
herein, 12,000 ordinary shares of Newco's common stock, par value $1.00
per share (the "Common Stock"), allocated to Sheffield. Additionally,
Newco desires to issue and sell to the Stockholders, and the
Stockholders desire to purchase from Newco, for aggregate consideration
of $7,500,000, apportioned between them as set forth herein, 12,000
shares of Newco's preferred stock, par value $1.00 per share (the
"Preferred Stock"), allocated 7,224 shares to Sheffield for aggregate
consideration of $4,515,000 and 4,776 shares to EIS for aggregate
consideration of $2,985,000.
B. As of the date hereof, EPIL has entered into a license agreement with
Newco, and Sheffield has entered into a license agreement with Newco,
in connection with the license to Newco of the Elan Intellectual
Property and the Sheffield Intellectual Property, respectively (each as
defined below).
C. Elan and Sheffield have agreed to co-operate in the research,
development and commercialization of the Products (as defined below)
based on their respective technologies.
<PAGE>
D. Elan and Sheffield have agreed to enter into this Agreement for the
purpose of recording the terms and conditions regulating their
relationship with each other, with respect to the Licensed Technologies
and with Newco.
NOW IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1
DEFINITIONS
1.1 In this Agreement, the following terms shall, where not inconsistent
with the context, have the following meanings respectively.
"Affiliate" shall mean any corporation or entity controlling,
controlled or under the common control of Elan or Sheffield, as the
case may be. For the purpose of this definition, "control" shall mean
direct or indirect ownership of fifty percent (50%) or more of the
stock or shares entitled to vote for the election of directors. Newco
is not an Affiliate of Elan or EIS.
"Agreement" shall mean this agreement (which expression shall be deemed
to include the Recitals and the Schedules hereto).
"Board" shall mean the board of directors of Newco.
"Business" shall mean the business specified in the Business Plan.
"Business Plan" shall mean the business plan and program of development
to be agreed by Elan and Sheffield pursuant to Clause 6 that shall
contain, among other things, to the extent practicable, the research
and development objectives, desired Product specifications, clinical
indications, preliminary clinical trial designs (Phase I/II),
development timelines, budgeted costs and the relative responsibilities
of Sheffield and Elan as it relates to the implementation of the R&D
Plan.
"Certificate of Designations" shall mean that certain certificate of
designations, preferences and rights of the Series D Preferred Stock
issued on the Closing Date.
"Closing Date" shall mean the date upon which the Transaction Documents
are executed and delivered by the Parties and the transactions effected
thereby are closed.
"Combined Fields" shall mean Field A, Field B and Field C.
"Common Stock Equivalents" shall mean any options, warrants, rights or
any other securities convertible, exercisable or exchangeable, in whole
or in part, for or into Common Stock.
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<PAGE>
"Compounds" shall mean the Field A Compound, the Field B Compound
and/or the Field C Compound.
"Directors" shall mean, at any time, the directors of Newco.
"Dividend Notes" shall mean promissory notes issued by Sheffield to
holders of Series D Preferred Stock as payment for dividends pursuant
to the Certificate of Designations.
"EIS Director" has the meaning set forth in Clause 5.
"Elan" shall mean EPIL and Affiliates and includes EIS and subsidiaries
of Elan Corporation, Plc. within the division of Elan Corporation, Plc.
carrying on business as Elan Pharmaceutical Technologies but shall not
include Affiliates and subsidiaries (present or future) of Elan
Corporation Plc within the division of Elan Corporation, Plc carrying
on business as Elan Pharmaceuticals which incorporates, inter alia,
Targon Corporation, Athena Neurosciences, Inc., Elan Pharmaceuticals,
Inc., Elan Diagnostics, Carnrick Laboratories, and Elan Europe Limited.
"Elan Improvements" shall mean improvements relating to the Elan
Patents and/or the Elan Know-How, developed (i) by Elan whether or not
pursuant to the Project, (ii) by Newco or Sheffield or by a third party
(under contract with Newco) whether or not pursuant to the Project,
and/or (iii) jointly by any combination of Elan, Sheffield or Newco
pursuant to the Project, except as limited by agreements with third
Parties. Subject to third party agreements, Elan Improvements shall
constitute part of Elan Intellectual Property and be included in the
license of the Elan Intellectual Property pursuant to Clause 2.1 of the
Elan License Agreement solely for the purposes set forth therein. If
the inclusion of an Elan Improvement in the license of Elan
Intellectual Property is restricted or limited by a third party
agreement, Elan shall use reasonable commercial efforts to minimize any
such restriction or limitation.
"Elan Intellectual Property" shall mean the Elan Know-How, the Elan
Patents and the Elan Improvements. For the avoidance of doubt, Elan
Intellectual Property shall exclude (i) Elan's patent rights and
know-how relating to protein or peptide agents or peptodomimetics,
derivatives or analogs thereof, designed to target a pharmaceutically
active agent to a certain site or sites in the body (targeting
technology) and (ii) inventions, patents and know-how owned, licensed
or controlled by Axogen Limited and Neuralab Limited, and by all
Affiliates and subsidiaries (present or future) of Elan Corporation,
Plc. carrying on business as Elan Pharmaceuticals which incorporates,
inter alia, Targon Corporation, Athena Neurosciences, Inc., Elan
Pharmaceuticals, Inc., Elan Diagnostics, Carnrick Laboratories, and
Elan Europe Limited.
"Elan Know-How" shall mean any and all rights owned, licensed or
controlled by Elan to any discovery, invention (whether patentable or
not), know-how, substances, data, techniques, processes, systems,
formulations and designs relating to Nanocrystal(TM) Technology.
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<PAGE>
"Elan License Agreement" shall mean the license agreement between Elan
and Newco, of even date herewith, attached hereto in Schedule 1.
"Elan Patents" shall mean any and all rights under any and all patents
applications and/or patents, now existing, currently pending or
hereafter filed or obtained by Elan relating to Nanocrystal(TM)
Technology as set forth in Schedule 1 of the Elan License Agreement,
and any foreign counterparts thereof and all divisionals,
continuations, continuations-in-part, any foreign counterparts thereof
and all patents issuing on, any of the foregoing, together with all
registrations, reissues, re-examinations or extensions thereof.
"Encumbrance" shall mean any liens, charges, encumbrances, equities,
claims, options, proxies, pledges, security interests, or other similar
rights of any nature.
"EPIL Patents" shall mean the Elan Patents owned by EPIL.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Note" shall mean promissory notes issued by Sheffield to
holders of the Series D Preferred Stock in exchange for share of Series
D Preferred Stock pursuant to the Certificate of Designations.
"Exchange Right" shall mean the Equity Exchange Right (as such term is
defined in the Certificate of Designations in effect on the date
hereof.)
"Field A" shall mean the topical pulmonary delivery of Formulations of
the Field A Compound by means of the Field A Device.
"Field B" shall mean the topical pulmonary delivery of Formulations of
the Field B Compound by means of the Field B Device.
"Field C" shall mean the topical pulmonary delivery of Formulations of
the Field C Compound by means of the Field C Device.
"Field A Device" shall mean a third party table top unit dose nebulizer
having a reservoir capable of holding a unit dose (a device and a
compressor to nebulize a unit dose shall be deemed a device), which is
a device having any one the following characteristics:
(i) [REDACTED]
(ii) [REDACTED]
(iii) [REDACTED]
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<PAGE>
(iv) [REDACTED]
(v) [REDACTED]
For the avoidance of doubt, Field A Device does not include [REDACTED]
"Field B Device" shall mean the Aerosol Drug Delivery System ("ADDS"),
owned by Systemic Pulmonary Delivery Limited and exclusively licensed
to Sheffield for topical pulmonary applications.
"Field C Device" shall mean the handheld multi-dose nebulizer ("MSI")
which was licensed exclusively by Siemens to Sheffield pursuant to the
Siemens Agreements and which was subsequently sub-licensed by Sheffield
to Zambon (on an exclusive basis for delivery of various medicines for
humans in treating respiratory disease and/or other lung diseases
including, but not limited to, anti-infectives) provided that Newco,
through the Management Committee, is successful in obtaining a
sub-license from Zambon to Newco enabling the development and use of
the Field C Compounds for use with a Field C Device, as described in
more detail in Clause 2.2 of the Elan License.
"Field A Compound" shall mean [REDACTED.]
"Field B Compound" shall mean [REDACTED] for therapeutic use to be
nominated by the Management Committee pursuant to Clause 2.3, and with
reference to Clause 2.3, any Substitute Field B Compound.
"Field C Compound" shall mean [REDACTED] and with reference to Clause
2.4, any Substitute Field C Compound and/or any Additional Field C
Compound".
"Field A Products" shall mean Formulations of the Field A Compound
delivered by means of any Field A Device in Field A.
"Field B Products" shall mean Formulations of the Field B Compound
delivered by means of the Field B Device in Field B.
"Field C Products" shall mean Formulations of the Field C Compound
delivered by means of the Field C Device in Field C.
"Financial Year" shall mean each year commencing on January 1 (or in
the case of the first Financial Year, the date hereof) and expiring on
December 31 of each year.
"Formulations" shall mean Nanocrystal(TM) Technology formulations of
Compounds for use in Field A, Field B or Field C, as applicable.
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<PAGE>
"Fully Diluted Common Stock" shall mean all of the issued and
outstanding Common Stock, assuming the conversion, exercise or exchange
of all outstanding Common Stock Equivalents.
"Funding Agreement" shall mean the Funding Agreement, dated as of the
date hereof, between EIS and Sheffield.
"License Agreements" shall mean the Elan License Agreement and the
Sheffield License Agreement.
"Licensed Technologies" shall mean, collectively, the Elan Intellectual
Property and the Sheffield Intellectual Property.
"Nanocrystal(TM) Technology" shall mean the Elan proprietary technology
directed to nanoparticulate formulations of compounds used in the
manufacturing and/or formulation process, and methods of making the
same.
"Newco By-Laws" shall mean the By-Laws of Newco.
"Newco Intellectual Property" shall mean all rights to patents,
know-how and other intellectual property arising out of the conduct of
the Project by any person, including any technology acquired by Newco
from a third party, that does not constitute Elan Intellectual Property
or Sheffield Intellectual Property.
"Newco Patents" shall mean any and all patents now existing, currently
pending or hereafter filed or obtained relating to the Newco
Intellectual Property, and any foreign counterparts thereof and all
divisionals, continuations, continuations-in-part, any foreign
counterparts thereof and all patents issuing on, any of the foregoing,
together with all registrations, reissues, re-examinations or
extensions thereof.
"Participant" shall mean Sheffield or Elan, as the case may be, and
"Participants" shall mean both Sheffield and Elan together as the
context requires.
"Party" shall mean Elan, Sheffield, or Newco, as the case may be, and
"Parties" shall mean all three together.
"Permitted Transferee" shall mean any Affiliate or subsidiary of Elan,
EIS or Sheffield, to whom this Agreement may be assigned, in whole or
in part, pursuant to the terms hereof or in the case of Elan/EIS, a
special purpose financing entity created by Elan or EIS provided such
are not competitors of Sheffield.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental entity or
authority or other entity of whatever nature.
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<PAGE>
"Products" shall mean the Field A Products, the Field B Products and/or
the Field C Products.
"Project" shall mean all activities as undertaken by or on behalf of
Newco in order to develop the Products.
"Registration Rights Agreements" shall mean the Registration Rights
Agreements of even date herewith relating to the common shares and the
common stock of Newco and Sheffield, respectively.
"Regulatory Application" shall mean any regulatory application or any
other application for marketing approval for a Product, which Newco
will file in any country of the Territory, including any supplements or
amendments thereto.
"Regulatory Approval" shall mean the final approval to market a Product
in any country of the Territory, and any other approval which is
required to launch the Product in the normal course of business.
"Research and Development Term" shall refer to the period of time from
the date hereof until the third anniversary of the date hereof.
"RHA" shall mean any relevant government health authority (or successor
agency thereof) in any country of the Territory whose approval is
necessary to market a Product in the relevant country of the Territory.
"R&D Program" shall mean any research and development program commenced
by Newco pursuant to the Project.
"R&D Plan" shall mean the program of work, including the budget, agreed
by the Management Committee as part of the Business Plan that relates
to the formulation, biopharmaceutical and clinical development of the
Products and such further research and development work as may be
agreed by the Management Committee from time to time.
"Securities Act" shall mean the United States Securities Act of 1933,
as amended.
"Series D Preferred Stock" shall mean the Series D Cumulative
Convertible Exchangeable Preferred Stock, par value $.01 per share, of
Sheffield.
"Shares" shall mean the shares of Common Stock and the shares of
Preferred Stock issued or issuable (directly or upon conversion) to the
Participants pursuant to this Agreement or the Newco Bye-Laws.
"Sheffield" shall mean Sheffield Pharmaceuticals, Inc and its
Affiliates.
"Sheffield Devices" shall mean the Field B Device and the Field C
Device.
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"Sheffield Directors" has the meaning set forth in Clause 5.
"Sheffield Improvements" shall mean improvements relating to the
Sheffield Patents and/or the Sheffield Know-How, developed (i) by
Sheffield whether or not pursuant to the Project, (ii) by Newco or Elan
or by a third party (under contract with Newco) whether or not pursuant
to the Project, and/or (iii) jointly by any combination of Sheffield,
Elan or Newco pursuant to the Project, except as limited by agreements
with third Parties.
Subject to third party agreements, Sheffield Improvements shall
constitute part of Sheffield Intellectual Property and be included in
the license of the Sheffield Intellectual Property pursuant to Clause
2.1 of the Sheffield License solely for the purposes set forth therein.
If the inclusion of a Sheffield Improvement in the license of Sheffield
Intellectual Property is restricted or limited by a third party
agreement, Sheffield shall use reasonable commercial efforts to
minimize any such restriction or limitation.
"Sheffield Intellectual Property" shall mean the Sheffield Know-How,
the Sheffield Patents and the Sheffield Improvements.
"Sheffield Know-How" shall mean any and all rights owned, licensed or
controlled by Sheffield to any discovery, invention (whether patentable
or not), know-how, substances, data, techniques, processes, systems,
formulations and designs relating exclusively to the Sheffield Devices.
"Sheffield License Agreement" shall mean the license agreement between
Sheffield and Newco, of even date herewith, attached hereto in Schedule
2.
"Sheffield Patents" shall mean any and all rights under any and all
patents applications and/or patents, now existing, currently pending or
hereafter filed or obtained by Sheffield relating to the Sheffield
Devices and all divisionals, continuations, continuations-in-part, any
foreign counterparts thereof and all patents issuing on, any of the
foregoing, together with all registrations, reissues, re-examinations
or extensions thereof.
"Sheffield Securities Purchase Agreement" shall mean that certain
Securities Purchase Agreement, of even date herewith, by and between
Sheffield and EIS.
"Siemens" shall mean Siemens Aktiengesellschaft.
"Siemens Agreements" shall mean the License Agreement (as amended)
dated 21 March 1997 and the Basic Supply Agreement dated 21 March 1997,
both between Sheffield Medical Technologies Inc. and Siemens
Aktiengesellschaft.
"Stockholder" shall mean any of EIS, Sheffield, any Permitted
Transferee or any other Person who subsequently becomes bound by this
Agreement as a holder of the Shares, and
"Stockholders" shall mean all of the Stockholders together.
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"Subsidiary" shall mean any company that is a subsidiary of Newco
within the meaning of applicable laws.
"Technological Competitor of Elan" shall mean a company, corporation or
person listed in Schedule 3 and successors thereof or any additional
broad-based technological competitor of Elan added to such Schedule 3
from time to time upon mutual agreement of the Parties
"Technological Competitor of Sheffield" shall mean a company,
corporation or person listed in Schedule 4 and successors thereof or
any additional broad-based technological competitor of Sheffield added
to such Schedule 4 from time to time upon mutual agreement of the
Parties.
"Term" shall mean the term of this Agreement.
"Territory" shall mean all of the countries of the world.
"Transaction Documents" shall mean this Agreement, the Funding
Agreement, the Elan License Agreement, the Sheffield License Agreement,
the Sheffield Securities Purchase Agreement, the Exchange Notes, the
Dividend Notes, the Registration Rights Agreements, the Certificate of
Designations and associated documentation of even date herewith, by and
between Sheffield, Elan, EIS and Newco, as applicable.
"United States Dollar" and "US$" and "$" shall mean the lawful currency
of the United States of America.
"Zambon" shall mean Inpharzam International, S.A..
"Zambon Agreement" shall mean the agreement dated June 15, 1998 between
Sheffield and Zambon.
1.2 In addition, the following definitions have the meanings in the Clauses
corresponding thereto, as set forth below.
Definition Clause
"AAA" 20.6
"Buyout Option" 20.4
"Closing" 4.3
"Common Stock" Recital
"Confidential Information" 22.1
"Co-sale Notice" 17.4
"Expert" 19.3
"Management Committee" 5.2.1
"Notice of Exercise" 17.3
"Notice of Intention" 17.3
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"Offered Shares" 17.3
"Offer Price" 17.3
"Preferred Stock" Recital
"Proposing Participant" 20.4
"Proposing Participant Price" 20.6
"Purchase Price" 20.6
"R&D Committee" 5.2.3
"Recipient Participant" 20.4
"Recipient Participant Price" 20.6
"Remaining Stockholders" 17.4
"Relevant Event" 20.2
"Selling Stockholder" 17.3
"Tag-Along Right" 17.4
"Transaction Proposal" 17.3
"Transfer" 17.1
"Transferee Terms" 17.4
"Transferring Stockholder" 17.4
1.3 Words importing the singular shall include the plural and vice versa.
1.4 Unless the context otherwise requires, reference to a recital, article,
paragraph, provision, clause or schedule is to a recital, article,
paragraph, provision, clause or schedule of or to this Agreement.
1.5 Reference to a statute or statutory provision includes a reference to
it as from time to time amended, extended or re-enacted.
1.6 The headings in this Agreement are inserted for convenience only and do
not affect its construction.
1.7 Unless the context or subject otherwise requires, references to words
in one gender include references to the other genders.
1.8 Capitalized terms used but not defined herein shall have the meanings
ascribed in the Transaction Documents, if defined therein.
CLAUSE 2
BUSINESS
2.1 This Agreement shall regulate the business of the development, testing,
registration, manufacture, commercialization and licensing of Products
in the Territory and to achieve the other objectives set out in this
Agreement. The focus of the Business will be to develop the Products in
the Combined Fields (subject to the provisions outlined in Clause 2.3
and Clause 2.4 of this
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Agreement and Clause 1 of the Funding Agreement) using the Elan
Intellectual Property, the Sheffield Intellectual Property and the
Newco Intellectual Property to agreed upon specifications and
timelines.
2.2 The central management and control of Newco shall be exercised in
Bermuda and shall be vested in the Directors and such Persons as they
may delegate the exercise of their powers in accordance with the Newco
By-Laws. The Stockholders shall use their best endeavors to ensure
that to the extent required pursuant to the laws of Bermuda, and to
ensure the sole residence of Newco in Bermuda, all meetings of the
Directors are held in Bermuda or other jurisdictions outside the United
States and generally to ensure that Newco is treated as resident for
taxation purposes in Bermuda.
2.3 Nomination procedures in Field B
The Management Committee shall nominate the Field B Compound as soon as
practicable following the Effective Date provided that the Management
Committee shall in no circumstances be entitled to nominate [REDACTED]
as the Field B Compound without the prior consent in writing of Elan.
Upon nomination of the Field B Compound, the R&D Committee shall carry
out, or have carried out on its behalf by a third party agreed by the
R&D Committee, a feasibility study ("Field B Feasibility Study") to
determine the feasibility of the Field B Compound initially nominated
for an R&D Program in Field B.
Subject to Clause 6.3 and Clause 1 of the Funding Agreement, if the
Management Committee is satisfied with the results of the Field B
Feasibility Study, the Management Committee will consider whether and
when Newco will commence an R&D Program in Field B with such Field B
Compound having regard to the other R&D Programs being undertaken by
Newco and the personnel resources and funding which Newco has allocated
thereto. If the Management Committee determines that such Field B
Compound represents a more valuable opportunity for Newco than Field A,
the
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Management Committee, to the extent necessary, will re-prioritize any
R&D Program(s) already commenced in Field A or proposed to be commenced
by Newco in such Field.
If the Management Committee is not satisfied with the results of the
Field B Feasibility Study, no R&D Program will be commenced by Newco in
respect of such Field B Compound and the Management Committee will
nominate a substitute [REDACTED] for therapeutic use in Field B (the
"Substitute Field B Compound") (provided that the Management Committee
shall in no circumstances be entitled to nominate [REDACTED] as the
Field B Compound without the prior consent in writing of Elan) which
will be subject to a new Field B Feasibility Study and all other
applicable provisions of this Clause 2.3.
Prior to Newco commencing any R&D Program in Field B with the Field B
Compound, or the Substitute Field B Compound, the Parties shall
negotiate in good faith such amendments as are required to the Licenses
and/or the Development Agreement, such as amending the provisions
regulating non-competition.
The Management Committee shall not be entitled to nominate more than
one Substitute Field B Compound hereunder.
With reference to Clause 6.3 and Clause 1 of the Funding Agreement, in
the event that either Elan or Sheffield determines not to fund any
amounts required for an R&D Program in Field B, but the other Party
desires to fund such R&D Program in Field B, the Party desiring to
continue such funding shall be entitled to enter into an agreement with
Newco to obtain the relevant R&D Program in Field B from Newco and to
enter into any necessary license agreements with Newco which will be
negotiated in good faith with Newco and based on the then current fair
market value of such R&D Program in Field B and other customary terms.
2.4 Nomination procedures in Field C
As provided in Clause 2.2 of the Elan License Agreement, on the date
which is [REDACTED] days following the Effective Date, or such extended
date as may be agreed in writing by Elan and Newco, Elan shall, at its
sole discretion, be entitled forthwith to terminate the license to
Newco described in Clause 2.1.3 of the Elan License, upon notice in
writing to Newco, in the event that Newco has not, prior to such date,
executed a written sub-license with Zambon for the development by Newco
of the Field C Formulation in Field C.
Prior to the execution by Newco of the written sub-license with Zambon,
as described herein, within the period specified herein, the Management
Committee will consider whether and when Newco will commence an R&D
Program in Field C having regard to the other R&D Programs being
undertaken by Newco and the personnel resources which Newco has
allocated thereto and the funding available from Zambon for such
proposed R&D Program.
If Newco commences an R&D Program in Field C with the Field C Compound
under this Clause 2.4 and such R&D Program is subsequently terminated
by the Management Committee within one year of commencement because the
Field C Compound cannot be
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formulated in a manner suitable for delivery with the Field C Device,
the Management Committee will consider the nomination of a substitute
[REDACTED] in Field C (the "Substitute Field C Compound").
After a period of 1 year following the later of the commencement date
of the R&D Program commenced by Newco for the Field C Compound or the
Substitute Field C Compound, on a semi-annual basis, the Management
Committee will consider whether it should nominate and consider one
additional [REDACTED] in Field C ("Additional Field C Compound") for an
one additional R&D Program in Field C having regard to the other R&D
Programs being undertaken by Newco and the personnel resources and
funding which Newco has allocated thereto and the funding available
from Zambon for such an additional R&D Program.
Prior to Newco commencing any R&D Program in Field C with a Substitute
Field C Compound or with an Additional Field C Compound, the Parties
shall negotiate in good faith such amendments as are required to the
Licenses and/or the Development Agreement, such as amending the
provisions regulating non-competition and as are required to the
agreement between Newco and Zambon described herein (assuming that such
agreement has been executed in accordance with the provisions hereof).
CLAUSE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Newco: Newco hereby represents and
warrants to each of the Stockholders as follows, as of the date hereof:
3.1.1 Organization: Newco is an exempted company duly organized,
validly existing and in good standing under the laws of
Bermuda, and has all the requisite corporate power and
authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be
conducted.
3.1.2 Capitalization: As of the date hereof, the authorized capital
stock of Newco consists of 12,000 shares of Common Stock and
12,000 shares of Preferred Stock. Prior to the date hereof, no
shares of capital stock of Newco have been issued.
3.1.3 Authorization: The execution, delivery and performance by Newco
of this Agreement, including the issuance of the Shares, have
been duly authorized by all requisite corporate actions; this
Agreement has been duly executed and delivered by Newco and is
the valid and binding obligation of Newco, enforceable against
it in accordance with its terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the enforcement of
creditors' rights generally, and except as enforcement of
rights to indemnity and contribution hereunder may be limited
by United States federal or state securities laws or principles
of public policy. The Shares, when issued as
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contemplated hereby or in the Newco By-Laws, will be validly
issued and outstanding, fully paid and non-assessable and not
subject to preemptive or any other similar rights of the
Stockholders or others.
3.1.4 No Conflicts: The execution, delivery and performance by Newco
of this Agreement, the issuance, sale and delivery of the
Shares, and compliance with the provisions hereof by Newco,
will not:
(i) violate any provision of applicable Bermuda law,
statute, rule or regulation applicable to Newco or
any ruling, writ, injunction, order, judgment or
decree of any court, arbitrator, administrative
agency or other governmental body applicable to Newco
or any of its properties or assets;
(ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute
(with notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation
or acceleration) under its charter or organizational
documents or any material contract to which Newco is
a party, except where such violation, conflict or
breach would not, individually or in the aggregate,
have a material adverse effect on Newco; or
(iii) result in the creation of, any Encumbrance upon any
of the properties or assets of Newco.
3.1.5 Approvals: As of the date hereof, no permit, authorization,
consent or approval of or by, or any notification of or filing
with, any Person is required in connection with the execution,
delivery or performance of this Agreement by Newco. Newco has
full authority to conduct its business as contemplated in the
Business Plan and the Transaction Documents.
3.1.6 Disclosure: This Agreement does not contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements contained herein not
misleading. Newco is not aware of any material contingency,
event or circumstance relating to its business or prospects,
which could have a material adverse effect thereon, in order
for the disclosure herein relating to Newco not to be
misleading in any material respect.
3.1.7 No Business; No Liabilities: Newco has not conducted any
business or incurred any liabilities or obligations prior to
the date hereof, except solely in connection with its
organization and formation.
3.2 Representations and Warranties of the Stockholders: Each of the
Stockholders hereby severally represents and warrants to Newco
as follows as of the date hereof:
3.2.1 Organization: Such Stockholder is a corporation duly
organized and validly existing under the laws of its
jurisdiction of organization and has all the
requisite corporate power and authority to own and
lease its respective properties, to carry on its
respective business as presently conducted and as
proposed to be conducted and to carry out the
transactions contemplated hereby.
3.2.2 Authority: Such Stockholder has full legal right,
power and authority to enter into this Agreement and
to perform its obligations hereunder, which have been
duly authorized by all requisite corporate action.
This Agreement is the valid and binding obligation of
such Stockholder, enforceable against it in
accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application
affecting the enforcement of creditors' rights
generally, and except as enforcement of rights to
indemnity and contribution hereunder may be limited
by United States federal or state securities laws or
principles of public policy.
3.2.3 No Conflicts: The execution, delivery and performance
by such Stockholder of this Agreement, purchase of
the Shares, and compliance with the provisions hereof
by such Stockholder will not:
(i) violate any provision of applicable law,
statute, rule or regulation known by and
applicable to such Stockholder or any ruling,
writ, injunction, order, judgment or decree of
any court, arbitrator, administrative agency
or other governmental body applicable to such
Stockholder or any of its properties or
assets;
(ii) conflict with or result in any breach of any
of the terms, conditions or provisions of, or
constitute (with notice or lapse of time or
both) a default (or give rise to any right of
termination, cancellation or acceleration)
under the charter or organizational documents
of such Stockholder or any material contract
to which such Stockholder is a party, except
where such violation, conflict or breach would
not, individually or in the aggregate, have a
material adverse effect on such Stockholder;
or
(iii) result in the creation of, any Encumbrance
upon any of the properties or assets of such
Stockholder.
3.2.4 Approvals: As of the date hereof, no permit,
authorization, consent or approval of or by, or any
notification of or filing with, any Person is
required in connection with the execution, delivery
or performance of this Agreement by such Stockholder.
3.2.5 Investment Representations: Such Stockholder is
sophisticated in transactions of this type and
capable of evaluating the merits and risks of its
investment in Newco. Such Stockholder has not been
formed solely for the purpose of making this
investment and such Stockholder is acquiring the
Common Stock and/or Preferred Stock for investment
for its own account, not as a nominee or agent, and
not with the view to, or for resale in connection
with, any distribution of any part thereof. Such
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Stockholder understands that the Shares have not been
registered under the Securities Act or applicable
state and foreign securities laws by reason of a
specific exemption from the registration provisions
of the Securities Act and applicable state and
foreign securities laws, the availability of which
depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of
such Stockholders' representations as expressed
herein. Such Stockholder understands that no public
market now exists for any of the Shares and that
there is no assurance that a public market will ever
exist for such Shares.
CLAUSE 4
AUTHORIZATION AND CLOSING
4.1 Newco has authorized the issuance to (i) EIS of 4,776 shares of
Preferred Stock and (ii) Sheffield of 12,000 shares of Common Stock and
7,224 shares of Preferred Stock, issuable as provided in Clause 4.3
hereof.
4.2 Sheffield and EIS hereby subscribe for the number of Shares set forth
in Clause 4.1 and shall pay to the Newco in consideration therefor, by
wire transfer of immediately available funds (to a bank account
established by Newco in connection with Completion) the subscription
amounts each as provided in Clause 4.4.1.
4.3 The closing (the "Closing") shall take place at the offices of Brock
Silverstein LLC at 800 Third Avenue, New York, New York 10022 on the
date hereof or such other places if any, as the Parties may agree and
shall occur contemporaneously with the closing under the Sheffield
Securities Purchase Agreement.
4.4 At the Closing, each of the Stockholders shall take or (to the extent
within its powers) cause to be taken the following steps at directors
and shareholder meetings of the Newco, or such other meetings or
locations, as appropriate:
4.4.1 Newco shall issue and sell to EIS, and EIS shall purchase from
Newco, upon the terms and subject to the conditions set forth
herein, 4,776 shares of Preferred Stock for an aggregate
purchase price of $2,985,000 Newco shall issue and sell to
Sheffield, and Sheffield shall purchase from Newco, upon the
terms and conditions set forth herein, (i) 12,000 shares of
Common Stock for an aggregate purchase price of $7,500,000 and
(ii) 7,224 shares of Preferred Stock for an aggregate purchase
price of $4,515,000;
4.4.2 the Parties shall execute and deliver to each other, as
applicable, certificates in respect of the Common Stock and
Preferred Stock described above and any other certificates,
resolutions or documents which the Parties shall reasonably
require;
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4.4.3. the adoption by the Newco of Newco's By-Laws;
4.4.4. the appointment of Kevin Insley, Loren G. Peterson, and Thomas
M. Fitzgerald as Directors of Newco; and
4.4.5. the resignation of all directors and the secretary of Newco
holding office prior to the execution of this Agreement and
delivery of written confirmation under seal by each Person so
resigning that he has no claim or right of action against
Newco and that Newco is not in any way obligated or indebted
to him.
4.5 Exemption from Registration:
The Shares will be issued under an exemption or exemptions from
registration under the Securities Act. Accordingly, the certificates
evidencing the Shares shall, upon issuance, contain the following
legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
SECURITIES LAWS OF A STATE OR OTHER JURISDICTION AND MAY NOT
UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS, (ii) TO THE EXTENT APPLICABLE,
RULE 144 UNDER THE SECURITIES ACT (OR ANY SIMILAR RULE UNDER
THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES)
OR ANY OTHER AVAILABLE EXCEPTION TO OR EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS, TOGETHER WITH AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR APPLICABLE
STATE SECURITIES LAWS.
4.6. Newco shall use reasonable efforts to file any documents that require
filing with the Registrar of Companies in Bermuda within the prescribed
time limits. EIS and Sheffield shall provide all reasonable
co-operation to Newco in relation to the matters set forth in this
Clause 4.6.
4.7. In the event that EIS exercises the Exchange Right prior to the second
anniversary of the Closing Date and Sheffield is required to transfer
to EIS any shares of Common Stock (in addition to the shares of
Preferred Stock otherwise transferable), Newco shall, immediately upon
such exercise, take all necessary steps to ensure that each share to be
transferred by Sheffield to EIS upon the exercise of the Exchange Right
is a duly and validly issued share
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of Preferred Stock (including the conversion of existing shares of
Common Stock held by Sheffield prior to the exercise of the Exchange
Right for newly created shares of Preferred Stock for purposes of the
exercise of the Exchange Right) and that EIS shall have full legal
right, title and interest in and to such shares of Preferred Stock
thereby exchanged. All shares of Newco capital stock transferred by
Sheffield to EIS upon exercise of the Exchange Right prior to the
second anniversary of the Closing Date shall be (or pursuant to this
clause 4.7, shall be converted from common into) shares of Preferred
Stock.
CLAUSE 5
DIRECTORS; MANAGEMENT AND R&D COMMITTEES
5.1. Directors:
Prior to the exercise of the Exchange Right, the Board shall be
composed of three Directors. Sheffield shall have the right to nominate
two directors of Newco ("Sheffield Directors") and EIS shall have the
right to nominate one Director of Newco ("EIS Director"), which
Director, save as further provided herein, shall only be entitled to
15% of the votes of the Board. To the extent required by applicable
Bermuda law, in the event that the EIS Director is not a resident of
Bermuda, at least one of the Sheffield Directors shall be a resident of
Bermuda. Sheffield may appoint one of the Sheffield Directors to be the
chairman of Newco. In the event that the Exchange Right is exercised by
EIS within 2 years following the Closing Date, the EIS Director shall
only be entitled to 15% of the votes of the Board until the expiry of 2
years from the Closing Date.
In the event that the Exchange Right is exercised by EIS at any time
after two years following the Closing Date or upon the expiry of 2
years following the Closing Date where the Exchange Right has been
exercised by EIS within 2 years following the Closing Date, each of
Sheffield, and EIS shall cause the Board to be reconfigured so that an
equal number of Directors are designated by EIS and Sheffield and that
each of the Directors has equal voting power.
5.1.1 If EIS removes the EIS Director, or Sheffield removes any of
the Sheffield Directors, EIS or Sheffield, as the case may be,
shall indemnify the other Stockholder against any claim by such
removed Director arising from such removal.
5.1.2 The Directors shall meet not less than three times in each
Financial Year and Board meetings shall be held in Bermuda to
the extent required pursuant to the laws of Bermuda or to
ensure the sole residence of Newco in Bermuda.
5.1.3 At any such meeting, the presence of at least one EIS Director
and at least one Sheffield Director shall be required to
constitute a quorum and, subject to Clause 18 hereof, the
affirmative vote of a majority of the Directors present at a
meeting at which such a quorum is present shall constitute an
action of the Directors. In the event of any meeting being
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inquorate, the meeting shall be adjourned for a period of seven
days. A notice shall be sent to the EIS Director(s) and the
Sheffield Directors specifying the date, time and place where
such adjourned meeting is to be held and reconvened.
5.1.4 The chairman of Newco shall hold office until the first meeting
of the Board after the exercise by EIS of the Exchange Right,
provided that the Exchange Right is exercised by EIS at any
time after two years from the date hereof. If the Exchange
Right is exercised by EIS within two years from the date
hereof, the chairman of Newco shall continue to hold office. If
the chairman is unable to attend any meeting of the Board, the
Sheffield Directors shall be entitled to appoint another
Director to act as chairman in his place at the meeting. After
exercise of the Exchange Right by EIS, each of EIS and
Sheffield, beginning with EIS, shall have the right,
exercisable alternatively, of nominating one Director to be
chairman of Newco for a term of one year. If the chairman of
Newco is unable to attend any meeting of the Board held after
the exercise of the Exchange Right by EIS, the Directors shall
be entitled to appoint another Director to act as chairman of
Newco in his place at the meeting.
5.1.5. In case of an equality of votes at a meeting of the Board, the
chairman of Newco shall not be entitled to a second or casting
vote. In the event of continued deadlock, the Board shall
resolve the deadlock pursuant to the provisions set forth in
Clause 19.
5.2 Management and R&D Committees:
5.2.1 The Board shall appoint a management committee (the "Management
Committee") to consist initially of four members, two of whom
shall be nominated by Elan and two of whom shall be nominated
by Sheffield, and each of whom shall be entitled to one vote,
whether or not present at any Management Committee meeting.
Decisions of the Management Committee shall require approval of
at least one Elan nominee on the Management Committee and one
Sheffield nominee on the Management Committee.
5.2.2 Each of Elan and Sheffield shall be entitled to remove any of
their nominees to the Management Committee and appoint a
replacement in place of any nominees so removed. The number of
members of the Management Committee may be altered if agreed to
by a majority of the Directors; provided that, each of Elan and
Sheffield shall be entitled to appoint an equal number of
members to the Management Committee. The Management Committee
shall be responsible for, inter alia, devising, implementing
and reviewing strategy for the Project.
5.2.3 The Management Committee shall appoint a research and
development committee (the "R&D Committee"), which shall
initially be comprised of four members, two of whom shall be
nominated by Elan and two of whom shall be nominated by
Sheffield, and each of whom shall have one vote, whether or not
present at an R&D Committee meeting during which research and
development issues are discussed. Decisions of the R&D
Committee shall require approval of at least one Elan nominee
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on the R&D Committee and one Sheffield nominee on the R&D
Committee.
5.2.4 Each of Elan and Sheffield shall be entitled to remove any of
their nominees to the R&D Committee and appoint a replacement
in place of any nominees so removed. The number of members of
the R&D Committee may be altered if agreed to by a majority of
the Directors provided that each of Elan and Sheffield shall be
entitled to appoint an equal number of members to the R&D
Committee.
5.2.5 The Management Committee shall be responsible for the
preparation of the Business Plan. The Management Committee
shall also be responsible for monitoring and conducting
periodic reviews of Elan Intellectual Property and Sheffield
Intellectual Property.
5.2.6 The R&D Committee shall be responsible for:-
(i) designing that portion of the Business Plan that
relates to the Project for consideration by the
Management Committee;
(ii) establishing a joint Project team consisting of an
equal number of team members from Elan and Sheffield,
including one Project leader from each of Elan and
Sheffield; and
(iii) implementing such portion of the Business Plan that
relates to the Project, as approved by the Management
Committee.
5.2.7 In the event of any dispute amongst the R&D Committee, the R&D
Committee shall refer such dispute to the Management Committee
whose decision on the dispute shall be binding on the R&D
Committee.
If the Management Committee cannot resolve the matter after 15
days or such other period as may be agreed by the Management
Committee, the dispute will be referred to a designated senior
officer of each of Elan and Sheffield, and thereafter, in the
event of continued deadlock, pursuant to the deadlock
provisions to be set forth in Clause 19, involving inter alia,
the referral of the dispute to an expert, whose decision will
be binding on the Participants. This process shall also apply
to any dispute within the Management Committee.
5.2.8 Elan and Sheffield shall permit Newco or its duly authorized
representative on reasonable notice and at any reasonable time
during normal business hours to have access to inspect and
audit the accounts and records of Elan or Sheffield and any
other book, record, voucher, receipt or invoice relating to the
calculation or the cost of the R&D Program and to the accuracy
of the reports which accompanied them. Any such inspection of
Elan's or Sheffield's records, as the case may be, shall be at
the expense of Newco, except that if such inspection reveals an
overpayment in the amount paid to Elan or Sheffield, as the
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case may be, for the R&D Program hereunder in any Financial
Year of 5% or more of the amount due to Elan or Sheffield, as
the case may be, then the expense of such inspection shall be
borne solely by Elan or Sheffield, as the case may be, instead
of by Newco. Any surplus over the sum properly payable by Newco
to Elan or Sheffield, as the case may be, shall be paid
promptly by Elan or Sheffield, as the case may be, to Newco. If
such inspection reveals a deficit in the amount of the sum
properly payable to Elan or Sheffield, as the case may be, by
Newco, Newco shall pay the deficit to Elan or Sheffield, as the
case may be.
CLAUSE 6
THE BUSINESS PLAN AND REVIEWS
6.1 The Directors shall meet together as soon as reasonably practicable
after the Closing Date hereof and shall agree upon and approve the
Business Plan for the current Financial Year within [REDACTED] days of
the Closing Date.
6.2. The Business Plan shall be reviewed and mutually agreed to by the
unanimous approval of the EIS Director and the Sheffield Directors on a
semi-annual basis.
6.3. Neither Participant shall be obliged to provide funding to Newco in the
absence of the semi-annual approval of the Business Plan and a
determination by each Participant, in its sole discretion, that
Subsequent Funding (as such term is defined in the Funding Agreement)
shall be provided for the development of the Products.
6.4. Future Business Plans prepared pursuant to Clause 5 shall be reviewed
and mutually agreed to by the EIS Director and the Sheffield Directors.
CLAUSE 7
RESEARCH AND DEVELOPMENT WORK
7.1 Subject to Clause 6.3, Elan and Sheffield, at Newco's request, may
undertake research and development work related to the development and
commercialization of the Products, at the request of Newco and as
articulated in the Business Plan, in furtherance of the development and
commercialization of the Products and cultivation of patent rights and
know-how related to the Elan Intellectual Property, Sheffield
Intellectual Property and Newco Intellectual Property.
7.2 Elan and Sheffield shall use reasonable efforts in undertaking any such
research and development work undertaken for Newco hereunder to conduct
such research and development work in a professional and timely manner,
in accordance with relevant RHA guidelines and regulations.
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7.3 The cost of such development work shall be Elan's and Sheffield's, as
the case may be, fully-burdened actual costs in respect thereof, plus
[REDACTED] of such costs. Research and development work that is
sub-contracted by Elan or Sheffield to third party providers and/or any
other materials or other services purchased from a third party provider
on Newco's behalf shall be charged by Elan or Sheffield to Newco at the
amount invoiced by the relevant third party provider.
CLAUSE 8
COMMERCIALIZATION
8.1 Newco shall diligently pursue the research, development, prosecution
and commercialization of the Products, as provided in the Business
Plan.
8.2 Subject to Clause 2 of the Sheffield License Agreement, at any time
during the development of the Products, Newco may, subject to the
Licenses and Clause 8.3, license the marketing rights to the Products
to one or more marketing partners, or otherwise commercialize the
Products under an alternative strategy to be agreed upon by Elan and
Sheffield.
8.3 Newco shall be responsible for negotiating with third Parties
commercially reasonable terms (including, inter alia, royalties,
milestones, fees, profit sharing, manufacturing rights, supply terms)
for the rights to be granted, but shall do so under the commercial
strategy agreed with Elan and Sheffield and shall keep Elan and
Sheffield informed throughout the negotiation process.
CLAUSE 9
SUBLICENSE AND ASSIGNMENT RIGHTS
9.1 Newco shall not be permitted to assign, license or sublicense any of
its rights in respect of the Newco Intellectual Property without the
prior written consent of Elan and Sheffield which consent will not be
unreasonably withheld or delayed; provided that:
9.1.1 Elan shall in all cases, in its sole discretion, be entitled
to withhold its consent in the case of a proposed sublicense
to any Technological Competitor of Elan;
9.1.2 Sheffield shall in all cases, in its sole discretion, be
entitled to withhold its consent in the case of a proposed
sublicense to any Technological Competitor of Sheffield
provided that for the avoidance of doubt, this Clause 9.1.2
shall not impact in any way Elan's right to grant sub-licenses
of Newco Intellectual Property pursuant to Clause 12.
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9.2 The Parties acknowledge and agree to be bound by the provisions of
Clause 2.7 of the Elan License Agreement and the provisions of Clause
2.7 of the Sheffield License Agreement which set forth the agreement
between the Parties thereto in relation to sub-licensing of the Elan
Intellectual Property and the Sheffield Intellectual Property
respectively.
CLAUSE 10
OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS/NON-COMPETITION
10.1. The Parties acknowledge and agree to be bound by the provisions of
Clause 3.1 of the Elan License Agreement and Clause 3.1 of the
Sheffield License Agreement set forth the agreement between the parties
thereto in relation to the ownership of the Elan Intellectual Property,
the Sheffield Intellectual Property and the Newco Intellectual property
respectively.
10.2 The Parties acknowledge and agree to be bound by the provisions of
Clause 4 of the Elan License Agreement and the provisions of Clause 4
of the Sheffield License Agreement which set forth the agreement
between the parties thereto in relation to the non-competition
obligations of Elan and Sheffield, respectively.
CLAUSE 11
INTELLECTUAL PROPERTY RIGHTS
11.1 Newco shall remain the owner of the Newco Intellectual Property.
11.1.1 Each Party shall be responsible for the preparation,
prosecution and maintenance of all patent applications and
issued patents relating to its own intellectual property.
Prior to filing for any patent protection on any Newco
Intellectual Property, Newco shall inform Elan and Sheffield
of its intention to do so.
11.1.2 Upon request, Elan or Sheffield shall provide information
regarding its activities set forth in 11.1.1.
11.2 Enforcement of Intellectual Property Rights; third party infringement
11.2.1 Sheffield, Newco and Elan shall promptly inform the other in
writing of any alleged infringement or unauthorized use of
which it shall become aware by a third party of Newco
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Intellectual Property, Elan Intellectual Property or Sheffield
Intellectual Property, and provide such other with any
available evidence of such unauthorized activity.
11.2.2 Elan shall have the right to pursue at its own expense any
enforcement activities of the Elan Intellectual Property.
Sheffield shall have the right to pursue at its own expense
any enforcement activities of the Sheffield Intellectual
Property. Both Elan and Sheffield agree to reasonably
co-operate with each other in any such action. Any expenses
borne by the co-operating party shall be reimbursed by the
enforcing party. Should either Elan or Sheffield decide not to
enforce the Elan Intellectual Property or the Sheffield
Intellectual Property as the case may be within the Combined
Fields, Newco may do so at its expense and for its own
benefit, and the parties will reasonably co-operate with such
action. If an enforcement action is successful, the Party
taking such enforcement action shall be entitled to any
proceeds recovered.
11.3 Infringement of third party patents
11.3.1 In the event that a claim or proceeding is brought against
Newco by a third party alleging that the manufacture, use,
offer for sale, sale or other activity relating to any of the
Products constitute an unauthorized use of an intellectual
property right owned by such a third party in the Territory,
Newco shall promptly advise Elan and Sheffield of such threat
or suit.
11.3.2 Newco shall indemnify, defend and hold Elan and Sheffield
harmless against all actions, losses, claims, demands,
damages, costs and liabilities (including reasonable attorneys
fees) relating directly or indirectly to all such claims or
proceedings directed to Products; provided that Elan or
Sheffield shall not acknowledge to the third party or to any
other person the validity of any claims of such a third party,
and shall not compromise or settle any claim or proceedings
relating thereto without the prior written consent of Newco,
not to be unreasonably withheld or delayed. At its option, in
the event the claim is directed primarily to Compounds, Elan
may elect to take over the conduct of such proceedings from
Newco, or in the event the claim is directed primarily at
Sheffield Devices, Sheffield may elect to take over the
conduct of such proceedings from Newco; provided that Newco's
indemnification obligations shall continue; the costs of
defending such claim shall be borne by the Party assuming
control over such proceedings; and Elan or Sheffield shall not
compromise or settle any such claim or proceeding without the
prior written consent of Newco, not to be unreasonably
withheld or delayed.
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CLAUSE 12
CROSS-LICENSES/EXPLOITATION OF PRODUCTS OUTSIDE FIELDS A, B AND C
12.1 Solely for the purpose of and insofar as is necessary, in each case,
for Elan to perform its obligations under the Elan License Agreement,
Newco shall grant to Elan a non-exclusive, worldwide, royalty-free,
fully paid-up license for the term of the License Agreements:
12.1.1 to use the Newco Intellectual Property in the Combined Fields,
and
12.1.2 subject to the terms and conditions of the Sheffield License
Agreement, a sublicense to use the Sheffield Intellectual
Property in the Combined Fields.
12.2 Solely for the purpose of and insofar as is necessary, in each case,
for Sheffield to perform its obligations under the Sheffield License
Agreement, Newco shall grant to Sheffield a non-exclusive, worldwide,
royalty-free, fully paid-up license for the term of the Licenses:
12.2.1 to use the Newco Intellectual Property in the Combined Fields,
and
12.2.2 subject to the terms and conditions of the Elan License
Agreement, a sublicense to use the Elan Intellectual Property
in the Combined Fields.
12.3 Elan shall be entitled to exploit the Newco Intellectual Property in
Field B and/or Field C outside Field B and/or Field C respectively
subject to the Parties negotiating a license agreement in good faith
(including all material provisions thereof, including as to whether the
license should be exclusive or non-exclusive), pursuant to which Newco
will grant Elan a license under the Newco Intellectual Property in
Field B and/or Field C outside Field B and/or Field C respectively on a
Product by Product basis. The financial terms of the said license
agreement shall have regard, inter alia, to:
12.3.1 the amount of monies expended by Newco in developing the Newco
Intellectual Property;
12.3.2 the materiality of the Newco Intellectual Property in Field B
and/or Field C by comparison to the further research and
development work to be conducted, and of the Elan Intellectual
Property and the Sheffield Intellectual Property; and
12.3.3 the financial return likely to be earned by Elan from the
proposed exploitation outside Field B and/or Field C; and
12.3.4 the impact of the proposed exploitation of the Newco
Intellectual Property in Field B and/or Field C outside Field
B and/or Field C respectively on the exploitation of the Newco
Intellectual Property in Field B and/or Field C within Field B
and/or Field C respectively.
12.4 Sheffield shall be entitled to exploit the Newco Intellectual Property
in Field B and/or Field C outside Field B and/or Field C respectively
subject to the Parties negotiating a license agreement in good faith
(including all material provisions thereof, including as to whether the
license should be exclusive or non-exclusive), pursuant to which Newco
will grant Sheffield a license under the Newco Intellectual Property
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outside Field B and/or Field C respectively on a Product by Product
basis. The financial terms of the said license agreement shall have
regard, inter alia, to:
12.4.1 the amount of monies expended by Newco in developing the Newco
Intellectual Property;
12.4.2 the materiality of the Newco Intellectual Property in Field B
and/or Field C by comparison to the further research and
development work to be conducted, and of the Elan Intellectual
Property and the Sheffield Intellectual Property; and
12.4.3 the financial return likely to be earned by Sheffield from the
proposed exploitation of outside Field B and/or Field C; and
12.4.4 the impact of the proposed exploitation of the Newco
Intellectual Property in Field B and/or Field C outside Field
B and/or Field C respectively on the exploitation of the Newco
Intellectual Property in Field B and/or Field C within Field B
and/or Field C respectively.
12.5 Newco hereby grants to Elan a worldwide, perpetual, fully-paid and
royalty-free license, with the right to grant sublicenses, to the Newco
Intellectual Property in Field A for use outside Field A.
CLAUSE 13
REGULATORY
13.1 Newco shall keep the other Parties promptly and fully advised of
Newco's regulatory activities, progress and procedures. Newco shall
inform the other Parties of any dealings it shall have with an RHA, and
shall furnish the other Parties with copies of all correspondence
relating to the Products. The Parties shall collaborate with a view to
obtaining any required regulatory approval of the RHA to market the
Products.
13.2 Newco shall, at its own cost, file, prosecute and maintain any and all
Regulatory Applications for the Products in the Territory in accordance
with the Business Plan, except where such obligations are by contract
undertaken by a third party.
13.3 Subject to Clause 13.5, and subject to a determination by Newco that
one or more regulatory approvals should be held in the name of Newco's
commercial partner such as a sub-licensee, any and all Regulatory
Approvals obtained hereunder for any Product shall be prosecuted and
owned by Newco, provided that Newco shall allow Elan and Sheffield
access thereto to enable Elan and Sheffield to fulfill their respective
obligations and exercise their respective rights under this Agreement.
Newco shall maintain such Regulatory Approvals at its own cost.
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13.4 It is hereby acknowledged that there are inherent uncertainties
involved in the registration of pharmaceutical products with the RHA's
insofar as obtaining approval is concerned and such uncertainties form
part of the business risk involved in undertaking the form of
commercial collaboration as set forth in this Agreement.
13.5 The DMF (Drug Master File) relating to Formulations shall be processed
by and be the property of Elan and at all times held in Elan's sole
name. Elan grants Newco for Field A, Field B and Field C, a right to
reference Elan's DMF, as described herein, with the FDA to the extent
necessary for Newco's regulatory purposes. Elan grants Sheffield for
Field B and Field C a right to reference Elan's DMF, as described
herein, with the FDA to the extent necessary for Sheffield's regulatory
purposes.
CLAUSE 14
MANUFACTURING
Elan will supply Nanocrystal Compounds to Newco at Elan's fully burdened cost
plus [REDACTED] of such cost; provided, however, that Elan shall have the right
to subcontract the manufacture and supply of the Nanocrystal Compounds. Elan
shall have the first right to manufacture and supply, and/or subcontract the
manufacture and supply of Formulations, subject to the Zambon Agreement.
Any such supply agreement shall be negotiated and agreed by the Parties not
later than the date of completion of Phase II (as such term is commonly used in
connection with FDA applications) of the R&D Program. The terms of the said
supply agreements shall be on Elan's normal commercial terms, and shall be
negotiated in good faith by the Parties thereto provided that Elan agrees that
the cost which would to be invoiced by Elan to Newco in respect of such
manufacture would be Elan's fully-burdened actual costs plus [REDACTED] of such
costs.
If Elan does not exercise its first right hereunder to manufacture and supply,
and/or subcontract the manufacture and supply of Formulations, then Newco shall
be free to enter into negotiations with a third party (other than a
Technological Competitor of Elan) to agree to terms upon which the third party
would be licensed by Elan (on licensing terms satisfactory to Elan) and by Newco
to the extent necessary (on licensing terms satisfactory to Newco) to
manufacture the relevant Formulation(s) in the Territory, which terms when taken
as a whole, are not more favourable to the third party than the principal terms
of the last written proposal offered by Newco to Elan or by Elan to Newco, as
the case may be.
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CLAUSE 15
TECHNICAL SERVICES AND ASSISTANCE
15.1 Whenever commercially and technically feasible, Newco shall contract
with Sheffield or Elan, as the case may be, to perform such other
services as Newco may require, other than those specifically dealt with
hereunder or in the License Agreements. In determining which Party
should provide such services, the Management Committee shall take into
account the respective infrastructure, capabilities and experience of
Elan and Sheffield. There shall be no obligation upon either of
Sheffield or Elan to perform such services.
15.2 Newco shall, if the Participants so agree, conclude an administrative
support agreement with Elan and/or Sheffield on such terms as the
Parties thereto shall in good faith negotiate. The administrative
services shall include one or more of the following administrative
services as requested by Newco:
15.2.1 accounting, financial and other services;
15.2.2 tax services;
15.2.3 insurance services;
15.2.4 human resources services;
15.2.5 legal and company secretarial services;
15.2.6 patent and related intellectual property services; and
15.2.7 all such other services consistent with and of the same type
as those services to be provided pursuant to this Agreement,
as may be required.
The foregoing list of services shall not be deemed exhaustive and may
be changed from time to time upon written request by Newco.
15.3. The Parties agree that each Party shall effect and maintain
comprehensive general liability insurance in respect of all clinical
trials and other activities performed by them on behalf of Newco. The
Stockholders and Newco shall ensure that the industry standard
insurance policies shall be in place for all activities to be carried
out by Newco.
15.4 If Elan or Sheffield so requires, Sheffield or Elan, as the case may
be, shall receive, at times and for periods mutually acceptable to the
Parties, employees of the other Party (such employees to be acceptable
to the receiving Party in the matter of qualification and competence)
for instruction in respect of the Elan Intellectual Property or the
Sheffield Intellectual Property, as the case may be, as necessary to
further the Project.
15.5 The employees received by Elan or Sheffield, as the case may be, shall
be subject to obligations of confidentiality no less stringent than
those set out in Clause 22 and such employees shall observe the rules,
regulations and systems adopted by the Party receiving the said
employees for its own employees or visitors.
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CLAUSE 16
AUDITORS, BANKERS, REGISTERED OFFICE,
ACCOUNTING REFERENCE DATE; SECRETARY
Unless otherwise agreed by the Stockholders and save as may be provided to the
contrary herein:
16.1 the auditors of Newco shall be Ernst & Young or as designated by the
Directors;
16.2 the bankers of Newco shall be as designated by the Directors; there
shall be established at a U.S. bank mutually agreed to by the parties a
bank account managed by Sheffield for the benefit of Newco;
16.3 the accounting reference date of Newco shall be December 31 in each
Financial Year; and
16.4 the secretary of Newco shall be I.S. Outerbridge or such other Person
as may be appointed by the Directors from time to time.
CLAUSE 17
TRANSFERS OF SHARES;
RIGHT OF FIRST OFFER; TAG ALONG RIGHTS
General:
17.1. No Stockholder shall, directly or indirectly, sell or otherwise
transfer (each, a "Transfer") any Shares held by it except in as
expressly permitted by and accordance with the terms of this Agreement.
Newco shall not, and shall not permit any transfer agent or registrar
for any Shares to, transfer upon the books of Newco any Shares from any
Stockholder to any transferee, in any manner, except in accordance with
this Agreement, and any purported transfer not in compliance with this
Agreement shall be void.
During the Research and Development Term, no Stockholder shall,
directly or indirectly, sell or otherwise Transfer any of its legal
and/or beneficial interest in the Shares held by it to any other
Person. After completion of the Research and Development Term, a
Stockholder may Transfer Shares provided such Stockholder complies with
the provisions of Clauses 17.2 and 17.3.
Notwithstanding anything contained herein to the contrary (i) at all
times, EIS and/or Sheffield shall have the right to Transfer any Shares
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to their Affiliates provided, however, that such assignment does not
result in adverse tax consequences for any other Parties and (ii)
Sheffield may not Transfer or allow any Encumbrance in, or to, any
Shares that are subject to the Exchange Right, other than to EIS or its
Affiliates. EIS shall have the right to Transfer any Shares to an
affiliate; provided, that such Affiliates shall agree to be expressly
subject to and bound by all the limitations and provisions which are
embodied in this Agreement.
17.2 No Stockholder shall, except with the prior written consent of the
other Stockholder, create or permit to subsist any pledge, lien or
charge over, or grant any option or other rights or Encumbrance in, or
to, all or any of the Shares held by it (other than by a Transfer of
such Shares in accordance with the provisions of this Agreement) made
by it to Newco unless any Person in whose favour any such pledge, lien,
or charge is created or permitted to subsist or such option or rights
are granted or such interest is disposed of shall be expressly subject
to and bound by all the limitations and provisions which are embodied
in this Agreement.
17.3 Rights of First Offer:
If, at any time after the end of the Research and Development Term, a
Stockholder shall desire to Transfer any Shares owned by it (a "Selling
Stockholder"), in any transaction or series of related transactions
other than a Transfer to an Affiliate or subsidiary or in the case of
EIS permitted by the Agreement to a special purpose financing or
similar entity established by EIS, then such Selling Stockholder shall
deliver prior written notice of its desire to Transfer (a "Notice of
Intention") (i) to Newco and (ii) to the Stockholders who are not the
Selling Stockholder (and any transferee thereof permitted hereunder, if
any), as applicable, setting forth such Selling Stockholder's desire to
make such Transfer, the number of Shares proposed to be transferred
(the "Offered Shares") and the proposed form of transaction (the
"Transaction Proposal"), together with any available documentation
relating thereto, if any, and the consideration to be paid and the
terms and conditions, at which such Selling Stockholder proposes to
Transfer the Offered Shares (the "Offer Price"). The "Right of First
Offer" provided for in this Clause 17 shall be subject to any "Tag
Along Right" benefiting a Stockholder which may be provided for by
Clause 17, subject to the exceptions set forth therein.
Upon receipt of the Notice of Intention, the Stockholders who are not
the Selling Stockholder shall have the right to purchase at the Offer
Price the Offered Shares, exercisable by the delivery of notice to the
Selling Stockholder (the "Notice of Exercise"), with a copy to Newco,
within 10 business days from the date of receipt of the Notice of
Intention. If no such Notice of Exercise has been delivered by the
Stockholders who are not the Selling Stockholder within such
10-business day period, or such Notice of Exercise does not relate to
all of the Offered Shares covered by the Notice of Intention, then the
Selling Stockholder shall be entitled to Transfer all of the Offered
Shares to the intended transferee. In the event that all of the Offered
Shares are not purchased by the non-selling Stockholders, the Selling
Stockholder shall sell the available Offered Shares within 30 days
after the delivery of such Notice of Intention on terms no more
favorable to a third party than those presented to the non-selling
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Stockholders. If such sale does not occur, the Offered Shares shall
again be subject to the Right of First Refusal set forth in Clause
17.3.
In the event that any of the Stockholders who are not the Selling
Stockholder exercise their right to purchase all of the Offered Shares
(in accordance with this Clause 17), then the Selling Stockholder shall
sell all of the Offered Shares to such Stockholder(s), in the amounts
set forth in the Notice of Intention, after not less than 20 business
days and not more than 30 business days from the date of the delivery
of the Notice of Exercise. In the event that more than one of the
Stockholders who are not the Selling Stockholders wish to purchase the
Offered Shares, the Offered Shares shall be allocated to such
Stockholders on the basis of their pro rata equity interests in Newco,
taken as a whole.
The rights and obligations of each of the Stockholders pursuant to the
Right of First Offer provided herein shall terminate upon the date that
the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act.
At the closing of the purchase of all of the Offered Shares by the
Stockholders who are not the Selling Stockholder (scheduled in
accordance with Clause 17), the Selling Stockholder shall deliver
certificates evidencing the Offered Shares being sold, duly endorsed,
or accompanied by written instruments of transfer in form reasonably
satisfactory to the Stockholders who are not the Selling Stockholder,
duly executed by the Selling Stockholder, free and clear of any adverse
claims, against payment of the purchase price therefor in cash, and
such other customary documents as shall be necessary in connection
therewith.
17.4 Tag Along Rights:
Subject to Clause 17.3, a Stockholder (the "Transferring Stockholder")
shall not Transfer (either directly or indirectly), in any one
transaction or series of related transactions, to any Person or group
of Persons, any Shares, unless the terms and conditions of such
Transfer shall include an offer to the other Stockholders (the
"Remaining Stockholders"), to sell Shares at the same price and on the
same terms and conditions as the Transferring Stockholder has agreed to
sell its Shares (the "Tag Along Right").
In the event a Transferring Stockholder proposes to Transfer any Shares
in a transaction subject to this Clause 17.4, it shall notify, or cause
to be notified, the Remaining Stockholders in writing of each such
proposed Transfer. Such notice shall set forth: (i) the name of the
transferee and the amount of Shares proposed to be transferred, (ii)
the proposed amount and form of consideration and terms and conditions
of payment offered by the transferee (the "Transferee Terms") and (iii)
that the transferee has been informed of the Tag Along Right provided
for in this Clause 17, if such right is applicable, and the total
number of Shares the transferee has agreed to purchase from the
Stockholders in accordance with the terms hereof.
The Tag Along Right may be exercised by each of the Remaining
Stockholders by delivery of a written notice to the Transferring
Stockholder (the "Co-sale Notice") within 20 business days following
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receipt of the notice specified in the preceding subsection. The
Co-sale Notice shall state the number of Shares owned by such Remaining
Stockholder which the Remaining Stockholder wishes to include in such
Transfer; provided, however, that without the written consent of the
Transferring Stockholder, the amount of such securities belonging to
the Remaining Stockholder included in such Transfer may not be greater
than such Remaining Stockholder's percentage beneficial ownership of
Fully Diluted Common Stock multiplied by the total number of shares of
Fully Diluted Common Stock to be sold by both the Transferring
Stockholder and all Remaining Stockholders. Upon receipt of a Co-sale
Notice, the Transferring Stockholder shall be obligated to transfer at
least the entire number of Shares set forth in the Co-sale Notice to
the transferee on the Transferee Terms; provided, however, that the
Transferring Stockholder shall not consummate the purchase and sale of
any Shares hereunder if the transferee does not purchase all such
Shares specified in all Co-sale Notices. If no Co-sale Notice has been
delivered to the Transferring Stockholder prior to the expiration of
the 20 business day period referred to above and if the provisions of
this Section have been complied with in all respects, the Transferring
Stockholder shall have the right for a 45-day period to Transfer Shares
to the transferee on the Transferee Terms without further notice to any
other party, but after such 45-day period, no such Transfer may be made
without again giving notice to the Remaining Stockholders of the
proposed Transfer and complying with the requirements of this Clause
17. At the closing of any Transfer of Shares subject to this Clause 17,
the Transferring Stockholder, and the Remaining Stockholder, in the
event such Tag Along Right is exercised, shall deliver certificates
evidencing such securities as have been Transferred by each, duly
endorsed, or accompanied by written instruments of transfer in form
reasonably satisfactory to the transferee, free and clear of any
adverse claim, against payment of the purchase price therefor.
Notwithstanding the foregoing, this Clause 17 shall not apply to any
sale of Common Stock pursuant to an effective registration statement
under the Securities Act in a bona fide public offering.
CLAUSE 18
MATTERS REQUIRING PARTICIPANTS' APPROVAL
18.1 Subject to the provisions of Clause 18.2, in consideration of Sheffield
and Elan agreeing to enter into the License Agreements, the Parties
hereby agree that Newco shall not without the prior approval of the EIS
Director and the Sheffield Directors:
18.1.1. make a material Newco determination outside the ordinary
course of business, including, among other things,
acquisitions or dispositions of intellectual property and
licenses or sublicenses, changes in the Business or the Newco
budget; entry into joint ventures and similar arrangements as
they relate to the Licensed Technologies and changes to the
Business Plan as they relate to the Licensed Technologies;
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18.1.2. issue any unissued Shares or unissued Common Stock
Equivalents, or create, authorize or issue any new shares
(including a split of the Shares) or Common Stock Equivalents,
except as expressly permitted by the Newco By-Laws in effect
as of the date hereof;
18.1.3. alter any rights attaching to any class of share in the
capital of Newco or alter the Newco By-Laws;
18.1.4. consolidate, sub-divide or convert any of Newco's share
capital or in any way alter the rights attaching thereto;
18.1.5. dispose of all or substantially all of the assets of Newco;
18.1.6. do or permit or suffer to be done any act or thing whereby
Newco may be wound up (whether voluntarily or compulsorily),
save as otherwise expressly provided for in this Agreement;
18.1.7. enter into any contract or transaction except in the ordinary
and proper course of the Business on arm's length terms;
18.1.8. license or sub-license any of the Elan Intellectual Property,
Sheffield Intellectual Property, Newco Intellectual Property;
18.1.9. amend or vary the terms of the Sheffield License Agreement or
the Elan License Agreement;
18.1.10. permit a person other than Newco to own a regulatory approval
relating to the Product(s);
18.1.11. approve, amend or vary the Business Plan or the Newco budget;
and
18.1.12. alter the number of Directors.
CLAUSE 19
DISPUTES
19.1 Should any dispute or difference arise between Elan and Sheffield, or
between Elan or Sheffield and Newco, during the period that this
Agreement is in force, other than a dispute or difference relating to
(i) the interpretation of any provision of this Agreement, (ii) the
interpretation or application of law, or (iii) the ownership of any
intellectual property, then any Party may forthwith give notice to the
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other Parties that it wishes such dispute or difference to be referred
to the Chief Executive Officer of Sheffield and the President of Elan
Pharmaceutical Technology, a division of Elan Corporation, Plc ("EPT").
19.2 In any event of a notice being served in accordance with Clause 19.1,
each of the Participants shall within 14 days of the service of such
notice prepare and circulate to the chief executive officer of each
Participant a memorandum or other form of statement setting out its
position on the matter in dispute and its reasons for adopting that
position. Each memorandum or statement shall be considered by the chief
executive officers of the Participants who shall endeavor to resolve
the dispute. If the chief executive officers of the Participants agree
upon a resolution or disposition of the matter, they shall each sign a
statement which sets out the terms of their agreement. The Participants
agree that they shall exercise the voting rights and other powers
available to them in relation to Newco to procure that the agreed terms
are fully and promptly carried into effect.
19.3 In the event the chief executive officers of the Participants are
unable to resolve a dispute or difference when it is referred to them
under Clause 19.1 which relates to the interpretation of this Agreement
or any other Transaction Document or the compliance of the Parties with
their legal obligations thereunder, such dispute or difference shall be
referred to arbitration in accordance with Clause 24.8.3 hereof. If the
dispute or difference does not relate to the interpretation of this
Agreement or any other Transaction Document or the compliance of the
Parties with their legal obligations thereunder, the provisions of
Clause 24.8.2 shall govern.
CLAUSE 20
TERMINATION
20.1 This Agreement shall govern the operation and existence of Newco until
20.1.1 terminated by written agreement of all Parties hereto or
20.1.2 otherwise terminated in accordance with this Clause 20.
20.2 For the purpose of this Clause 20, a "Relevant Event" is committed or
suffered by a Participant if:
20.2.1 [REDACTED]
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20.2.2 [REDACTED]
20.2.3 [REDACTED]
20.2.4 [REDACTED]
20.2.5 [REDACTED]
20.2.6 [REDACTED]
20.4 If either Participant commits or suffers a Relevant Event, the other
Participant shall be entitled, within three months of the occurrence of
the Relevant Event, to require the defaulting Participant (the
"Recipient Participant") to sell on reasonable terms of payment to the
non-defaulting Participant (the "Proposing Participant") all (but not
some only) of the Shares, held or beneficially owned by the Recipient
Participant for an amount equal to [REDACTED] of the fair market value
of the Shares of the Recipient Participant (the "Buyout Option").
20.5 The Proposing Participant shall notify the Recipient Participant of the
exercise of the Buyout Option, no later than 30 business days prior to
the proposed exercise thereof, by delivering written notice to the
Recipient Participant stating that the Buyout Option is exercised and
the price at which the Proposing Participant is willing to purchase the
Shares of the Recipient Participant.
20.6 In the event that the Participants do not agree upon a purchase price
for the Shares within five Business Days following the receipt by the
Recipient Participant of written notice from the Proposing Participant
pursuant to Clause 20.5 above, the Proposing Participant may contact
the American Arbitration Association ("AAA"), sitting in New York City
and request that an independent US-based arbitrator who is expert in
the pharmaceutical/biotechnology industry be appointed within 10
Business Days. The AAA shall endeavor to select an arbitrator who is
technically knowledgeable in the pharmaceutical/biotechnology industry
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(and who directly and through his affiliates, has no business
relationship with, or shareholding in, either the Proposing Participant
or the Recipient Participant). Promptly upon being notified of the
arbitrator's appointment, the Proposing Participant and the Recipient
Participant shall submit to the arbitrator details of their assessment
of the fair market value for the Shares of the Recipient Participant
together with such information as they think necessary to validate
their assessment. The arbitrator shall notify the Recipient Participant
of [REDACTED] of the fair market value assessed by the Proposing
Participant (the "Proposing Participant Price") and shall notify the
Proposing Participant of [REDACTED] of the fair market value assessed
by the Recipient Participant (the "Recipient Participant Price"). The
Proposing Participant and the Recipient Participant shall then be
entitled to make further submissions to the arbitrator within five
Business Days explaining why the Recipient Participant Price or the
Proposing Participant Price, as the case may be, is unjustified. The
arbitrator shall thereafter meet with the Proposing Participant and the
Recipient Participant and shall thereafter choose either the Recipient
Participant Price or the Proposing Participant Price (but not any other
price) as the purchase price for the Shares (the "Purchase Price") on
the basis of which price the Expert determines to be closer to
[REDACTED] of the fair market value for the Shares of the Recipient
Participant. The arbitrator shall use his best efforts to determine the
Purchase Price within 30 Business Days of his appointment. The
Proposing Participant and the Recipient Participant shall bear the
costs of the arbitrator equally provided that the arbitrator may, in
his discretion, allocate all or a portion of such costs to one Party.
Any decision of the arbitrator shall be final and binding.
20.7 The Proposing Participant shall purchase the Shares of the Recipient
Participant by delivery of the Purchase Price in cash no later than the
15th Business Day following determination of the Purchase Price by the
Expert.
20.8 The Shares of the Recipient Participant so transferred shall be sold by
the transferor as beneficial owner with effect from the date of such
transfer free from any lien, charge or encumbrance with all rights and
restrictions attaching thereto. If the Proposing Participant elects to
purchase the Shares of the Recipient Participant, the Shares of the
Recipient Participant shall be sold by the Recipient Participant as
beneficial owner for a price equal to [REDACTED] of the Purchase Price
with effect from the date specified by the Proposing Participant in its
notice of election free from any lien, charge or encumbrance together
with all rights attaching thereto.
20.9 If the Proposing Participant exercises the Buyout Option, both parties
will negotiate in good faith to agree to additional reasonable
provisions and/or amendments to the License Agreements to protect the
intellectual property rights of the Recipient Party.
20.10 If either Participant commits a Relevant Event, the other Stockholder
shall have in addition to all other legal and equitable rights and
remedies hereunder, the right to terminate this Agreement upon 30 days'
written notice.
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20.11 In the event of a termination of the Elan License Agreement and/or the
Sheffield License Agreement, both parties will negotiate in good faith
to determine whether this Agreement should be terminated and if so,
which provisions should survive termination.
20.12 The provisions of Clauses 1.1, 18, 19, 20 and 22 shall survive the
termination of this Agreement under this Clause 20.10 or by mutual
consent pursuant to Clause 20.1 in accordance with their terms; all
other terms and provisions of this Agreement shall cease to have effect
and be null and void upon the termination of this Agreement under this
Clause 20.10 or by mutual consent pursuant to Clause 20.1.
CLAUSE 21
SHARE RIGHTS
The following is a summary of the terms of the capital stock of Newco.
This summary does not purport to be complete and is qualified in all respects by
reference to the Newco By-laws, which are hereby incorporated by reference.
Each share of Common Stock is entitled to one vote on all matters on
which the stockholders of Newco are entitled to vote. Subject to the Bermuda
Companies Act of 1981 (or any successor legislation), shares of Preferred Stock
shall not be entitled to vote on any matters brought before the shareholders of
Newco. At any time after to the second anniversary of the date hereof each share
of Preferred Stock may be converted into shares of Common Stock at a one-for-one
ratio, subject to adjustment for stock splits, stock dividends and similar
events. The Preferred Stock and the Common Stock rank pari passu with respect to
the payment of dividends, which shall be paid to the holders thereof on a pro
rata basis. Upon any liquidation, dissolution or winding up of Newco or the sale
of substantially all of the assets of Newco, or the merger of Newco with and
into another Person, the Preferred Stock shall rank prior to the Common Stock
and the holders of Preferred Stock shall be entitled to be paid, prior to any
distribution to any holders of Common Stock, an amount in cash equal the
aggregate purchase price paid by the Stockholders for the Preferred Stock,
pursuant to Clause 4.41 hereof.
CLAUSE 22
CONFIDENTIALITY
22.1 The Parties and/or Newco acknowledge and agree that it may be
necessary, from time to time, to disclose to each other confidential
and/or proprietary information, including without limitation,
inventions, works of authorship, trade secrets, specifications,
designs, data, know-how and other information, relating to the Combined
Fields, the Products, present or future products, the Newco
Intellectual Property, the Elan Intellectual Property or the Sheffield
Intellectual Property, as the case may be, methods, compounds, research
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projects, work in process, services, sales suppliers, customers,
employees and/or business of the disclosing Party, whether in oral,
written, graphic or electronic form (collectively "Confidential
Information").
22.2 Any Confidential Information revealed by a Party to another Party shall
be maintained as confidential and shall be used by the receiving Party
exclusively for the purposes of fulfilling the receiving Party's rights
and obligations under this Agreement, and for no other purpose.
Confidential Information shall not include:
22.2.1 information that is generally available to the public;
22.2.2 information that is made public by the disclosing Party;
22.2.3 information that is independently developed by the receiving
Party, as evidenced by such Party's records, without the aid,
application or use of the disclosing Party's Confidential
Information;
22.2.4 information that is published or otherwise becomes part of the
public domain without any disclosure by the receiving Party,
or on the part of the receiving Party's directors, officers,
agents, representatives or employees;
22.2.5 information that becomes available to the receiving Party on a
non-confidential basis, whether directly or indirectly, from a
source other than the disclosing Party, which source did not
acquire this information on a confidential basis; or
22.2.6 information which the receiving Party is required to disclose
pursuant to:
(i) a valid order of a court or other governmental body
or any political subdivision thereof or as otherwise
required by law, rule or regulation; or
(ii) other requirement of law;
provided, however, that if the receiving Party becomes legally required to
disclose any Confidential Information, the receiving Party shall give the
disclosing Party prompt notice of such fact so that the disclosing Party may
obtain a protective order or confidential treatment or other appropriate remedy
concerning any such disclosure. The receiving Party shall fully co-operate with
the disclosing Party in connection with the disclosing Party's efforts to obtain
any such order or other remedy. If any such order or other remedy does not fully
preclude disclosure, the receiving Party shall make such disclosure only to the
extent that such disclosure is legally required; or
22.2.7 information which was already in the possession of the
receiving Party at the time of receiving such information, as
evidenced by its records, provided such information was not
previously provided to the receiving party from a source which
was under an obligation to keep such information confidential;
or
22.2.8 information that is the subject of a written permission to
disclose, without restriction or limitation, by the disclosing
Party.
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22.3 Each Party agrees to disclose Confidential Information of another Party
only to those employees, representatives and agents requiring knowledge
thereof in connection with their duties directly related to the
fulfilling of the Party's obligations under this Agreement, so long as
such persons are under an obligation of confidentiality no less
stringent than as set forth herein. Each Party further agrees to inform
all such employees, representatives and agents of the terms and
provisions of this Agreement and their duties hereunder and to obtain
their consent hereto as a condition of receiving Confidential
Information. Each Party agrees that it will exercise a reasonable
degree of care and protection to preserve the proprietary and
confidential nature of the Confidential Information disclosed by a
Party. Each Party agrees that it will, upon request of another Party,
return all documents and any copies thereof containing Confidential
Information belonging to or disclosed by such other Party. Each Party
shall promptly notify the other Parties upon discovery of any
unauthorized use or disclosure of the other Parties' Confidential
Information.
22.4 Notwithstanding the above, each Party may use or disclose Confidential
Information disclosed to it by another Party to the extent such use or
disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, complying with
patent applications, prosecuting or defending litigation, complying
with applicable governmental regulations or otherwise submitting
information to tax or other governmental authorities, conducting
clinical trials, or granting a permitted sub-license or otherwise
exercising its rights hereunder; provided, that if a Party is required
to make any such disclosure of the other Party's Confidential
Information, other than pursuant to a confidentiality agreement, such
Party shall inform the third party recipient of the terms and
provisions of this Agreement and their duties hereunder and shall
obtain their commitment to abide by the confidentiality provisions of
this Clause 22 as a condition of releasing to the third party recipient
the Confidential Information.
22.5 Any breach of this Clause 22 by any employee, representative or agent
of a Party is considered a breach by the Party itself.
22.6 The provisions relating to confidentiality in this Clause 22 shall
remain in effect during the Term and for a period of seven years
following the termination of this Agreement.
22.7 The Parties agree that the obligations of this Clause 22 are necessary
and reasonable in order to protect the Parties' respective businesses,
and each Party expressly agrees that monetary damages would be
inadequate to compensate a Party for any breach by the other Party of
its covenants and agreements set forth herein. Accordingly, the Parties
agree and acknowledge that any such violation or threatened violation
will cause irreparable injury to a Party and that, in addition to any
other remedies that may be available, in law or in equity or otherwise,
any Party shall be entitled to obtain injunctive relief against the
threatened breach of the provisions of this Clause 22, or a
continuation of any such breach by the other Party, specific
performance and other equitable relief to redress such breach together
with its damages and reasonable counsel fees and expenses to enforce
its rights hereunder, without the necessity of proving actual or
express damages.
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CLAUSE 23
COSTS
22.1 Each Stockholder shall bear its own legal and other costs incurred in
relation to preparing and concluding this Agreement and the Transaction
Documents.
22.2 All other costs, legal fees, registration fees and other expenses
relating to the transactions contemplated hereby, including the costs
and expenses incurred in relation to the incorporation of Newco, shall
be borne by Newco.
CLAUSE 24
GENERAL
24.1 Good Faith:
Each of the Parties hereto undertakes with the others to do all things
reasonably within its power that are necessary or desirable to give
effect to the spirit and intent of this Agreement.
24.2 Further Assurance:
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.
24.3 No Representation:
Each of the Parties hereto hereby acknowledges that in entering into
this Agreement it has not relied on any representation or warranty
except as expressly set forth herein or in any document referred to
herein.
24.4 Force Majeure:
Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay is caused
by or results from causes beyond its reasonable control, including
without limitation, acts of God, fires, strikes, acts of war (whether
war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances or intervention of any
relevant government authority, but any such delay or failure shall be
remedied by such Party as soon as practicable.
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24.5 Relationship of the Parties:
Nothing contained in this Agreement is intended or is to be construed
to constitute Elan/EIS and Sheffield as partners, or Elan/EIS as an
employee or agent of Sheffield, or Sheffield as an employee or agent of
Elan/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.
24.6 Counterparts:
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of
which when taken together shall constitute this Agreement.
24.7 Notices:
Any notice to be given under this Agreement shall be sent in writing by
registered or recorded delivery post or reputable overnight courier
such as Federal Express or telecopied to:
Elan/EIS 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
and
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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Sheffield at:
Sheffield Pharmaceuticals Inc.
425 South Woodsmill Road
St. Louis, MO 63017
Attention: President
Telephone: 314-579-9899
Fax: 314-579-9799
and
3136 Winton Road, Suite 306
Rochester, NY 14623
Attention: Chairman
Telephone: 716-292-0310
Fax: 716-292-0522
with a copy to:
Daniel J. Gallagher, Esq.
Olshan, Grundman, Frome, Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Telephone: 212-753-7200
Fax: 212-935-1787
Newco at:
102 St. James Court
Flatts, Smiths FL04
Bermuda
Attention: Secretary
Telephone: 441-292-9169
Fax: 441-292-2224
and to
Clarendon House
2 Church St.
Hamilton, Bermuda
or to such other address(es) as may from time to time be notified by
any Party to the others hereunder.
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Any notice sent by mail shall be deemed to have been delivered within
three Business Days after dispatch or delivery to the relevant courier
and any notice sent by telecopy shall be deemed to have been delivered
upon confirmation of receipt. Notices of change of address shall be
effective upon receipt. Notices by telecopy shall also be sent by
another method permitted hereunder.
24.8 Governing Law; Arbitration
24.8.1. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
24.8.2. The Parties will attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by
negotiation between executives of the Parties. In the event
that such negotiations do not result in a mutually acceptable
resolution, the Parties agree to consider other dispute
resolution mechanisms including mediation.
24.8.3 Any dispute under this Agreement which is not settled by
mutual consent under Clause 24.8.2 shall be finally settled by
binding arbitration, conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association by one arbitrator appointed in accordance with
said rules. Such arbitrator shall be reasonably satisfactory
to each of the Parties; provided, that if the Parties are
unable to agree upon the identity of such arbitrator within 15
days of demand by either Party, then either Party shall have
the right to petition a presiding justice of the Supreme Court
of New York, New York County, to appoint an arbitrator.
The arbitration shall be held in New York, New York and the
arbitrator shall be an independent expert in pharmaceutical
product development and marketing (including clinical
development and regulatory affairs).
The arbitrator shall determine what discovery will be
permitted, consistent with the goal of limiting the cost and
time which the Parties must expend for discovery; provided the
arbitrator shall permit such discovery as they deem necessary
to permit an equitable resolution of the dispute.
Any written evidence originally in a language other than
English shall be submitted in English translation accompanied
by the original or a true copy thereof.
The costs of the arbitration, including administrative and
arbitrators' fees, shall be shared equally by the Parties and
each Party shall bear its own costs and attorneys' and
witness' fees incurred in connection with the arbitration.
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In rendering judgement, the arbitrator shall be instructed by
the Parties that he shall be permitted to select solely from
between the proposals for resolution of the relevant issue
presented by each Party, and not any other proposal.
A disputed performance or suspended performances pending the
resolution of the arbitration must be completed within 30 days
following the final decision of the arbitrators or such other
reasonable period as the arbitrators determine in a written
opinion.
Any arbitration under this Agreement shall be completed within
one year from the filing of notice of a request for such
arbitration.
The arbitration proceedings and the decision shall not be made
public without the joint consent of the Parties and each Party
shall maintain the confidentiality of such proceedings and
decision unless otherwise permitted by the other Party.
The Parties agree that the decision shall be the sole,
exclusive and binding remedy between them regarding any and
all disputes, controversies, claims and counterclaims
presented to the arbitrators. Application may be made to any
court having jurisdiction over the Party (or its assets)
against whom the decision is rendered for a judicial
recognition of the decision and an order of enforcement.
24.9 Severability:
If any provision in this Agreement is agreed by the Parties to be,
deemed to be or becomes invalid, illegal, void or unenforceable under
any law that is applicable hereto, such provision will be deemed
amended to conform to applicable laws so as to be valid and enforceable
or, if it cannot be so amended without materially altering the
intention of the Parties, it will be deleted, with effect from the date
of such agreement or such earlier date as the Parties may agree, and
the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be impaired or affected in any way.
24.10 Amendments:
No amendment, modification or addition hereto shall be effective or
binding on any Party unless set forth in writing and executed by a duly
authorized representative of all Parties.
24.11 Waiver:
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any future breach or failure to perform or of
any other right arising under this Agreement.
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24.12 Assignment:
None of the Parties shall be permitted to assign its rights or
obligations hereunder without the prior written consent of the other
Parties except as follows (in which case, written notice shall be
delivered by the assigning Party to the other Parties):
24.12.1 Elan, EIS and/or Sheffield shall have the right to assign
their rights and obligations hereunder to their Affiliates
provided, however, that such assignment does not result in
adverse tax consequences for any other Parties.
24.12.2 Elan and EIS shall have the right to assign their rights and
obligations hereunder to any Affiliate. Each assignee must
comply with the representations and warranties in clause 3.5
hereof.
24.13 Whole Agreement/No Effect on Other Agreements:
This Agreement (including the Schedules attached hereto) and the
Transaction Documents set forth all of the agreements and
understandings between the Parties with respect to the subject matter
hereof, and supersedes and terminates all prior agreements and
understandings between the Parties with respect to the subject matter
hereof. There are no agreements or understandings with respect to the
subject matter hereof, either oral or written, between the Parties
other than as set forth in this Agreement and the Transaction
Documents.
In the event of any ambiguity or conflict arising between the terms of
this Agreement and those of the Newco Bye-Laws, the terms of this
Agreement shall prevail, except with respect to Clause 21, in which
case the terms of the Newco Bye-laws shall govern.
No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement
between any of the Parties unless specifically referred to, and solely
to the extent provided herein. In the event of a conflict between the
provisions of this Agreement and the provisions of the License
Agreements, the terms of this Agreement shall prevail unless this
Agreement specifically provide otherwise.
24.14 Successors:
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and permitted assigns.
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SCHEDULE 1
ELAN LICENSE AGREEMENT
<PAGE>
SCHEDULE 2
SHEFFIELD LICENSE AGREEMENT
<PAGE>
SCHEDULE 3
TECHNOLOGICAL COMPETITORS OF ELAN
[REDACTED]
<PAGE>
SCHEDULE 4
TECHNOLOGICAL COMPETITORS OF SHEFFIELD
[REDACTED]
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day
first set forth above.
SIGNED
BY:/s/
-----------------------------------
for and on behalf of
ELAN PHARMA INTERNATIONAL LTD.
in the presence of:__________________
SIGNED
BY:/s/
-----------------------------------
for and on behalf of
ELAN INTERNATIONAL SERVICES, LTD.
in the presence of:__________________
SIGNED
BY:/s/
-----------------------------------
for and on behalf of
SHEFFIELD PHARMACEUTICALS, INC.
in the presence of:__________________
SIGNED
BY:/s/
-----------------------------------
for and on behalf of
SHEFFIELD NEWCO, LTD.
in the presence of:__________________
LICENSE AGREEMENT
BETWEEN
SHEFFIELD PHARMACEUTICALS, INC.
AND
SHEFFIELD NEWCO LIMITED
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS
2. SHEFFIELD LICENSE TO NEWCO
3. INTELLECTUAL PROPERTY
4. NON-COMPETITION/AFTER ACQUIRED TECHNOLOGY
5. FINANCIAL PROVISIONS
6. RIGHT OF INSPECTION AND AUDIT
7. REPRESENTATIONS AND WARRANTIES
8. TERM AND TERMINATION
9. CONFIDENTIAL INFORMATION
10. GOVERNING LAW AND JURISDICTION
11. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
12. ASSIGNMENT
13. NOTICES
14. MISCELLANEOUS
2
<PAGE>
THIS AGREEMENT made this 19 October 1999
between:
(1) Sheffield Pharmaceuticals, Inc., a corporation duly incorporated and
validly existing under the laws of Delaware and having its principal
place of business at 425 S. Woodsmill Road, Suite 270, St. Louis, MO
63017, USA("Sheffield");
(2) Newco Limited, a private limited company incorporated under the laws of
Bermuda and having its registered office at Clarendon House, 2 Church
Street, Hamilton, Bermuda ("Newco"); and
(3) Elan Pharma International Limited incorporated under the laws of
Ireland, and having its registered office at WIL House, Shannon
Business Park, Shannon, County Clare, Ireland ("EPIL").
RECITALS:
A. Simultaneously herewith, Sheffield, Elan, EIS, and Newco are entering
into the JDOA for the purpose of recording the terms and conditions of
the joint venture and of regulating their relationship with each other
and certain aspects of the affairs of, and their dealings with Newco.
B. Newco desires to enter into this Agreement with Sheffield so as to
permit Newco to utilize the Sheffield Intellectual Property in making,
having made, importing, using, offering for sale and selling the
Products in Field B and Formulations in Field C in the Territory in
accordance with the terms of this Agreement.
C. Simultaneously herewith Newco and EPIL are entering into the Elan
License Agreement relating to Newco's use of the Elan Intellectual
Property.
1 DEFINITIONS
1.1 In this Agreement unless the context otherwise requires:
"Affiliate" shall mean any corporation or entity controlling,
controlled or under the common control of Elan or Sheffield, as the
case may be, excluding Systemic Pulmonary Delivery Ltd.. For the
purpose of this definition, "control" shall mean direct or indirect
ownership of fifty percent (50%) or more of the stock or shares
entitled to vote for the election of directors. Newco is not an
Affiliate of Sheffield.
"Agreement" shall mean this license agreement (which expression shall
be deemed to include the Recitals and Schedules hereto).
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"Business Plan" shall have the meaning, as such term is defined in the
JDOA.
"Combined Fields" shall mean Field A, Field B and Field C.
"Compounds" shall mean the Field A Compound, the Field B Compound
and/or the Field C Compound.
"Confidential Information" shall have the meaning, as such term is
defined in Clause 9.
"Definitive Documents" shall mean the definitive agreements relating to
the transaction including finance, stock purchase, research and license
agreements.
"Elan" shall mean EPIL and Affiliates and subsidiaries of Elan
Corporation, Plc. within the division of Elan Corporation, Plc.
carrying on business as Elan Pharmaceutical Technologies but shall not
include Affiliates and subsidiaries (present or future) of Elan
Corporation Plc within the division of Elan Corporation, Plc carrying
on business as Elan Pharmaceuticals which incorporates, inter alia,
Targon Corporation, Athena Neurosciences, Inc., Elan Pharmaceuticals,
Inc., Elan Diagnostics, Carnrick Laboratories, and Elan Europe Limited.
"EIS" shall mean Elan International Services, Limited, a private
limited company incorporated under the laws of Bermuda and having its
registered office at St James Court, Flatts, Smiths, FL04 Bermuda.
"Effective Date" shall mean the date of this Agreement.
"Elan Intellectual Property" shall mean the Elan Know-How, the Elan
Patents and the Elan Improvements, as such terms are defined in the
Elan License Agreement.
"Elan Patents" shall have the meaning as such term is defined in the
Elan License Agreement.
"Elan Improvements" shall have the meaning as such term is defined in
the Elan License Agreement.
"Elan Licenses" shall have the meaning set forth in Clause 2.1 of the
Elan License Agreement.
"Elan License Agreement" shall mean that certain license agreement, of
even date herewith, entered into between Elan and Newco.
"Field A" shall mean the topical pulmonary delivery of Formulations of
the Field A Compound by means of the Field A Device.
"Field B" shall mean the topical pulmonary delivery of Formulations of
the Field B Compound by means of the Field B Device.
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"Field C" shall mean the topical pulmonary delivery of Formulations of
the Field C Compound by means of the Field C Device.
"Field A Device" shall mean a third party table top unit dose nebulizer
having a reservoir capable of holding a unit dose (a device and the
compressor to nebulize a unit dose shall be deemed a device), which is
a device having any one the following characteristics:
(i) [REDACTED]
(ii) [REDACTED]
(iii) [REDACTED]
(iv) [REDACTED]
(v) [REDACTED]
For the avoidance of doubt, the Field A Device does not include
[REDACTED].
"Field B Device" shall mean the Aerosol Drug Delivery System ("ADDS"),
owned by Systemic Pulmonary Delivery Limited and exclusively licensed
to Sheffield for topical pulmonary applications.
"Field C Device" shall mean the handheld multi-dose nebulizer ("MSI")
which was licensed exclusively by Siemens to Sheffield pursuant to the
Siemens Agreements and which was subsequently sub-licensed by Sheffield
to Zambon (on an exclusive basis for delivery of various medicines for
humans in treating respiratory disease and/or other lung diseases
including, but not limited to, anti-infectives) provided that Newco,
through the Management Committee, is successful in obtaining a
sub-license from Zambon to Newco enabling the development and use of
the Field C Compound for use with the Field C Device , as described in
more detail in Clause 2.2.
"Field A Compound" shall mean [REDACTED].
"Field B Compound" shall mean [REDACTED] for therapeutic use to be
nominated by the Management Committee pursuant to the JDOA and with
reference to the JDOA, any Substitute Field B Compound.
"Field C Compound" shall mean [REDACTED] and with reference to the
JDOA, any Substitute Field C Compound and/or any Additional Field C
Compound.
"Financial Year" shall mean each year commencing on 1 January (or in
the case of the first Financial Year, the Effective Date) and expiring
on 31 December of each year.
"Formulations" shall mean Nanocrystal(TM) Technology formulations of
Compounds for use in Field A, Field B or Field C, as applicable.
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"JDOA" shall mean that certain joint development and operating
agreement, of even date herewith, by and between Elan, Sheffield, EIS
and Newco.
"Licensed Technologies" shall mean the Elan Intellectual Property and
the Sheffield Intellectual Property.
"Licenses" shall mean the Elan License and the Sheffield License.
"Management Committee" shall have the meaning, as such term is defined
in the JDOA.
"Nanocrystal(TM) Technology" shall mean the Elan proprietary technology
directed to nanoparticulate formulations of compounds used in the
manufacturing and/or formulation process, and methods of making the
same.
"Newco Intellectual Property" shall mean all rights to patents,
know-how and other intellectual property arising out of the conduct of
the Project by any person, including any technology acquired by Newco
from a third party, that does not constitute Elan Intellectual Property
or Sheffield Intellectual Property.
"Newco Patents" shall mean any and all patents now existing, currently
pending or hereafter filed or obtained relating to the Newco
Intellectual Property, and any foreign counterparts thereof and all
divisionals, continuations, continuations-in-part, any foreign
counterparts thereof and all patents issuing on, any of the foregoing,
together with all registrations, reissues, re-examinations or
extensions thereof.
"Party" shall mean Sheffield or Newco, as the case may be, and
"Parties" shall mean Sheffield and Newco.
"Products" shall mean the Field A Products, the Field B Products and/or
the Field C Products, as follows:
"Field A Products" shall mean Formulations of the Field A Compound
delivered by means of any Field A Device in Field A.
"Field B Products" shall mean Formulations of the Field B Compound
delivered by means of the Field B Device in Field B.
"Field C Products" shall mean Formulations of the Field C Compound
delivered by means of the Field C Device in Field C.
"Project" shall mean all activities as undertaken by Elan, Sheffield
and Newco in order to develop the Products.
"R&D Committee" shall have the meaning, as such term is defined in the
JDOA.
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"R&D Plan" shall have the meaning, as such term is defined in the JDOA.
"R&D Program" shall mean any research and development program commenced
by Newco pursuant to the Project.
"Sheffield" shall mean Sheffield Pharmaceuticals, Inc and its
Affiliates, excluding Newco.
"Sheffield Devices" shall mean the Field B Device and the Field C
Device.
"Sheffield Intellectual Property" shall mean the Sheffield Know-How,
the Sheffield Patents and the Sheffield Improvements.
"Sheffield Know-How" shall mean any and all rights owned, licensed or
controlled by Sheffield to any discovery, invention (whether patentable
or not), know-how, substances, data, techniques, processes, systems,
formulations and designs relating exclusively to the Sheffield Devices.
"Sheffield Licenses" shall have the meaning set forth in Clause 2.1.
"Sheffield Patents" shall mean any and all rights under any and all
patents applications and/or patents, now existing, currently pending or
hereafter filed or obtained by Sheffield relating to the Sheffield
Devices and all divisionals, continuations, continuations-in-part, any
foreign counterparts thereof and all patents issuing on, any of the
foregoing, together with all registrations, reissues, re-examinations
or extensions thereof.
"Sheffield Improvements" shall mean improvements relating to the
Sheffield Patents and/or the Sheffield Know-How, developed (i) by
Sheffield whether or not pursuant to the Project, (ii) by Newco or Elan
or by a third party (under contract with Newco) whether or not pursuant
to the Project, and/or (iii) jointly by any combination of Sheffield,
Elan or Newco pursuant to the Project, except as limited by agreements
with third Parties.
Subject to third party agreements, Sheffield Improvements shall
constitute part of Sheffield Intellectual Property and be included in
the license of the Sheffield Intellectual Property pursuant to Clause
2.1 solely for the purposes set forth therein. If the inclusion of a
Sheffield Improvement in the license of Sheffield Intellectual Property
is restricted or limited by a third party agreement, Sheffield shall
use reasonable commercial efforts to minimize any such restriction or
limitation.
"Siemens" shall mean Siemens Aktiengesellschaft.
"Siemens Agreements" shall mean the License Agreement dated 21 March
1997 and the Basic Supply Agreement dated 21 March 1997, both between
Sheffield Medical Technologies Inc. and Siemens Aktiengesellschaft.
"Technological Competitor of Sheffield" shall mean a company,
corporation or person listed in Schedule 1 and successors thereof or
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any additional broad-based technological competitor of Sheffield added
to such Schedule 1 from time to time upon mutual agreement of the
Parties.
"Term" shall have the meaning set forth in Clause 8.
"Territory" shall mean all the countries of the world.
"United States Dollar" and "US$" shall mean the lawful currency for the
time being of the United States of America.
"Zambon" shall mean Inpharzam International, S.A.
"Zambon Agreement" shall mean the agreement dated 15 June 1998 between
Sheffield and Zambon.
1.2 In this Agreement:
1.2.1 The singular includes the plural and vice versa, and the
masculine includes the feminine and vice versa and the neuter
includes the masculine and the feminine.
1.2.2 Any reference to a Clause or Schedule shall, unless otherwise
specifically provided, be to a Clause or Schedule of this
Agreement.
1.2.3 The headings of this Agreement are for ease of reference only
and shall not affect its construction or interpretation.
2. SHEFFIELD LICENSE TO NEWCO
2.1. Sheffield hereby grants to Newco for the Term the following licenses:
2.1.1 a non-exclusive license (including the right to grant
sublicenses subject to the limitations of Clause 2.7) of the
Sheffield Intellectual Property solely to make, have made,
import, use, offer for sale and sell the Field B Products in
the Territory in Field B;
2.1.2 subject to the execution by Newco of a written sub-license
with Zambon as more fully described in Clause 2.2 for the
development by Newco of the Field C Formulations in accordance
with Clause 2.2, a non-exclusive license (including the right
to grant sublicenses subject to the limitations of Clause 2.7
and the Zambon Agreement) of the Sheffield Intellectual
Property solely to make and have made, import, use, offer for
sale and sell the Field C Products in the Territory in Field C
(the "Sheffield Licenses").
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2.2 On the date which is [REDACTED] days following the Effective Date, or
such extended date as may be agreed in writing by Elan and Newco
pursuant to Clause 2.2 of the Elan License Agreement, Sheffield shall,
at its sole discretion, be entitled forthwith to terminate the license
to Newco described in Clause 2.1.2, upon notice in writing to Newco, in
the event that Newco has not, prior to such date, executed a written
sub-license with Zambon for the development by Newco of the Field C
Formulations in Field C.
Sheffield shall use reasonable commercial efforts to procure that
Zambon executes such written sub-license with Newco in a timely manner
and in any event within 180 days following the Effective Date, or such
extended date as may be agreed in writing by Elan and Newco pursuant to
Clause 2.2 of the Elan License Agreement.
Such written sub-license will be subject to the approval of the
Management Committee and will include authority from Zambon to Newco to
the extent necessary for Newco to develop, make, have made and use the
Field C Formulations in the Territory, general financial terms,
development schedule, and terms governing the funding by Zambon of any
R&D Program(s) in Field C, together with such other substantive issues
as the Management Committee shall deem appropriate and customary terms.
For the avoidance of doubt, to the extent royalty or other compensation
obligations are payable to Zambon in respect of any license or
sub-license from Zambon to Newco of intellectual property rights
necessary for Newco to develop, make, have made and use the Field C
Formulations in the Territory, Sheffield shall be responsible for same
and shall indemnify Newco in respect of any such royalty or other
compensation obligations payable to Zambon.
2.3 Sheffield shall be responsible for payments related to the financial
provisions and obligations of any third party agreement with respect to
the Sheffield Intellectual Property to which it is a party on the
Effective Date (including amendments thereto) (the "Sheffield Effective
Date Agreements"), including without limitation, any royalty or other
compensation obligations triggered thereunder on the Effective Date, or
triggered thereunder after the Effective Date.
For the avoidance of doubt, royalties, milestones or other payments
which arise from the process of the commercialization or exploitation
of products under the Sheffield Effective Date Agreements (for example,
a milestone payment payable upon successful completion of Phase II
clinical trials, the filing of an NDA application, obtaining NDA
approval, or first commercial sale) shall be payments for which
Sheffield will be responsible under this Clause 2.1.
2.4 Subject to Sheffield's obligations and indemnity set forth in Clause
2.2 to the extent royalty or other compensation obligations are payable
to Zambon in respect of any license or sub-license from Zambon to Newco
of intellectual property rights necessary for Newco to develop, make,
have made and use the Field C Formulations in the Territory, to the
extent royalty or other compensation obligations that are payable to
third parties with respect to the Sheffield Intellectual Property would
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be triggered after the Effective Date under any third party agreement
entered into by Sheffield after the Effective Date (the "Sheffield
Post-Effective Date Agreements"), by a proposed use of such Sheffield
Intellectual Property in connection with the Project, Sheffield will
inform Newco of such royalty or compensation obligations. If Newco
agrees to utilise such Sheffield Intellectual Property in connection
with the Project, Newco will be responsible for the payment of such
royalty or other compensation obligations relating thereto.
For the avoidance of doubt, royalties, milestones or other payments
which arise from the process of the commercialization or exploitation
of products under the Sheffield Post-Effective Date Agreements (for
example, a milestone payment payable upon successful completion of
Phase II clinical trials, the filing of an NDA application, obtaining
NDA approval, or first commercial sale) shall be payments for which
Newco will be responsible under this Clause 2.4.
2.5 Elan shall be a third party beneficiary under this Agreement and shall
have the right to cause Newco to enforce Newco's rights under this
Agreement against Sheffield.
2.6 Notwithstanding anything contained in this Agreement to the contrary,
Sheffield shall have the right outside the Field B and Field C and
subject to the non-competition provisions of Clause 4 to exploit and
grant licenses and sublicenses of the Sheffield Intellectual Property.
For the avoidance of doubt, Newco shall have no right to use the
Sheffield Intellectual Property outside Field B or Field C.
2.7 Newco shall not be permitted to assign or sublicense any of its rights
under the Sheffield Intellectual Property without the prior written
consent of Sheffield, which consent shall not be unreasonably withheld
or delayed provided that Sheffield shall in all cases, in its sole
discretion, be entitled to withhold its consent in the case of a
proposed sublicense to any Technological Competitor to Sheffield.
2.8 Any agreement between Newco and any permitted third party for the
development or exploitation of the Sheffield Intellectual Property
shall require such third party to maintain the confidentiality of all
information concerning the Sheffield Intellectual Property.
Insofar as the obligations owed by Newco to Sheffield are concerned,
Newco shall remain responsible for all acts and omissions of any
permitted sub-licensee, including Elan, as if they were acts and
omissions by Newco.
3 INTELLECTUAL PROPERTY
3.1 Ownership of Intellectual Property:
3.1.1 Newco shall own the Newco Intellectual Property.
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3.1.2 Sheffield shall own the Sheffield Intellectual Property.
3.2 Trademarks:
3.2.1 Sheffield hereby grants to Newco for the Term a non-exclusive,
royalty free license in the Territory to use and display the
Sheffield Trademarks to promote, offer for sale and sell the
Products in Field B in the Territory and the following
provisions shall apply as regards the use of the Sheffield
Trademarks by Newco hereunder:
(1) Newco shall ensure that each reference to and use of an
Sheffield Trademark by Newco is in a manner approved by
Sheffield and accompanied by an acknowledgement, in a
form approved by Sheffield, that the same is a trademark
(or registered trademark) of Sheffield.
From time to time, upon the reasonable request of
Sheffield, Newco shall submit samples of the Product to
Sheffield or its duly appointed agent to ensure
compliance with quality standards and specifications.
Sheffield, or its duly appointed agent, shall have the
right to inspect the premises of Newco where the
Products are manufactured, held or stored, and Newco
shall permit such inspection, upon advance notice at any
reasonable time, of the methods and procedures used in
the manufacture, storage and sale of the Product. Newco
shall not sell or otherwise dispose of any Product under
the Sheffield Trademarks that fails to comply with the
quality standards and specifications referred to in this
Clause 3.2, as determined by Sheffield.
(2) Newco shall not use an Sheffield Trademark in any way
which might materially prejudice its distinctiveness or
validity or the goodwill of Sheffield therein.
(3) The parties recognize that the Sheffield Trademarks have
considerable goodwill associated therewith. Newco shall
not use in relation to the Products any trademarks other
than the Sheffield Trademarks (except the Elan
Trademarks (as defined in the Elan License Agreement)
licensed to Newco under the Elan License Agreement)
without obtaining the prior consent in writing of
Sheffield, which consent may not be unreasonably
withheld. However, such use must not conflict with the
use and display of the Sheffield Trademark and such use
and display must be approved by Sheffield.
(4) Newco shall not use in the Territory any trademarks or
trade names so resembling the Sheffield Trademark as to
be likely to cause confusion or deception.
(5) Newco shall promptly notify Sheffield in writing of any
alleged infringement or unauthorised use of which it
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becomes aware by a third party of the Sheffield
Trademarks and provide Sheffield with any applicable
evidence of infringement or unauthorised use.
(6) Newco shall not be permitted to assign or sublicense any
of its rights under the Sheffield Trademarks without the
prior written consent of Sheffield, which consent shall
not be unreasonably withheld or delayed.
3.2.2 Sheffield shall, at its expense and sole discretion, file and
prosecute applications to register and maintain registrations
of the Sheffield Trademarks in the Territory. Newco shall
reasonably co-operate with Sheffield in such efforts. In the
event Sheffield decides not to file or prosecute such
Sheffield Trademark, Newco may request Sheffield to do the
same at Newco's expense, and Sheffield shall file or prosecute
such Sheffield Trademark at Newco's request and expense unless
Sheffield believes such action is without merit.
3.2.3 Sheffield will be entitled to conduct all enforcement
proceedings relating to the Sheffield Trademarks and shall at
its sole discretion decide what action, if any, to take in
respect to any enforcement proceedings of the Sheffield
Trademarks or any other claim or counter-claim brought in
respect to the use or registration of the Sheffield
Trademarks. Any such proceedings shall be conducted at
Sheffield's expense and for its own benefit. Newco and
Sheffield shall reasonably cooperate with Sheffield in such
efforts. In the event Sheffield decides not to engage in
enforcement proceedings of the Sheffield Trademarks, Newco may
request Sheffield to do the same at Newco's expense unless
Sheffield believes the basis for such enforcement proceedings
is without merit. In such a case, Sheffield shall have the
sole discretion not to engage in any such enforcement
proceedings
3.2.4 Save where Newco adopts its own mark under Clause 3.2.4, in
the event Newco becomes aware that any Sheffield Trademark has
been challenged by a third party in a judicial or
administrative proceeding in a country in the Territory as
infringing on the rights of a third party Newco shall promptly
notify Sheffield in writing and Sheffield shall have the first
right to decide whether or not to defend such allegations, or
to adopt an alternative mark, or allow Newco to adopt an
alternative mark. If Sheffield decides not defend the
Sheffield Trademark, then Newco may request Sheffield to
defend the Sheffield Trademark, at Newco's expense, unless
such requested defense is reasonably believed by Sheffield to
be unsubstantiated and without merit. In such a case,
Sheffield may elect not to initiate defence proceedings.
3.2.5 Newco will have no ownership rights in respect of the
Sheffield Trademarks or of the goodwill associated therewith,
and Newco hereby acknowledges that, except as expressly
provided in this Agreement, it shall not acquire any rights in
respect thereof and that all such rights and goodwill are, and
will remain, vested in Sheffield.
3.2.6 Nothing in this Agreement shall be construed as a warranty on
the part of Sheffield regarding the Sheffield Trademarks,
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including without limitation, that use of the Sheffield
Trademarks in the Territory will not infringe the rights of
any third parties. Accordingly, Newco acknowledges and agrees
that Sheffield makes no such warranty.
3.2.7 Sheffield assumes no liability to Newco or to any third
parties with respect to the quality, performance or
characteristics of any of the goods manufactured or sold by
Newco under the Sheffield Trademarks pursuant to this
Agreement.
4 NON-COMPETITION/AFTER ACQUIRED TECHNOLOGY
4.1 Subject to Clause 4.2 and Clause 8.6, during the period during which
the license described in Clause 2.1.1 of the Elan License Agreement has
not been terminated, Sheffield shall not, alone or in conjunction with
a third party, develop or commercialize any unit dose steroid listed in
Schedule 2 for topical pulmonary delivery using a Field A Device,
subject to written agreements between Sheffield and unaffiliated third
parties in effect on the Effective Date.
Sheffield hereby confirms that no such agreements are in effect on the
date hereof between Sheffield and an unaffiliated third party.
4.2 If, after the Effective Date, Sheffield acquires know-how or patent
rights relating to the Field A, Field B or Field C (in the case of
Field C, subject to the Zambon Agreement), or acquires or merges with a
third party entity that has know-how or patent rights relating to the
Field A, Field B or Field C (in the case of Field C, subject to the
Zambon Agreement), Sheffield shall offer to license such know-how and
patent rights to Newco (subject to existing contractual obligations),
on commercially reasonable terms on an arm's length basis for a
reasonable period under the prevailing circumstances.
If Newco determines that Newco should not acquire such license,
Sheffield shall be free to fully exploit such know-how and patent
rights with the Sheffield Intellectual Property then licensed to Newco,
whether inside or outside the Field A, Field B or Field C, as
applicable, and to grant to third parties licenses and sublicenses with
respect thereto.
5 FINANCIAL PROVISIONS
5.1 Royalties:
Prior to the commercialization of the Products, the Management
Committee shall consider and if appropriate, determine reasonable
royalties with respect to the commercialization of the Products by
Newco that shall be payable by Newco to Elan and Sheffield, and shared
by Elan and Sheffield equally.
At such time, the Management Committee will agree an appropriate
definition of "Net Sales" as such term is used in this Agreement.
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5.2 Payment of any royalties pursuant to Clause 5.1 shall be made quarterly
in arrears during each Financial Year within 30 days after the expiry
of the calendar quarter. The method of payment shall be by wire
transfer to an account specified by Sheffield. Each payment made to
Sheffield shall be accompanied by a true accounting of all Products
sold by Newco's permitted sublicensees, if any, during such quarter.
Such accounting shall show, on a country-by-country and
Product-by-Product basis, Net Sales (and the calculation thereof) and
each calculation of royalties with respect thereto, including the
calculation of all adjustments and currency conversions.
5.3 Newco shall maintain and keep clear, detailed, complete, accurate and
separate records for a period of 3 years:
5.3.1 to enable any royalties on Net Sales that shall have accrued
hereunder to be determined; and
5.3.2 to enable any deductions made in the Net Sales calculation to
be determined.
5.4 All payments due hereunder shall be made in United States Dollars.
Payments due on Net Sales of any Product for each calendar quarter made
in a currency other than United States Dollars shall first be
calculated in the foreign currency and then converted to United States
Dollars on the basis of the exchange rate in effect on the last working
day for such quarter for the purchase of United States Dollars with
such foreign currency quoted in the Wall Street Journal (or comparable
publication if not quoted in the Wall Street Journal) with respect to
the currency of the country of origin of such payment, determined by
averaging the rates so quoted on each business day of such quarter.
5.5 If, at any time, legal restrictions in the Territory prevent the prompt
payment when due of royalties or any portion thereof, the Parties shall
meet to discuss suitable and reasonable alternative methods of paying
Sheffield the amount of such royalties. In the event that Newco is
prevented from making any payment under this Agreement by virtue of the
statutes, laws, codes or government regulations of the country from
which the payment is to be made, then such payments may be paid by
depositing them in the currency in which they accrue to Sheffield's
account in a bank acceptable to Sheffield in the country the currency
of which is involved or as otherwise agreed by the Parties.
5.6 Sheffield and Newco agree to co-operate in all respects necessary to
take advantage of any double taxation agreements or similar agreements
as may, from time to time, be available.
5.7 Any taxes payable by Sheffield on any payment made to Sheffield
pursuant to this Agreement shall be for the account of Sheffield. If so
required by applicable law, any payment made pursuant to this Agreement
shall be made by Newco after deduction of the appropriate withholding
tax, in which event the Parties shall co-operate to obtain the
appropriate tax clearance as soon as is practicable. On receipt of such
clearance, Newco shall forthwith arrange payment to Sheffield of the
amount so withheld.
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6 RIGHT OF INSPECTION AND AUDIT
6.1 Once during each Financial Year, or more often not to exceed quarterly
as reasonably requested by Sheffield, Newco shall permit Sheffield or
its duly authorised representatives, upon reasonable notice and at any
reasonable time during normal business hours, to have access to inspect
and audit the accounts and records of Newco and any other book, record,
voucher, receipt or invoice relating to the calculation of the royalty
payments on Net Sales submitted to Sheffield.
Any such inspection of Newco's records shall be at the expense of
Sheffield, except that if any such inspection reveals a deficiency in
the amount of the royalty actually paid to Sheffield hereunder in any
Financial Year quarter of [REDACTED] or more of the amount of any
royalty actually due to Sheffield hereunder, then the expense of such
inspection shall be borne solely by Newco. Any amount of deficiency
shall be paid promptly to Sheffield by Newco.
If such inspection reveals a surplus in the amount of royalties
actually paid to Sheffield by Newco, Sheffield shall reimburse Newco
the surplus within 15 days after determination.
6.2 In the event of any unresolved dispute regarding any alleged deficiency
or overpayment of royalty payments hereunder, the matter will be
referred to an independent firm of chartered accountants chosen by
agreement of Sheffield and Elan for a resolution of such dispute. Any
decision by the said firm of chartered accountants shall be binding on
the Parties.
7 REPRESENTATIONS AND WARRANTIES
7.1 Sheffield represents and warrants to Newco and Elan, as of the
Effective Date, as follows:
7.1.1 Sheffield has the right to grant the Sheffield Licenses
subject to the Zambon Agreement in the case of the license
described in Clause 2.1.2;
7.1.2 there are no agreements with any third parties that conflict
with the Sheffield Licenses.
7.2 Sheffield further agrees and represents and warrants to Newco and Elan
as follows:
7.2.1 as of the Effective Date, each of the Siemens Agreements is
valid and in full force and effect;
7.2.2 as of the Effective Date, there are no existing or claimed
defaults by Sheffield, and to Sheffield's best knowledge by
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any other party, under any of the Siemens Agreements and no
event, act or omission has occurred which (with or without
notice, lapse of time or the happening or occurrence of any
other event) would result in a default under the Siemens
Agreements by Sheffield, or to Sheffield's best knowledge by
any other party;
7.2.3 during the Term, Sheffield will fully comply with all of the
terms and conditions of the Siemens Agreements. Sheffield will
enforce its rights under the Siemens Agreements and save with
the prior approval in writing of the Management Committee
which shall not unreasonably be withheld, Sheffield will not
assign its rights under the Siemens Agreements; and
7.2.4 during the Term, Sheffield will keep Newco and Elan fully
informed with respect to Sheffield's transactions,
arrangements and business under the Siemens Agreements that
relate to Newco and/or the transactions contemplated
hereunder, and Sheffield shall provide Newco and Elan with any
written notices delivered by any party thereunder that relate
to Newco and/or the transactions contemplated hereunder, or
that may affect Newco.
7.3 During the Term, Sheffield shall not terminate, amend, modify, or waive
any of its rights under the Siemens Agreements without the prior
written consent of the Management Committee (by the unanimous vote of
its members) provided, however, that such consent will not be required
if such termination, amendment, modification, or waiver would not have
a material adverse effect, individually or in the aggregate, on the
financial condition, results of operation, business and/or assets of
Newco.
7.4 Sheffield shall indemnify Newco and Elan against all costs claims and
liabilities which may arise in any way in relation to or in connection
with the Siemens Agreements and/or any sub-license agreement or
agreements entered into by Newco pursuant to Clause 2.2.
7.5 In addition to any other indemnities provided for herein, Sheffield
shall indemnify and hold harmless Newco and its Affiliates and their
respective employees, agents, officers and directors from and against
any claims, losses, liabilities or damages (including reasonable
attorney's fees and expenses) incurred or sustained by Newco arising
out of or in connection with any:
7.5.1 breach of any representation, covenant, warranty or obligation
by Sheffield hereunder; or
7.5.2 act or omission on the part of Sheffield or any of its
respective employees, agents, officers and directors in the
performance of this Agreement.
7.6 In addition to any other indemnities provided for herein, Newco shall
indemnify and hold harmless Sheffield and its Affiliates and their
respective employees, agents, officers and directors from and against
any claims, losses, liabilities or damages (including reasonable
attorney's fees and expenses) incurred or sustained by Sheffield
arising out of or in connection with any:
16
<PAGE>
7.6.1 breach of any representation, covenant, warranty or obligation
by Newco hereunder; or
7.6.2 act or omission on the part of Newco or any of its agents or
employees in the performance of this Agreement.
7.7 The Party seeking an indemnity shall:
7.7.1 fully and promptly notify the other Party of any claim or
proceeding, or threatened claim or proceeding;
7.7.2 permit the indemnifying Party to take full care and control of
such claim or proceeding;
7.7.3 co-operate in the investigation and defence of such claim or
proceeding;
7.7.4 not compromise or otherwise settle any such claim or
proceeding without the prior written consent of the other
Party, which consent shall not be unreasonably withheld
conditioned or delayed; and
7.7.5 take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceeding.
7.8 EXCEPT AS SET FORTH IN THIS CLAUSE 7, SHEFFIELD IS GRANTING THE
LICENSES HEREUNDER ON AN "AS IS" BASIS WITHOUT REPRESENTATION OR
WARRANTY WHETHER EXPRESS OR IMPLIED INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR INFRINGEMENT OF
THIRD PARTY RIGHTS, AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.
7.9 EXCEPT AS SET FORTH IN CLAUSE 7.4, NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, SHEFFIELD AND NEWCO SHALL NOT BE LIABLE TO
THE OTHER BY REASON OF ANY REPRESENTATION OR WARRANTY, CONDITION OR
OTHER TERM OR ANY DUTY OF COMMON LAW, OR UNDER THE EXPRESS TERMS OF
THIS AGREEMENT, FOR ANY CONSEQUENTIAL, SPECIAL OR INCIDENTAL OR
PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF PROFITS OR OTHERWISE) AND
WHETHER OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR
EMPLOYEES OR AGENTS OR OTHERWISE.
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8. TERM AND TERMINATION
8.1 The term of this Agreement shall commence as of the Effective Date and
shall, subject to the rights of termination outlined in this Clauses 8,
expire on a Product-by-Product basis and on a country-by-country basis
on the last to occur of:
8.1.1 [REDACTED] years starting from the date of the first
commercial sale of the Product in the country concerned; or
8.1.2 the date of expiration of the last to expire of the patents
included in the Elan Patents and/or the Elan Improvements
and/or the Sheffield Patents and/or the Elan Improvements that
relate to the Product.
("the Term")
8.2 If either Party commits a Relevant Event, the other Party shall have,
in addition to all other legal and equitable rights and remedies
hereunder, the right to terminate this Agreement upon 30 days' prior
written notice to the defaulting Party.
8.3 For the purpose of this Clause 8, a "Relevant Event" is committed or
suffered by a Party if:
8.3.1 [REDACTED]
8.3.2 [REDACTED]
8.3.3 [REDACTED]
8.3.4 [REDACTED]
8.3.5 [REDACTED]
8.3.6 [REDACTED]
18
<PAGE>
8.4 Sheffield shall be entitled to forthwith terminate this Agreement if
Elan elects to terminate the Elan License Agreement under Clause 8.4 of
the Elan License Agreement.
8.5 Upon expiration or termination of the Agreement:
8.5.1. any sums that were due from Newco to Sheffield on Net Sales in
the Territory or in such particular country or countries in
the Territory (as the case may be) prior to the expiration or
termination of this Agreement as set forth herein shall be
paid in full within 60 days after the expiration or
termination of this Agreement for the Territory or for such
particular country or countries in the Territory (as the case
may be);
8.5.2 any provisions that expressly survive termination or
expiration of this Agreement, including without limitation
this Clause 8, shall remain in full force and effect;
8.5.3 all representations, warranties and indemnities shall insofar
as are appropriate remain in full force and effect;
8.5.4 the rights of inspection and audit set out in Clause 6 shall
continue in force for a period of one year; and
8.5.5 all rights and licenses granted pursuant to this Agreement and
to the Sheffield Intellectual Property pursuant to the JDOA
(including the rights of Newco pursuant to Clause 11 of the
JDOA) shall cease for the Territory or for such particular
country or countries in the Territory (as the case may be) and
shall revert to or be transferred to Sheffield, and Newco
shall not thereafter use in the Territory or in such
particular country or countries in the Territory (as the case
may be) any rights covered by this Agreement;
8.5.6 subject to Clause 8.5.7 and to such license, if any, granted
by Newco to Sheffield pursuant to the provisions of Clause 12
of the JDOA, all rights to Newco Intellectual Property shall
be transferred to and jointly owned by Sheffield and Elan and
may only be exploited by either Elan or Sheffield with the
consent of the other Party pursuant to a written agreement to
be negotiated in good faith;
8.5.7 the rights of permitted third party sub-licensees in and to
the Sheffield Intellectual Property shall survive the
termination of the license and sublicense agreements granting
said intellectual property rights to Newco; and Newco, Elan
and Sheffield shall in good faith agree upon the form most
advantageous to Elan and Sheffield in which the rights of
Newco under any such licenses and sublicenses are to be held
(which form may include continuation of Newco solely as the
holder of such licenses or assignment of such rights to a
third party or parties, including an assignment to both Elan
and Sheffield).
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Any sublicense agreement between Newco and such permitted
sublicensee shall permit an assignment of rights by Newco and
shall contain appropriate confidentiality provisions.
8.6 In the event that the Parties and Elan mutually agree to terminate the
portion of the Project (as defined in the JDOA) which relates to Field
A, the provisions of Clause 4.1 and the provisions of Clause 4.2
(insofar as the provisions of Clause 4.2 relate to Field A) shall
automatically terminate.
9 CONFIDENTIAL INFORMATION
9.1 The Parties agree that it will be necessary, from time to time, to
disclose to each other confidential and proprietary information,
including without limitation, inventions, works of authorship, trade
secrets, specifications, designs, data, know-how and other proprietary
information relating to the Combined Fields, the Products, processes,
services and business of the disclosing Party.
The foregoing shall be referred to collectively as "Confidential
Information".
9.2 Any Confidential Information disclosed by one Party to another Party
shall be used by the receiving Party exclusively for the purposes of
fulfilling the receiving Party's obligations under this Agreement and
the JDOA and for no other purpose.
9.3 Each Party shall disclose Confidential Information of the other Party
only to those employees, representatives and agents requiring knowledge
thereof in connection with fulfilling the Party's obligations under
this Agreement. Each Party further agrees to inform all such employees,
representatives and agents of the terms and provisions of this
Agreement and their duties hereunder and to obtain their agreement
hereto as a condition of receiving Confidential Information. Each Party
shall exercise the same standard of care as it would itself exercise in
relation to its own confidential information (but in no event less than
a reasonable standard of care) to protect and preserve the proprietary
and confidential nature of the Confidential Information disclosed to it
by the other Party. Each Party shall, upon request of the other Party,
return all documents and any copies thereof containing Confidential
Information belonging to, or disclosed by, such other Party.
9.4 Any breach of this Clause 9 by any person informed by one of the
Parties is considered a breach by the Party itself.
9.5 Confidential Information shall not be deemed to include:
9.5.1 information that is in the public domain;
9.5.2 information which is made public through no breach of this
Agreement;
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9.5.3 information which is independently developed by a Party as
evidenced by such Party's records;
9.5.4 information that becomes available to a Party on a
non-confidential basis, whether directly or indirectly, from a
source other than a Party, which source did not acquire this
information on a confidential basis; or
9.5.5 information which the receiving Party is required to disclose
pursuant to:
(i) a valid order of a court or other governmental body; or
(ii) any other requirement of law;
provided that if the receiving Party becomes legally required
to disclose any Confidential Information, the receiving Party
shall give the disclosing Party prompt notice of such fact so
that the disclosing Party may obtain a protective order or
other appropriate remedy concerning any such disclosure. The
receiving Party shall fully co-operate with the disclosing
Party in connection with the disclosing Party's efforts to
obtain any such order or other remedy. If any such order or
other remedy does not fully preclude disclosure, the receiving
Party shall make such disclosure only to the extent that such
disclosure is legally required.
9.6 The provisions relating to confidentiality in this Clause 9 shall
remain in effect during the term of this Agreement, and for a period of
7 years following the expiration or earlier termination of this
Agreement.
9.7 The Parties agree that the obligations of this Clause 9 are necessary
and reasonable in order to protect the Parties' respective businesses,
and each Party agrees that monetary damages would be inadequate to
compensate a Party for any breach by the other Party of its covenants
and agreements set forth herein.
Accordingly, the Parties agree that any such violation or threatened
violation shall cause irreparable injury to a Party and that, in
addition to any other remedies that may be available, in law and equity
or otherwise, each Party shall be entitled to obtain injunctive relief
against the threatened breach of the provisions of this Clause 9, or a
continuation of any such breach by the other Party, specific
performance and other equitable relief to redress such breach together
with its damages and reasonable counsel fees and expenses to enforce
its rights hereunder, without the necessity of proving actual or
express damages.
10 GOVERNING LAW AND JURISDICTION
10.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
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10.2 The Parties will attempt in good faith to resolve any dispute arising
out of or relating to this Agreement promptly by negotiation between
executives of the Parties. In the event that such negotiations do not
result in a mutually acceptable resolution, the Parties agree to
consider other dispute resolution mechanisms including mediation.
In the event that the Parties fail to agree on a mutually acceptable
dispute resolution mechanism, any such dispute shall be finally settled
by the courts of competent jurisdiction. For the purposes of this
Agreement the parties submit to the non-exclusive jurisdiction of the
courts of the State of New York.
11 IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
Neither Sheffield nor Newco shall be liable for delay in the
performance of any of its obligations hereunder if such delay results
from causes beyond its reasonable control, including, without
limitation, acts of God, fires, strikes, acts of war, intervention of a
government authority, but any such delay or failure shall be remedied
by such Party as soon as practicable.
12 ASSIGNMENT
This Agreement may not be assigned by either Party without the prior
written consent of the other, save that either Party may assign this
Agreement to its Affiliates or subsidiaries without such prior written
consent provided that such assignment does not have any adverse tax
consequences on the other Party.
13 NOTICES
13.1 Any notice to be given under this Agreement shall be sent in writing in
English by registered airmail or telefaxed to the following addresses:
If to Newco at:
102 St. James Court
Flatts,
Smiths FL04
Bermuda
Attention: Secretary
Telephone: 441 292 9169
Fax: 441 292 2224
with a copy to Elan and Sheffield at the addresses listed below:
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If to Sheffield at:
Sheffield Pharmaceuticals, Inc.
425 S. Woodsmill Road
Suite 270
St Louis
MO 63017
USA.
Attn: Chief Executive Officer
Telephone 001 314 579 9899
Fax: 001 314 579 9799
with a copy to:
Daniel Gallagher, Esq.
Olshan, Grundman, Trome
Rosenzeig, LLP
505 Park Avenue
New York, NY 10022
Telephone 002 212 753 7200
Fax: 001 212 935 1787
If to Elan at:
Elan Corporation, plc
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
Telefax: + 353 1 709 4124
or to such other address(es) and telefax numbers as may from time to
time be notified by either Party to the other hereunder.
13.2 Any notice sent by mail shall be deemed to have been delivered within
seven 7 working days after dispatch and any notice sent by telex or
telefax shall be deemed to have been delivered within twenty 24 hours
of the time of the dispatch. Notice of change of address shall be
effective upon receipt.
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14 MISCELLANEOUS
14.1 Waiver:
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any other breach or failure to perform or of
any other right arising under this Agreement.
14.2 Severability:
If any provision in this Agreement is agreed by the Parties to be, or
is deemed to be, or becomes invalid, illegal, void or unenforceable
under any law that is applicable hereto:
14.2.1 such provision will be deemed amended to conform to applicable
laws so as to be valid and enforceable; or
14.2.2 if it cannot be so amended without materially altering the
intention of the Parties, it will be deleted, with effect from
the date the Parties may agree, and the validity, legality and
enforceability of the remaining provisions of this Agreement
shall not be impaired or affected in any way.
14.3 Further Assurances:
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.
14.4 Successors:
This Agreement shall be binding upon and enure to the benefit of the
Parties hereto, their successors and permitted assigns.
14.5 No Effect on Other Agreements/Conflict:
No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement
between the Parties unless specifically referred to, and solely to the
extent provided herein.
In the event of a conflict between the provisions of this Agreement and
the provisions of the JDOA, the terms of the JDOA shall prevail unless
this Agreement specifically provides otherwise.
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14.6 Amendments:
No amendment, modification or addition hereto shall be effective or
binding on any Party unless set forth in writing and executed by a duly
authorised representative of each Party.
14.7 Counterparts:
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of
which when taken together shall constitute this Agreement.
14.8 Good Faith:
Each Party undertakes to do all things reasonably within its power
which are necessary or desirable to give effect to the spirit and
intent of this Agreement.
14.9 No Reliance:
Each Party hereby acknowledges that in entering into this Agreement it
has not relied on any representation or warranty save as expressly set
out herein or in any document referred to herein.
14.10 Relationship of the Parties:
Nothing contained in this Agreement is intended or is to be construed
to constitute Sheffield and Newco as partners, or Sheffield as an
employee of Newco, or Newco as an employee of Sheffield.
Neither 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 the other Party or to bind the other Party to any contract,
agreement or undertaking with any third party.
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SCHEDULE 1
TECHNOLOGICAL COMPETITIORS OF SHEFFIELD
[REDACTED]
<PAGE>
SCHEDULE 2
List of Steroids for Clause 4.1
[REDACTED]
<PAGE>
IN WITNESS WHEREOF the Parties hereto have executed this Agreement.
/s/
SIGNED BY
for and on behalf of
SHEFFIELD PHARMACEUTICALS, INC.
/s/
SIGNED BY
For and on behalf of
SHEFFIELD NEWCO LIMITED
/s/
AGREED TO AND ACCEPTED BY
ELAN PHARMA INTERNATIONAL LIMITED
LICENSE AGREEMENT
BETWEEN
ELAN PHARMA INTERNATIONAL LIMITED
AND
SHEFFIELD NEWCO LIMITED
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS
2. ELAN LICENSE TO NEWCO
3. INTELLECTUAL PROPERTY
4. NON-COMPETITION/AFTER ACQUIRED TECHNOLOGY
5. FINANCIAL PROVISIONS
6. RIGHT OF INSPECTION AND AUDIT
7. REPRESENTATIONS AND WARRANTIES
8. TERM AND TERMINATION
9. CONFIDENTIAL INFORMATION
10. GOVERNING LAW AND JURISDICTION
11. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
12. ASSIGNMENT
13. NOTICES
14. MISCELLANEOUS
<PAGE>
THIS AGREEMENT made this 20 October 1999
between:
(1) Elan Pharma International Limited incorporated under the laws of
Ireland, and having its registered office at WIL House, Shannon
Business Park, Shannon, County Clare, Ireland ("EPIL");
(2) Newco Limited, a private limited company incorporated under the laws of
Bermuda and having its registered office at Clarendon House, 2 Church
Street, Hamilton, Bermuda ("Newco"); and
(3) Sheffield Pharmaceuticals, Inc., a corporation duly incorporated and
validly existing under the laws of Delaware and having its principal
place of business at 425 S. Woodsmill Road, Suite 270, St. Louis, MO
63017, USA("Sheffield").
RECITALS:
A. Simultaneously herewith, Sheffield, Elan, EIS, and Newco are entering
into the JDOA for the purpose of recording the terms and conditions of
the joint venture and of regulating their relationship with each other
and certain aspects of the affairs of, and their dealings with Newco.
B. Newco desires to enter into this Agreement with Elan so as to permit
Newco to utilize the Elan Intellectual Property in making, having made,
importing, using, offering for sale and selling the Products in Field A
and Field B and Formulations in Field C in the Territory in accordance
with the terms of this Agreement.
C. Simultaneously herewith Newco and Sheffield are entering into the
Sheffield License Agreement relating to Newco's use of the Sheffield
Intellectual Property.
1 DEFINITIONS
1.1 In this Agreement unless the context otherwise requires:
"Affiliate" shall mean any corporation or entity controlling,
controlled or under the common control of Elan or Sheffield, as the
case may be, excluding Systemic Pulmonary Delivery Ltd.. For the
purpose of this definition, "control" shall mean direct or indirect
ownership of fifty percent (50%) or more of the stock or shares
entitled to vote for the election of directors. Newco is not an
Affiliate of Sheffield.
"Agreement" shall mean this license agreement (which expression shall
be deemed to include the Recitals and Schedules hereto).
3
<PAGE>
"Business Plan" shall have the meaning, as such term is defined in the
JDOA.
"Change of Control of Sheffield/Newco" shall mean circumstances where:
(i) a Technological Competitor of Elan shall, directly or
indirectly, acquire [REDACTED] or more of the voting stock of
Sheffield or Newco, or otherwise control or influence in any
material respect their management or business or otherwise
have entered into any joint venture, collaboration, license or
other arrangement with Sheffield or Newco, as the case may be,
to such an extent that such a Technological Competitor of Elan
is materially engaged or involved with the business or
development of Sheffield or Newco, as the case may be; or
(ii) any person other than a Technological Competitor of Elan
shall, directly or indirectly, acquire [REDACTED] or more of
the then voting stock of Sheffield or Newco, or otherwise
merge, consolidate or enter into any similar transaction (or
binding agreement in respect thereof) with Sheffield or Newco.
"Combined Fields" shall mean Field A, Field B and Field C.
"Compounds" shall mean the Field A Compound, the Field B Compound
and/or the Field C Compound.
"Confidential Information" shall have the meaning, as such term is
defined in Clause 9.
"Definitive Documents" shall mean the definitive agreements relating to
the transaction including finance, stock purchase, research and license
agreements.
"Elan" shall mean EPIL and Affiliates and subsidiaries of Elan
Corporation, Plc. within the division of Elan Corporation, Plc.
carrying on business as Elan Pharmaceutical Technologies but shall not
include Affiliates and subsidiaries (present or future) of Elan
Corporation Plc within the division of Elan Corporation, Plc carrying
on business as Elan Pharmaceuticals which incorporates, inter alia,
Targon Corporation, Athena Neurosciences, Inc., Elan Pharmaceuticals,
Inc., Elan Diagnostics, Carnrick Laboratories, and Elan Europe Limited.
"EIS" shall mean Elan International Services, Limited, a private
limited company incorporated under the laws of Bermuda and having its
registered office at Clarendon House, 2 Church Street, Hamilton,
Bermuda.
"Effective Date" shall mean the date of this Agreement.
"Elan Intellectual Property" shall mean the Elan Know-How, the Elan
Patents and the Elan Improvements.
For the avoidance of doubt, Elan Intellectual Property shall exclude
(i) Elan's patent rights and know-how relating to protein or peptide
agents or peptodomimetics, derivatives or analogs thereof, designed to
4
<PAGE>
target a pharmaceutically active agent to a certain site or sites in
the body (targeting technology) and (ii) inventions, patents and
know-how owned, licensed or controlled by Axogen Limited and Neuralab
Limited, and by all Affiliates and subsidiaries (present or future) of
Elan Corporation, Plc. carrying on business as Elan Pharmaceuticals
which incorporates, inter alia, Targon Corporation, Athena
Neurosciences, Inc., Elan Pharmaceuticals, Inc., Elan Diagnostics,
Carnrick Laboratories, and Elan Europe Limited.
"Elan Know-How" shall mean any and all rights owned, licensed or
controlled by Elan to any discovery, invention (whether patentable or
not), know-how, substances, data, techniques, processes, systems,
formulations and designs relating to Nanocrystal(TM) Technology.
"Elan Licenses" shall have the meaning set forth in Clause 2.1.
"Elan Patents" shall mean any and all rights under any and all patents
applications and/or patents, now existing, currently pending or
hereafter filed or obtained by Elan relating to Nanocrystal(TM)
Technology as set forth in Schedule 1, and any foreign counterparts
thereof and all divisionals, continuations, continuations-in-part, any
foreign counterparts thereof and all patents issuing on, any of the
foregoing, together with all registrations, reissues, re-examinations
or extensions thereof.
"EPIL Patents" shall mean the Elan Patents owned by EPIL.
"Elan Improvements" shall mean improvements relating to the Elan
Patents and/or the Elan Know-How, developed (i) by Elan whether or not
pursuant to the Project, (ii) by Newco or Sheffield or by a third party
(under contract with Newco) whether or not pursuant to the Project,
and/or (iii) jointly by any combination of Elan, Sheffield or Newco
pursuant to the Project, except as limited by agreements with third
Parties.
Subject to third party agreements, Elan Improvements shall constitute
part of Elan Intellectual Property and be included in the license of
the Elan Intellectual Property pursuant to Clause 2.1 solely for the
purposes set forth therein. If the inclusion of an Elan Improvement in
the license of Elan Intellectual Property is restricted or limited by a
third party agreement, Elan shall use reasonable commercial efforts to
minimize any such restriction or limitation.
"Elan Trademark(s)" shall mean one or more trademarks, trade names, or
service marks that are owned or licensed by or on behalf of Elan which
Elan may nominate and approve in writing from time to time for use in
connection with the sale or promotion of the Products by Newco.
"Field A" shall mean the topical pulmonary delivery of Formulations of
the Field A Compound by means of the Field A Device.
"Field B" shall mean the topical pulmonary delivery of a Formulations
of the Field B Compound by means of the Field B Device.
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<PAGE>
"Field C" shall mean the topical pulmonary delivery of a Formulations
of the Field C Compound by means of the Field C Device.
"Field A Device" shall mean a third party table top unit dose nebulizer
having a reservoir capable of holding a unit dose (a device and the
compressor to nebulize a unit dose shall be deemed a device), which is
a device having any one the following characteristics:
(i) [REDACTED]
(ii) [REDACTED]
(iii) [REDACTED]
(iv) [REDACTED]
(v) [REDACTED]
For the avoidance of doubt, the Field A Device does not include
[REDACTED]
"Field B Device" shall mean the Aerosol Drug Delivery System ("ADDS"),
owned by Systemic Pulmonary Delivery Limited and exclusively licensed
to Sheffield for topical pulmonary applications.
"Field C Device" shall mean the handheld multi-dose nebulizer ("MSI")
which was licensed exclusively by Siemens to Sheffield pursuant to the
Siemens Agreements and which was subsequently sub-licensed by Sheffield
to Zambon (on an exclusive basis for delivery of various medicines for
humans in treating respiratory disease and/or other lung diseases
including, but not limited to, anti-infectives) provided that Newco,
through the Management Committee, is successful in obtaining a
sub-license from Zambon to Newco enabling the development of the Field
C Compound for use with the Field C Device, as described in more detail
in Clause 2.2.
"Field A Compound" shall mean [REDACTED]
"Field B Compound" shall mean [REDACTED] for therapeutic use to be
nominated by the Management Committee pursuant to the JDOA and with
reference to the JDOA, any Substitute Field B Compound.
"Field C Compound" shall mean [REDACTED] and with reference to the
JDOA, any Substitute Field C Compound and/or any Additional Field C
Compound.
"Financial Year" shall mean each year commencing on 1 January (or in
the case of the first Financial Year, the Effective Date) and expiring
on 31 December of each year.
"Formulations" shall mean Nanocrystal(TM) Technology formulations of
Compounds for use in Field A, Field B or Field C, as applicable.
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<PAGE>
"JDOA" shall mean that certain joint development and operating
agreement, of even date herewith, by and between Elan, Sheffield, EIS
and Newco.
"Licensed Technologies" shall mean the Elan Intellectual Property and
the Sheffield Intellectual Property.
"Licenses" shall mean the Elan License and the Sheffield License.
"Management Committee" shall have the meaning, as such term is defined
in the JDOA.
"Nanocrystal(TM) Technology" shall mean the Elan proprietary technology
directed to nanoparticulate formulations of compounds used in the
manufacturing and/or formulation process, and methods of making the
same.
"Newco Intellectual Property" shall mean all rights to patents,
know-how and other intellectual property arising out of the conduct of
the Project by any person, including any technology acquired by Newco
from a third party, that does not constitute Elan Intellectual Property
or Sheffield Intellectual Property.
"Newco Patents" shall mean any and all patents now existing, currently
pending or hereafter filed or obtained relating to the Newco
Intellectual Property, and any foreign counterparts thereof and all
divisionals, continuations, continuations-in-part, any foreign
counterparts thereof and all patents issuing on, any of the foregoing,
together with all registrations, reissues, re-examinations or
extensions thereof.
"Party" shall mean Elan or Newco, as the case may be, and "Parties"
shall mean Elan and Newco.
"Products" shall mean the Field A Products, the Field B Products and/or
the Field C Products, as follows:
"Field A Products" shall mean Formulations of the Field A Compound
delivered by means of any Field A Device in Field A.
"Field B Products" shall mean Formulations of the Field B Compound
delivered by means of the Field B Device in Field B.
"Field C Products" shall mean Formulations of the Field C Compound
delivered by means of the Field C Device in Field C.
"Project" shall mean all activities as undertaken by Elan, Sheffield
and Newco in order to develop the Products.
"R&D Committee" shall have the meaning, as such term is defined in the
JDOA.
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"R&D Plan" shall have the meaning, as such term is defined in the JDOA.
"R&D Program" shall mean any research and development program commenced
by Newco pursuant to the Project.
"Sheffield" shall mean Sheffield Pharmaceuticals, Inc and its
Affiliates, excluding Newco.
"Sheffield Intellectual Property" shall mean the Sheffield Know-How,
the Sheffield Patents and the Sheffield Improvements, as such terms are
defined in the Sheffield License Agreement.
"Sheffield License" shall have the meaning set forth in Clause 2.1 of
the Sheffield License Agreement.
"Sheffield License Agreement" shall mean that certain license
agreement, of even date herewith, entered into between Sheffield and
Newco.
"Sheffield Patents" shall have the meaning as such term is defined in
the Sheffield License Agreement.
"Sheffield Improvements" shall have the meaning as such term is defined
in the Sheffield License Agreement.
"Siemens" shall mean Siemens Aktiengesellschaft.
"Siemens Agreements" shall mean the License Agreement dated 21 March
1997 and the Basic Supply Agreement dated 21 March 1997, both between
Sheffield Medical Technologies Inc. and Siemens Aktiengesellschaft.
"Technological Competitor of Elan" shall mean a company, corporation or
person listed in Schedule 2 and successors thereof or any additional
broad-based technological competitor of Elan added to such Schedule
from time to time upon mutual agreement of the Parties.
"Term" shall have the meaning set forth in Clause 8.
"Territory" shall mean all the countries of the world.
"United States Dollar" and "US$" shall mean the lawful currency for the
time being of the United States of America.
"Zambon" shall mean Inpharzam International, S.A.
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1.2 In this Agreement:
1.2.1 The singular includes the plural and vice versa, and the
masculine includes the feminine and vice versa and the neuter
includes the masculine and the feminine.
1.2.2 Any reference to a Clause or Schedule shall, unless otherwise
specifically provided, be to a Clause or Schedule of this
Agreement.
1.2.3 The headings of this Agreement are for ease of reference only
and shall not affect its construction or interpretation.
2. ELAN LICENSE TO NEWCO
2.1. Elan hereby grants to Newco for the Term the following licenses subject
to any contractual obligations that Elan has as of the Effective Date,
including but not limited to [REDACTED]
2.1.1 an exclusive license (including the right to grant sublicenses
subject to the limitations of Clause 2.7) of the Elan
Intellectual Property solely to make, have made, import, use,
offer for sale and sell the Field A Products in the Territory
in Field A;
2.1.2 a non-exclusive license (including the right to grant
sublicenses subject to the limitations of Clause 2.7) of the
Elan Intellectual Property solely to make, have made, import,
use, offer for sale and sell the Field B Products in the
Territory in Field B;
2.1.3 subject to the execution by Newco of a written sub-license
with Zambon as more fully described in Clause 2.2 for the
development by Newco of the Field C Formulations in accordance
with Clause 2.2, a non-exclusive license (including the right
to grant sublicenses subject to the limitations of Clause 2.7)
of the Elan Intellectual Property solely to make, have made,
import, use, offer for sale and sell the Field C Formulations
in the Territory in Field C;
(the "Elan Licenses").
2.2 On the date which is [REDACTED] days following the Effective Date, or
such extended date as may be agreed in writing by Elan and Newco, Elan
shall, at its sole discretion, be entitled forthwith to terminate the
license to Newco described in Clause 2.1.3, upon notice in writing to
Newco, in the event that Newco has not, prior to such date, executed a
written sub-license with Zambon for the development by Newco of the
Field C Formulations in Field C.
Such written sub-license will be subject to the approval of the
Management Committee and will include authority from Zambon to Newco to
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the extent necessary for Newco to develop, make, have made and use the
Field C Formulations in the Territory, general financial terms,
development schedule, and terms governing the funding by Zambon of any
R&D Program(s) in Field C, together with such other substantive issues
as the Management Committee shall deem appropriate and customary terms.
For the avoidance of doubt, to the extent royalty or other compensation
obligations are payable to Zambon in respect of any license or
sub-license from Zambon to Newco of intellectual property rights
necessary for Newco to develop, make, have made the Field C
Formulations in the Territory, Sheffield shall be responsible for same
and shall indemnify Newco in respect of any such royalty or other
compensation obligations payable to Zambon.
2.3 Elan shall be responsible for payments related to the financial
provisions and obligations of any third party agreement with respect to
the Elan Intellectual Property to which it is a party on the Effective
Date (including amendments thereto) (the "Elan Effective Date
Agreements"), including without limitation, any royalty or other
compensation obligations triggered thereunder on the Effective Date, or
triggered thereunder after the Effective Date.
For the avoidance of doubt, royalties, milestones or other payments
which arise from the process of the commercialization or exploitation
of products under the Elan Effective Date Agreements (for example, a
milestone payment payable upon successful completion of Phase II
clinical trials, the filing of an NDA application, obtaining NDA
approval, or first commercial sale) shall be payments for which Elan
will be responsible under this Clause 2.1.
2.4 To the extent royalty or other compensation obligations that are
payable to third parties with respect to the Elan Intellectual Property
would be triggered after the Effective Date under any third party
agreement entered into by Elan after the Effective Date (the "Elan
Post-Effective Date Agreements"), by a proposed use of such Elan
Intellectual Property in connection with the Project, Elan will inform
Newco of such royalty or compensation obligations. If Newco agrees to
utilise such Elan Intellectual Property in connection with the Project,
Newco will be responsible for the payment of such royalty or other
compensation obligations relating thereto.
For the avoidance of doubt, royalties, milestones or other payments
which arise from the process of the commercialization or exploitation
of products under the Elan Post-Effective Date Agreements (for example,
a milestone payment payable upon successful completion of Phase II
clinical trials, the filing of an NDA application, obtaining NDA
approval, or first commercial sale) shall be payments for which Newco
will be responsible under this Clause 2.2.
2.5 Sheffield shall be a third party beneficiary under this Agreement and
shall have the right to cause Newco to enforce Newco's rights under
this Agreement against Elan.
2.6 Notwithstanding anything contained in this Agreement to the contrary,
Elan shall have the right outside the Field A, Field B and Field C and
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subject to the non-competition provisions of Clause 4 to exploit and
grant licenses and sublicenses of the Elan Intellectual Property.
For the avoidance of doubt, Newco shall have no right to use the Elan
Intellectual Property outside Field A, Field B or Field C.
2.7 Newco shall not be permitted to assign or sublicense any of its rights
under the Elan Intellectual Property without the prior written consent
of Elan, which consent shall not be unreasonably withheld or delayed
provided that Elan shall in all cases, in its sole discretion, be
entitled to withhold its consent in the case of a proposed sublicense
to any Technological Competitor to Elan.
2.8 Any agreement between Newco and any permitted third party for the
development or exploitation of the Elan Intellectual Property shall
require such third party to maintain the confidentiality of all
information concerning the Elan Intellectual Property.
Insofar as the obligations owed by Newco to Elan are concerned, Newco
shall remain responsible for all acts and omissions of any permitted
sub-licensee, including Sheffield, as if they were acts and omissions
by Newco.
3 INTELLECTUAL PROPERTY
3.1 Ownership of Intellectual Property:
3.1.1 Newco shall own the Newco Intellectual Property.
3.1.2 Elan shall own the Elan Intellectual Property.
3.2 Trademarks:
3.2.1 Elan hereby grants to Newco for the Term a non-exclusive,
royalty free license in the Territory to use and display the
Elan Trademarks to promote, offer for sale and sell the
Products in Field A, Field B and the Formulations in Field C
in the Territory and the following provisions shall apply as
regards the use of the Elan Trademarks by Newco hereunder:
(1) Newco shall ensure that each reference to and use of an
Elan Trademark by Newco is in a manner approved by Elan
and accompanied by an acknowledgement, in a form
approved by Elan, that the same is a trademark (or
registered trademark) of Elan.
From time to time, upon the reasonable request of Elan,
Newco shall submit samples of the Product to Elan or
its duly appointed agent to ensure compliance with
quality standards and specifications. Elan, or its duly
appointed agent, shall have the right to inspect the
premises of Newco where the Products are manufactured,
held or stored, and Newco shall permit such inspection,
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upon advance notice at any reasonable time, of the
methods and procedures used in the manufacture, storage
and sale of the Product. Newco shall not sell or
otherwise dispose of any Product under the Elan
Trademarks that fails to comply with the quality
standards and specifications referred to in this Clause
3.2, as determined by Elan.
(2) Newco shall not use an Elan Trademark in any way which
might materially prejudice its distinctiveness or
validity or the goodwill of Elan therein.
(3) The parties recognize that the Elan Trademarks have
considerable goodwill associated therewith. Newco shall
not use in relation to the Products any trademarks
other than the Elan Trademarks (except the Sheffield
Trademarks (as defined in the Sheffield License
Agreement) licensed to Newco under the Sheffield
License Agreement) without obtaining the prior consent
in writing of Elan, which consent may not be
unreasonably withheld. However, such use must not
conflict with the use and display of the Elan Trademark
and such use and display must be approved by Elan.
(4) Newco shall not use in the Territory any trademarks or
trade names so resembling the Elan Trademark as to be
likely to cause confusion or deception.
(5) Newco shall promptly notify Elan in writing of any
alleged infringement or unauthorised use of which it
becomes aware by a third party of the Elan Trademarks
and provide Elan with any applicable evidence of
infringement or unauthorised use.
(6) Newco shall not be permitted to assign or sublicense
any of its rights under the Elan Trademarks without the
prior written consent of Elan, which consent shall not
be unreasonably withheld or delayed.
3.2.2 Elan shall, at its expense and sole discretion, file and
prosecute applications to register and maintain registrations
of the Elan Trademarks in the Territory. Newco shall
reasonably co-operate with Elan in such efforts. In the event
Elan decides not to file or prosecute such Elan Trademark,
Newco may request Elan to do the same at Newco's expense, and
Elan shall file or prosecute such Elan Trademark at Newco's
request and expense unless Elan believes such action is
without merit.
3.2.3 Elan will be entitled to conduct all enforcement proceedings
relating to the Elan Trademarks and shall at its sole
discretion decide what action, if any, to take in respect to
any enforcement proceedings of the Elan Trademarks or any
other claim or counter-claim brought in respect to the use or
registration of the Elan Trademarks. Any such proceedings
shall be conducted at Elan's expense and for its own benefit.
Newco and Sheffield shall reasonably cooperate with Elan in
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such efforts. In the event Elan decides not to engage in
enforcement proceedings of the Elan Trademarks, Newco may
request Elan to do the same at Newco's expense unless Elan
believes the basis for such enforcement proceedings is
without merit. In such a case, Elan shall have the sole
discretion not to engage in any such enforcement proceedings
3.2.4 Save where Newco adopts its own mark under Clause 3.2.4, in
the event Newco becomes aware that any Elan Trademark has
been challenged by a third party in a judicial or
administrative proceeding in a country in the Territory as
infringing on the rights of a third party Newco shall
promptly notify Elan in writing and Elan shall have the first
right to decide whether or not to defend such allegations, or
to adopt an alternative mark, or allow Newco to adopt an
alternative mark. If Elan decides not defend the Elan
Trademark, then Newco may request Elan to defend the Elan
Trademark, at Newco's expense, unless such requested defense
is reasonably believed by Elan to be unsubstantiated and
without merit. In such a case, Elan may elect not to initiate
defence proceedings.
3.2.5 Newco will have no ownership rights in respect of the Elan
Trademarks or of the goodwill associated therewith, and Newco
hereby acknowledges that, except as expressly provided in
this Agreement, it shall not acquire any rights in respect
thereof and that all such rights and goodwill are, and will
remain, vested in Elan.
3.2.6 Nothing in this Agreement shall be construed as a warranty on
the part of Elan regarding the Elan Trademarks, including
without limitation, that use of the Elan Trademarks in the
Territory will not infringe the rights of any third parties.
Accordingly, Newco acknowledges and agrees that Elan makes no
such warranty.
3.2.7 Elan assumes no liability to Newco or to any third parties
with respect to the quality, performance or characteristics
of any of the goods manufactured or sold by Newco under the
Elan Trademarks pursuant to this Agreement.
4 NON-COMPETITION/AFTER ACQUIRED TECHNOLOGY
4.1 Subject to Clause 4.2 and Clause 4.3 and Clause 8.6, during the period
during which the license described in Clause 2.1.1 has not been
terminated, Elan shall not, alone or in conjunction with a third party,
develop or commercialize any of the unit dose steroids listed in
Schedule 3 for topical pulmonary delivery using a Field A Device and
utilizing the Nanocrystal(TM)Technology, subject to written agreements
between Elan and unaffiliated third parties on the Effective Date,
including but not limited to the Development License and Supply
Agreement dated 26 July 1999 between EPIL and Merck Corporation.
For the avoidance of doubt, the non-compete obligation set forth in
this Clause 4 shall not prevent or restrict EPIL (as the owner of
intellectual property related to Nanocrystal(TM) Technology) from
entering into any agreement with any third party to license the
Nanocrystal(TM) Technology, such license being limited to compounds
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owned, acquired, in-licensed or otherwise proprietary to such third
party but not including any of the unit dose steroids listed in
Schedule 3 for topical pulmonary delivery using a Field A Device and
utilizing the Nanocrystal(TM) Technology.
The provisions of this Clause 4.1 shall only act as a restriction upon
Affiliates and subsidiaries of Elan Corporation, Plc. within the
division of Elan Corporation, Plc. carrying on business as Elan
Pharmaceutical Technologies and shall not act as a restriction upon,
nor in any way affect, Affiliates and subsidiaries (present or future)
of Elan Corporation Plc within the division of Elan Corporation, Plc
carrying on business as Elan Pharmaceuticals which incorporates, inter
alia, Targon Corporation, Athena Neurosciences, Inc., Elan
Pharmaceuticals, Inc., Elan Diagnostics, Carnrick Laboratories, and
Elan Europe Limited.
4.2 Notwithstanding the provisions of Clause 4.1, the non-competition
obligations of Elan set forth in Clause 4.1 shall not restrict Elan
from entering into an agreement with [REDACTED] during the period of
[REDACTED] following the Effective Date, or such longer period as may
be agreed by Elan and Newco, for the development of a unit dose of
[REDACTED], for topical pulmonary delivery using a Field A Device and
utilizing the Nanocrystal(TM)Technology subject to the following
conditions:
4.2.1 if such agreement is not executed by Elan and [REDACTED] within
the period of [REDACTED] following the Effective Date, or such
longer period as may be agreed by Elan and Newco, this
exception to the non-competition obligations of Elan set forth
in Clause 4.1 shall expire and be of no further force or
effect;
4.2.2 if such agreement is agreed for execution by Elan and [REDATED]
within the period of [REDACTED] following the Effective Date,
or such longer period as may be agreed by Elan and Newco, Newco
and Sheffield shall forthwith sign an amendment to this License
Agreement (and any of the other Definitive Documents, if
necessary) terminating the non-competition obligations of Elan
set forth in Clause 4.1 insofar as such obligations relate to
[REDACTED] and the Parties shall agree in good faith and on
reasonable commercial and customary terms what portion of the
royalties payable by [REDACTED] to Elan under the agreement
proposed for execution should be payable to Newco in return for
such amendment to this License Agreement (and any of the other
Definitive Documents, if necessary).
4.3 If, after the Effective Date, Elan acquires know-how or patent rights
relating to the Field A, Field B or Field C, or acquires or merges with
a third party entity that has know-how or patent rights relating to the
Field A, Field B or Field C, Elan shall offer to license such know-how
and patent rights to Newco (subject to existing contractual
obligations), on commercially reasonable terms on an arm's length basis
for a reasonable period under the prevailing circumstances.
If Newco determines that Newco should not acquire such license, Elan
shall be free to fully exploit such know-how and patent rights with the
Elan Intellectual Property then licensed to Newco, whether inside or
outside the Field A, Field B or Field C, as applicable, and to grant to
third parties licenses and sublicenses with respect thereto.
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5 FINANCIAL PROVISIONS
5.1 License Fee:
In consideration of the license by EPIL to Newco of the EPIL Patents
under Clause 2, Newco shall pay to EPIL a non-refundable license fee of
[REDACTED] in cash (the "License Fee"), the receipt of which is hereby
acknowledged by EPIL.
The License Fee shall not be subject to future performance obligations
of Elan to Newco or Sheffield and shall not be applicable against
future services provided by Elan to Newco or Sheffield.
For the avoidance of doubt, in the event that Elan terminates the
license to Newco described in Clause 2.1.3 pursuant to the provisions
of Clause 2.2, no part of the License Fee described in this Clause 5.1
shall become refundable to Sheffield.
5.2 Royalties:
Prior to the commercialization of the Products, the Management
Committee shall consider and if appropriate, determine reasonable
royalties with respect to the commercialization of the Products by
Newco that shall be payable by Newco to Elan and Sheffield, and shared
by Elan and Sheffield equally.
At such time, the Management Committee will agree an appropriate
definition of "Net Sales" as such term is used in this Agreement.
5.3 Payment of any royalties pursuant to Clause 5.2 shall be made quarterly
in arrears during each Financial Year within 30 days after the expiry
of the calendar quarter. The method of payment shall be by wire
transfer to an account specified by Elan. Each payment made to Elan
shall be accompanied by a true accounting of all Products sold by
Newco's permitted sublicensees, if any, during such quarter.
Such accounting shall show, on a country-by-country and
Product-by-Product basis, Net Sales (and the calculation thereof) and
each calculation of royalties with respect thereto, including the
calculation of all adjustments and currency conversions.
5.4 Newco shall maintain and keep clear, detailed, complete, accurate and
separate records for a period of 3 years:
5.4.1 to enable any royalties on Net Sales that shall have accrued
hereunder to be determined; and
5.4.2 to enable any deductions made in the Net Sales calculation to
be determined.
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5.5 All payments due hereunder shall be made in United States Dollars.
Payments due on Net Sales of any Product for each calendar quarter made
in a currency other than United States Dollars shall first be
calculated in the foreign currency and then converted to United States
Dollars on the basis of the exchange rate in effect on the last working
day for such quarter for the purchase of United States Dollars with
such foreign currency quoted in the Wall Street Journal (or comparable
publication if not quoted in the Wall Street Journal) with respect to
the currency of the country of origin of such payment, determined by
averaging the rates so quoted on each business day of such quarter.
5.6 If, at any time, legal restrictions in the Territory prevent the prompt
payment when due of royalties or any portion thereof, the Parties shall
meet to discuss suitable and reasonable alternative methods of paying
Elan the amount of such royalties. In the event that Newco is prevented
from making any payment under this Agreement by virtue of the statutes,
laws, codes or government regulations of the country from which the
payment is to be made, then such payments may be paid by depositing
them in the currency in which they accrue to Elan's account in a bank
acceptable to Elan in the country the currency of which is involved or
as otherwise agreed by the Parties.
5.7 Elan and Newco agree to co-operate in all respects necessary to take
advantage of any double taxation agreements or similar agreements as
may, from time to time, be available.
5.8 Any taxes payable by Elan on any payment made to Elan pursuant to this
Agreement shall be for the account of Elan. If so required by
applicable law, any payment made pursuant to this Agreement shall be
made by Newco after deduction of the appropriate withholding tax, in
which event the Parties shall co-operate to obtain the appropriate tax
clearance as soon as is practicable. On receipt of such clearance,
Newco shall forthwith arrange payment to Elan of the amount so
withheld.
6 RIGHT OF INSPECTION AND AUDIT
6.1 Once during each Financial Year, or more often not to exceed quarterly
as reasonably requested by Elan, Newco shall permit Elan or its duly
authorised representatives, upon reasonable notice and at any
reasonable time during normal business hours, to have access to inspect
and audit the accounts and records of Newco and any other book, record,
voucher, receipt or invoice relating to the calculation of the royalty
payments on Net Sales submitted to Elan.
Any such inspection of Newco's records shall be at the expense of Elan,
except that if any such inspection reveals a deficiency in the amount
of the royalty actually paid to Elan hereunder in any Financial Year
quarter of [REDACTED] or more of the amount of any royalty actually due
to Elan hereunder, then the expense of such inspection shall be borne
solely by Newco. Any amount of deficiency shall be paid promptly to
Elan by Newco.
If such inspection reveals a surplus in the amount of royalties
actually paid to Elan by Newco, Elan shall reimburse Newco the surplus
within 15 days after determination.
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6.2 In the event of any unresolved dispute regarding any alleged deficiency
or overpayment of royalty payments hereunder, the matter will be
referred to an independent firm of chartered accountants chosen by
agreement of Sheffield and Elan for a resolution of such dispute. Any
decision by the said firm of chartered accountants shall be binding on
the Parties.
7 REPRESENTATIONS AND WARRANTIES
7.1 Elan represents and warrants to Newco and Sheffield, as of the
Effective Date, as follows:
7.1.1 Elan has the right to grant the Elan Licenses;
7.1.2 there are no agreements with any third parties that conflict
with the Elan Licenses.
7.2 In addition to any other indemnities provided for herein, Elan shall
indemnify and hold harmless Newco and its Affiliates and their
respective employees, agents, officers and directors from and against
any claims, losses, liabilities or damages (including reasonable
attorney's fees and expenses) incurred or sustained by Newco arising
out of or in connection with any:
7.2.1 breach of any representation, covenant, warranty or obligation
by Elan hereunder; or
7.2.2 act or omission on the part of Elan or any of its respective
employees, agents, officers and directors in the performance
of this Agreement.
7.3 In addition to any other indemnities provided for herein, Newco shall
indemnify and hold harmless Elan and its Affiliates and their
respective employees, agents, officers and directors from and against
any claims, losses, liabilities or damages (including reasonable
attorney's fees and expenses) incurred or sustained by Elan arising out
of or in connection with any:
7.3.1 breach of any representation, covenant, warranty or obligation
by Newco hereunder; or
7.3.2 act or omission on the part of Newco or any of its agents or
employees in the performance of this Agreement.
7.4 The Party seeking an indemnity shall:
7.4.1 fully and promptly notify the other Party of any claim or
proceeding, or threatened claim or proceeding;
7.4.2 permit the indemnifying Party to take full care and control of
such claim or proceeding;
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7.4.3 co-operate in the investigation and defence of such claim or
proceeding;
7.4.4 not compromise or otherwise settle any such claim or
proceeding without the prior written consent of the other
Party, which consent shall not be unreasonably withheld
conditioned or delayed; and
7.4.5 take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceeding.
7.5 EXCEPT AS SET FORTH IN THIS CLAUSE 7, ELAN IS GRANTING THE LICENSES
HEREUNDER ON AN "AS IS" BASIS WITHOUT REPRESENTATION OR WARRANTY
WHETHER EXPRESS OR IMPLIED INCLUDING WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR INFRINGEMENT OF THIRD PARTY
RIGHTS, AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.
7.6 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, ELAN AND
NEWCO SHALL NOT BE LIABLE TO THE OTHER BY REASON OF ANY REPRESENTATION
OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF COMMON LAW, OR
UNDER THE EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL,
SPECIAL OR INCIDENTAL OR PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF
PROFITS OR OTHERWISE) AND WHETHER OCCASIONED BY THE NEGLIGENCE OF THE
RESPECTIVE PARTIES, THEIR EMPLOYEES OR AGENTS OR OTHERWISE.
8. TERM AND TERMINATION
8.1 The term of this Agreement shall commence as of the Effective Date and
shall, subject to the rights of termination outlined in this Clauses 8,
expire on a Product-by-Product basis and on a country-by-country basis
on the last to occur of:
8.1.1 [REDACTED] years starting from the date of the first
commercial sale of the Product in the country concerned; or
8.1.2 the date of expiration of the last to expire of the patents
included in the Elan Patents and/or the Elan Improvements
and/or the Sheffield Patents and/or the Elan Improvements that
relate to the Product.
("the Term")
8.2 If either Party commits a Relevant Event, the other Party shall have,
in addition to all other legal and equitable rights and remedies
hereunder, the right to terminate this Agreement upon 30 days' prior
written notice to the defaulting Party.
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8.3 For the purpose of this Clause 8, a "Relevant Event" is committed or
suffered by a Party if:
8.3.1 [REDACTED]
8.3.2 [REDACTED]
8.3.3 [REDACTED]
8.3.4 [REDACTED]
8.3.5 [REDACTED]
8.3.6 [REDACTED]
8.4 Elan shall be entitled to forthwith terminate this Agreement in the
event of a Change of Control of Sheffield/Newco.
As provided in Clause 8.4 of the Sheffield License Agreement, Sheffield
shall be entitled to terminate the Sheffield License Agreement if Elan
elects to terminate the Elan Licenses hereunder.
8.5 Upon expiration or termination of the Agreement:
8.5.1. any sums that were due from Newco to Elan on Net Sales in the
Territory or in such particular country or countries in the
Territory (as the case may be) prior to the expiration or
termination of this Agreement as set forth herein shall be
paid in full within 60 days after the expiration or
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termination of this Agreement for the Territory or for such
particular country or countries in the Territory (as the case
may be);
8.5.2 any provisions that expressly survive termination or
expiration of this Agreement, including without limitation
this Clause 8, shall remain in full force and effect;
8.5.3 all representations, warranties and indemnities shall insofar
as are appropriate remain in full force and effect;
8.5.4 the rights of inspection and audit set out in Clause 6 shall
continue in force for a period of one year; and
8.5.5 all rights and licenses granted pursuant to this Agreement and
to the Elan Intellectual Property pursuant to the JDOA
(including the rights of Newco pursuant to Clause 11 of the
JDOA) shall cease for the Territory or for such particular
country or countries in the Territory (as the case may be) and
shall revert to or be transferred to Elan, and Newco shall not
thereafter use in the Territory or in such particular country
or countries in the Territory (as the case may be) any rights
covered by this Agreement;
8.5.6 subject to Clause 8.5.7 and to such license, if any, granted
by Newco to Elan pursuant to the provisions of Clause 12 of
the JDOA, all rights to Newco Intellectual Property shall be
transferred to and jointly owned by Sheffield and Elan and may
only be exploited by either Elan or Sheffield with the consent
of the other Party pursuant to a written agreement to be
negotiated in good faith;
8.5.7 the rights of permitted third party sub-licensees in and to
the Elan Intellectual Property shall survive the termination
of the license and sublicense agreements granting said
intellectual property rights to Newco; and Newco, Elan and
Sheffield shall in good faith agree upon the form most
advantageous to Elan and Sheffield in which the rights of
Newco under any such licenses and sublicenses are to be held
(which form may include continuation of Newco solely as the
holder of such licenses or assignment of such rights to a
third party or parties, including an assignment to both Elan
and Sheffield).
Any sublicense agreement between Newco and such permitted
sublicensee shall permit an assignment of rights by Newco and
shall contain appropriate confidentiality provisions.
8.6 In the event that the Parties and Sheffield mutually agree to terminate
the portion of the Project (as defined in the JDOA) which relates to
Field A, the license described in Clause 2.1.1, the provisions of
Clause 4.1 and the provisions of Clause 4.3 (insofar as the provisions
of Clause 4.3 relate to Field A) shall automatically terminate.
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9 CONFIDENTIAL INFORMATION
9.1 The Parties agree that it will be necessary, from time to time, to
disclose to each other confidential and proprietary information,
including without limitation, inventions, works of authorship, trade
secrets, specifications, designs, data, know-how and other proprietary
information relating to the Combined Fields, the Products, processes,
services and business of the disclosing Party.
The foregoing shall be referred to collectively as "Confidential
Information".
9.2 Any Confidential Information disclosed by one Party to another Party
shall be used by the receiving Party exclusively for the purposes of
fulfilling the receiving Party's obligations under this Agreement and
the JDOA and for no other purpose.
9.3 Each Party shall disclose Confidential Information of the other Party
only to those employees, representatives and agents requiring knowledge
thereof in connection with fulfilling the Party's obligations under
this Agreement. Each Party further agrees to inform all such employees,
representatives and agents of the terms and provisions of this
Agreement and their duties hereunder and to obtain their agreement
hereto as a condition of receiving Confidential Information. Each Party
shall exercise the same standard of care as it would itself exercise in
relation to its own confidential information (but in no event less than
a reasonable standard of care) to protect and preserve the proprietary
and confidential nature of the Confidential Information disclosed to it
by the other Party. Each Party shall, upon request of the other Party,
return all documents and any copies thereof containing Confidential
Information belonging to, or disclosed by, such other Party.
9.4 Any breach of this Clause 9 by any person informed by one of the
Parties is considered a breach by the Party itself.
9.5 Confidential Information shall not be deemed to include:
9.5.1 information that is in the public domain;
9.5.2 information which is made public through no breach of this
Agreement;
9.5.3 information which is independently developed by a Party as
evidenced by such Party's records;
9.5.4 information that becomes available to a Party on a
non-confidential basis, whether directly or indirectly, from a
source other than a Party, which source did not acquire this
information on a confidential basis; or
9.5.5 information which the receiving Party is required to disclose
pursuant to:
(i) a valid order of a court or other governmental body; or
(ii) any other requirement of law;
21
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provided that if the receiving Party becomes legally required
to disclose any Confidential Information, the receiving Party
shall give the disclosing Party prompt notice of such fact so
that the disclosing Party may obtain a protective order or
other appropriate remedy concerning any such disclosure. The
receiving Party shall fully co-operate with the disclosing
Party in connection with the disclosing Party's efforts to
obtain any such order or other remedy. If any such order or
other remedy does not fully preclude disclosure, the receiving
Party shall make such disclosure only to the extent that such
disclosure is legally required.
9.6 The provisions relating to confidentiality in this Clause 9 shall
remain in effect during the term of this Agreement, and for a period of
7 years following the expiration or earlier termination of this
Agreement.
9.7 The Parties agree that the obligations of this Clause 9 are necessary
and reasonable in order to protect the Parties' respective businesses,
and each Party agrees that monetary damages would be inadequate to
compensate a Party for any breach by the other Party of its covenants
and agreements set forth herein.
Accordingly, the Parties agree that any such violation or threatened
violation shall cause irreparable injury to a Party and that, in
addition to any other remedies that may be available, in law and equity
or otherwise, each Party shall be entitled to obtain injunctive relief
against the threatened breach of the provisions of this Clause 9, or a
continuation of any such breach by the other Party, specific
performance and other equitable relief to redress such breach together
with its damages and reasonable counsel fees and expenses to enforce
its rights hereunder, without the necessity of proving actual or
express damages.
9.8 For the avoidance of doubt, all Confidential Information of Newco
received by Elan hereunder shall not be disclosed by Elan to Affiliates
and/or subsidiaries (present or future) of Elan Corporation, Plc.
within the division of Elan Corporation, Plc. carrying on business as
Elan Pharmaceuticals which incorporates, inter alia, Targon
Corporation, Athena Neurosciences, Inc., Elan Pharmaceuticals, Inc.,
Elan Diagnostics, Carnrick Laboratories, and Elan Europe Limited.
10 GOVERNING LAW AND JURISDICTION
10.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
10.2 The Parties will attempt in good faith to resolve any dispute arising
out of or relating to this Agreement promptly by negotiation between
executives of the Parties. In the event that such negotiations do not
result in a mutually acceptable resolution, the Parties agree to
consider other dispute resolution mechanisms including mediation.
In the event that the Parties fail to agree on a mutually acceptable
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dispute resolution mechanism, any such dispute shall be finally settled
by the courts of competent jurisdiction. For the purposes of this
Agreement the parties submit to the non-exclusive jurisdiction of the
courts of the State of New York.
11 IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
Neither Elan nor Newco shall be liable for delay in the performance of
any of its obligations hereunder if such delay results from causes
beyond its reasonable control, including, without limitation, acts of
God, fires, strikes, acts of war, intervention of a government
authority, but any such delay or failure shall be remedied by such
Party as soon as practicable.
12 ASSIGNMENT
This Agreement may not be assigned by either Party without the prior
written consent of the other, save that either Party may assign this
Agreement to its Affiliates or subsidiaries without such prior written
consent provided that such assignment does not have any adverse tax
consequences on the other Party.
13 NOTICES
13.1 Any notice to be given under this Agreement shall be sent in writing in
English by registered airmail or telefaxed to the following addresses:
If to Newco at:
Clarendon House,
2 Church Street,
Hamilton,
Bermuda
Attention: Secretary
Telephone: 441 292 9169
Fax: 441 292 2224
with a copy to Elan and Sheffield at the addresses listed below:
If to Sheffield at:
Sheffield Pharmaceuticals, Inc.
425 S. Woodsmill Road
Suite 270
St Louis
MO 63017
USA.
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Attn: Chief Executive Officer
Telephone 001 314 579 9899
Fax: 001 314 579 9799
with a copy to:
Daniel Gallagher, Esq.
Olshan, Grundman, Trome
Rosenzeig, LLP
505 Park Avenue
New York, NY 10022
Telephone 002 212 753 7200
Fax: 001 212 935 1787
If to Elan at:
Elan Corporation, plc
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
Telefax: + 353 1 709 4124
or to such other address(es) and telefax numbers as may from time to
time be notified by either Party to the other hereunder.
13.2 Any notice sent by mail shall be deemed to have been delivered within
seven 7 working days after dispatch and any notice sent by telex or
telefax shall be deemed to have been delivered within twenty 24 hours
of the time of the dispatch. Notice of change of address shall be
effective upon receipt.
14 MISCELLANEOUS
14.1 Waiver:
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any other breach or failure to perform or of
any other right arising under this Agreement.
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14.2 Severability:
If any provision in this Agreement is agreed by the Parties to be, or
is deemed to be, or becomes invalid, illegal, void or unenforceable
under any law that is applicable hereto:
14.2.1 such provision will be deemed amended to conform to applicable
laws so as to be valid and enforceable; or
14.2.2 if it cannot be so amended without materially altering the
intention of the Parties, it will be deleted, with effect from
the date the Parties may agree, and the validity, legality and
enforceability of the remaining provisions of this Agreement
shall not be impaired or affected in any way.
14.3 Further Assurances:
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.
14.4 Successors:
This Agreement shall be binding upon and enure to the benefit of the
Parties hereto, their successors and permitted assigns.
14.5 No Effect on Other Agreements/Conflict:
No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement
between the Parties unless specifically referred to, and solely to the
extent provided herein.
In the event of a conflict between the provisions of this Agreement and
the provisions of the JDOA, the terms of the JDOA shall prevail unless
this Agreement specifically provides otherwise.
14.6 Amendments:
No amendment, modification or addition hereto shall be effective or
binding on any Party unless set forth in writing and executed by a duly
authorised representative of each Party.
14.7 Counterparts:
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of
which when taken together shall constitute this Agreement.
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14.8 Good Faith:
Each Party undertakes to do all things reasonably within its power
which are necessary or desirable to give effect to the spirit and
intent of this Agreement.
14.9 No Reliance:
Each Party hereby acknowledges that in entering into this Agreement it
has not relied on any representation or warranty save as expressly set
out herein or in any document referred to herein.
14.10 Relationship of the Parties:
Nothing contained in this Agreement is intended or is to be construed
to constitute Elan and Newco as partners, or Elan as an employee of
Newco, or Newco as an employee of Elan.
Neither 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 the other Party or to bind the other Party to any contract,
agreement or undertaking with any third party.
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SCHEDULE 1
ELAN PATENTS
[REDACTED]
<PAGE>
SCHEDULE 2
TECHNOLOGICAL COMPETITORS OF ELAN
[REDACTED]
<PAGE>
SCHEDULE 3
List of Steroids for Clause 4.1
[REDACTED]
<PAGE>
IN WITNESS WHEREOF the Parties hereto have executed this Agreement.
/S/
SIGNED BY
for and on behalf of
ELAN PHARMA INTERNATIONAL LIMITED
/S/
SIGNED BY
For and on behalf of
SHEFFIELD NEWCO LIMITED
/S/
AGREED TO AND ACCEPTED BY
SHEFFIELD PHARMACEUTICALS, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of
October 18, 1999 by and between Sheffield Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and Elan International Services, Ltd., a Bermuda
exempted limited liability company incorporated under the laws of Bermuda
("EIS").
R E C I T A L S:
A. Pursuant to a Securities Purchase Agreement (the "Purchase
Agreement") by and between EIS and the Company, dated as of the date hereof, the
Company has issued to EIS (i) shares of Series D Preferred Stock; (ii) shares of
Series F Preferred Stock; and (iii) a Warrant to acquire up to 150,000 shares of
the Common Stock.
B. In addition, pursuant to the Purchase Agreement, the Company may
require that EIS purchase shares of Series E Preferred Stock with an aggregate
stated value of up to $4,005,000.
C. The closings under the Purchase Agreement have occurred on the date
hereof; it being a condition to such closings that the parties execute and
deliver this Agreement.
D. The parties desire to set forth herein their agreement relating to
the granting of certain resale registration rights to the Holders (as defined
below) of the Common Stock issuable upon conversion, exercise or exchange of any
of the other Securities. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meaning ascribed to such terms in the
Purchase Agreement.
A G R E E M E N T:
The parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" of any Person shall mean any other Person controlling,
controlled by or under common control with such particular Person. In the case
of a natural Person, his Affiliates include
<PAGE>
members of such Person's immediate family, natural lineal descendants of such
Person or a trust for the exclusive benefit of such Person and his immediate
family and natural lineal descendants.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, par value $0.01 per share
of the Company.
"Holder", "Holders" or "Holders of Registrable Securities" shall mean
EIS and any Person who shall have acquired Registrable Securities from EIS as
permitted herein, either individually or jointly as the case may be.
"Person" shall mean an individual, a partnership, a company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental or quasi-governmental entity or any department,
agency or political subdivision thereof.
"Preferred Stock" shall mean, collectively, the Series D Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock.
"Registrable Securities" means (i) any Common Stock issued or issuable
upon conversion, exchange or exercise of the Securities held or otherwise
acquired by any Holders, and (ii) any Common Stock issued or issuable in respect
of the securities referred to in clause (i) above upon any stock split, stock
dividend, recapitalization or similar event; excluding in all cases, however,
any Registrable Securities sold by a Person in a transaction (including a
transaction pursuant to a registration statement under this Agreement and a
transaction pursuant to Rule 144 promulgated under the Securities Act) in which
registration rights are not transferred pursuant to Section 9 hereof.
"Register," "Registered" and "Registration" shall refer to a resale
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, other than Selling
Expenses, incurred by the Company in complying with Sections 2 or 3 hereof,
including without limitation, all registration, qualification and filing fees,
exchange listing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration and the reasonable fees
and disbursements, of one counsel for the Holders, such counsel to be selected
by Holders holding a majority of the Registrable Securities held by the Holders
and included in such registration.
2
<PAGE>
"Requisite Holders" shall mean Holders holding at least 50% of the
authorized and outstanding Preferred Stock.
"Securities" shall mean shares of Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock and the Warrant, in each case issued
to EIS pursuant to the Purchase Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and the costs of any accountants, counsel or other experts retained
by the Holders.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
2. Demand Registration. (a) Request or exercise for Registration.
Requisite Holders shall have the right at any time and on one occasion to
request registration under the Securities Act of all or part of the Registrable
Securities held by such Holder on Form S-3, or if such form is unavailable for
such a registration, such other form as is available for such a registration
(the "Demand Registration"). A Demand Registration shall specify the approximate
number of Registrable Securities requested to be registered. Within 10 days
after receipt of any such request, the Company will give written notice of such
requested registration to all other Holders of Registrable Securities and, if
they request to be included in such registration, the Company shall include the
Registrable Securities held by such Holders in such offering if they have
responded affirmatively within 15 days after the receipt of the Company's
notice. The Holders in aggregate will be entitled to request one Demand
Registration. A registration will not count as the permitted Demand Registration
until it has become effective (unless the Demand Registration has not become
effective due solely to the fault of the Holders requesting such registration,
including a request by such Holders that such registration be withdrawn). The
Company will pay all Registration Expenses in connection with the Demand
Registration whether or not it has become effective.
(b) Priority on Demand Registration. If the Demand Registration
is an underwritten offering and the managing underwriter or underwriters advise
the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering, exceeds the number of Registrable Securities and
other securities, if any, which can be sold in such offering without adversely
affecting the marketability of the offering, the Company will include in such
registration:
3
<PAGE>
(i) first, the Registrable Securities requested to be
included in such registration by the Holders (or, if necessary,
such Registrable Securities pro rata among the Holders thereof
based upon the number of Registrable Securities owned by each
such Holder); and
(ii) thereafter, other securities requested to be included
in such registration.
(c) Restrictions on Demand Registration. The Company may postpone
for up to three months in any 12 month period, the filing or the effectiveness
of a registration statement for the Demand Registration if the Company
determines in good faith that such Demand Registration would reasonably be
expected to have a material adverse effect on any proposal or plan by the
Company to engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or similar
transaction; provided, that in such event, the Holders initially requesting such
Demand Registration will be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration will not count as the Demand
Registration hereunder and the Company will pay all Registration Expenses in
connection with such registration.
(d) Selection of Underwriters. The Holders will have the right to
select the investment banker(s) and manager(s) to administer an offering
pursuant to the Demand Registration, subject to the Company's approval, which
will not be unreasonably withheld.
(e) Other Registration Rights. Except as provided in this
Agreement, so long as any Holder owns any Registrable Securities, the Company
will not grant to any Persons the right to request the Company to register any
equity securities of the Company, or any securities convertible, exchangeable or
exercisable for such securities, which is superior to or in conflict with the
rights granted to the Holders hereunder, without the prior written consent of
the Requisite Holders; it being understood, however, that the Company may grant
rights to other Persons to (i) participate in Piggyback Registrations (as
defined below) so long as such rights are subordinate or pari passu to the
rights of the Holders of Registrable Securities with respect to such Piggyback
Registrations and (ii) request registrations so long as the Holders of
Registrable Securities are entitled to participate in any such registrations
with such Persons pro rata on the basis of the number of shares owned by each
such Holder.
3. Piggyback Registrations. (a) Right to Piggyback. Whenever the
Company proposes to register any of its securities under the Securities Act
(each, a "Piggyback Registration"), the Company will give prompt written notice
to all Holders of Registrable Securities of its intention to effect such a
registration and, subject to Section 3(b) and the other terms of this Agreement,
will include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within 15
days after the receipt of the Company's
4
<PAGE>
notice. Notwithstanding the foregoing, a Piggyback Registration shall not
include any registration statement (i) on Form S-8 or any successor form to such
form, (ii) on Form S-4 or any successor form to such form, (iii) filed in
connection with an exchange offer or an offering of Common Stock or of
securities convertible or exchangeable into Common Stock made solely to its
existing stockholders in connection with a rights offering or solely to the
Company's employees, or a post-effective amendment to any then effective
registration statement.
(b) Priority on Piggyback Registrations. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and the
managing underwriter(s) advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such registration:
(i) first, the securities the Company proposes to sell;
(ii) second, the Registrable Securities requested to be
included in such registration by the Holders and any securities
requested to be included in such registration by any other Person that
is entitled to registration rights that are not subordinate to the
rights of the Holders, pro rata among the Holders of such Registrable
Securities and such other Persons, on the basis of the number of shares
owned by each of such Holders; and
(iii) thereafter, other securities requested to be included
in such registration.
(c) Right to Terminate Registration. If, at any time after giving
written notice of its intention to register any of its securities as set forth
in Section 3(a) and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register such securities, the Company may, at its election, give
written notice of such determination to each Holder of Registrable Securities
and thereupon be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith as provided herein).
(d) Selection of Underwriters. The Company will have the right to
select the investment banker(s) and manager(s) to administer an offering
pursuant to a Piggyback Registration.
4. Expenses of Registration. Except as otherwise provided herein, all
Registration Expenses incurred in connection with all registrations pursuant to
Sections 2 and 3 shall be borne by the Company. Unless otherwise stated, all
Selling Expenses relating to securities registered on behalf of the Holders of
Registrable Securities shall be borne by such holders.
5
<PAGE>
5. Holdback Agreements. (a) The Company agrees (i) not to effect any
public sale or distribution for its own account of its equity securities, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and during the 90-day period beginning on the
effective date of the underwritten Demand Registration or any underwritten
Piggyback Registration (except as part of such underwritten registration or
pursuant to registrations on Form S-8 or any successor form), unless the
underwriter(s) managing the registered public offering otherwise agree, and (ii)
to use reasonable efforts to cause each Holder of at least 5% (on a
fully-diluted basis) of its Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, purchased from the Company at any
time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such periods (except
as part of such underwritten registration, if otherwise permitted), unless the
underwriter(s) managing the registered public offering otherwise agree.
(b) Each Holder of Registrable Securities whose Registrable
Securities are eligible for inclusion in a Registration Statement filed pursuant
to Section 2 hereof agrees, if requested by the managing underwriter(s) in an
underwritten offering of any Registrable Securities, not to effect any public
sale or distribution of Registrable Securities, including a sale pursuant to
Rule 144 (or any similar provision then effect) under the Securities Act (except
as part of such underwritten registration), during the seven-day period prior
to, and during the 90-day period or such shorter period as may be agreed to by
the parties hereto) following the effective date of such Registration Statement
to the extent timely notified in writing by the Company or the managing
underwriter or underwriters.
6. Registration Procedures. Whenever the Holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and pursuant thereto the Company will
as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
on any form for which the Company qualifies with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will (i)
furnish to the counsel selected by the Holders copies of all such documents
proposed to be filed, which documents will be subject to the review of such
counsel, and (ii) notify each holder of Registrable Securities covered by such
registration of any stop order issued or threatened by the Commission);
(b) 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 for
a period of not less than nine months and comply with the
6
<PAGE>
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdiction as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 6(d), (ii) subject itself to taxation in any
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement of amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) Use its best efforts to cause all such Registrable Securities
to be listed on each securities exchange on which similar securities issued by
the Company are then listed and, if not so listed, to be listed on the NASD
automated quotation system and, if listed on the NASD automated quotation
system, use its best efforts to secure designation of all such Registrable
Securities covered by such registration statement as a NASDAQ National market
system security within the meaning of Rule 11Aa2-1 of the Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
7
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(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriter(s), if
any, reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(i) make available for inspection by a representative of the
Holders of Registrable Securities included in the registration statement, any
underwriter(s) participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, subject to a confidentiality agreement in customary form,
all pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(j) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
Common Stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(l) obtain a so-called "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by such letters; and
(m) undertake such other actions and do all other things which
the Holders shall reasonably request and which shall be customary at the time
for such registrations.
7. Indemnification. (a) The Company agrees to indemnify, to the fullest
extent permitted by applicable law, each Holder of Registrable Securities, its
officers and directors and each Person who controls such Holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities,
expenses or any amounts paid in settlement of any litigation, investigation or
proceeding commenced or threatened (collectively, the "Claims") to which each
such indemnified party may become subject under the Securities Act insofar as
such Claim(s) arose out of (i) any untrue or alleged untrue statement of
material fact contained, on the effective date thereof, in any registration
8
<PAGE>
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, (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, or (iii) any violations by the Company of any federal,
state or common law rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with any such
registration, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein or by such Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such Holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify
such underwriter(s), their officers and directors and each Person who controls
such underwriter(s) (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statements in which a
Holder of Registrable Securities is participating, each such Holder will furnish
to the Company in writing such customary information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus (the "Seller's Information") and, to the fullest extent
permitted by applicable law will indemnify the Company, its directors and
officers and each Person who controls the Company (within the meaning of the
Securities Act) against any and all Claims to which each such indemnified party
may become subject under the Securities Act insofar as such Claim(s) arose out
of (i) any untrue or alleged untrue statement of material fact contained, on the
effective date thereof, in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, (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 or (iii) any
violations by such Person of any federal, state or common law rule or regulation
applicable to such Person and relating to action required of or inaction by such
Person in connection with any such registration; provided that with respect to
Claim(s) arising pursuant to clause (i) or (ii) above, the material misstatement
or omission is contained in such Seller's Information; provided, further, that
the obligation to indemnify will be individual to each Holder and will be
limited to the net amount of proceeds received by such Holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (but the failure to provide such notice shall
not release the indemnifying party of its obligation under paragraphs (a) and
(b), unless and then only to the extent that the indemnifying party has been
prejudiced by such failure to provide such notice) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. An indemnifying party who is
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not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnifying party shall not be liable to indemnify an
indemnified party for any settlement, or consent to judgment of any such action
effected without the indemnifying party's consent (but such consent will not be
unreasonably withheld). Furthermore, the indemnifying party shall not, except
with the approval of each indemnified party, consent to the entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to each indemnified party
of a release from all liability in respect to such claim or litigation without
any payment or consideration provided by each such indemnified party.
(e) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under clauses (a) and (b) above in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the Company,
the underwriter(s), the sellers of Registrable Securities and any other sellers
participating in the registration statement from the sale of shares pursuant to
the registered offering of securities to which indemnity is sought but also the
relative fault of the Company, the underwriter(s), the sellers of Registrable
Securities and any other sellers participating in the registration statement in
connection with the statement or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company, the
underwriter(s), the sellers of Registrable Securities and any other sellers
participating in the registration statement shall be deemed to be based on the
relative relationship of the total net proceeds from the offering (before
deducting expenses) to the Company, the total underwriting commissions and fees
from the offering (before deducting expenses) to the underwriter(s) and the
total net proceeds from the offering (before deducting expenses) to the sellers
of Registrable Securities and any other sellers participating in the
registration statement. The relative fault of the Company, the underwriter(s),
the sellers of Registrable Securities and any other sellers participating in the
registration statement shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by registration statement and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(f) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any
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officer, director or controlling person of such indemnified party and will
survive the transfer of securities.
8. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (b) as expeditiously as possible notifies the
Company of the occurrence of any event as a result of which such prospectus
contains an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (c) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Transfer of Registration Rights. The rights granted to any Person
under this Agreement may be assigned to a transferee or assignee in connection
with any transfer or assignment of Registrable Securities by a Holder; provided,
that: (a) such transfer may otherwise be effected in accordance with applicable
securities laws, (b) if not already a party hereto, the assignee or transferee
agrees in writing prior to such transfer to be bound by the provisions of this
Agreement applicable to the transferor, (c) such transferee shall own
Registrable Securities representing at least 250,000 shares of Common Stock
(subject to the anti-dilution adjustments contained in the Purchase Agreement),
and (d) EIS shall act as agent and representative for such Holder for the giving
and receiving of notices hereunder. In the event that such assignment occurs
subsequent to the date of effectiveness of a Registration Statement filed
pursuant to this Agreement, the transferee agrees to pay all reasonable expenses
necessary to amend or supplement such Registration Statement to reflect such
assignment.
10. Information by Holder. Each Holder shall furnish the Company such
written information regarding such Holder and any distribution proposed by such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration qualification or
compliance referred to in this Agreement.
11. Exchange Act Compliance. The Company shall comply with all of the
reporting requirements of the 1934 Act applicable to it and shall comply with
all other public information reporting requirements of the Commission which are
conditions to the availability of Rule 144 for the sale of the Registrable
Securities. The Company shall cooperate with each Purchaser in supplying such
information as may be necessary for such Purchaser to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of Rule 144.
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12. Limitation on Registration. Notwithstanding anything to the
contrary in this Agreement, the Company shall not be obligated to effect a
registration of any Holder's Registrable Securities pursuant to Sections 2 or 3
hereof if all of the Registrable Securities have been sold under Rule 144,
Regulation S or similar provision under the Securities Act so that there is no
further restriction on the transfer by the transferee or if the Holders may sell
the Registrable Securities without restriction pursuant to Rule 144(k) under the
Securities Act (or any successor statute thereto).
13. Miscellaneous. (a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders of Registrable
Securities in this Agreement.
(b) Remedies. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(c) Amendments and Waivers. Except as otherwise provided herein,
the provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and Holders of at least 50% of the Registrable
Securities; provided, that without the prior written consent of all the Holders,
no such amendment or waiver shall reduce the foregoing percentage.
(d) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
Holders of Registrable Securities are also for the benefit of, and enforceable
by, any subsequent holder of Registrable Securities.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
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(g) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(h) Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto will be governed by the internal law, and not the law of conflicts, of
New York. Each of the Parties hereby irrevocably submits to the jurisdiction of
any New York State or United States Federal court sitting in the county, city
and state of New York over any action or proceeding arising out of or relating
to this Agreement or the Transaction Documents; and each hereby waives the
defense of an inconvenient forum for the maintenance of such an action.
(i) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
or by hand to the recipient, one day after being sent to the recipient by an
internationally recognized overnight delivery service (charges prepaid) or three
days after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to the parties hereto at the addresses indicated on
the signature page hereto and to the Company at the address indicated below:
Sheffield Pharmaceuticals, Inc.
South Winton Court
3136 Winton Road South
Suite 306
Rochester, New York 14623
Attention: Chairman
and
Sheffield Pharmaceuticals, Inc.
425 South Woodsmill Road
St. Louis, Missouri 63017-3441
Attention: Chief Executive Officer
(j) Termination. This Agreement shall terminate on the date as of
which each Holder has sold all remaining Registrable Securities in a transaction
or transactions of the type described in Section 12 hereof.
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IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
Sheffield Pharmaceuticals, Inc.
By:/s/
---------------------------------------
Name:
Title:
Elan International Services, Ltd.
By:/s/
---------------------------------------
Name:
Title:
102 St. James Court
Flatts, Smiths Parish
Bermuda, FL04
Attention: Director
Facsimile: (441) 292-2224
