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EXHIBIT 10.5
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") is made as of the 6th day
of March, 1998 between Allergan, Inc., a Delaware corporation ("Allergan"), and
Allergan Specialty Therapeutics, Inc., a Delaware corporation ("ASTI").
BACKGROUND
A. Allergan is the holder of all of the issued and outstanding shares of
capital stock of ASTI. Allergan intends to make a $200 million capital
contribution to ASTI, to license certain technology to ASTI, and to make other
arrangements in order to establish ASTI as a separate enterprise for the purpose
of researching and developing human pharmaceutical products and commercializing
such products, most likely through licensing to Allergan.
B. Allergan intends to distribute all of the ASTI Shares (as defined
below) to the holders of Allergan Common Stock.
Now, therefore, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
1.2 "Agent" shall mean First Chicago Trust Company of New York, as
distribution agent, appointed by Allergan to set up book entry accounts under
the Direct Registration System representing the ASTI Shares pursuant to the
Distribution.
1.3 "Allergan/ASTI Agreements" shall mean this Agreement, the Research
and Development Agreement, the Technology License Agreement, the License Option
Agreement, the Services Agreement and the Purchase Option.
1.4 "Allergan Common Stock" shall mean the Common Stock, par value $0.01
per share, of Allergan.
1.5 "Commission" shall mean the Securities and Exchange Commission.
1.6 "ASTI Shares" shall mean the Class A Common Stock, par value $0.01
per share, of ASTI.
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1.7 "Distribution" shall mean the distribution of ASTI Shares to holders
of record on February 17, 1998 of Allergan Common Stock immediately following
completion of the transactions contemplated in Sections 2 and 3 hereof.
1.8 "Distribution Date" shall mean the proposed date of effecting the
Distribution, which is anticipated to occur on or about March 10, 1998.
1.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.10 "Form 8-A" shall mean the registration statement on Form 8-A to be
filed by ASTI with the Commission to effect the registration of the ASTI Shares
pursuant to the Exchange Act.
1.11 "License Option Agreement" shall mean the License Option Agreement
dated as of the date hereof between Allergan and ASTI.
1.12 "Prospectus" shall mean the prospectus to be distributed to the
holders of Allergan Common Stock in connection with the Distribution.
1.13 "Purchase Option" shall mean that certain option contained in
ASTI's Restated Certificate of Incorporation pursuant to which Allergan has the
right to purchase all, but not less than all, of the outstanding ASTI Shares.
1.14 "Record Date" shall mean the close of business on February 17, 1998
or such other date as is determined by the Allergan Board of Directors or any
committee thereof.
1.15 "Registration Statement" shall mean the registration statement on
Form S-1 registering the issuance of ASTI Shares pursuant to the Distribution.
1.16 "Research and Development Agreement" shall mean the Research and
Development Agreement dated as of the date hereof between Allergan and ASTI.
1.17 "Services Agreement" shall mean the Services Agreement dated as of
the date hereof between Allergan and ASTI.
1.18 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.19 "Technology License Agreement" shall mean the Technology License
Agreement dated as of the date hereof between Allergan and ASTI.
2. PRELIMINARY ACTION.
2.1 REGISTRATION STATEMENT AND PROSPECTUS. ASTI has prepared and filed
the Registration Statement with the Commission. Subject to the conditions set
forth herein, Allergan and ASTI shall use reasonable efforts to cause the
Registration Statement to become effective under the Securities Act. ASTI has
prepared, and Allergan shall cause to be mailed, the Prospectus to the record
holders on the Record Date of Allergan Common Stock.
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2.2 FORM 8-A. ASTI has prepared and filed with the Commission a Form 8-A
which includes or incorporates by reference relevant portions of the
Registration Statement. Subject to the conditions set forth herein, ASTI shall
use reasonable efforts to cause the Form 8-A to become effective under the
Exchange Act.
2.3 BLUE SKY. ASTI shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the Distribution to permit
the ASTI Shares to be distributed as described in the Prospectus.
2.4 LISTING. ASTI has prepared and filed an application to effect the
listing of the ASTI Shares on the Nasdaq National Market. ASTI shall use
reasonable efforts to cause the ASTI Shares to be so listed.
2.5 NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Each party hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any agreements or the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable laws. Notwithstanding the foregoing, the
parties shall use reasonable efforts to obtain all consents and approvals, to
enter into all agreements and to make all filings and applications which may be
required for the consummation of the transactions contemplated by this
Agreement, including, without limitation, all applicable regulatory filings or
consents under federal or state laws and all necessary consents, approvals,
agreements, filings and applications.
3. ISSUE AND SALE OF ASTI SHARES.
3.1 PURCHASE OF ASTI CLASS A COMMON STOCK. Prior to the Distribution
Date and in consideration of Allergan's contribution of $200 million in cash to
ASTI, ASTI will issue to Allergan that number of ASTI Shares such that Allergan
may distribute to holders of Allergan Common Stock one ASTI Share for every 20
shares of Allergan Common Stock held on the Record Date. Allergan and ASTI
acknowledge that all of the ASTI Shares held by Allergan will be distributed by
Allergan to the holders of outstanding shares of Allergan Common Stock.
4. THE DISTRIBUTION.
4.1 THE DISTRIBUTION. ASTI shall take all steps required by Allergan or
the Agent to effect the Distribution. Prior to the Distribution, and upon
receipt of the capital contribution described in Section 3 hereof, ASTI shall
cause to be issued to Allergan a certificate or certificates representing a
sufficient number of ASTI Shares so that Allergan may distribute one ASTI Share
for every 20 shares of Allergan Common Stock held on the Record Date.
4.2 EXPENSES OF DISTRIBUTION. All expenses related in any way to the
Distribution, including without limitation all legal, financial advisory and
accounting fees of Allergan and ASTI, shall be borne by ASTI.
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5. ADDITIONAL ASSURANCES; INDEMNIFICATION.
5.1 MUTUAL ASSURANCES. Allergan and ASTI agree to cooperate with respect
to the implementation of the Allergan/ASTI Agreements and to execute such
further documents and instruments as may be necessary to confirm the
transactions contemplated thereby.
5.2 INDEMNIFICATION. If Allergan exercises the Purchase Option, from and
after such exercise, Allergan shall indemnify, defend and hold harmless ASTI's
officers and directors to the same extent as provided in ASTI's Restated
Certificate of Incorporation.
5.3 NOTICE. Any person entitled to indemnification pursuant to Section
5.2 shall give Allergan prompt notice in writing, in the manner set forth in
Section 7.7 below, of any claim or demand made against such person for which
such person may be entitled to indemnification under Section 5.2.
6. CONDITIONS TO EFFECTIVENESS OF DISTRIBUTION.
The Distribution shall be subject to the satisfaction or waiver by
Allergan of the following conditions and the satisfaction or waiver by ASTI of
the conditions in Sections 6.8 and 6.9:
6.1 BOARD APPROVAL. The Allergan/ASTI Agreements (including exhibits and
schedules) shall have been approved by the Board of Directors of Allergan and
ASTI and shall have been executed and delivered by appropriate officers of
Allergan and ASTI, and the Allergan Board of Directors (or a committee thereof)
shall have declared a dividend of the ASTI Shares as of the Record Date to the
holders of record of the Allergan Common Stock.
6.2 SECURITIES LAW COMPLIANCE. The transactions contemplated hereby
shall be in compliance with applicable federal and state securities laws, and
the Registration Statement shall have been declared effective and no stop orders
shall have been instituted with respect thereto under the Securities Act.
6.3 RESTATED CERTIFICATE OF INCORPORATION. The Restated Certificate of
Incorporation of ASTI shall have been adopted by the Board of Directors,
approved by Allergan as sole stockholder of ASTI, and filed with the Delaware
Secretary of State.
6.4 FORM 8-A EFFECTIVE. The Form 8-A shall have become effective under
the Exchange Act.
6.5 LISTING APPLICATION APPROVED. The ASTI Shares shall be approved for
quotation on the Nasdaq National Market.
6.6 FAIRNESS OPINION. Allergan shall have received an opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, investment advisor to Allergan, in
form and substance satisfactory to Allergan, to the effect that (i) from a
financial point of view, the Distribution provides a reasonable structure to
pursue the financial objectives described in the Prospectus of
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Allergan and (ii) from a financial point of view, the Distribution is fair to
the stockholders of Allergan.
6.7 PERMITS AND LICENSES. ASTI shall have received such permits and
licenses as may be necessary for the purpose of commencing operations
contemplated by the Allergan/ASTI Agreements.
6.8 CONSENTS. Each of Allergan and ASTI shall have received such
consents, and shall have received executed copies of such agreements or
amendments of agreements, as it shall deem necessary in connection with the
completion of the transaction contemplated by this Agreement.
6.9 OTHER INSTRUMENTS. All actions and other documents and instruments
deemed necessary or advisable in connection with the transactions contemplated
hereby shall have been taken or executed, as the case may be, in form and
substance satisfactory to Allergan and ASTI.
6.10 LEGAL PROCEEDINGS. No legal proceedings affecting or arising out of
the transactions contemplated hereby or which could otherwise affect Allergan or
ASTI in a materially adverse manner shall have been commenced or threatened
against Allergan, ASTI or the directors or officers of either Allergan or ASTI.
6.11 MATERIAL CHANGES. No material adverse change shall have occurred
with respect to Allergan or ASTI, the securities markets (either generally or
with respect to Allergan or ASTI) or general economic or financial conditions
which shall, in the reasonable judgment of Allergan, make the transactions
contemplated by this Agreement inadvisable.
6.12 OTHER CONDITIONS. Such other conditions as may be set by the
Allergan Board of Directors or any committee thereof in the resolutions
authorizing the Distribution shall have been satisfied.
7. MISCELLANEOUS.
7.1 WAIVER, REMEDIES AND AMENDMENT. Any waiver by either party hereto of
a breach of any provisions of this Agreement shall not be implied and shall not
be valid unless such waiver is recited in writing and signed by such party.
Failure of any party to require, in one or more instances, performance by the
other party in strict accordance with the terms and conditions of this Agreement
shall not be deemed a waiver or relinquishment of the future performance of any
such terms or conditions or of any other terms and conditions of this Agreement.
A waiver by either party of any term or condition of this Agreement shall not be
deemed or construed to be a waiver of such term or condition for any other term.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be a limitation of any
other remedy, right, undertaking, obligation or agreement of either party. This
Agreement may not be amended except in a writing signed by both parties.
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7.2 ASSIGNMENT. Neither party may assign its rights and obligations
hereunder without the prior written consent of the other party, which consent
may not be unreasonably withheld; provided, however, that Allergan may assign
such rights and obligations hereunder to an Affiliate of Allergan or to any
person or entity with which Allergan is merged or consolidated or which acquires
all or substantially all of the assets of Allergan.
7.3 DISPUTE RESOLUTION. In the event of any dispute, the parties shall
refer such dispute to the Chief Executive Officer ("CEO") of ASTI and the CEO of
Allergan for attempted resolution by good faith negotiations within sixty (60)
days after such referral is made. During such period of good faith negotiations,
any applicable time periods under this Agreement shall be tolled. In the event
such executives are unable to resolve such dispute within such sixty (60) day
period, the parties shall submit their dispute to binding arbitration before a
retired California Superior Court Judge at J.A.M.S./Endispute located in Orange,
California, such arbitration to be conducted pursuant to the J.A.M.S./Endispute
procedure rules for commercial disputes then in effect. The award of the
arbitrator shall include an award of reasonable attorneys' fees and costs to the
prevailing party.
7.4 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.
7.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California as applied to residents of
that state entering into contracts to be performed in that state.
7.6 HEADINGS. The headings set forth at the beginning of the various
sections of this Agreement are for convenience and form no part of the Agreement
between the parties.
7.7 NOTICES. Notices required under this Agreement shall be in writing
and sent by registered or certified mail, postage prepaid, or by facsimile and
confirmed by registered or certified mail, postage prepaid, and addressed as
follows:
If to Allergan: Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: Corporate Vice President, General Counsel
If to ASTI: Allergan Specialty Therapeutics, Inc.
2525 Dupont Drive
Irvine, CA 92612
Facsimile: (714) 246-4774
Attention: President and Chief Executive Officer
All notices shall be deemed to be effective five days after the date of
mailing or upon receipt if sent by facsimile (but only if followed by certified
or registered confirmation). Either
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party may change the address at which notice is to be received by written notice
pursuant to this Section 7.7.
7.8 SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified,
if possible, to the minimum extent necessary to make it valid and enforceable
or, if such modification is not possible, it shall be stricken and the remaining
provisions shall remain in full force and effect.
7.9 RELATIONSHIP OF THE PARTIES. For all purposes of this Agreement,
ASTI and Allergan shall be deemed to be independent contractors and anything in
this Agreement to the contrary notwithstanding, nothing herein shall be deemed
to constitute ASTI and Allergan as partners, joint venturers, coowners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever. Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way to obligate the other party, except as expressly authorized
in writing by the other party. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume nor shall be liable for any
liabilities or obligations of the other party, whether past, present or future.
7.10 SURVIVAL. The provisions of Sections 1, 5, 7.1, 7.3, 7.5, 7.6, 7.7,
7.8 and this Section 7.10 shall survive the termination for any reason of this
Agreement. Any payments due under this Agreement with respect to any period
prior to its termination shall be made notwithstanding the termination of this
Agreement. Neither party shall be liable to the other due to the termination of
this Agreement as provided herein, whether in loss of good will, anticipated
profits or otherwise.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ALLERGAN, INC.
By: /s/ LESTER J. KAPLAN
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Title: Corporate Vice President,
Science & Technology
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ALLERGAN SPECIALTY THERAPEUTICS, INC.
By: /s/ LESTER J. KAPLAN
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Title: Chief Executive Officer
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