Exhibit 10.4

 

SERVICES AGREEMENT

 

THIS SERVICES AGREEMENT (this “Agreement”) is made and entered into as of the
10th day of August, 2004 by and between Third Security, LLC, a Virginia limited
liability company (“THIRD SECURITY”), and New River Pharmaceuticals Inc., a
Virginia corporation, including all of its now or hereafter existing
subsidiaries (“NEW RIVER”).

 

WHEREAS, NEW RIVER intends to pursue an underwritten initial public offering
(the closing of which is hereafter referred to as the “Offering”);

 

WHEREAS, historically THIRD SECURITY has provided certain corporate and
administrative services to its affiliates, including NEW RIVER; and

 

WHEREAS, THIRD SECURITY and NEW RIVER desire that THIRD SECURITY continue to
provide certain services to NEW RIVER through and following the Offering
pursuant to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be bound hereby, agree as follows:

 

1. Services. Following the Offering, THIRD SECURITY will provide or cause to be
provided to NEW RIVER, those corporate and administrative services described in
Exhibit A hereto (the “Services”), as requested by NEW RIVER from time to time.
The scope of the Services may be adjusted by the mutual agreement of the parties
hereto.

 

2. Charges for Services. As consideration for the Services provided hereunder,
NEW RIVER agrees to pay the following fees and expenses to THIRD SECURITY:

 

(a) Fees for Services performed for NEW RIVER by a vendor, contractor or similar
third party (other than THIRD SECURITY) shall be equal to the final invoiced
costs charged by such third party to THIRD SECURITY for the performance of such
Services.

 

(b) With respect to all other Services provided by THIRD SECURITY employees, NEW
RIVER will pay to THIRD SECURITY an hourly rate calculated as follows for each
THIRD SECURITY employee providing Services in a given invoice period under this
Agreement: such hourly rate shall equal [the annual salary of the THIRD SECURITY
employee performing the given Services plus a thirty percent (30%) markup to
cover the cost of overhead and fringe benefits provided to such THIRD SECURITY
employee] divided by 2,080 hours. In addition, NEW RIVER will pay reasonable
travel and other out-of-pocket expenses incurred in connection therewith.

 

(c) All travel and out-of-pocket expenses of THIRD SECURITY made in accordance
with the then effective policies of THIRD SECURITY governing such expenses will
be deemed reasonable and may not be subject to any dispute.

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3. Payments.

 

(a) THIRD SECURITY shall submit to NEW RIVER by the fifteenth (15th) day of each
month an invoice for all charges associated with Services provided during the
preceding month, including any other amounts payable in respect of prior invoice
periods. All invoices shall reference the Services provided and the charges
associated therewith, any related adjustments and any other amounts that are
payable. Except as provided in subparagraph (b) below, NEW RIVER shall remit
payment in full for all charges invoiced on or before the last business day of
the month in which the invoice is received. Payment of all invoices shall be
made by check or electronic funds transfer of immediately available funds to an
account or accounts designated by THIRD SECURITY. Any late payment shall bear
interest at the rate of one half percent (0.5%) per month or fraction thereof
until paid.

 

(b) In the event of a dispute as to an invoiced amount, NEW RIVER shall promptly
pay all undisputed amounts, but shall be entitled to withhold amounts in
dispute, and shall promptly notify THIRD SECURITY of such dispute and the basis
therefor. The parties agree to provide each other with sufficient records and
information to resolve such dispute and, without limiting the rights and
remedies of the parties hereunder, to negotiate in good faith a resolution
thereto. Notwithstanding this clause (b), the late payment interest provision in
Section 3(a) shall apply to all such withheld amounts that are ultimately
determined to be due and payable, which amounts, including any interest, shall
be promptly remitted to THIRD SECURITY in the manner provided herein.

 

4. Term of Agreement. The term of this Agreement shall commence immediately upon
the date hereof and continue for a period of twenty four (24) months unless
terminated by agreement of the parties hereto (except with respect to the
services identified in Paragraph 7 of Exhibit A, which shall be provided until
December 30, 2007). Notwithstanding the foregoing this Agreement shall become
terminable at any time by NEW RIVER upon delivery of written notice to THIRD
SECURITY with respect to any Services or any part thereof. Termination under
this Section 4 or otherwise shall have no effect on the obligations of the
parties to provide Services prior to the effective date of such termination or
to make payments in respect of charges incurred in connection therewith or which
relate to events occurring prior to such date.

 

5. Performance of Services.

 

(a) THIRD SECURITY shall perform the Services or cause the Services to be
performed with the same degree of care, skill, timeliness and prudence
customarily exercised with respect to its own operations. It is understood and
agreed that the Services will be substantially identical in nature and quality
to the Services performed by THIRD SECURITY for NEW RIVER during the year prior
to the commencement of the term of this Agreement, except with respect to such
services required to effect the Offering.

 

(b) Each party acknowledges that the Services will be provided only with respect
to NEW RIVER’s business. Services will not be requested for the benefit of any
entity other than NEW RIVER. NEW RIVER agrees that it will use the Services only
in accordance with all applicable federal, state and local laws, and regulations
and in accordance with the reasonable conditions, rules, regulations and
specifications which are or may be set forth in any manuals, materials,
documents or instructions of THIRD SECURITY. THIRD SECURITY reserves the right
to take all actions, including the termination of any Services or part thereof,
in order to ensure that the Services are provided in accordance with any
applicable laws and regulations.

 

(c) Any input or information needed by either party to perform or utilize the
Services pursuant to the provisions of this Agreement shall be provided by the
other party in a manner consistent with the practices employed by the parties
during the year prior to the date of this Agreement. Should the failure by NEW
RIVER to provide such input or information render the performance of the
Services impossible or unreasonably difficult, THIRD SECURITY may, upon
reasonable notice, refuse to provide such Services.

 

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6. Liability and Indemnification. Except as provided below, THIRD SECURITY and
all of its managing directors, officers, agents and employees shall have no
liability, whether direct or indirect, in contract, tort or otherwise, under
this Agreement for any damage, loss or other harm (including, without
limitation, out-of-pocket expenses and fees and disbursements of counsel) of any
type suffered by NEW RIVER or any third party in connection with the performance
or non-performance of this Agreement or the Services contemplated hereby or any
action or in-action of any of the indemnified parties in connection with the
foregoing, except for any such damage, loss or other harm directly caused by or
directly resulting from the gross negligence or willful misconduct of THIRD
SECURITY in connection with the performance or non-performance of this Agreement
or the Services contemplated hereby or the action or inaction of any of the
indemnified parties in connection with the foregoing. In the event of a third
party claim, NEW RIVER, including its successors and assigns, for itself and on
behalf of all of its subsidiaries, shall indemnify, defend and hold harmless
THIRD SECURITY and all of its managing directors, officers, agents and employees
from and against any and all such damages, losses and other harms (including,
without limitation, out-of-pocket expenses and fees, counsel fees and
disbursements of counsel) caused by or arising out of the performance or
non-performance of this Agreement or the Services contemplated hereby or the
actions or in-actions of any of the indemnified parties in connection with the
foregoing other than any such damage, loss or other harm directly caused by or
directly resulting from the gross negligence or willful misconduct of THIRD
SECURITY in connection with the performance or non-performance of this Agreement
or the Services contemplated hereby or the actions or in-actions of any of the
indemnified parties in connection with the foregoing. The total liability of
THIRD SECURITY under this Section 6 will not under any circumstances exceed the
aggregate amount of actual fees paid to THIRD SECURITY by NEW RIVER pursuant to
this Agreement. Notwithstanding any other provision of this Agreement, THIRD
SECURITY shall have no liability for (i) any lost profits or any incidental,
consequential, special, indirect or similar damages of any kind or nature
whatsoever of NEW RIVER or any third party (including the fees and expenses of
counsel) or (ii) the acts or omissions of any third party (other than THIRD
SECURITY) that provides Services hereunder. This Section 6 shall survive the
termination of this Agreement until such time as the obligations of the parties
(including their respective successors and assigns) set forth in this Section 6
have been fully satisfied.

 

7. Confidentiality. The parties each agree to hold in trust and maintain
confidential, and, except as required by law or applicable rules and regulations
promulgated thereunder or by court order or other legal process, not to disclose
to others without first obtaining the prior written approval of the other party,
any information received by it from the other party or developed or otherwise
obtained by it under this Agreement, including all information resulting from
the provision or utilization of the Services hereunder (collectively, the
“Information”). At the time of termination of this Agreement in whole or in
part, each party shall, within 90 days after the effective date of such
termination, return to each other all written Information that it obtained and
shall not retain or allow any third party to retain photocopies or other
reproductions of such Information, provided that (i) the parties may retain any
Information to the extent reasonably needed to comply with applicable tax,
accounting or financial reporting requirements or to resolve any legal issues
identified at the time of termination, and (ii) in the case of a partial
termination of this Agreement, the parties may retain any Information required
to perform or utilize any remaining Services covered by this Agreement.
Alternatively, each party may, upon receipt of the written consent of the other
party, destroy such Information instead of returning the same pursuant to the
foregoing sentence. The obligations set forth in this Section 7 shall not apply
to any Information that is shown by either party to be or have become knowledge
generally available to the public other than through the acts or omissions of
such party.

 

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8. Assignment. Neither party shall assign or transfer any of its rights or
delegate any of its obligations under this Agreement without first obtaining the
prior written consent of the other party, which consent may be withheld by such
other party in its sole discretion; provided that THIRD SECURITY shall be
permitted to cause any Services to be provided or caused to be provided by THIRD
SECURITY through one or more third parties selected by THIRD SECURITY; and
provided further that the selection of any third party by THIRD SECURITY shall
be subject to the prior written consent of NEW RIVER (which shall not be
unreasonably withheld or delayed) unless such third party shall have provided
the same or similar Services to THIRD SECURITY at any time during the twelve
(12) months immediately preceding the date of this Agreement. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns.

 

9. Notices. All notices and other communications hereunder shall be in writing
and shall be delivered in person, by United States mail, certified, return
receipt requested, postage prepaid, by express mail by a nationally recognized
carrier, or by facsimile transmission (provided, if sent by facsimile
transmission, such notice shall also be sent by one of the other methods
provided under this section within 24 hours after initially sent by facsimile
transmission) to the following:

 

Third Security, LLC

Attn: Legal Department

The Governor Tyler

1881 Grove Ave

Radford, VA 24141

Fax No.: 540-633-7939

 

New River Pharmaceuticals Inc.

Attn: Secretary

The Governor Tyler

1881 Grove Ave

Radford, VA 24141

Fax No.: 540-633-7939

 

or to such other addresses as either party may designate from time to time in
writing. The date of any notice so sent will be deemed to be the date of receipt
(or refusal), in the case of United States mail, the following business day, in
the case of overnight express mail, and, in the case of facsimile transmission,
upon receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day if not received during the
recipient’s normal business hours.

 

10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without giving effect
to the principles of conflicts of laws thereof.

 

11. Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed an original but all of which
shall together constitute but one and the same instrument.

 

12. Headings. The headings and captions set forth in this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation hereof.

 

13. Severability. The provisions of this Agreement are severable and should any
provisions hereof be void, voidable or unenforceable under any applicable law,
such provision shall not affect or invalidate any other provision of this
Agreement, which shall continue to govern the relative rights and duties of the
parties as though such void, voidable or unenforceable provision were not a part
hereof.

 

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14. Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, oral or written, with respect
thereto. This Agreement may not be amended or otherwise modified or supplemented
except by a written instrument duly executed by both parties. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.

 

THIRD SECURITY, LLC   NEW RIVER PHARMACEUTICALS INC. By:  

/s/ Randal J. Kirk

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  By:  

/s/ Randal J. Kirk

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Name:   Randal J. Kirk   Name:   Randal J. Kirk Title:   Senior Managing
Director   Title:   Chairman, President and Chief Executive Officer

 

 

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