Document:

Exhibit 10.53

 

Execution Version

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of April 12, 2004 is
made and entered into by and among Reliant Pharmaceuticals, Inc., a Delaware
corporation and the successor in interest to Reliant Pharmaceuticals, LLC (“Parent”), RP SUB No. 1,
Inc., a Delaware corporation and a wholly-owned subsidiary of Parent
(“MergerSub”), Versant Reliant
Corporation, a Delaware corporation (“Versant”),
Versant Venture Capital I, L.P., a Delaware limited partnership and a
stockholder of Versant (“VVC I”),
Versant Affiliates Fund I-A, L.P., a Delaware limited partnership and a
stockholder of Versant (“VAF IA”),
Versant Affiliates Fund I-B, L.P., a Delaware limited partnership and a
stockholder of Versant (“VAF IB”)
and Versant Side Fund I, L.P., a Delaware limited partnership and a stockholder
of Versant (“VSF I,” and, together
with VVC I, VAF IA and VAF IB, the “Versant
Stockholders”). Versant shall be the surviving corporation of the
merger of MergerSub with and into Versant as provided herein (the “Merger”).

 

WHEREAS, Versant was formed by the Versant
Stockholders for the sole purpose of investing in Reliant Pharmaceuticals, LLC,
a Delaware limited liability company, which was converted into a Delaware
corporation effective April 1, 2004 (the “Conversion”),
and Versant has transacted no other business other than to hold certain equity
securities of Parent;

 

WHEREAS, Versant is the record and
beneficial owner of 750,000 shares of the Series B Preferred Stock of Parent
and 153,420 shares of the Series C Preferred Stock of Parent (collectively, the
“Versant-Owned Reliant Equity”);

 

WHEREAS, MergerSub is a Delaware
corporation organized and existing under the laws of the State of Delaware
which was formed for the purpose of participating in the Merger with Versant;

 

WHEREAS, as a result of the Conversion,
Parent desires to acquire the stock of Versant and the Versant Stockholders
desire to acquire shares of Parent Preferred Stock (as defined herein) in a
tax-free transaction and the parties hereto are willing to enter into this
Agreement to effect such transaction; and

 

WHEREAS, the respective boards of directors
of Versant and MergerSub have approved and declared advisable, and the Versant
Stockholders and the stockholder of MergerSub have determined it to be in their
respective best interests to effect, the merger of MergerSub with and into
Versant upon the terms and subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the State of Delaware (the “DGCL”).

 

 

NOW, THEREFORE, in consideration of the
foregoing and the respective representations and warranties set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:

 

ARTICLE 1.

THE MERGER

 

1.01                           The
Merger.

 

(a)                                  General. Subject to the terms and
conditions of this Agreement and in accordance with the DGCL, at the Effective
Time (as defined herein): (a) MergerSub shall be merged with and into Versant
and the separate corporate existence of MergerSub shall thereupon cease, (b)
Versant shall be the surviving company in the Merger (the “Surviving
Company”), its name shall be “RP Sub No.1, Inc.” and it shall
continue to be governed by the laws of the State of Delaware, (c) all rights,
privileges, immunities, powers, purposes, franchises, properties and assets of
Versant and MergerSub shall vest in the Surviving Company, and (d) all debts,
liabilities, obligations, restrictions, disabilities and duties of Versant and
MergerSub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Company. At the Effective Time, the
Certificate of Incorporation and By-laws of the Surviving Company shall be
amended in their entirety to contain the provisions set forth in the
Certificate of Incorporation and the By-laws of MergerSub, each as in effect
immediately prior to the Effective Time.

 

(b)                                 Tax-Free Treatment. The parties intend that the Merger
will meet the requirements of Section 368(a) of the Internal Revenue Code of
1986, as amended (the “Code”), and
the rules and regulations promulgated thereunder.

 

1.02                           Effective
Time. As soon as practicable after the satisfaction or, if permissible,
waiver of the conditions set forth in Article VI, the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger (“Merger Certificate”) with the Secretary of
State of the State of Delaware in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the date and time of such
filing, or if another date and time is specified in such filing, such specified
date and time, being the “Effective
Time”). Immediately prior to the filing
of the Merger Certificate, a closing (the “Closing”)
will be held at the offices of Latham & Watkins LLP (or such other place as
the parties may agree) at 10:00 a.m., local time, for the purpose of confirming
satisfaction or waiver of all conditions to the Merger. The date on which the
Closing occurs is referred to herein as the “Closing
Date.”

 

1.03                           Directors
and Officers of the Surviving Company. The directors of MergerSub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Company, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Company. The officers of MergerSub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Company, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Company.

 

2

 

ARTICLE 2.

EFFECT OF THE MERGER; CONVERSION OF SECURITIES

 

2.01                           Conversion
of Securities. At the Effective Time, by virtue of the Merger and without
any action on the part of Parent, MergerSub, Versant or any Versant
Stockholder:

 

(a)                                  Versant Common Stock. Each issued and outstanding share
of common stock par value $1.00 per share, of Versant (“Versant Common Stock”) shall be converted
into and become: (i) 265.957446809  validly
issued, fully paid and nonassessable shares of 
Series B Preferred Stock, par value $0.01 per share, of Parent (the “Series B Preferred Stock”); and (ii)
54.404255319 validly issued, fully paid and nonassessable shares of Series C
Preferred Stock, par value $0.01 per share, of Parent (the “Series C Preferred Stock” together with the
Series B Preferred Stock, the “Parent
Preferred Stock”). As of the Effective Time, all shares of Versant
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of shares of Versant
Common Stock immediately prior to the Effective Time shall cease to have any
rights with respect thereto, except the right to receive upon the surrender of
such certificates evidencing such shares, certificates representing the shares
of Parent Preferred Stock, and cash in lieu of fractional shares of Parent
Preferred Stock as provided in Section 2.05 hereof. All shares of Parent
Preferred Stock issued in exchange for Versant Common Stock in connection with
the Merger shall be deemed to have been issued on the dates set forth on Exhibit
A, such dates being the dates the equivalent securities constituting the
Versant-Owned Reliant Equity were issued.

 

(b)                                 MergerSub Common Stock. Each share of common stock, par
value $0.01 per share, of MergerSub issued and outstanding immediately prior to
the Effective Time shall remain outstanding and shall automatically convert
into one (1) validly issued, fully paid and nonassessable share of common stock
of the Surviving Company.

 

2.02                           Exchange
of Certificates

 

(a)                                  The certificates previously
representing shares of Versant Common Stock (the “Versant Certificates”) shall represent the right to receive
certificates representing the shares of Parent Preferred Stock into which such
shares of Versant Common Stock were converted in the Merger. As soon as
practicable after the Effective Time, the holder of such Versant Certificate
shall be entitled to receive in exchange therefore one or more certificates
representing that number of whole shares of Parent Preferred Stock into which
the shares of Versant Common Stock represented thereby were converted pursuant
to the provisions of this Article II after taking into account all the
shares of Versant Common Stock then held by such holder under all such Versant
Certificates so surrendered, and such Versant Certificates so surrendered shall
forthwith be stamped cancelled.

 

(b)                                 The
certificate(s) previously representing shares of the common stock, par value
$0.01 per share, of MergerSub shall remain outstanding and, from and after the
Effective Time, shall represent the corresponding shares of the common stock of
Surviving Company.

 

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2.03                           Distributions
with Respect to Unexchanged Securities. No dividends or other distributions
declared or made after the Effective Time with respect to Parent Preferred
Stock with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Versant Certificate with respect to the shares of Parent
Preferred Stock that the holder thereof has the right to receive upon the
surrender thereof, and no cash payment in lieu of fractional shares of Parent
Preferred Stock shall be paid to any such holder pursuant to Section 2.05,
in each case until the holder of such share of Versant Common Stock shall
surrender such Versant Certificates in accordance with this Article II. Following
surrender of any Versant Certificates, there shall be paid to the record holder
of the certificate representing whole shares of Parent Preferred Stock issued
in exchange therefore, without interest (a) at the time of such surrender, the
amount of any cash payable in lieu of fractional shares of Parent Preferred
Stock to which such holder is entitled pursuant to Section 2.05 and the amount
of dividends or other distributions paid with respect to such whole shares of
Parent Preferred Stock with a record date after the Effective Time and paid
prior to such surrender and (b) at the appropriate payment date, the amount of
dividends or other distributions payable with respect to such whole shares of
Parent Preferred Stock with a record date after the Effective Time but prior to
such surrender and a payment date after such surrender.

 

2.04                           No
Further Ownership Rights in Versant Common Stock. All shares of Parent
Preferred Stock issued in exchange for Versant Certificates that are
surrendered in accordance with the terms of this Article II (including
any dividends or other distributions paid pursuant to Section 2.03 and cash in
lieu of fractional shares pursuant to Section 2.05) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to (i) the
shares of Versant Stock previously represented by such Versant Certificates. After
the Effective Time there shall be no further registration of transfers on the
transfer books of Versant of the shares of Versant Common Stock that were
outstanding immediately prior to the Effective Time.

 

2.05                           No
Fractional Shares; Cash in Lieu. No certificates or scrip representing
fractional shares of Parent Preferred Stock shall be issued upon the surrender
for exchange of Versant Certificates. Each holder of Versant Common Stock
issued and outstanding at the Effective Time which would otherwise be entitled
to receive a fractional share of Parent Preferred Stock upon surrender of
Versant Certificates for exchange pursuant to this Article II shall
receive, in lieu thereof, cash in an amount equal to the value of such
fractional share, which shall be equal to the fraction of a share of Parent
Preferred Stock that would otherwise be issued multiplied by $20.00.

 

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF VERSANT AND THE VERSANT
STOCKHOLDERS

 

Versant and each of the
Versant Stockholders, severally and not jointly, represent and warrant to
Parent and MergerSub as follows:

 

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3.01                           Organization
and Qualification.

 

(a)                                  Versant is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware with full corporate power and authority to own, lease and operate
its assets and properties and to carry on its business as now being and as
heretofore conducted. Versant is qualified or otherwise authorized to transact
business as a foreign corporation in California and in no other jurisdiction,
and there is no other jurisdiction in which such qualification or authorization
is required in order to own, lease and operate its assets and properties and to
carry on its business.

 

(b)                                 Versant has previously provided to
Parent true and complete copies of its Certificate of Incorporation and
By-Laws, each as currently in effect, and such charter documents shall not have
been modified prior to the Effective Time. Versant is neither in default in the
performance, observation or fulfillment of such charter documents nor subject
to any other charter documents. The minute books of Versant provided to Parent
contain reasonably accurate records of the actions taken (i) at meetings of the
Board of Directors (and any committees thereof) or by written consent in lieu
thereof, and (ii) by consent or meeting of the stockholders of Versant, in each
case, from the date of the incorporation of Versant through and including the date
hereof.

 

(c)                                  Versant has transacted no other
business and has no other corporate purpose other than to hold equity
securities of Parent. Versant is the beneficial owner of 750,000 shares of
Series B Preferred Stock, which shares (including predecessor securities
thereto) were acquired on July 24, 2000 (with respect to 375,000 shares) and
December 15, 2000 (with respect to 375,000 shares), and 153,420 shares of
Series C Preferred Stock, which shares (including predecessor securities
thereto) were acquired on January 28, 2002. Without limiting the foregoing,
Versant:  (i) is not and never has been
party to any contract or agreement other than those set forth on Schedule
3.01(c); (ii) did not and does not own any property, whether real,
personal, intangible or otherwise (other than equity securities of Parent); and
(iii) neither currently nor at any time in the past had or has any employees or
employee benefit  plans.

 

3.02                           Subsidiaries
and Other Affiliates. Versant has no subsidiaries. Versant did not and does
not, directly or indirectly, own, have an investment in or have any right or
obligation to acquire any of the capital stock of (or hold an equity or
membership interest in), and is not a party to a partnership or joint venture
with, any other person, other than Parent.

 

3.03                           Authority
to Execute and Perform Agreements. Versant has the corporate power and
authority to enter into, execute and deliver this Agreement and to perform
fully its obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action of Versant, including approval by
its Board of Directors and the Versant Stockholders. This Agreement has been
duly executed and delivered by Versant and the Versant Stockholders and, when
duly executed and delivered by the other parties hereto, will constitute a
valid and binding obligation of Versant and each Versant Stockholder,
enforceable against Versant and such Versant Stockholder in accordance with its
terms.

 

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3.04                           Capitalization.

 

(a)                                  Versant is authorized to issue
10,000 shares of common stock, par value $1.00 per share, of which 2,820 shares
(the “Versant Shares”) are as of
the date hereof (and, immediately prior to Effective Time, will be) issued and
outstanding. Exhibit B attached hereto sets forth a true and complete
list of the name of each record holder of the issued and outstanding Versant
Shares, and the number of Versant Shares owned by each such record holder as of
the date hereof.

 

(b)                                 There are no outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise receive from Versant any shares of capital
stock or any other security of Versant, and there is no outstanding security of
any kind pursuant to which there is a contractual right to convert into or
exchange for such shares of capital stock or other security of Versant.

 

(c)                                  Versant has no equity appreciation
rights, phantom stock plan, option plan, restricted stock plan or similar
rights outstanding. There are not any outstanding obligations of Versant to
repurchase, redeem or otherwise acquire any Versant Shares, voting securities
or securities convertible into or exchangeable or exercisable for Versant
Shares or voting securities of Versant, or to issue, deliver or sell, or cause
to be issued, delivered or sold, any such securities. All outstanding Versant
Shares are duly authorized and validly issued, fully paid, non-assessable and
free of any preemptive rights. All outstanding Versant Shares have been issued
in compliance with all applicable federal and state securities laws. There are
no registration rights agreements, voting trusts, proxies or other similar
agreements, instruments or understandings to which Versant is a party with
respect to the outstanding Versant Shares.

 

3.05                           No
Conflicts. The execution, delivery and performance of this Agreement by
Versant and the consummation by Versant of the Merger and the other
transactions contemplated hereby will not: 
(a) violate any provision of the Certificate of Incorporation or By-Laws
of Versant; (b) violate, conflict with or result in the breach of any of the
terms or conditions of, result in modification of the effect of, or otherwise
give any other contracting party the right to terminate or accelerate any
payment owed by Versant under, or constitute (or with notice or lapse of time
or both constitute) a default under, any note, bond, mortgage, deed of trust,
security interest, indenture, lease, license, contract, agreement, plan or
other instrument to which Versant is a party or to which it or any of its
assets, properties or securities are bound or subject (the “Versant Agreements”); (c) require Versant
to obtain any consent or approval from, or provide notice to, any third party
required under any Versant Agreement prior to the Closing; (d) violate any law,
ordinance or regulation or any order, judgment, injunction, decree or other
requirement of any governmental entity applicable to Versant or by which any of
Versant’s assets, properties or securities is bound; (e) violate any permits
issued to or held by Versant; or (f) result in the creation of any pledge,
lien, charge, encumbrance or security interest (“Liens”) on the assets, properties or securities of Versant. No
filing or registration with, or authorization, consent or approval of, any
governmental entity is required by or with respect to Versant in connection
with the execution and delivery of this Agreement by Versant, or the
consummation of the transactions contemplated hereby, except for the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
by MergerSub and Versant.

 

6

 

3.06                           Versant
Financial Statements. Versant has previously delivered to Parent the
unaudited financial statements (including, in each case, any related notes
thereto) as of and for the years ended December 31, 2002 and 2003, and the
three month period ended March 31, 2004 (the “Financial Statements”). The Financial Statements fairly
present in all material respects, the financial position of Versant as at the
respective dates thereof and the results of its operations and cash flows for
the periods indicated. The unaudited balance sheet of Versant dated as of March
31, 2004 is hereinafter referred to as the “Versant
Balance Sheet.”

 

3.07                           Absence
of Undisclosed Liabilities. Other than those liabilities created by the
agreements set forth on Schedule 3.01(c), as of the date of the Versant
Balance Sheet, Versant has no liabilities of any nature, whether accrued,
absolute, contingent or otherwise (including, without limitation, liabilities
as guarantor or otherwise with respect to obligations of others or liabilities
for Taxes (as defined below) due or then accrued or to become due), other than
those that were adequately reflected or reserved against on the Versant Balance
Sheet. Except as disclosed on the Versant Balance Sheet, Versant is not subject
to any obligation or liability, whether absolute, accrued, contingent or
otherwise and there is no existing condition, situation or set of circumstances
which would reasonably be expected to result in such an obligation or
liability.

 

3.08                           No
Material Adverse Change. Except as heretofore disclosed in writing by
Versant to Parent, there has been no material adverse change in the business,
properties or financial condition of Versant since the date of the Versant
Balance Sheet.

 

3.09                           Tax
Matters.

 

(a)                                  Versant has filed all Tax Returns
required to be filed by Versant (except, as set forth in Schedule 3.09,
in those jurisdictions to which any apportioned losses from Reliant
Pharmaceuticals, LLC were deemed too small to warrant the expense of filing). All
such Tax Returns were true, correct and complete in all material respects. All
Taxes owed by Versant (whether or not shown on any Tax Return) have been timely
paid. Any provision for Taxes reflected in the Versant Balance Sheet is
adequate for payment of any and all Tax liabilities for periods ending on or
before April 12, 2004. There are no Liens for Taxes on any assets of Versant
except Liens for current Taxes not yet due or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have been
made.

 

(b)                                 There has not been any audit of any
Tax Return filed by Versant and to the knowledge of Versant or any Versant
Stockholder, no audit of any such Tax Return is in progress and neither Versant
nor any Versant Stockholder has been notified by any Tax authority that any
such audit is contemplated or pending. To the knowledge of Versant and each
Versant Stockholder, there is no Tax deficiency or claim for additional Taxes
asserted or threatened to be asserted against Versant by any Taxing authority. No
extension of time with respect to any date on which a Tax Return was or is to
be filed by Versant or on behalf of Versant is in force, and no waiver or
agreement by Versant is in force for the extension of time for the assessment
or payment of any Tax.

 

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(c)                                  Versant (i) has not been a member of
an “affiliated group” filing a consolidated federal income tax return, and (ii)
has no liability for the Taxes of any person (other than the Taxes of Versant)
under Treas. Reg. § 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.

 

(d)                                 Versant does not hold any United
States real property interests within the meaning of Section 897(c) of the
Code.

 

(e)                                  Versant has not agreed, nor is it
required, to make any adjustment under Section 481(a) of the Code by reason of
a change in accounting method or otherwise.

 

(f)                                    There is no person who should be
treated as an employee of Versant for any employment or withholding tax purpose
who was not treated as an employee by Versant. Versant has not entered into any
compensatory agreements with respect to the performance of services that would
be an “excess parachute payment” within the meaning of Sections 280G and 4999
of the Code if Versant were not a small corporation as defined in Code Section
280G(b)(5).

 

(g)                                 For purposes of this Agreement, the
term “Tax” or “Taxes” means all federal, state, local and
foreign taxes or assessments, including income, sales, gross receipts, excise,
use, value added, royalty, franchise, payroll, withholding, property and import
taxes and any interest or penalties applicable thereto, and the term “Tax Return” means any return (including
information return), report, notice, form, declaration, claim for refund,
estimate, election, information statement or other document relating to any
Tax, including any schedule or attachment thereto, and including any amendment
thereof filed or to be filed with any governmental entity.

 

3.10                           Compliance
with Laws. Versant is not in violation of any applicable law, ordinance or
regulation or any order, judgment, injunction, decree or other requirement of
any court, arbitrator or governmental entity. Since its incorporation, Versant
has not received notice of, and there has not been any citation, fine or
penalty imposed against Versant for, any violation or alleged violation that
has had or that would reasonably be expected to have a material adverse effect
with respect to the business, properties, assets, liabilities, financial
condition, results of operations of Versant.

 

3.11                           Actions
and Proceedings. There are no outstanding orders, awards, judgments,
injunctions or decrees of any court, arbitrator or governmental entity against
Versant or any of its securities, assets or properties. There are no (a)
judicial or administrative actions, suits, or claims or legal, administrative
or arbitration proceedings or, to the knowledge of Versant, investigations or
reviews pending, or (b) to the knowledge of Versant, judicial or administrative
actions, suits, or claims or legal, administrative or arbitration proceedings,
investigations or reviews threatened against Versant.

 

3.12                           Disclosure.
The representations and warranties of Versant and the Versant Stockholders
contained in this Agreement, do not contain any untrue statement of a material
fact, and do not 

 

8

 

omit to state any
material fact necessary to make such representations, warranties and
statements, in light of the circumstances under which they are made, not
misleading.

 

3.13                           Additional
Representations Regarding Versant Stockholders.

 

(a)                                  Each Versant Stockholder is a
Delaware limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware with full partnership power
and authority to own, lease and operate its assets and properties and to carry
on its business as now being and as heretofore conducted.

 

(b)                                 Each Versant Stockholder has the
limited partnership power and authority to enter into, execute and deliver this
Agreement and to perform fully its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite action of each
Versant Stockholder. This Agreement has been duly executed and delivered by
each Versant Stockholder and, when duly executed and delivered by the other
parties hereto, will constitute a valid and binding obligation of each Versant
Stockholder, enforceable against each Versant Stockholder in accordance with
its terms.

 

(c)                                  The execution, delivery and
performance of this Agreement by each Versant Stockholder and the consummation
by each Versant Stockholder of the transactions contemplated hereby will not
(i) violate any provision of the Certificate of Limited Partnership or
Partnership Agreement of any Versant Stockholder, (ii) violate any law,
ordinance or regulation or any order, judgment, injunction, decree or other
requirement of any governmental entity applicable to any Versant Stockholder or
by which any of its assets or properties is bound; (iii) violate any permits
issued to or held by any Versant Stockholder; or (iv) result in the creation of
any Lien on the assets or properties of any Versant Stockholder. No filing or
registration with, or authorization, consent or approval of, any governmental
entity is required by or with respect to Versant in connection with the
execution and delivery of this Agreement by any Versant Stockholder, or the
consummation of the transactions contemplated hereby.

 

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERSUB

 

Parent and MergerSub,
jointly and severally, represent and warrant to Versant and the Versant
Stockholders as follows:

 

4.01                           Organization
and Good Standing.

 

(a)                                  Each of Parent and MergerSub is a
corporation duly formed, validly existing and in good standing under the laws
of the State of Delaware with full power and authority to own, lease and
operate its assets and properties and to carry on its business as now being and
as heretofore conducted. Parent and MergerSub are each qualified or otherwise
authorized to transact business as a foreign entity in all jurisdictions in
which such qualification or 

 

9

 

authorization is required by law, except for jurisdictions in which the
failure to be so qualified or authorized would not have a material adverse
effect with respect to Parent or MergerSub.

 

(b)                                 MergerSub was formed solely for the
purpose of carrying out the transactions contemplated by this Agreement and has
no other assets or activities.

 

(c)                                  As of the date hereof, all of the
issued and outstanding stock of MergerSub is, and immediately prior to the
Effective Time, will be, owned by Parent. There is no current plan or intention
to cause equity interests in MergerSub to be issued or transferred to any
additional party after the Merger.

 

4.02                           Authority
to Execute and Perform Agreement. Parent and MergerSub each have the
corporate power and authority to enter into, execute and deliver this Agreement
and to perform fully their respective obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action of Parent
and MergerSub, including approval by the boards of director of MergerSub and
approval by Parent as the sole stockholder of MergerSub as required under the
charter documents of such entities and DGCL. This Agreement has been duly
executed and delivered by each of Parent and MergerSub and, when duly executed
and delivered by Versant, will constitute a valid and binding obligation of
each of Parent and MergerSub, enforceable against each of such entities in
accordance with its terms.

 

4.03                           Capitalization.

 

(a)                                  Parent is authorized to issue  shares of capital stock as follows:  (i) 100,000,000 shares of common stock, $0.01
par value per share, 4,680,908 shares of which are issued and outstanding; (ii)
425,000 shares of Series A Preferred Stock, $0.01 par value per share, 425,000
shares of which are issued and outstanding; (iii) 14,250,000 shares of Series B
Preferred Stock, $0.01 par value per share, 13,500,000 shares of which are
issued and outstanding, (iv) 8,211,047 shares of Series C Preferred Stock,
$0.01 par value per share, 8,057,627 shares of which are issued and
outstanding; and (v) 19,172,842 shares of Series D Preferred Stock, $0.01 par
value per share, 13,618,192 shares of which are issued and outstanding. When
issued in accordance with the terms of this Agreement, the Parent Preferred
Stock to be issued to the Versant Stockholders will be validly issued, fully
paid and nonassessable, but will be subject to the restrictions set forth in
(x) the Certificate of Designations, filed with the Secretary of State of the
State of Delaware on April 1, 2004 (y) the Second Amended and Restated
Registration Rights Agreement, dated as of September 25, 2003, among Parent and
the signatories thereto (the “Registration
Rights Agreement”) and (z) the Stockholders’ Agreement, dated as of
April 1, 2004 among Parent and its stockholders (the “Stockholders’ Agreement”).

 

(b)                                 MergerSub is authorized to issue
1,000 shares of common stock, par value $0.01 per share, of which 1,000 are as
of the date hereof (and, immediately prior to Effective Time, will be) issued
and outstanding. Such shares have been duly authorized and are validly issued,
fully paid and nonassessable, and have not been issued in violation of any
preemptive rights.

 

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4.04                           No
Conflicts. The execution, delivery and performance of this Agreement by
Parent and MergerSub and the consummation by Parent and MergerSub of the
transactions contemplated hereby will not: 
(a) violate any provision of the charter documents of Parent or
MergerSub; (b) violate, conflict with or result in the breach of any of the
terms or conditions of, result in modification of the effect of, or otherwise
give any other contracting party the right to terminate or accelerate all
payments owed by Parent under, or constitute (or with notice or lapse of time
or both constitute) a default under, any note, bond, mortgage, deed of trust,
security interest, indenture, lease, license, contract, agreement, plan or
other instrument to which Parent is a party or to which any of them or any of
their assets or properties is bound or subject (the “Parent Agreements”); (c) require Parent or MergerSub to obtain
any consent or approval from, or provide notice to, any third party required
under any Parent Agreement prior to the Closing; (d) violate any law, ordinance
or regulation or any order, judgment, injunction, decree or other requirement
of any court, arbitrator or governmental entity applicable to Parent or
MergerSub or by which any of the assets, properties or securities of Parent or
MergerSub are bound; or (e) result in the creation of any Lien on the assets,
properties or securities of Parent, excluding from the foregoing clauses (b),
(c), (d), and (e) any exceptions to the foregoing that, in the aggregate, would
not reasonably be expected to have a material adverse effect on the business,
properties, assets, liabilities, financial condition, results of operations of
Parent or on the ability of either Parent or MergerSub to consummate the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any governmental entity is required by
or with respect to Parent or MergerSub in connection with the execution and
delivery of this Agreement by Parent and MergerSub, or the consummation of the
transactions contemplated hereby, except: 
(i) in connection, or in compliance, with the provisions of the
Securities Act of 1933, as amended; (ii) for the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware by MergerSub and
Versant; and (iii) for such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to obtain or make
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, properties, assets, liabilities,
financial condition, results of operations of Parent or on the ability of
Parent and MergerSub to consummate the transactions contemplated hereby.

 

4.05                           Disclosure.
The representations and warranties of Parent and MergerSub contained in this
Agreement, do not contain any untrue statement of a material fact, and do not
omit to state any material fact necessary to make such representations,
warranties and statements, in light of the circumstances under which they are
made, not misleading.

 

COVENANTS
AND AGREEMENTS

 

4.06                           Affirmative
Covenants of Versant. Except with the prior written consent of Parent, as
given by the chief executive officer or chief financial officer, during the
period from the date hereof to the earlier of (a) the termination of this
Agreement pursuant to Section 7.01 or (b) the Closing Date, Versant shall
preserve its business and goodwill and shall operate its business diligently
and solely in the ordinary course and consistent with past practice.

 

11

 

4.07                           Negative
Covenants of Versant. Except with the prior written consent of Parent, as
given by the chief executive officer or chief financial officer, during the
period from the date hereof to the earlier of (a) the termination of this
Agreement pursuant to Section 7.01 or (b) the Closing Date, Versant shall not:

 

(a)                                  sell, transfer, abandon or otherwise
dispose of, or mortgage, pledge or create or permit to be created any Lien on,
any of its assets;

 

(b)                                 adopt a plan or agreement of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other material reorganization of Versant;

 

(c)                                  (i) incur any obligation or
liability other than in the ordinary course of business, (ii) incur any
indebtedness for borrowed money, or (iii) enter into any contracts or
commitments involving payments by Versant;

 

(d)                                 initiate, compromise or settle any
litigation or arbitration proceedings;

 

(e)                                  enter into or materially modify any
contract, agreement or similar instrument;

 

(f)                                    make any change in accounting method
or practice other than as required by applicable law;

 

(g)                                 make or commit to make any capital
expenditures;

 

(h)                                 make or rescind any Tax election,
settle or compromise any Tax liability or amend any Tax Return in any respect;

 

(i)                                     make any offer of employment to any
individual or enter into any consulting arrangement with any Person;

 

(j)                                     (i) declare, set aside or pay any
dividends on, or make any other distributions (whether in cash, stock or
property) in respect of, any Versant Shares or other securities, (ii) split,
combine or reclassify any Versant Shares or other securities or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for the Versant Shares or other securities; (iii) purchase, redeem
or otherwise acquire any Versant Shares or any other securities thereof or any
rights, warrants or options to acquire any such Versant Shares or other
securities; (iv) issue, deliver, sell or grant any Versant Common Stock or
other securities, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such Versant Common
Stock, voting securities or convertible securities, or any “phantom” stock, “phantom”
stock rights, stock appreciation rights or equity based performance units;

 

(k)                                  authorize or allow either the Board
of Directors or the Versant Stockholders to amend, revise or otherwise make any
change to the Certificate of Incorporation or By-Laws of Versant;

 

12

 

(l)                                     make any acquisition of real
property or enter into any real property lease;

 

(m)                               enter into any agreement or contract
for the sole purpose of obligating Versant to indemnify any third party or
amend any such existing indemnification-only agreement, which amendment would
have the effect of increasing Versant’s indemnification obligations thereunder;
or

 

(n)                                 make any commitment to do any of the
foregoing.

 

4.08                           Consummation
of Agreement. Each party shall use its commercially reasonable efforts to
perform and fulfill all conditions and obligations to be performed and
fulfilled by it under this Agreement and to ensure that to the extent within
its control or capable of influence by it, no breach of any of the respective
representations, warranties and agreements hereunder occurs or exists on or
prior to the Effective Time, all to the end that the transactions contemplated
by this Agreement shall be fully carried out in a timely fashion.

 

4.09                           Tax-free
Transaction. The parties hereto acknowledge that they have reviewed and
understand the structure and effects of the Merger. During the two year period
following the Merger, Parent will not liquidate, or transfer the stock of, the
Surviving Company, or cause or permit the Surviving Company to sell or dispose
of a substantial portion of its assets. Each of Parent and Versant shall report
the Merger for income tax purposes as a tax-free transaction within the meaning
of Section 368(a) of the Code (and any comparable state or local tax statute).

 

4.10                           Inspection
of Records; Access. From the date hereof to the Effective Time, Versant
shall allow all designated officers, attorneys, accountants and other
representatives of Parent reasonable access to at reasonable times and upon
reasonable prior notice to the offices, records and files, correspondence and
other books and records of Versant and to the financial information of the
Versant Stockholders with respect to Versant as Parent may reasonably request
in connection with the transactions contemplated by this Agreement. Except as
required by law, Parent will hold, and will cause its officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any and all information received from Versant or the
Versant Stockholders, as the case may be, directly or indirectly, in confidence.

 

Section
5.06                                Tax
Matters.

 

(a)                                  Tax
Returns. Versant Ventures I, LLC, a Delaware limited liability company (“Versant GP”), as designee of the Versant
Stockholders  will cause to be timely prepared
and provided to Parent, and Parent will cause to be timely filed when due
(taking into account all extensions properly obtained), all Tax Returns that
are required to be filed for any tax period ending on or before the Closing
Date by or with respect to Versant (except, as set forth in Schedule 3.09,
in those jurisdictions to which any apportioned losses from Parent are deemed
too small to warrant the expense of filing) (the “Pre-Closing Tax Period”). Parent will cause to be timely
prepared and filed when due (taking into account all extensions properly obtained)
all Tax Returns required to be filed for any tax periods beginning after the
Closing Date and for any Straddle Period by or with respect to Versant (the “Post-Closing Tax Period”). For purposes of 

 

13

 

the Agreement “Straddle Period”
shall mean any tax period that includes but does not end on the Closing Date. Each
of Parent and Versant GP will cause to be delivered to the other party for its
review and approval (which approval will not be unreasonably withheld) a copy
of each Tax Return it is required to prepare under this Section 5.06 at least
30 days prior to the due date for the filing of such Tax Return (taking into
account all extensions properly obtained). Versant GP and Parent agree to
consult and resolve in good faith any issue arising as a result of the review
of such Tax Return and to use their reasonable best efforts to agree to the
filing as promptly as possible of such Tax Return.

 

(b)                                 Contests.
Promptly after receipt by Parent, Versant or one of their affiliates of written
notice of the assertion or commencement of any claim, assessment, audit,
examination or other proposed change or adjustment by any taxing authority
relating to any Pre-Closing Tax Period (each, a “Tax Claim”)
the recipient will promptly notify Versant GP. Versant GP will have the right,
at its expense, to control and direct the conduct, defense, settlement and
compromise of any Tax Claim to the extent it pertains to Taxes for any such
period; provided, however, that Parent and its
representatives will be permitted to be present at all proceedings and to
approve (which approval shall not be unreasonably withheld) any settlement or
other disposition of such Tax Claim if it would adversely affect Parent or any
of its affiliates.

 

(c)                                  Assistance
and Cooperation. After the Closing Date, each of Versant GP and Parent will
(and cause their respective affiliates to) provide such assistance, information
and records to the other as may reasonably be requested in connection with the
preparation or filing of any Tax Return or defense of any Tax Claim.

 

(d)                                 Election
to File Consolidated Return. Parent will elect, and will cause Versant to
elect, to file a consolidated federal income tax return for the taxable year of
Parent in which the Merger occurs.

 

CONDITIONS

 

4.11                           Conditions
to Obligations of Parent and MergerSub. The obligations of Parent and
MergerSub to effect the Merger and the other transactions contemplated herein
are subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:

 

(a)                                  Versant Approval. Versant and the Versant
Stockholders shall have approved this Agreement and the Merger. Versant shall
provide evidence of such approval and waiver to Parent and MergerSub or their
representatives.

 

(b)                                 Representations
and Warranties. The representations and warranties of
Versant and the Versant Stockholders set forth in Article III hereof
shall be true and correct when made, and shall be true and correct at the
Effective Time (other than representations and warranties made as of a specific
date, which shall be true and correct as of that date).

 

14

 

(c)                                  Covenants. Versant and the Versant
Stockholders shall have performed all covenants required by this Agreement to
be performed by them on or before the Effective Time.

 

(d)                                 Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or domestic
governmental entity or authority of competent jurisdiction which prohibits the
consummation of the Merger and all foreign or domestic governmental consents,
orders and approvals required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and shall be in effect
at the Effective Time.

 

(e)                                  Injunctions. There shall be no order or
injunction of a foreign or United States federal or state court or other
governmental entity of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger.

 

(f)                                    Parent Agreements. Each of the Versant Stockholders
shall have executed signature pages to the Registration Rights Agreement and
the Stockholders’ Agreement. Such signature pages shall be held in escrow until
the Effective Time.

 

4.12                           Conditions
to Obligations of Versant and the Versant Stockholders. The obligations of
Versant and the Versant Stockholders to effect the Merger and the other
transactions contemplated herein are subject to the satisfaction on or prior to
the Closing Date of each of the following conditions:

 

(a)                                  MergerSub Approval. The Board of Directors of
MergerSub shall have approved, and shall have obtained Parent’s (as sole
stockholder of MergerSub) approval of, this Agreement and the Merger. Parent
and MergerSub shall provide evidence of such approval to Versant and the
Versant Stockholders or their representatives.

 

(b)                                 Representations
and Warranties. The representations and warranties of
Parent and MergerSub set forth in Article IV hereof shall be true and
correct when made, and shall be true and correct at the Effective Time (other
than representations and warranties made as of a specific date, which shall be
true and correct as of that date).

 

(c)                                  Covenants. Parent and MergerSub shall have
performed all covenants required by this Agreement to be performed by each of
them on or before the Effective Time.

 

(d)                                 Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or domestic
governmental entity or authority of competent jurisdiction which prohibits the
consummation of the Merger and all foreign or domestic governmental consents,
orders and approvals required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and shall be in
effect at the Effective Time.

 

15

 

(e)                                  Injunctions. There shall be no order or
injunction of a foreign or United States federal or state court or other
governmental entity of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger.

 

ARTICLE 5.

INDEMNIFICATION

 

5.01                           Indemnification
by Versant Stockholders. From and after the Closing Date, each Versant
Stockholder, severally and not jointly, agree to indemnify, defend and save the
Parent, Parent’s affiliates, and their respective directors, officers,
shareholders, attorneys, accountants, representatives, agents and employees
(collectively, the “Parent Indemnified
Parties”), harmless from and against, and to promptly pay to or
reimburse each such person or entity for, any and all liabilities (whether
contingent, fixed or unfixed, liquidated or unliquidated, or otherwise),
obligations, deficiencies, demands, claims, suits, actions, or causes of
action, assessments, losses, costs, expenses, Taxes, interest, fines,
penalties, actual or punitive damages or costs or expenses of any and all
investigations, proceedings, judgments, environmental analyses, remediations,
settlements and compromises, whether or not resulting from third party claims,
(including reasonable fees and expenses of attorneys, accountants and other
experts) (collectively, “Damages”)
arising out of or relating to:

 

(a)                                  inaccuracy or breach of any
representation or warranty of Versant or the Versant Stockholders contained in
this Agreement; and

 

(b)                                 any non-compliance with or breach of
any covenant or agreement of Versant or the Versant Stockholders contained in
this Agreement.

 

(c)                                  Notwithstanding anything in this
Agreement to the contrary, the sole recourse of any Parent Indemnified Party
for any and all Damages relating to or
arising from Taxes shall be controlled by Section 7.05.

 

5.02                           Indemnification
by Parent. From and after the Closing Date and subject to the provisions of
this Article VII, Parent agrees to indemnify, hold harmless and defend
the Versant Stockholders, the Versant Stockholders’ affiliates, and their
respective partners, directors, officers, shareholders, attorneys, accountants,
representatives, agents and employees (collectively, the “Versant Indemnified Parties”) from and
against any and all Damages arising out of or relating to:

 

(a)                                  any inaccuracy or breach of any
representation or warranty of Parent or MergerSub contained in this Agreement;
and

 

(b)                                 any non-compliance with or breach of
any covenant or agreement of Parent or MergerSub contained in this Agreement.

 

16

 

Notwithstanding anything in this Agreement to the
contrary, the sole recourse of any Versant Indemnified Party for any and all Damages relating to or arising from Taxes shall be
controlled by Section 7.05.

 

5.03                           Indemnification
Process. Except as provided in Section 7.04, the party or parties making a
claim for indemnification under this Article VII shall be, for the
purposes of this Agreement, referred to as the “Indemnified Party” and the
party or parties against whom such claims are asserted under this Article
VII shall be, for the purposes of this Agreement, referred to as the “Indemnifying
Party”. All claims by any Indemnified Party under this Article VII shall
be asserted and resolved as follows:

 

(a)                                  In the event that (i) any claim,
demand or proceeding is asserted or instituted by any person other than the
parties to this Agreement or their affiliates which could give rise to Damages
for which an Indemnifying Party could be liable to an Indemnified Party under
this Agreement (such claim, demand or proceeding, a “Third Party Claim”) or (ii) any Indemnified Party under this
Agreement shall have a claim to be indemnified by any Indemnifying Party under
this Agreement which does not involve a Third Party Claim (such claim, a “Direct Claim” and, together with Third
Party Claims, “Claims”), the
Indemnified Party shall with reasonable promptness send to the Indemnifying
Party a written notice specifying the nature of such claim, demand or
proceeding and the amount or estimated amount thereof (which amount or
estimated amount shall not be conclusive of the final amount, if any, of such
claim, demand or proceeding) (a “Claim Notice”),
provided that a delay in
notifying the Indemnifying Party shall not relieve the Indemnifying Party of
its obligations under this Agreement except to the extent that (and only to the
extent that) such failure shall have caused the Damages for which the
Indemnifying Party is obligated to be greater than such Damages would have been
had the Indemnified Party given the Indemnifying Party proper notice.

 

(b)                                 In the event of a Third Party Claim,
the Indemnifying Party shall be entitled to appoint counsel of the Indemnifying
Party’s choice at the expense of the Indemnifying Party to represent the
Indemnified Party and any others the Indemnifying Party may reasonably
designate in connection with such claim, demand or proceeding (in which case
the Indemnifying Party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by any Indemnified Party except as
set forth below); provided that
such counsel is reasonably acceptable to the Indemnified Party. Notwithstanding
an Indemnifying Party’s election to appoint counsel to represent an Indemnified
Party in connection with a Third Party Claim, an Indemnified Party shall have
the right to employ separate counsel, and the Indemnifying Party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel selected by the Indemnifying Party to represent the Indemnified Party
would present such counsel with a conflict of interest or (ii) the Indemnifying
Party shall not have employed counsel to represent the Indemnified Party within
a reasonable time after notice of the institution of such Third Party Claim. If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim, demand or
proceeding which the Indemnifying Party defends, or, if appropriate and related
to the claim, demand or proceeding in question, in making any counterclaim
against the person asserting the 

 

17

 

Third Party Claim, or any cross-complaint against any person. No Third
Party Claim may be settled or compromised (i) by the Indemnified Party without
the prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed or (ii) by the Indemnifying Party without the
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed. In the event any Indemnified Party settles or
compromises or consents to the entry of any judgment with respect to any Third
Party Claim without the prior written consent of the Indemnifying Party (except
in the event the Indemnifying Party unreasonably withheld or delayed its
consent), each Indemnified Party shall be deemed to have waived all rights
against the Indemnifying Party for indemnification under this Article VII.

 

(c)                                  In the event of a Direct Claim, the
Indemnifying Party shall notify the Indemnified Party within 30 days of receipt
of a Claim Notice whether or not the Indemnifying Party disputes such claim.

 

(d)                                 From and after the delivery of a
Claim Notice under this Agreement, at the reasonable request of the
Indemnifying Party, each Indemnified Party shall grant the Indemnifying Party
and its representatives reasonable access to the books, records and properties
of such Indemnified Party to the extent reasonably related to the matters to
which the Claim Notice relates. All such access shall be granted during normal
business hours and shall be granted under conditions which will not
unreasonably interfere with the business and operations of such Indemnified
Party. The Indemnifying Party will not, and shall require that its
representatives do not, use (except in connection with such Claim Notice) or
disclose to any third person other than the Indemnifying Party’s
representatives (except as may be required by applicable law) any information
obtained pursuant to this Section 7.03(d) which is designated as confidential
by an Indemnified Party.

 

5.04                           Survival
of Representations and Warranties. The representations and warranties of
the parties contained in this Agreement shall survive the Closing for the
applicable period set forth in this Section 7.04, and any and all claims and
causes of action for indemnification under this Article VII arising out
of the inaccuracy or breach of any representation or warranty of the parties
must be made prior to the termination of the applicable survival period. All of
the representations and warranties of the parties contained in this Agreement
and any and all claims and causes of action for indemnification under this Article
VII with respect thereto shall terminate two years following the Closing
Date; provided that (a) the
representations and warranties of Versant and the Versant Stockholders
contained in Sections 3.01, 3.02, 3.03, 3.04, 3.05 and 3.13, and Parent and
MererSub contained in Sections 4.01, 4.02, 4.03 and 4.04 shall survive
indefinitely, and (b) the representations and warranties of Versant and
the Versant Stockholders contained in Section 3.09 shall survive until 90 days
following the expiration of the applicable statute or similar period of
limitations; it being understood that in the event notice of any claim for
indemnification under Section 7.01(a) or Section 7.02(a) shall have been given
within the applicable survival period, the representations and warranties that
are the subject of such indemnification claim shall survive until such time as
such claim is finally resolved.

 

18

 

5.05                           Tax
Indemnification.

 

(a)                                  From and after the Closing, Versant
GP and the Versant Stockholders shall indemnify, save and hold harmless the
Parent Indemnified Parties from and against (i) all liability for Taxes of
Versant or the Versant Stockholders (to the extent liability for Taxes of the
Versant Stockholders is imposed on Versant) with respect to the transactions
contemplated by this Agreement; (ii) all liability for Taxes of Versant or the
Versant Stockholders (to the extent liability for Taxes of the Versant
Stockholders is imposed on Versant) for all Pre-Closing Tax Periods; (iii) any
and all Damages arising out of, resulting from or incident to any breach by
Versant GP or the Versant Stockholders of any covenant contained in Section 5.06;
and (iv) any and all Damages arising out of, resulting from or
incident to any inaccuracy or breach or any representation or warranty
of Versant or any Versant Stockholder contained in Section 3.09.

 

(b)                                 From and after the Closing, Parent
shall indemnify, save and hold harmless the Versant Indemnified Parties from
and against (i) all liability for Taxes of Versant for any Post-Closing Tax
Period and (ii) any and all Damages arising out of, resulting from or incident
to the breach by Parent of any covenant contained in Sections 5.04 or 5.06.

 

(c)                                  In the case of any Straddle Period:

 

(i)                                     real, personal and intangible
property Taxes and any other Taxes levied on a per diem basis (“Per Diem Taxes”) of Versant for a
Pre-Closing Tax Period shall be equal to the amount of such Per Diem Taxes for
the entire Straddle Period multiplied by a fraction, the numerator of which is
the number of days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the total number of days in the Straddle
Period; and

 

(ii)                                  the Taxes of Versant (other than Per
Diem Taxes) for any Pre-Closing Tax Period shall be computed as if such taxable
period ended as of the Closing.

 

(d)                                 The parties shall satisfy their
indemnity obligations pursuant to this Section 7.05 within 10 days after a
final determination (within the meaning of Section 1313(a) of the Internal
Revenue Code of 1986, as amended) of the relevant Tax is made.

 

ARTICLE 6.

TERMINATION

 

6.01                           Termination.
This Agreement may be terminated at any time prior to the Effective Time, as
follows:

 

(a)                                  by Versant or the Versant
Stockholders upon written notice to Parent, if either Parent or MergerSub has
breached any representation, warranty or covenant contained herein such that
the conditions set forth in Article VI would not be satisfied, and such
breach has not been cured by the Closing Date;

 

(b)                                 by Parent upon written notice to
Versant, if either Versant or any Versant Stockholder has breached any
representation, warranty or covenant contained herein such that 

 

19

 

the conditions set forth in Article VI would not be satisfied,
and such breach has not been cured by the Closing Date; or

 

(c)                                  by mutual written consent of Parent,
Versant and the Versant Stockholders.

 

6.02                           Effect
of Termination. If this Agreement is terminated as provided in Section
8.01, this Agreement shall forthwith become void and have no effect, without
liability on the part of any party, its directors, officers or stockholders, other
than the provisions of this Section 8.02.

 

ARTICLE 7.

MISCELLANEOUS

 

7.01                           Amendment.
This Agreement may not be amended except by an instrument signed by each party
hereto; provided, however, that
after adoption of this Agreement by the Versant Stockholders or Parent as sole
stockholder of MergerSub, no amendment may be made, without the further
approval of such stockholders that (a) alters or changes the amount or kind of
consideration to be received as provided herein or (b) alters or changes any of
the terms of this Agreement if such alteration or change would materially
adversely affect the Versant Stockholders or Parent, as sole stockholder of
MergerSub, as applicable.

 

7.02                           Public
Announcements and Confidentiality. None
of Versant, the Surviving Company, or any Versant Stockholder shall issue or
cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other transactions contemplated hereby
without the prior approval of Parent, except to the extent any party is
required to do so by law (in which event, Parent shall nevertheless have the
opportunity to review and consult with the disclosing party regarding such
disclosure prior to the making thereof). Notwithstanding anything to the
contrary set forth herein or in any other agreement or understanding between
the parties hereto, the parties to this Agreement may disclose to any and all
persons, without limitation of any kind, the “tax treatment” and “tax
structure,” within the meaning of Treasury Regulation Section 1.6011-4, of the
Merger and all materials of any kind (including opinions or other tax analyses)
that are provided to it relating to such tax treatment and tax structure (but
no other details regarding matters covered by this Agreement, including,
without limitation, the identities of the parties); provided, however, that each party recognizes that the
privilege each has to maintain, in its sole discretion, the confidentiality of
a communication relating to the Merger, including a confidential communication
with its attorney or a confidential communication with a federally authorized
tax practitioner under Section 7525 of the Internal Revenue Code, is not
intended to be affected by the foregoing.

 

7.03                           Notices.
All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent
by an overnight courier service, such as Federal Express, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

 

20

 

If to Parent or MergerSub:

 

110
Allen Road

Liberty
Corner, New Jersey 07938

Attention:  Chief Executive Officer

Telephone
No.: (908) 580-1200

Telecopy
No.: (980) 542-9405

 

with a
copy to:

 

Latham
& Watkins LLP

Sears
Tower, Suite 5800

Chicago,
Illinois  60606

Attention:  Michael A. Pucker

Telephone
No.: (312) 876-7700

Telecopy
No.: (312) 993-9767

 

If to
Versant or any Versant Stockholder:

 

Versant Venture Management, LLC

3000 Sand Hill Road

Building 4, Suite 210

Menlo Park, CA  94025

Attn:  Sam Colella and Robin L. Praeger

Facsimile:
(650) 854-9513

 

with a copy sent simultaneously to:

 

O’Melveny & Myers LLP

1999 Avenue of the Stars

Los Angeles, CA 90067

Attn: 
Robert Blashek

Facsimile: 
(310) 246-6779

 

7.04                           Entire
Agreement; Third Party Beneficiaries. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.

 

7.05                           Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of the terms,
provisions and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.

 

7.06                           Governing
Law. This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware without regard to the conflict of laws principles
thereof.

 

21

 

7.07                           Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties. This
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.

 

7.08                           Headings;
Construction. The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.

 

7.09                           Waiver.
Any party hereto may waive any condition to its obligations hereunder, or any
breach, default or misrepresentation of any other party hereunder; provided, however, that no waiver by any party of any
default, or misrepresentation, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, or misrepresentation or affect in
any way any rights arising by virtue of any prior or subsequent such
occurrence.

 

7.10                           Counterparts.
This Agreement may be executed in one or more counterparts, any of which may be
executed and transmitted by facsimile, each of which shall be deemed to be an
original of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same instrument. This Agreement shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties. 

 

22

 

IN WITNESS WHEREOF,
Parent, MergerSub, Versant and the Versant Stockholders have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.

 

	
   

  	
  RELIANT PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By :

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RP SUB NO. 1, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By :

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VERSANT RELIANT CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By :

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

S-1

 

	
   

  	
  VERSANT
  VENTURE CAPITAL I, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Versant Ventures I,
  LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  VERSANT
  AFFILIATES FUND I-A, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Versant Ventures I,
  LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VERSANT
  AFFILIATES FUND I-B, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Versant Ventures I,
  LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VERSANT
  SIDE FUND I, L.P.

  
	
   

  	
   

  
	
   

  	
  By: Versant Ventures I,
  LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

2

 

	
  For
  purposes of Sections 5.06 and 7.05

  	
   

  
	
   

  	
   

  	
   

  
	
  VERSANT
  VENTURES I, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

3

 

Exhibit
A

 

Merger
Consideration/Deemed Issue Date/

Fractional
Share Payment

 

	
  Versant Stockholder

  	
   

  	
  Merger Consideration

  	
   

  	
  Deemed Issue

  Dates

  	
   

  	
  Cash for

  Fractional

  Shares

  	
   

  
	
  Versant Venture
  Capital I, L.P.

  	
   

  	
  343,670 shares of Series B Preferred Stock

  	
   

  	
  7/24/00

  	
   

  	
  $

  	
  36.60

  	
   

  
	
   

  	
   

  	
  343,670 shares of Series B Preferred Stock

  	
   

  	
  12/15/00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  140,602 shares of Series C Preferred Stock

  	
   

  	
  1/28/02

  	
   

  	
  $

  	
  36.80

  	
   

  
	
  Versant
  Affiliates Fund I-A, L.P.

  	
   

  	
  6702 shares of Series B Preferred Stock

  	
   

  	
  7/24/00

  	
   

  	
  $

  	
  .68

  	
   

  
	
   

  	
   

  	
  6702 shares of Series B Preferred Stock

  	
   

  	
  12/15/00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2,741 shares of Series C Preferred Stock

  	
   

  	
  1/28/02

  	
   

  	
  $

  	
  .80

  	
   

  
	
  Versant
  Affiliates Fund I-B, L.P.

  	
   

  	
  17,612 shares of Series B Preferred Stock

  	
   

  	
  7/24/00

  	
   

  	
  $

  	
  1.96

  	
   

  
	
   

  	
   

  	
  17,611 shares of Series B Preferred Stock

  	
   

  	
  12/15/00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7,205 shares of Series C Preferred Stock

  	
   

  	
  1/28/02

  	
   

  	
  $

  	
  1.68

  	
   

  
	
  Versant Side
  Fund I, L.P.

  	
   

  	
  7,016 shares of Series B Preferred Stock

  	
   

  	
  7/24/00

  	
   

  	
  $

  	
  .76

  	
   

  
	
   

  	
   

  	
  7,015 shares of Series B Preferred Stock

  	
   

  	
  12/15/00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2,870 shares of Series C Preferred Stock

  	
   

  	
  1/28/02

  	
   

  	
  $

  	
  .72

  	
   

  

 

 

Exhibit
B

 

Owners
of Versant Shares

 

	
  Versant Stockholder

  	
   

  	
  Number of Versant

  Shares Owned

  	
   

  	
  Percentage of Versant

  Shares Owned

  	
   

  
	
  Versant Venture
  Capital I, L.P.

  	
   

  	
  2584.4

  	
   

  	
  91.65

  	
  %

  
	
  Versant
  Affiliates Fund I-A, L.P.

  	
   

  	
  50.4

  	
   

  	
  1.79

  	
  %

  
	
  Versant
  Affiliates Fund I-B, L.P.

  	
   

  	
  132.44

  	
   

  	
  4.70

  	
  %

  
	
  Versant Side
  Fund I, L.P.

  	
   

  	
  52.76

  	
   

  	
  1.87

  	
  %

  
	
  Total:

  	
   

  	
  2820

  	
   

  	
  100.00

  	
  %

  

 

 

Schedule
3.01(c)

 

Versant
Contracts

 

•                  Limited
Liability Company Unit Subscription Agreement, dated as of July 21, 2000, among
Reliant Pharmaceuticals, LLC and the purchasers signatory thereto.

 

•                  Series
C Preferred Unit Subscription Agreement, dated as of December 17, 2001, among
Reliant Pharmaceuticals, LLC and the purchasers signatory thereto.

 

 

Schedule
3.09

 

Tax
Matters

 

	
  ALABAMA

  	
   

  	
  AL

  
	
  ARIZONA

  	
   

  	
  AZ

  
	
  ARKANSAS

  	
   

  	
  AR

  
	
  COLORADO

  	
   

  	
  CO

  
	
  CONNECTICUT

  	
   

  	
  CT

  
	
  DELAWARE

  	
   

  	
  DE

  
	
  FLORIDA

  	
   

  	
  FL

  
	
  IDAHO

  	
   

  	
  ID

  
	
  INDIANA

  	
   

  	
  IN

  
	
  KENTUCKY

  	
   

  	
  KY

  
	
  LOUISIANA

  	
   

  	
  LA

  
	
   

  	
   

  	
   

  
	
  MAINE

  	
   

  	
  ME

  
	
  MARYLAND

  	
   

  	
  MD

  
	
  MASSACHUSETTS

  	
   

  	
  MA

  
	
  MICHIGAN

  	
   

  	
  MI

  
	
  MINNESOTA

  	
   

  	
  MN

  
	
  MISSISSIPPI

  	
   

  	
  MS

  
	
  MISSOURI

  	
   

  	
  MO

  
	
   

  	
   

  	
   

  
	
  NEBRASKA

  	
   

  	
  NE

  
	
  NEW
  HAMPSHIRE

  	
   

  	
  NH

  
	
  NORTH
  CAROLINA

  	
   

  	
  NC

  
	
  OREGON

  	
   

  	
  OR

  
	
  PENNSYLVANIA

  	
   

  	
  PA

  
	
  WISCONSIN

  	
   

  	
  WIQuickLinks
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Exhibit 10.54  

 
 

DISTRIBUTION SERVICES AGREEMENT    
    

        This Distribution Services Agreement ("Agreement") is entered into as of February 1, 2005 by and between
Reliant Pharmaceuticals, Inc., a Delaware corporation with its principal place of business located at 110 Allen Road, Liberty Corner, NJ 07938 ("Customer"), and Cardinal Health*
with its principal place of business located at 7000 Cardinal Place, Dublin, Ohio 43017 ("Service Supplier"). Customer and Service Supplier shall each be a "Party" and shall collectively be referred
to herein as the "Parties." 

 
 

RECITALS    
    

        WHEREAS, Service Supplier provides services including but not limited to logistics and inventory management
services, administrative services, and financial services; and, Customer wishes to purchase such services from Service Supplier; and 

        WHEREAS, Service Supplier is willing to provide and Customer desires certain additional services to Customer as needed and agreed upon by
both parties. 

        WHEREAS, Customer and Service Supplier desire to assure adequate availability of supply and inventory management of Products. 

        NOW THEREFORE, in consideration of the foregoing, the mutual representations, warranties and covenants contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 

 
 

ARTICLE 1
  Definitions  
    

	1.1
	"Aggregate Inventory" means, at any given time, the total of Products in units that Service Supplier has on hand at all of its storage
and/or distribution facilities and that Service Supplier has on order from Customer.

	1.2
	"Average Weekly Movement" means, at any given time, the total quantity of Products in units and dollars (by NDC number) sold by Service
Supplier to Providers over the immediately preceding twenty four (24) weeks divided by twenty-four (24).

	1.3
	"Confidential Information" means the confidential information described in Section 6.2.

	1.4
	"Inventory and Sales Reports" means the reports described in Sections 2.2.D.

	1.5
	"New Price" means the WAC charged by Customer after the effective date and time of a price change instituted by Customer at any time
following the effective date of this Agreement, February 1, 2005.

	1.6
	"Old Price" means the WAC charged by Customer immediately preceding the institution of a New Price.

	1.7
	"Person" means any individual, partnership, association, joint venture, corporation, limited liability company, trust or other entity.

	1.8
	"Products" means all current and future pharmaceutical products sold by Customer, including those bearing Customer's label and
packaging, which Customer sells to wholesale customers in the United States. (see current price list).

	1.9
	"Providers" means the purchaser(s) of Products from Service Supplier in the United States.

	1.10
	"WAC" means Wholesale Acquisition Cost charged by Customer to Service Supplier. May also be referred to as List Price. 

 
 
 

ARTICLE 2
  Services  
    

General—Customer agrees to compensate Service Supplier for each of the services described below in accordance with the fee structure
contained on Schedule A; provided, however, in the event any law, rule, regulation, judicial decree or
interpretation invalidates or adversely impacts the Customer as related to the fee structure contained in Schedule A, the services to be provided hereunder by Service Supplier to Customer shall
continue uninterrupted and the parties shall meet in good faith to discuss and implement a new fee structure to compensate Service Supplier for the services contemplated herein. 

	2.1.
	Distribution and Inventory Management Services.

 
	(A)
	 Sophisticated Ordering Technology

 
	(B)
	 Daily consolidated deliveries to Providers

 
	(C)
	 Emergency shipments to Providers 24/7/365

 
	(D)
	 Consolidated accounts receivable management

 
	(E)
	 Contract and Chargeback administration

 
	(F)
	 Returns processing

 
	(G)
	 Customer Service support

 
	(H)
	 Adequate working inventories to meet customer needs and service levels

 
	(I)
	 Licensed, environmentally controlled, PDMA compliant, secure facilities

	2.2
	Additional Inventory Management Services.

	(A)
	Inventory
Levels. During the term of this Agreement, but not commencing until inventory levels then-existing as of the effective date of this
Agreement have been worked down to the levels set forth in this Paragraph (A), Service Supplier will use best efforts to maintain Aggregate Inventory levels (for each Product) of no less than
[***] and no more than [***] on all Products as calculated on Average Weekly Movement, or as reasonably requested by Reliant and agreed upon by Service
Supplier. New Product launches will be excluded from this requirement for the first [***] from initial launch and quantities will be mutually agreed upon between the parties.
In the event that Service Supplier fails to maintain Aggregate Inventory levels as set forth in this Section 2.2(A), Customer shall not be required to pay any Service Fee, as it relates to that
Product, (as defined in schedule A attached hereto) to Service Supplier for the calendar quarter in which such failure occurs. 

Service
Supplier shall be required to redistribute Customer's Products according to and using a First-In, First-Out ("FIFO") methodology. 

	(B)
	Purchase
Limits. Customer agrees to ship all Service Supplier purchase orders in full. Customer has the right to question any orders that exceed
[***] of Service Supplier's Average Weekly Movement and has the right to cancel any quantities that Service Supplier is not able to provide reasonable justifications and/or
explanations.

	(C)
	Product
Availability. Service Supplier and Customer will jointly use best efforts to minimize product shortages and maximize product availability by
agreeing to the following:

	•
	Service
Supplier will institute an automated balancing system on Customer Products in order to optimize the use of existing inventories across the entire Service Supplier
network, including brokerage. 

	[***]
	Certain
information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the
omitted portions. 

2

 

	•
	During
backorder situations and limited product availability and upon Customer's request, Service Supplier will implement more frequent order and receiving cycles to help
reduce inventory requirements. 

In
the event Service Supplier materially fails to use its best efforts to minimize product shortages and maximize product availability as set forth herein, Customer may reduce the Service Fee by
[***]% [***] (as defined in schedule A attached hereto) to Service Supplier for the calendar quarter in which such failure occurs. 

	(D)
	Data
/ Reporting Services. Service Supplier shall prepare inventory and related sales data reports, pursuant to EDI 852 and EDI 867 formats, detailing the
status of its inventory of each Product (quantity and dollars by Product and distribution center) ("Inventory Reports") and movement of Products ("Sales Reports") by NDC number for the duration of
this Agreement. All Inventory Reports and Sales Reports shall include all of Service Suppliers' (and any of Service Supplier's subsidiaries or affiliates, including without limitation, Cardinal
Trading Company) distribution centers and/or storage facilities (each shall be referred to as a "Distribution Center"). Service Supplier shall provide Customer with such Inventory Reports monthly and
Sales Reports monthly. All such Inventory and Sales Reports shall be transmitted in EDI 852 and EDI 867 formats as set forth herein, respectively and shall include such information as reasonably
requested by Customer, including but not limited to the following:

	(a)
	On
hand inventory level by Distribution Center; and

	(b)
	On
order inventory level by Distribution Center; and

	(c)
	Sales
out by Distribution Center 

Service
Supplier may, due to contractual requirements, be required to block certain data in the 867's that discloses Provider identity. This may include Provider name and DEA number, and any other
data that would identify a Provider. 

Upon
the signing of this Agreement, Service Supplier shall provide Customer with hard copies of the latest and most current EDI data contemplated hereunder in a Microsoft Excel spreadsheet format.
Within thirty (30) days after entering into this Agreement, the Parties shall examine and test the capability of their respective EDI systems and complete implementation of a mutually agreeable
system
whereby transfers of information can be made effectively on a consistent basis. In the event that critical internal support systems and electronic communication links including EDI, are not available
for five (5) consecutive business days, the Parties will cooperate to promptly implement substitute procedures to document the information customarily sent by EDI and prevent interruptions to
each other's business. 

Service
Supplier will also provide Morgue Reports (detail of non merchantable product) to Customer on a monthly basis. 

In
the event Service Supplier materially fails to fulfill its obligations as set forth in this Paragraph (D), Customer may reduce the Service Fee [***]%
[***] (as defined in schedule A attached hereto) to Service Supplier for the calendar quarter in which such failure occurs. 

	(E)
	Customer
Monitoring. During the term of this Agreement Service Supplier will implement processes and procedures to monitor customer order patterns. Within
thirty (30) days of execution of this Agreement, Service Supplier and Customer will agree upon parameters which may represent speculative buy activity by Service Supplier customers. Any orders
that meet the agreed upon parameters will be investigated by Service Supplier and the outcome reported to Customer. If it is determined by Customer and Service Supplier that a customer is engaging in
speculative purchasing activity, additional steps will be implemented by Service Supplier to limit such customer purchases to reasonable levels. Furthermore, Service Supplier will provide Customer
with "Events Management" which will include new Providers, lost Providers, and any other information that it is aware of that would affect Product movement. 

	[***]
	Certain
information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the
omitted portions. 

3

 

	(F)
	Service
Level. Service Supplier will provide Customer with a monthly service level on each Product of at least [***] percent
[***] calculated in accordance with the standards and procedures specified below. For purposes of this Agreement, the service level percentage will be calculated by dividing
total units of each Product shipped by the number of units of each Product ordered, on a Product by Product basis. The following items will be excluded from the service level calculation: recalled
and/or discontinued items, manufacturer backorders and inability/failure to supply. In the event Service Supplier materially fails to use its best efforts as set forth in this Paragraph (F),
Customer may reduce the Service Fee [***]% [***] (as defined in schedule A attached hereto) to Service Supplier for the calendar quarter in which
such failure occurs.

	(G)
	Purchase
Requirement. Service Supplier and all Affiliates and subsidiaries of Service Supplier, including Cardinal Trading Company, agrees to purchase
100% of its requirements of Customer Products directly from Customer. Service Supplier, and its Affiliates and subsidiaries, including Cardinal Trading Company, agrees not to purchase any of such
Products from any other Person whether within or outside the United States.

	(H)
	New
Product Launch Support. Service Supplier will provide guaranteed support for future Customer new product launches. Support will consist of, but not be
limited to, the following:

	a.
	Stocking
each distribution center with initial quantities of new Products, as reasonably determined by Customer, in no case to exceed
[***] of anticipated demand, unless agreed upon in advance and in writing by the Parties.

	b.
	Providing
daily sales out reports for the first 60 days of product launch

	c.
	Work
with Customer to identify specific retail outlets that use similar products and can be targeted for use of the new product to assist with retail
distribution. 

In
the event Service Supplier materially fails to use its best efforts as set forth in this Paragraph (H), Customer may reduce the Service Fee [***]
[***] (as defined in schedule A attached hereto) to Service Supplier for the calendar quarter in which such failure occurs. 

	(I)
	Deductions
Reconciliation. Service Supplier may take deductions it determines are necessary or appropriate provided however, Service Supplier will notify
Customer of any deductions in a timely manner and will delay taking such deductions for up to thirty (30) days from the date of notification to give the parties the opportunity to meet and
discuss the deductions. Service Supplier will use its best efforts to resolve any deductions during this thirty (30) day period.

	(J)
	Product
Recalls. In the event of a recall, warning letter, quarantine, or withdrawal of a product(s), Customer shall reimburse Service Supplier for all
reasonable direct notification and collections costs incurred, as published in the then current HDMA guidelines. These costs may include costs of notification and costs of collections if outside the
normal returns process, however the cost of returns and shipping costs are already included in the base fee as noted at the beginning. 

	[***]
	Certain
information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the
omitted portions. 

4

 

	(K)
	Audit
and Inspection. During the term of this Agreement, upon reasonable prior notice and during normal business hours, either Party shall be entitled to
audit and inspect those relevant records which are maintained by the other Party in connection with its performance under this Agreement; provided, however, the audit or inspection shall be performed
by permanent employees of the party or an independent public accounting firm so designated by the party conducting such audit or inspection and, except in connection with a governmental inquiry or
investigation, in no event shall any such audit or inspection relate to any transaction or event which occurred more than twenty-four (24) months prior to the date of such audit or
inspection. Any audit performed pursuant to this Paragraph (K) shall be at expense of the party conducting such audit, unless such audit reveals an underpayment or overpayment of five per cent
(5%) or more in favor of the auditing party for any contract year, in which case the audited party shall reimburse the auditing party for the actual costs of such audit. 

 
 

ARTICLE 3
  Term and Termination; Remedies  
    

	3.1
	Term
and Termination. This Agreement shall remain in full force and effect as of February 1, 2005 and for a period of two (2) years
thereafter unless terminated by either Customer and/or Service Supplier, as the case may be, by (a) the mutual written agreement of Customer and Service Supplier; or (b) a breach by
Customer or Service Supplier of any of the terms of this Agreement that is not cured within thirty (30) days of written notification thereof by the non-breaching party; or
(c) the institution (whether voluntarily or involuntarily) of bankruptcy, insolvency, liquidation or similar proceedings by or against Customer or Service Supplier, or the assignment of
Customer's or Service Supplier's assets for the benefit of creditors, or (d) Subject to Section 6.4 of this Agreement, if either party, in its sole discretion, determines that any of the
terms hereunder may violate any new or existing law, rule or regulation, then that party reserves the right to: (1) terminate this Agreement without notice or (2) eliminate or reduce
orders made by Service Supplier. In the event that either party takes an action pursuant to the immediately preceding sentence of this Section 3.1, both parties agree to use their reasonable
best efforts to negotiate and execute a distribution services agreement that will meet in all material respects the economic and business expectations of the parties with respect to this Agreement to
the extent permitted by law. 

 
 

ARTICLE 4
  Indemnification  
    

	4.1
	Indemnification.
Each Party ("Indemnifying Party") shall defend, indemnify, and hold harmless the other Party ("Indemnified Party") and its affiliates,
shareholders, directors, officers and employees from and against any and all claims, causes of action, obligations, liability, liens, indebtedness, debts, judgments, damages (exclusive of lost
profits) losses, costs, expenses, and fees (including, without limitation, reasonable attorney fees) to the extent arising from or related to (1) breach or default under any representation,
warranty, covenant, obligation or promise made by the Indemnifying Party or its affiliate under this Agreement, (2) the Indemnifying Party's fraud, intentional misconduct, omission or
negligence Notwithstanding the above, the Indemnifying Party shall not be obligated to defend, indemnify, or hold Customer harmless from claims arising out of willful, wanton or negligent act or
omission by the Indemnified Party or from the Indemnified Party's breach of this Agreement. This indemnity is conditioned upon prompt notice of any claim which may be covered by this indemnity,
permitting the Indemnifying Party to handle such claim as it determines most appropriate, cooperating fully with the Indemnifying Party in its handling of such claim, and not making or offering to
make any settlement of such claim without the prior written consent of the Indemnifying Party. IN NO EVENT WILL THE INDEMNIFYING PARTY BE LIABLE FOR INDIRECT, CONSEQUENTIAL SPECIAL OR PUNITIVE DAMAGES
OR LOST PROFITS. 

5

 
 
 

ARTICLE 5
  Insurance  
    

	5.1
	Insurance.
Each Party shall maintain at its expense commercial general liability insurance in a principal amount of not less than the coverage generally
maintained by companies of similar size in its industry. Each Party shall also maintain a product liability policy relating to any use of the Products at any time after the date of this Agreement with
coverage of not less than One Million Dollars ($1,000,000) per occurrence and Ten Million Dollars ($10,000,000) in the aggregate. Each of the policies required under this Section 15 and
maintained by any Party shall name the other Party as an additional insured and require the insurer to provide at least thirty (30) days written notice to such other Party before any
cancellation or material change to the limits, deductibles or terms of such policies. Within thirty (30) days after the date of this Agreement, each Party shall furnish to the other Party
certificates evidencing its insurance, such other Party's designation as additional insured, and such notice requirement. Any Party may elect to suspend its performance under this Agreement until any
insurance required to be maintained by the other Party is in place and such certificates of coverage are provided. In the event that any of the required policies of insurance are written on a
claims-made basis, then such policies shall be maintained during the entire term of this Agreement and for a period of not less than five (5) years following the termination or
expiration of this Agreement. Each insurance policy that is required under this Section shall be obtained from an insurance carrier with an A.M. Best rating of at least A-VII. 

 
 

ARTICLE 6
  Miscellaneous  
    

	6.1
	Nature
of Relationship. The relationship between Customer and Service Supplier is that of service buyer-seller, and no agency, franchise, partnership,
joint venture or other relationship shall be construed to exist between the parties. Nothing contained in this Agreement shall be construed as giving Service Supplier any rights as a wholesaler of
Products, whether in any territory or with respect to any class of customers for Products. Customer reserves the right to appoint additional distribution service suppliers and to sell directly to
customers, including without limitation, the U.S. Government (including any agencies, departments or services thereof), qualifying tax-supported and non-profit institutions,
mail service and other retail providers, and such other accounts as Customer deems appropriate. Service Supplier represents that the services hereunder are bona fide and the consideration there for is
no greater than the fair market value for such services and as such are not discounts as defined in the CMS December 9, 2004 letter with respect to Average Sales Price.

	6.2
	Confidentiality.
During the term of this Agreement, each party, its respective agents, employees and representatives (collectively, the "Receiving Party")
may receive or have access to confidential materials and information of the other party (the "Disclosing Party"). All such materials and information (including, but not limited, Products information,
operations, methods, strategies, formulas, price lists, discount programs, incentives, rebates, records of unit movement for Products, shipping and warehousing, and confidential proprietary
information from third parties), are collectively referred to herein as "Confidential Information" and constitute the property of the Disclosing Party. During the term
hereof and for a period of one (1) year thereafter the Receiving Party shall not use or disclose to third persons any such Confidential Information without the Disclosing Party's prior written
consent, excepting those (a) disclosures made on a confidential basis to and use by the directors, officers, employees, and agents of the Receiving Party who have a reasonable need to know such
information in connection with the Receiving Party's performance of this Agreement, (b) disclosures which are required by law, as reasonably determined by the Receiving Party or its legal
counsel, or are made on a confidential basis to the Receiving Party's attorneys, accountants, and other professional advisors in connection with matters relating to this Agreement, and
(c) routine disclosures in the normal course of business, including to IMS/DDD or similar organizations. 

6

 

Upon
termination of this Agreement (for any reason) each Party will promptly: (i) return to the other party all documentation and other materials (including copies of original documentation or
other materials) containing any confidential information of the other Party; or (ii) certify to the other Party, as to the destruction of all such documentation and other materials. 

	6.3
	Assignment
and Delegation. Neither Party may assign this Agreement without the prior written consent of the other party; provided, however, that either
Party may assign this Agreement without such consent to an Affiliate or to a successor to substantially all of the pharmaceutical assets or business of such Party, whether in a merger, sale of stock,
sale of assets or other transaction.. For the purpose of this Section 4.3, an Affiliate shall be defined to include any company controlling, controlled by, or under common control with Service
Supplier or Customer as the case may be through stock ownership, direct or indirect. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties.

	6.4
	Governing
Law. Agreement shall be interpreted in accordance with, and governed by, the laws of the State of New York, without regard to any conflicts of
laws' rules.

	6.5
	Severability;
Waiver. The invalidity of all or part of any provision of this Agreement shall not affect the validity of any other provision of this
Agreement or the remaining portion of the applicable provision. Either party's failure to insist on compliance or enforcement of any provision of this Agreement shall not affect its validity or
enforceability or constitute a waiver of future enforcement of that provision or of any other provision of this Agreement.

	6.6
	Statute
of Frauds. All EDI transmissions made pursuant to this Agreement shall be deemed by the parties to be the same as written communication for all
purposes, and for all applications of law and statutes, including but not limited to, the Statue of Frauds under the State of the Ohio Uniform Commercial Code.

	6.7
	Force
Majeure. Neither Party shall be liable for delay in delivery or nonperformance in whole or in part nor shall the other Party have the right to
terminate this Agreement where delivery or performance has been affected by a condition of force majeure. For purposes of this Agreement, force majeure means a condition which results from causes
beyond a party's reasonable control, including, but not limited to, acts of God, acts of the other party, shortages, fires, labor disputes, strikes, floods, epidemics, quarantines, acts of terrorism,
war, riot, delay in transportation, compliance with any applicable governmental regulation or order, whether or not it later proves to be invalid, or inability to obtain labor, materials or
manufacturing facilities. If either Party is affected by a force majeure event, such Party shall, within 10 days of its occurrence, give notice to the other Party stating the nature of the
event, its anticipated duration and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration than is reasonably
required and the non-performing party shall use its best efforts to remedy its inability to perform. 

7

 
	6.8
	Notices.
All notices to either Party (each a "Notice") shall be in writing, shall refer specifically to this Agreement and shall be hand delivered or sent
by express courier service, costs prepaid, or by facsimile to the respective addresses specified below (or to such other address as may be specified by Notice to the other Party): 

	        If to Service Supplier, to:	        Cardinal Health, Inc

        7000 Cardinal Place

        Dublin, OH 43017

        Attention: General Counsel

        Telecopier No.: 614-757-6948
	

        If to Customer, to:	

        Reliant Pharmaceuticals, Inc.

        110 Allen Road

        Liberty Corner, NJ 07938

        Attention: Michael J. Lerner, Esq., Vice President, Legal Affairs

        Telecopier: 908.542.9406

	6.10
	Entire
Agreement. This Agreement constitutes the entire agreement between the Parties and supersedes all prior contracts, agreements and understandings
between the Parties whether written or oral with regard to the subject matter hereof. This Agreement may not be amended except in writing signed by authorized representatives of the Parties hereto. 

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

	Reliant Pharmaceuticals, Inc.	 	Cardinal Health*
	

By:	
 	

	
 	

By:	
 	

	

Name:	
 	

	
 	

Name:	
 	

	

Title:	
 	

	
 	

Title:	
 	

	
 	
 	

 	
 	

 	
 	

 
	

EDI Contact Person:	
 	

EDI Contact Person:
	
 	
 	

 	
 	

 	
 	

 
	

Name:	
 	

	
 	

Name:	
 	

	

E-mail:	
 	

	
 	

E-Mail:	
 	

	

Phone:	
 	

	
 	

Phone:	
 	

*The term "Cardinal Health" shall include the following affiliated operating companies: Cardinal Health 110, Inc., formerly known as Whitmire Distribution Corporation, a
Delaware corporation (Folsom, California); Cardinal Health 106, Inc., formerly known as James W. Daly, Inc., a Massachusetts corporation (Peabody, Massachusetts); Cardinal Health
103, Inc., formerly known as Cardinal Southeast, Inc., a Mississippi corporation (Richland, Mississippi); Cardinal Health 100, Inc., formerly known as Bindley Western
Industries, Inc., an Indiana corporation (Indianapolis, Indiana); Cardinal Health 104, LP f/k/a Service Supplier Distribution, L.P., an Ohio limited partnership (Dublin, Ohio) Cardinal Health
107, Inc., formerly known as National Pharmpak Services, Inc., an Ohio corporation, and any other subsidiary of Cardinal Health, Inc., an Ohio corporation ("CHI"), as may be
designated by CHI and The Cardinal Trading Company. 

8

 
 
 

SCHEDULE A    
    

        Service Fee:    The Service Fee of [***]% will be calculated and paid quarterly
based on the total value of all Products invoiced to Service Supplier by Customer during the quarter, including brokerage and drop ship, from Customer during that quarter valued at the Customers WAC
at the time the Product was purchased. Customer shall pay such fees no later than thirty (30) days after the end of each calendar quarter.    All such fees will be paid to Service
Supplier in the form of a credit memo. For purposes of this Agreement a "calendar quarter" shall mean the following consecutive three calendar month periods:
January 1—March 31, April 1—June 30, July 1—September 30 and October 1—December 31 

        Service Fee Credits:    Customer will receive credit towards Service Fee for the following items: 

	a.
	[***]

	b.
	[***]

	[***]
	Certain
information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the
omitted portions. 

9

QuickLinks

DISTRIBUTION SERVICES AGREEMENT

RECITALS

ARTICLE 1 Definitions

ARTICLE 2 Services

ARTICLE 3 Term and Termination; Remedies

ARTICLE 4 Indemnification

ARTICLE 5 Insurance

ARTICLE 6 Miscellaneous

SCHEDULE A

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