Shareholders' Agreement Of Kirin-amgen, Inc.

Exhibit 10.3
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SHAREHOLDERS' AGREEMENT


OF


KIRIN-AMGEN, INC.,


a California corporation


TABLE OF CONTENTS
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Page
---- RECITALS......................................................................... 1


1. CERTAIN DEFINITIONS........................................................ 3


1.01 Stock.............................................................. 3
1.02 EPO................................................................ 3
1.03 Field of Activity.................................................. 4
1.04 Expression Systems................................................. 4
1.05 Transferred Technology............................................. 4
1.06 EPO Technology..................................................... 5
1.07 EPO Organisms...................................................... 6
1.08 Core Technology.................................................... 6
1.09 Development Program................................................ 6
1.10 Party.............................................................. 7


2. FORMATION.................................................................. 7


2.01 Formation.......................................................... 7
2.02 Name............................................................... 7
2.03 Principal Office................................................... 8
2.04 Articles of Incorporation.......................................... 8
2.05 Bylaws............................................................. 8
2.06 Business Purpose................................................... 8
2.07 Fiscal Year ....................................................... 8
2.08 California Agent for Service of Process............................ 9
2.09 Counsel to Corporation ............................................ 9
2.10 Accountants to Corporation......................................... 9
2.11 Initial Capital.................................................... 9
2.12 Subscription....................................................... 10
2.13 Additional Capital................................................. 11
2.14 Withdrawals........................................................ 12
2.15 Default on Additional Capital Contribution Obligation.............. 12
2.16 Title to Property.................................................. 13
2.17 Occurrence of the Conversion Event................................. 13


3. CLOSING.................................................................... 14


4. CLOSING DOCUMENTS.......................................................... 14


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Page
---- 5. REPRESENTATIONS AND WARRANTIES OF AMGEN............................. 15
5.01 Good Standing............................................... 15
5.02 Authorization............................................... 15
5.03 No Breach................................................... 15
5.04 Title....................................................... 16
5.05 No Violations............................................... 17
5.06 No Litigation............................................... 18
5.07 Representations and Warranties.............................. 18


6. REPRESENTATIONS AND WARRANTIES OF KIRIN............................. 19
6.01 Good Standing............................................... 19
6.02 Authorization............................................... 19
6.03 No Breach................................................... 19
6.04 No Violations............................................... 20
6.05 No Litigation............................................... 20
6.06 Representations and Warranties.............................. 20


7. [INTENTIONALLY OMITTED]............................................. 21


8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF KIRIN.................... 21
8.01 No Misrepresentations....................................... 21
8.02 Compliance with Agreement................................... 21
8.03 Delivery.................................................... 21
8.04 Opinion of Counsel.......................................... 23
8.05 No Litigation............................................... 24
8.06 Additional Documents........................................ 24
8.07 Hart-Scott-Rodino Clearance................................. 25


9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF AMGEN.................... 25
9.01 No Misrepresentations....................................... 25
9.02 Compliance with Agreement................................... 25
9.03 Delivery.................................................... 25
9.04 Opinion of Counsel.......................................... 26
9.05 No Litigation............................................... 28
9.06 Additional Documents........................................ 28


10. SURVIVAL AND INDEMNIFICATION........................................ 28
10.01 Survival of Representations and Warranties.................. 28
10.02 Indemnification............................................. 28
10.03 Mechanism................................................... 29


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Page
----
11. BROKERS............................................................. 30


12. MANAGEMENT.......................................................... 31
12.01 Board of Directors.......................................... 31
12.02 Officers.................................................... 31
12.03 Actions Requiring Consent................................... 32
12.04 Accounting and Internal Controls............................ 33
12.05 Financial and Business Information and Tax Returns.......... 34
12.06 Bank Accounts............................................... 35
12.07 Independent Enterprise...................................... 35
12.08 Compensation of Officers and Directors...................... 35
12.09 Fiduciary Duty.............................................. 36
12.10 Other Activities............................................ 36
12.11 Non-Competition............................................. 36


13. BUSINESS MATTERS.................................................... 37
13.01 License Agreements.......................................... 37
13.02 Development Program......................................... 38
13.03 Services Agreements......................................... 39


14. RESTRICTIONS ON SHARES.............................................. 39
14.01 Overall Restrictions........................................ 39
14.02 Additional Restrictions..................................... 40
14.03 Purchase Price and Payment Date............................. 41
14.04 Delivery of Shares.......................................... 42


15. ADDITIONAL SHARES................................................... 42


16. ENDORSEMENT OF CERTIFICATE.......................................... 42


17. [INTENTIONALLY OMITTED]............................................. 43


18. COSTS AND EXPENSES.................................................. 43


19. EXPORT CONTROL LAWS................................................. 44
19.01 Export Law Compliance....................................... 44
19.02 Specific Authorization...................................... 44


20. DISTRIBUTIONS OF CASH............................................... 45


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Page
---- 21. DISSOLUTION/LIQUIDATION............................................ 45


21.01 Event of Dissolution...................................... 45
21.02 Final Accounting and Tax Returns.......................... 46
21.03 Liquidation............................................... 46
21.04 Cancellation of Certificates.............................. 47


22. MISCELLANEOUS PROVISIONS........................................... 48
22.01 Notices................................................... 48
22.02 Publicity and Disclosure.................................. 49
22.03 Entire Agreement; Amendment............................... 49
22.04 Waiver.................................................... 50
22.05 Enforcement............................................... 50
22.06 Remedies.................................................. 51
22.07 Headings.................................................. 51
22.08 Effectiveness............................................. 51
22.09 Attorneys' Fees and Costs................................. 52
22.10 Governing Law............................................. 52
22.11 Binding Effect............................................ 52
22.12 Exhibits.................................................. 52
22.13 Number and Gender......................................... 53
22.14 Counterparts.............................................. 53
22.15 Agreement to Perform Necessary Acts....................... 53
22.16 Validity.................................................. 53
22.17 Representations........................................... 54
22.18 Force Majeure............................................. 54
22.19 Expansion of Business..................................... 55


SIGNATURES.................................................................... 55


EXHIBIT SCHEDULE


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SHAREHOLDERS' AGREEMENT
-----------------------


THIS SHAREHOLDERS' AGREEMENT ("Agreement") is made and entered into at Los Angeles, California, U.S.A. this 11th day of May, 1984, by and among AMGEN, a California corporation, having its principal office at 1900 Oak Terrace Lane, Thousand Oaks, California 91320, U.S.A . ("Amgen"), KIRIN BREWERY COMPANY, LIMITED, a Japanese corporation, having its principal office at 26-1, Jingumae, 6 Chome, Shibuya-Ku, Tokyo 150, Japan ("Kirin"), and KIRIN-AMGEN, INC., a California corporation, having its principal office at 1900 Oak Terrace Lane, Thousand Oaks, California 91320, U.S.A. ("Corporation").


R E C I T A L S


A. Amgen has conducted research, has developed and possesses certain existing proprietary technical information, technology and know-how relating to genetic engineering which has enabled it to clone and express the gene for human erythropoietin, and Amgen is continuing to develop human erythropoietin.


B. Kirin and Amgen believe that the aforementioned genetic engineering techniques will have important application to the development of human therapeutic products.


C. Kirin and Amgen desire to form Corporation for purposes of development, manufacture, production and worldwide commercial sale of erythropoietin for human therapeutic use.


D. Kirin and Amgen believe that a joint business effort between them dedicated to such purposes would be of mutual benefit to the accomplishment thereof and that the compatibility between Amgen and Kirin is such that substantial economic returns may be gained by each through cooperative effort.


E. Amgen intends to contribute cash to Corporation, to assign to Corporation, perpetually and irrevocably, all of its right, title and interest in and to the Transferred Technology (as defined in Paragraph 1.05 below), and to license to Corporation the Core Technology (as defined in Paragraph 1.08 below), exclusively with respect to its direct application to the Field of Activity (as defined in Paragraph 1.03 below), as more fully set forth herein, in consideration of the issuance to Amgen of capital stock in Corporation as more fully set forth herein.


F. Kirin intends to contribute cash to Corporation in consideration of the issuance to Kirin of capital stock in Corporation as more fully set forth herein.


G. The simultaneous transfers and resultant issuances contemplated in Recitals E. and F. above are intended to qualify as a tax-free incorporation of Corporation pursuant to Section 351 of the Internal Revenue Code of 1954, as amended.


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H. It is the desire of Kirin and Amgen to cooperate in other mutually agreeable areas of business interest.


NOW, THEREFORE, it is agreed as follows:


1. CERTAIN DEFINITIONS
-------------------


As used in this Agreement, the following terms shall have the following meanings:


1.01 Stock
-----


(a) The term Class A Common Stock shall mean the duly authorized no par common stock of Corporation with no preference rights on liquidation.


(b) The term Class B Common Stock shall mean the duly authorized no par common stock of Corporation which contains certain preference rights on liquidation (as set forth in Para- graph 21 below), which preference rights shall be in effect until the occurrence of the Conversion Event (as defined in Paragraph 2.17 below), at which time all issued and outstanding Class B Common Stock shall be automatically converted into Class A Common Stock on a share-for- share basis eliminating any shareholder preference rights on liquidation of Corporation.


1.02 EPO


The term EPO shall mean erythropoietin or a fragment thereof for use in human therapeutic applications, whether


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manufactured or isolated from natural materials, and whether glycosylated or not glycosylated.


1.03 Field of Activity
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The term Field of Activity shall mean- the areas of development, manufacture, production and worldwide commercial sale of EPO, including EPO pharmaceuticals, for human therapeutic use, but not for animal therapeutic use nor- for commercial diagnostic use (collectively "EPO Products"), and shall include but not be limited to, toxicology, dosage studies, pre-clinical studies, clinical trials, product registration and government approvals, all relative to the development, manufacture, production and worldwide commercial sale of such EPO Products.


1.04 Expression Systems
------------------


The term Expression Systems shall mean any system of production of EPO utilizing natural or synthetic genes or vectors or recombinant DNA materials, including but not limited to, expression in e. coli, mammalian and/or yeast cell systems.


1.05 Transferred Technology
----------------------


The term Transferred Technology shall mean all proprietary technical information, technology and know-how, heretofore developed by Amgen, relating specifically to EPO Products which are owned by Amgen, or which is covered or protected by letters patent, patent applications, trademarks, service marks, trade names, copyrights or licenses held by Amgen,


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as of the Closing Date, and which are required in the development, manufacture, production, testing, assay, use or sale of EPO Products, including the EPO Organisms (as defined in Paragraph 1.07 below) in existence as of the Closing Date. By way of illustration, but not limitation, with respect to the foregoing, Transferred Technology shall include the sequence of the EPO gene and restriction map of the related vector and any information, know-how, data, process, technique, algorithm, program, design, drawing, formula or test data relating to any toxicology, dosage studies, pre-clinical studies, clinical trials or testing in progress relating to EPO,as more fully set forth on Exhibit "A" attached hereto. The Transferred Technology shall be assigned to Corporation effective on the Closing Date pursuant to that certain Assignment and License Agreement which is attached hereto as Exhibit "B" ("Amgen Assignment"); provided, however, that until such time as the Conversion Event occurs, Amgen shall hold as custodian for Corporation and Kirin, the sequence of the EPO gene and restriction map of the related vector.


1.06 EPO Technology
--------------


The term EPO Technology shall mean the Transferred Technology, as well as all improvements and enhancements thereto developed by the Parties hereafter- under the Development Program, and the Core Technology (as defined in Paragraph 1.08 below), as well as all improvements and enhancements thereto developed by the Parties hereafter which have been used in the development of EPO Products whether within or without of the Development Program


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1.07 EPO Organisms
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The term EPO Organisms shall mean any and all organisms developed by Amgen which are assigned perpetually and irrevocably to Corporation pursuant to the Amgen Assignment, and which have been genetically engineered to produce biologically active EPO, as well as all improvements and enhancements thereto developed by Amgen subsequent to the Closing Date pursuant to the Development Program.


1.08 Core Technology
---------------


The term Core Technology shall mean Amgen's proprietary technical information, technology and know-how, including without limitation, protein purification, fermentation, process development and hybridomas, other than Transferred Technology, which is required to conduct Corporation's business in the Field of Activity. The Core Technology shall be licensed to Corporation exclusively with respect to its direct application to the Field of Activity pursuant to the Amgen Assignment.


1.09 Development Program
-------------------


The term Development Program, as more fully set forth in the Development and Supply Agreement attached hereto as Exhibit "C," and which shall have appended thereto the preliminary R&D Plan and Budget therefor, shall mean any development conducted by Amgen, Kirin and/or Corporation and paid for by Corporation relating to (i) toxicology, dosage studies, preclinical studies, clinical trials and product registration of EPO


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in accordance with the laws, regulations and guidelines of the United States and Japan, respectively, (ii) commercial manufacturing scale production of EPO in one or more Expression Systems, and (iii) other mutually agreed upon development activities related to the Field of Activity.


1.10 Party
-----


The term Party shall mean Kirin, Amgen or Corporation, as the context shall indicate, or, when used in the plural, Kirin, Amgen and Corporation, as the context shall indicate.


2. FORMATION
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2.01 Formation
---------


On or before the Closing Date (as defined in Paragraph 3 below), Kirin and Amgen shall establish or cause to be established, "Kirin-Amgen, Inc.," which shall be a corporation organized under the laws of the State of California. Immediately after its formation, Kirin-Amgen, Inc. shall become a Party to this Agreement.


2.02 Name
----


The corporate designation of Corporation shall be "Kirin-Amgen, Inc." or such other name as may be mutually agreed to by Kirin and Amgen.


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2.03 Principal Office
----------------


The principal office and place of business of Corporation shall be located at 1900 Oak Terrace Lane, Thousand Oaks, California 91320, U.S.A., or at such other place as may be mutually agreed to by Kirin and Amgen.


2.04 Articles of Incorporation
-------------------------


The Articles of Incorporation of Corporation ("Articles") shall be as attached hereto as Exhibit "D," as may be amended from time to time as may be mutually agreed to by Kirin and Amgen.


2.05 Bylaws
------


The Bylaws of Corporation ("Bylaws") shall be as attached hereto as Exhibit "E", as may be amended from time to time as may be mutually agreed to by Kirin and Amgen.


2.06 Business Purpose
----------------


The business of Corporation shall be to engage in the development, manufacture, production and sale of EPO Products for human therapeutic use in the Field of Activity and to otherwise exploit such EPO Technology for commercial purposes by whatever means including, but not limited to, the license or sale of such EPO Technology by mutual agreement of Kirin and Amgen, and to do all things necessary, appropriate or advisable in furtherance thereof.


2.07 Fiscal Year
-----------


The fiscal year of Corporation shall be the calendar year ("Corporate Year").


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2.08 California Agent for Service of Process
---------------------------------------


The name of the initial agent for service of process on Corporation in California is Joel S. Marcus, Esq., Musick, Peeler & Garrett, One Wilshire Boulevard, Suite 2000, Los Angeles, California 90017.


2.09 Counsel to Corporation
----------------------


The law firm of Musick, Peeler and Garrett, One Wilshire Boulevard, Suite 2000, Los Angeles, California 90017, shall act as general counsel for Corporation until otherwise mutually agreed between Kirin and Amgen pursuant to that certain Conflicts Letter of even date herewith which is attached hereto as Exhibit "F".


2.10 Accountants to Corporation
--------------------------


The independent certified public accounting firm of Arthur Young and Company, 515 South Flower Street, Suite 2600, Los Angeles, California 90071, shall act as independent accountants to Corporation pursuant to that certain engagement letter attached hereto as Exhibit "G".


2.11 Initial Capital


The initial capital of Corporation pursuant to the two (2) subscriptions described in Paragraph 2.12 below, shall consist of a total of twelve million (12,000,000) shares of no par value Class A Common Stock with the right to one (1) vote per share ("Class A Common Stock"), and twelve million (12,000,000) shares of no par value Class B Common Stock with the right to one


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(1) vote per share ("Class B Common Stock"). Upon the occurrence of the Conversion Event (as defined in Paragraph 2.17 below), Kirin's shares of Class B Common Stock shall be automatically converted on a share-for-share basis into shares of Class A common stock subject to the terms of Paragraph 2.17 below and the provisions contained in Corporation's Articles.


2.12 Subscription


Kirin hereby subscribes for twelve million (12,000,000) shares of Class B Common Stock of Corporation, and Amgen hereby subscribes for twelve million shares (12,000,000) shares of Class A Common Stock of Corporation. The subscription price for all shares, whether of Class A Common Stock or Class B Common Stock, shall be ONE DOLLAR (U.S. $1.00) per share, and shall be payable as follows:


2.12.1 Kirin shall pay its full subscription price for the Class B Common Stock by cashiers or certified check or by wire transfer from Kirin to Corporation's account at a bank to be designated by both Kirin and Amgen ("Corporate Bank Account") on the Closing Date of the full subscription price of TWELVE MILLION DOLLARS (US $12,000,000.00).


2.12.2 Amgen shall pay its full subscription price for the Class A Common Stock as follows: (i) FOUR MILLION DOLLARS (U.S. $4,000,000.00) by cashiers or certified check or by wire transfer from Amgen to the Corporate Bank Account on the Closing Date, and (ii) a contribution and complete assignment in


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kind to Corporation on the Closing Date of all of the Transferred Technology, such transfer to be made pursuant to the Amgen Assignment. Kirin and Amgen acknowledge that the fair market value of Amgen's capital contribution to Corporation described in subparagraph (ii) above shall be EIGHT MILLION DOLLARS (U.S. $8,000,000.00).


2.13 Additional Capital
------------------


2.13.1 Subject to Paragraph 2.15 below, no additional capital stock may be issued by Corporation other than by the mutual written consent of Kirin and Amgen. The Parties hereto shall meet no less frequently than annually following the formation of Corporation to determine its capital needs and the business and Development Program for the next succeeding year.


2.13.2 In the event that the initial capital contributions to Corporation pursuant to Paragraph 2.11 above (together with interest earned by Corporation on the cash so contributed) are insufficient to fund the activities of Corporation and the Development Program until such time as all approvals (governmental or otherwise) have been obtained for the manufacture and sale of EPO Products in the Field of Activity in the Kirin Territory and the Amgen Territory (as defined in Paragraph ...