Prothena Corporation plc
Prothena Corp plc (Form: 10-12B/A, Received: 12/13/2012 16:26:52)

As filed with the Securities and Exchange Commission on December 13, 2012

Registration No.            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 3

to

Form 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

 

Prothena Corporation plc

(Exact name of registrant as specified in its charter)

 

 

 

Ireland   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

650 Gateway Boulevard

South San Francisco, California

  94080
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (650) 837-8550

 

 

Securities to be registered pursuant to Section 12(b) of the Act:

 

Title of Each Class to be so Registered

 

Name of Each Exchange on Which
Each Class is to be Registered

Ordinary Shares, par value $0.01 per share   The Nasdaq Global Market

Securities to be registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨   (Do not check if a smaller reporting company)    Smaller reporting company   x

 

 

 


INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

The information required by the following Form 10 Registration Statement items is contained in the Information Statement sections that we identify below, each of which we incorporate in this report by reference:

 

Item 1. Business

The information required by this item is contained under the sections “Summary,” “Risk Factors,” “The Separation and Distribution and Related Transactions,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” of the Information Statement, which sections are incorporated herein by reference.

 

Item 1A. Risk Factors

The information required by this item is contained under the section “Risk Factors” of the Information Statement, which section is incorporated herein by reference.

 

Item 2. Financial Information

The information required by this item is contained under the sections “Summary,” “Risk Factors,” “Capitalization,” “Selected Historical Carve-out Combined Financial Data,” “Unaudited Pro Forma Condensed Carve-out Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Share Capital” and “Index to Financial Statements,” and the financial statements referenced therein, of the Information Statement, which sections are incorporated herein by reference.

 

Item 3. Properties

The information required by this item is contained under the section “Business — Facilities” of the Information Statement, which section is incorporated herein by reference.

 

Item 4. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is contained under the section “Security Ownership of Certain Beneficial Owners and Management” of the Information Statement, which section is incorporated herein by reference.

 

Item 5. Directors and Executive Officers

The information required by this item is contained under the section “Corporate Governance and Management” of the Information Statement, which section is incorporated herein by reference.

 

Item 6. Executive Compensation

The information required by this item is contained under the sections “Executive Compensation” and “Corporate Governance and Management — Compensation Committee Interlocks and Insider Participation” of the Information Statement, which sections are incorporated herein by reference.

 

Item 7. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is contained under the sections “Arrangements between Elan and Prothena,” “Certain Relationships and Related Party Transactions” and “Corporate Governance and Management” of the Information Statement, which sections are incorporated herein by reference.


Item 8. Legal Proceedings

The information required by this item is contained under the section “Business — Legal Proceedings” of the Information Statement, which section is incorporated herein by reference.

 

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The information required by this item is contained under the sections “Risk Factors,” “Capitalization,” “The Separation and Distribution and Related Transactions,” “Listing and Trading of our Ordinary Shares,” “Dividend Policy” and “Executive Compensation” of the Information Statement, which sections are incorporated herein by reference.

 

Item 10. Recent Sales of Unregistered Securities

None.

 

Item 11. Description of Registrant’s Securities to be Registered

The information required by this item is contained under the section “Description of Share Capital” of the Information Statement, which section is incorporated herein by reference.

 

Item 12. Indemnification of Directors and Officers

The information required by this item is contained under the section “Indemnification of Directors and Officers” of the Information Statement, which section is incorporated herein by reference.

 

Item 13. Financial Statements and Supplementary Data

The information required by this item is contained under the sections “Unaudited Pro Forma Condensed Carve-out Combined Financial Statements” and “Index to Financial Statements,” and the financial statements referenced therein, of the Information Statement, which sections are incorporated herein by reference.

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

 

Item 15. Financial Statements and Exhibits

(a) Financial Statements

The information required by this item is contained under the section “Unaudited Pro Forma Condensed Carve-out Combined Financial Statements” and “Index to Financial Statements,” and the financial statements referenced therein, of the Information Statement, which sections are incorporated herein by reference.


(b) Exhibits

The following documents are filed as exhibits hereto:

 

Exhibit
No.
  

Description

2.1*    Demerger Agreement, dated as of November 8, 2012 between Elan Corporation, plc and Prothena Corporation plc
2.2*    Form of Amended and Restated Intellectual Property License and Contribution Agreement among Neotope Biosciences Limited, Elan Pharma International Limited, and Elan Pharmaceuticals, Inc.
2.3†    Form of Intellectual Property License and Conveyance Agreement among Neotope Biosciences Limited, Elan Pharma International Limited and Elan Pharmaceuticals, Inc.
2.4*    Form of Asset Purchase Agreement between Elan Pharmaceuticals, Inc. and Prothena Biosciences Inc
3.1*    Form of Memorandum and Articles of Association of Prothena Corporation plc
8.1*    Form of Tax Opinion of Cadwalader, Wickersham & Taft LLP
8.2*    Form of Tax Opinion of KPMG LLP, Independent Registered Public Accounting Firm
10.1*    Form of Tax Matters Agreement
10.2†    Form of Transitional Services Agreement
10.3*    Subscription and Registration Rights Agreement, dated as of November 8, 2012 by and among Prothena Corporation plc, Elan Corporation, plc and Elan Science One Limited
10.4†    Form of Research and Development Services Agreement
10.5*    Form of Deed of Indemnity
10.6*    Lease Agreement, dated as of March 18, 2010 between Are-San Francisco No. 33, LLC and Elan Pharmaceuticals, Inc.
10.7*    First Amendment to Lease, dated as of November 18, 2011 between Are-San Fancisco No. 33, LLC and Elan Pharmaceuticals, Inc.
10.8*    Second Amendment to Lease, dated as of June 1, 2012 between Are-San Francisco No. 33, LLC and Elan Pharmaceuticals, Inc.
10.9*    Third Amendment to Lease, dated as of October 3, 2012 between Are-San Francisco No. 33, LLC and Elan Pharmaceuticals, Inc.
10.10*    Assignment of Tenant’s Interest in Lease and Assumption of Lease Obligations, dated as of December 2, 2012 between Elan Pharmaceuticals, Inc. and Prothena Biosciences Inc
10.11*    Form of Prothena Corporation plc 2012 Long Term Incentive Plan
10.12*    Form of Prothena Biosciences Inc Severance Plan
10.13†    Form of Prothena Corporation plc Incentive Compensation Plan
10.14*    License Agreement, dated as of December 31, 2008 between the University of Tennessee Research Foundation and Elan Pharmaceuticals, Inc.
10.15    Form of Deed of Indemnity for Former Officers and Directors
21.1*    List of Subsidiaries
99.1    Information Statement, preliminary and subject to completion, dated December 13, 2012

 

* Previously filed.
Supersedes and replaces exhibit of same numerical designation filed with Amendment No. 2 to the Registration Statement on November 30, 2012.


SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Prothena Corporation plc
   

By:

  /s/ Neil McLoughlin
   

Name:

  Neil McLoughlin
Date: December 13, 2012    

Title:

  Company Secretary

 

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Exhibit 2.3

INTELLECTUAL PROPERTY LICENSE AND CONVEYANCE

AGREEMENT

AMONG

NEOTOPE BIOSCIENCES LIMITED

AND

ELAN PHARMA INTERNATIONAL LIMITED

AND

ELAN PHARMACEUTICALS, INC.

Dated as of December     , 2012

 

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INTELLECTUAL PROPERTY LICENSE AND CONVEYANCE AGREEMENT

This INTELLECTUAL PROPERTY LICENSE AND CONVEYANCE AGREEMENT (the “Agreement”) is made this      day of December 2012 (the “Effective Date”) among NEOTOPE BIOSCIENCES LIMITED, a private limited company incorporated under the laws of Ireland with offices at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland (“NBL”) on the one hand, and ELAN PHARMA INTERNATIONAL LIMITED, a private limited company incorporated under the laws of Ireland with offices at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland (“EPIL”) and ELAN PHARMACEUTICALS, INC., a Delaware corporation having an address at 180 Oyster Point Boulevard, South San Francisco, CA 94080 (“EPI”) on the other hand (collectively, “Elan”).

WHEREAS:

 

  A. Elan Corporation, plc (“PLC”) and Prothena Corporation plc (“Prothena”) have entered into that Certain Demerger Agreement dated as of November 8, 2012 (the “Demerger Agreement”).

 

  B. NBL, an Affiliate of EPIL and EPI as of the Effective Date, will be wholly owned by Prothena upon the consummation of the transactions contemplated by the Demerger Agreement (the “Demerger”).

 

  C. The Demerger Agreement contemplates that, prior to the Demerger, the Pre-Demerger Restructuring (as defined in the Demerger Agreement) shall have been consummated, which Pre-Demerger Restructuring is intended to allocate, assign, and transfer to entities that will be owned by Prothena from and after the Demerger (including NBL), assets and liabilities that comprise the Prothena Business (as defined in the Demerger Agreement).

 

  D. As part of the Pre-Demerger Restructuring, EPI, EPIL and NBL wish to allocate, assign and transfer to NBL the assets and liabilities relating to the Projects (as defined below) to the extent set forth herein.

NOW IT IS HEREBY AGREED AS FOLLOWS:

ARTICLE I

DEFINITIONS

In this Agreement, the following definitions shall apply:

 

“Acquired Assets”    Assigned IP, Project Contracts, Project Materials other than Elan Materials, and Project Records that are owned by Elan as of the Effective Date.
“Acquired Liabilities”    Debts, liabilities, losses, guarantees, commitments and obligations relating to or associated with the Acquired Assets.

“Active Immunotherapeutic Approaches”

   Direct immunization with a target, or a fragment derived from a target (“Immunogen”), either with adjuvant alone or coupled to a carrier molecule designed to elicit an immune response of humoral or cellular nature in the host. Included are Immunogens in complex with another protein, such as, for example, lipid stabilized Immunogens and protein conjugated Immunogens, as well as multivalent vaccines incorporating multiple Immunogens.

 

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“Affiliate”    A corporation or other entity that controls, is controlled by or is under common control with such corporation or entity. A person or entity shall be regarded as in control of another entity if it owns or controls more than fifty percent (50%) of the voting securities or other ownership interest of the other corporation or entity.
“AGE”    Advanced glycation end products.
“Ancillary Intellectual Property”    The Intellectual Property licensed by Elan to NBL pursuant to Article III hereof and set forth on Schedule E.
“Assigned Intellectual Property” or “Assigned IP”    Neotope Patent Rights, Project Know-How and Neotope Trademark Rights.
“ELND2 Materials”    Antibodies 6F10, 5E10, 5D8 and 8G9, which specifically bind ELND-002.
“Elan Materials”    The materials listed in Schedule D.
“Exclusive License”    A fully paid, perpetual, irrevocable (except as otherwise expressly provided in Article III) and royalty-free license including the right to sublicense, whereby licensee’s rights are sole and entire and operate to exclude all others including licensor and its Affiliates, except as otherwise expressly provided herein.
“Inactive”    Funded at an average annual rate of less than seventy-five thousand dollars ($75,000) over a period of two calendar years, including both internal and external expenditures in the aggregate.
“Intellectual Property”    All (a) inventions (whether or not patentable and whether or not reduced to practice), records of inventions, test information, developments, applications, improvements, formulae, concepts, ideas, methods or processes, research property rights, all improvements to any of the foregoing, and all Patents, (b) copyrights, and all applications, registrations and renewals in connection therewith, (c) trade secrets, Know-How and confidential information, (d) domain names, computer software, firmware and applications (including source code, executable code, data, databases, programming and notes and documents and other related documentation), other than commercial off-the-shelf software, (e) works and designs embodied in advertising and promotional materials, (f) other proprietary rights and (g) copies and tangible embodiments of the foregoing in whatever form or medium.

 

3


“Know-How”    Confidential scientific, technical, medical and marketing data, trade secrets and information, including all ideas, concepts, research and development, know-how, composition information and embodiments, manufacturing and production processes, techniques and information, specifications, technical and business data, designs, drawings, supplier lists, pricing and cost information, and data and know-how embodied in business and marketing plans and proposals, inventions (whether or not patentable and whether or not reduced to practice), records of inventions, test information, developments, applications, improvements, formulae, concepts, ideas, methods or processes, research property rights and all improvements to any of the foregoing.
“Laminin”    Laminin 411 (Flanagan et al., Laminin-411 Is a Vascular Ligand for MCAM and Facilitates TH17 Cell Entry into the CNS, Plos One, July 2012, Vol. 7, Issue 7) and other laminin molecules.
“MCAM”    Melanoma cell adhesion molecule (Flanagan et al., Laminin-411 Is a Vascular Ligand for MCAM and Facilitates TH17 Cell Entry into the CNS, Plos One, July 2012, Vol. 7, Issue 7).
“Neotope Patent Rights”    The Patents listed on Schedule A-I and any Patents claiming priority thereto.
“Neotope Trademark Rights”    The Trademark Rights listed on Schedule A-II.
“OTL”    Onclave Therapeutics Limited.
“Passive Immunotherapeutic Approaches”    Treatment of a host with either a whole antibody, or a fragment of an antibody which recognizes a target (or fragment or epitope in the target).
“Patents”    All patents and patent applications, whether foreign or domestic, all patents arising from such applications, and all patents and patent applications based on, or claiming or corresponding to the priority dates, of any of the foregoing and any renewals, reissues, extensions (or other governmental actions that provide exclusive rights to the owner thereof in the patented subject matter beyond the original expiration date), substitutions, confirmations, registrations, revalidations, reexaminations, additions, continuations, continued prosecutions, continuations-in-part or divisions of or to any of the foregoing, including without limitation, supplementary protection certificates or the equivalent thereof.
“Person”    Any individual, firm, partnership, company, corporation, government authority or other entity.
“Project Contracts”    The contracts listed in Schedule B.

 

4


“Project Know-How”    All Know-How relating solely to the Projects.
“Project Materials”    The materials listed in Schedule C.
“Project Records”    Copies of all files, documents and correspondence relating solely to the Projects, including data, reports, certificates, laboratory notebooks, written notes, standard operating procedures, logs, studies, databases, raw or experimental data, research records, assay protocols, meeting minutes, certificates of analysis, and vendor and supplier lists necessary for furthering the Projects and products arising therefrom.
“Projects”    Research, development and commercialization activities directed to the use, in the diagnosis, prevention and treatment of diseases, of (a) Active Immunotherapeutic Approaches and Passive Immunotherapeutic Approaches, in each case directly targeting one or more Targets and/or (b) any and all Syn103 Program Compounds.
“Syn 103 Program Compounds”   

ELN584103 (4-fluoro-N-(4-(trifluoromethyl)phenyl)benzenesulfonamide) having the structure:

 

LOGO

 

And related compounds ELN584092, ELN584105, ELN584164, ELN584095, ELN584090.

“Synuclein Patent Rights”    The Patents listed in Schedule A-III and Patents claiming priority thereto.
“Target”    Any and all of (i) MCAM; (ii) Laminin; (iii) AGE; (iv) damaged myelin; (v) fragments of any and all of (i)-(iv); and/or (vi) epitopes presented by any and all of (i)-(v) complexed with other molecular entities, including without limitation proteins, lipids, polymers, nucleic acids, compounds; provided, however, that in the case of (vi), such epitope shall include at least two amino acids of any of (i)-(iv) as determined by standard epitope mapping techniques.
“Territory”    The world.
“Trademark Rights”    All trademarks, trademark rights, service marks, service mark rights, trade dress, logos, slogans, trade names, trade name rights, Internet domain names and subdomains, together with all translations, adaptations, derivations, and combinations thereof and all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith.

 

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ARTICLE II

PURCHASE AND SALE OF ACQUIRED ASSETS

 

1. Elan hereby transfers, sells, conveys, assigns and delivers to NBL all right, title and interest in the Territory to (i) the Acquired Assets and (ii) subject to the Demerger Agreement, the Acquired Liabilities. Subject to Article VI hereof and notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to transfer, sell, convey, or assign any Acquired Asset if an attempted transfer, sale, conveyance, or assignment thereof, without the consent of a third party, would constitute a breach or other contravention of the rights of such Acquired Asset, or would in any way adversely affect the rights of EPI or EPIL, or upon transfer, sale, conveyance or assignment, NBL under such Acquired Asset.

 

2. Subject to Article VI hereof, Elan shall use commercially reasonable efforts to conclude as soon as reasonably practicable after the Effective Date the perfected assignments of, and to consummate the transfer of all of Elan’s rights, title, and interest in the Acquired Assets to NBL.

 

3. Elan shall use commercially reasonable efforts to transfer and deliver all Project Materials and Project Records when and in the manner requested by NBL.

ARTICLE III

GRANT OF EXCLUSIVE LICENSE OF PATENT RIGHTS AND MATERIALS

 

1. Elan hereby grants to NBL an Exclusive License in the Territory solely for the Projects to (1) conduct research and development activities, and (2) make, have made, use, offer for sale, sell and import products within the Projects, under:

 

  a. Synuclein Patent Rights; and

 

  b. Elan Materials.

 

2. For the avoidance of doubt, Elan and its Affiliates, other than NBL and OTL, shall use certain Target antibodies, i.e., 11A5, 12C6, 6H7, 8A5, 5C12 and the lipid/synuclein antibodies (collectively, “Synuclein Antibodies”) solely for research purposes, excluding use in studies relating to the Projects, and for no other purpose (“Elan’s Permitted Use”).

 

3. Except as provided in this Section 3, Elan and its Affiliates, other than NBL and OTL, shall not distribute to third parties or make a public disclosure of any Synuclein Antibodies without NBL’s prior written consent. Elan may, without NBL’s prior written consent:

 

  a. Distribute to collaborators other than academic institutions under a written agreement prohibiting publication or further distribution of the Elan Materials and expressly limiting use to Elan’s Permitted Use; or

 

6


  b. Distribute no more than 1 mg of any of 11A5, 6H7, and 8A5 under a written agreement prohibiting identification of the antibody structure and further distribution and expressly limiting use to Elan’s Permitted Use; or

 

  c. Publish results obtained with, but not the structure of, any of 11A5, 6H7, and 8A5; or

 

  d. Disclose and publish in a patent application and any patent issuing therefrom any results obtained with the Synuclein Antibodies in Elan’s Permitted Use.

 

4. For the avoidance of doubt, NBL and its Affiliates shall use certain non-Target antibodies, i.e., ELND2 Materials, TY11/15, 27-1, 2E4, 3G10 and APP antibodies solely for research purposes relating to the Projects, and for no other purpose (“NBL’s Permitted Use”).

 

5. Except as provided in this Section 5, NBL and its Affiliates shall not distribute to third parties or make a public disclosure of any ELND2 Materials without Elan’s prior written consent. NBL may, without Elan’s prior written consent:

 

  a. Distribute to collaborators other than academic institutions under a written agreement prohibiting publication or further distribution of the ELND2 Materials and expressly limiting use to NBL’s Permitted Use; or

 

  b. Distribute to academic institutions conducting research in furtherance of the Projects under a written agreement prohibiting further distribution of the ELND2 Materials and expressly limiting use to NBL’s Permitted Use; or

 

  c. Disclose and publish in a patent application and any patent issuing therefrom any results obtained with the ELND2 Materials in NBL’s Permitted Use.

 

6. On an annual basis, NBL shall review Projects to identify which have been Inactive. Within sixty (60) days of such identification, NBL shall notify Elan of such Inactive Projects, and the rights granted to NBL under Article III with respect to Ancillary Intellectual Property related solely to such identified Inactive Projects shall terminate and shall revert to Elan.

ARTICLE IV

CONSIDERATION

In consideration for the transfer of the Acquired Assets to NBL, NBL shall pay EPI and EPIL a total of $375,000 and assume (subject to the terms of the Demerger Agreement) the Acquired Liabilities.

ARTICLE V

PROSECUTION OF PATENT RIGHTS

NBL shall solely control the prosecution and maintenance of all Neotope Patent Rights, and shall pay all costs associated therewith incurred after the Effective Date and shall have no obligation to Elan in respect of such Neotope Patent Rights. EPI shall solely

 

7


control the prosecution of Synuclein Patent Rights; provided, however, that EPI shall keep NBL reasonably apprised of the status of the Synuclein Patent Rights and reasonably consider the input of NBL with respect to the prosecution of any claims in the Synuclein Patent Rights solely related to the Projects.

ARTICLE VI

RELATIONSHIP TO DEMERGER AGREEMENT

This Agreement is subject in all respects to the terms and conditions of the Demerger Agreement. The consummation of the transactions contemplated by this Agreement shall constitute part of the Pre-Demerger Restructuring (as defined in the Demerger Agreement) under the Demerger Agreement and shall accordingly be consummated prior to the consummation of the transactions contemplated by the Demerger Agreement. The Acquired Assets and Acquired Liabilities conveyed to NBL pursuant to this Agreement shall constitute assets of the Prothena Business and Prothena Business Liabilities, respectively, for all purposes of the Demerger Agreement. Nothing contained in this Agreement shall be deemed to supersede any of the covenants, agreements, representations or warranties of Elan, Seller, Prothena, or Buyer contained in the Demerger Agreement. In the event of a conflict between this Agreement and the Demerger Agreement, the terms of the Demerger Agreement shall control.

ARTICLE VII

TERM AND TERMINATION

This Agreement may be terminated at any time prior to the Demerger by written consent of the parties hereto.

ARTICLE VIII

MISCELLANEOUS

 

1. Force Majeure

Neither party to this Agreement shall be liable for delay in the performance of any of its obligations hereunder if such delay results from causes beyond its reasonable control, including, without limitation, acts of God, fires, strikes, acts of war, or intervention of any government authority, but any such delay or failure shall be remedied by such party as soon as practicable.

 

2. Relationship of the Parties

Nothing contained in this Agreement is intended or is to be construed to constitute EPI, EPIL and NBL as partners or joint venturers or employees of the other party. Neither party hereto shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other party or to bind the other party to any contract, agreement or undertaking with any third party.

 

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3. Counterparts

This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute this Agreement. This Agreement may be executed by facsimile (including electronically by PDF). The parties agree that facsimile copies of signatures have the same effect as original signatures.

 

4. Notices

Any notice or other communication required or permitted to be given to either party under this Agreement shall be given in writing and shall be delivered by hand or by facsimile (and promptly confirmed by registered mail, postage prepaid and return receipt requested, or by reputable overnight delivery service or courier), addressed to each party at the following addresses or such other address as may be designated by notice pursuant to this Article VII Section 4:

 

  If to NBL:      Neotope Biosciences Limited
       Treasury Building
       Lower Grand Canal Street
       Dublin 2, Ireland
       Attention: Director
  If to EPI:      Elan Pharmaceuticals, Inc.
       180 Oyster Point Blvd.
       South San Francisco, CA 94080
       Attention: Secretary
  If to EPIL:      Elan Pharma International Limited
       Treasury Building
       Lower Grand Canal Street
       Dublin 2, Ireland
       Attention: Director

Any notice or communication given in conformity with this Article VIII Section 4 shall be deemed to be effective when received by the addressee, if delivered by facsimile, hand or delivery service or courier, and four days after mailing, if mailed.

 

5. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of Ireland.

 

6. Severability

If any provision in this Agreement is deemed to be or becomes invalid, illegal or unenforceable, (i) such provision will be deemed amended to conform to applicable laws so as to be valid and enforceable or, if it cannot be so amended without materially altering the intention of the parties, it will be deleted, and (ii) the validity, legality and enforceability of the remaining provisions of this Agreement shall not be impaired or affected in any way.

 

9


7. Amendments

No amendment, modification or addition hereto shall be effective or binding on either party unless set forth in writing and executed by a duly authorized representative of both parties.

 

8. Waiver

No waiver of any right under this Agreement shall be deemed effective unless contained in a writing signed by the party charged with such waiver, and no waiver of any breach or failure to perform shall be deemed to be a waiver of any future breach or failure to perform or of any other right arising under this Agreement.

 

9. Headings

The section headings contained in this Agreement are included for convenience only and form no part of the agreement between the parties.

 

10. Assignment, Etc.

Neither party may assign its rights and obligations hereunder without the prior written consent of the other party; provided, however, that either party shall have the right to assign such rights and obligations hereunder to an Affiliate or to any Person with which such party is merged or consolidated or which purchases all or substantially all of the assets of such party.

 

11. No Effect on Other Agreements

No provision of this Agreement shall be construed so as to negate, modify or affect in any way the provisions of any other agreement between the parties unless specifically referred to, and solely to the extent provided in any such other agreement.

 

12. Successors

This Agreement will inure to the benefit of and be binding upon the successors of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Agreement on the date last written below, effective as of the Effective Date.

 

NEOTOPE BIOSCIENCES LIMITED
By:  

 

Name:  
Title:  
Date:  

 

10


ELAN PHARMACEUTICALS, INC.   ELAN PHARMA INTERNATIONAL LIMITED
By:  

 

  By:  

 

NAME:     Name:  
Title:     Title:  
Date:     Date:  

 

11

Exhibit 10.2

DATED [                    ] 2012

Elan Corporation Plc

and

Prothena Corporation Plc

 

 

TRANSITIONAL SERVICES AGREEMENT

 

 

 

 


CONTENTS

 

1.   INTERPRETATION      1   
2.   SERVICES TO BE PROVIDED      5   
3.   WARRANTIES      6   
4.   PERSONNEL      6   
5.   DURATION      6   
6.   SERVICE FEES      6   
7.   TRANSITIONAL SERVICES CHANGE MANAGEMENT      7   
8.   INTELLECTUAL PROPERTY      7   
9.   DATA PROTECTION      7   
10.   TERMINATION      8   
11.   EFFECT OF TERMINATION      9   
12.   LIABILITY      9   
13.   AUDIT ACCESS      9   
14.   CONFIDENTIALITY      9   
15.   FORCE MAJEURE      10   
16.   ENTIRE AGREEMENT      10   
17.   ASSIGNMENT      10   
18.   SUB-CONTRACTING      10   
19.   NO PARTNERSHIP      10   
20.   VARIATION      10   
21.   SEVERABILITY      10   
22.   WAIVER      11   
23.   EXPENSES      11   
24.   NOTICES      11   
25.   DISPUTE ESCALATION PROCEDURE      11   
26.   NON SOLICITATION      12   
27.   COUNTERPARTS      12   
28.   GOVERNING LAW AND JURISDICTION      12   

SCHEDULE 1 – Transitional Services

SCHEDULE 2 – Service Fees

SCHEDULE 3 – Transitional Services Committee

SCHEDULE 4 – Premises


THIS AGREEMENT is made the      day of                  2012 (the “ Effective Date ”).

BETWEEN:

 

  (1) Elan Corporation Plc , a public limited company incorporated in Ireland (registered number 30356) having its registered office is at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland (“ Elan ”);

 

  (2) Prothena Corporation Plc , a public limited company incorporated in Ireland (registered number 518146) having its registered office is at 25-28 North Wall Quay, Dublin 2 (“ Prothena ”)

(each a “ Party ” and together the “ Parties ”).

WHEREAS:

 

A. Elan entered into a demerger agreement with Prothena dated [                    ] 2012 (the “ Demerger Agreement ”), pursuant to which the Prothena Business (as defined in the Demerger Agreement) will be separated from Elan and transferred to Prothena.

 

B. In accordance with the Demerger Agreement, Elan has agreed to provide to Prothena certain transition services for specified periods following Completion (as defined in the Demerger Agreement), as set forth in Part A of Schedule 1.

 

C. Elan desires to purchase from Prothena, and Prothena desires to provide to Elan certain transition services for specified periods following Completion as set forth in Part B of Schedule 1.

NOW IT IS HEREBY AGREED as follows:

 

1. INTERPRETATION

 

1.1. Definitions

In this Agreement the following terms shall have the meanings specified below:

Affiliate means, in relation to either party, any company which is for the time being a holding company of that party or a subsidiary of that party or of any such holding company (as defined in Section 155 of the Companies Act 1963 (as amended)).

Agreement means this agreement and the schedules hereto;

Applicable Law means any Irish, U.S. federal, state, local or other foreign statute, enactment, ordinance, order, regulation, guidance or other similar instrument (including building codes and local authority byelaws) which relate to the provision or receipt of the Transitional Services or otherwise relate to the performance of this Agreement;

Background Intellectual Property Rights means any Intellectual Property Rights owned by or licensed to either Party and used by that Party in the provision of the Transitional Services;

Breaching Party has the meaning set forth in clause 10.3;

Business Day means 9am to 5.30pm on any day that is not a Saturday or a Sunday or public holiday, on which the banks are generally open for business in Ireland and New York City, New York, United States;

Completion has the meaning given to it in the Demerger Agreement;

Computer Systems means the computer equipment, software, ancillary equipment, communications equipment, operating software, routers, hubs, servers, micro processors, firmware and any equipment or systems containing, controlled or affected by any of the foregoing and used by either Party in the supply of the Transitional Services;

 

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Confidential Information means any information which might fairly be considered to be of a confidential nature including commercial, business, financial, technical, operational, administrative, marketing, economic or other information or data (including trade secrets, know-how, customer and supplier details, new products, prices, strategy, marketing, business opportunities and future plans) in whatever form supplied or received (whether in oral, written, magnetic, electronic, digital or any other form) relating to the business and/or the affairs of either Party which is directly or indirectly disclosed or made available in connection with this Agreement by either Party, or on either Party’s behalf, to the other Party and/or any of the other Party’s directors, officers, employees, advisers or consultants before or after the date of this Agreement;

Continuing Affiliate means any Affiliate of Elan that will continue to be an Affiliate of Elan following Completion;

Data Protection Law means the Data Protection Acts 1988 and 2003 or any other similar Applicable Law and where Data Controller, Data Processor and Personal Data or Processing are referred to in this Agreement they shall have the respective meanings set out in the Data Protection Law;

Demerger Agreement has the meaning given to it in the Recitals

Effective Date means the date of Completion;

Elan has the meaning set forth in the Recitals;

Elan Services Fees has the meaning given to it in Clause 6;

Elan Services means the services to be provided by Elan to Prothena under this Agreement as set out in Part A of Schedule 1 (which for the avoidance of doubt include the IT Services).

Force Majeure means in relation to any Party, any circumstances beyond the reasonable control of that Party involving war, insurrection, riot, civil commotion, acts of terrorism, act of God, market closure (which is not in the ordinary course of business), fire, water damage, explosion, mechanical breakdown, any law, decree, regulation or order of any government or governmental body (including any court or tribunal), any material interruption in telecommunications, Internet or utilities services, in each case which is beyond the affected Party’s reasonable control and which actually prevents, hinders or delays such Party from performing its obligations under this Agreement;

Good Industry Practice means, in relation to any undertaking and any circumstances, the exercise of the skill, diligence, and prudence which would be expected from a reasonably skilled and experienced person engaged in the same type of undertaking in the same industry sector;

Initiating Party has the meaning given in clause 10.3;

Intellectual Property Right means any trade mark, service mark, trade name, mask work, invention, discoveries, concepts, ideas and improvements to existing technology, patent, patent application, trade secret, copyright, know-how, data, proprietary information, processes, procedure, protocol, techniques, designs, formulae, products, compounds, compositions, material, technologies, apparatus, devices, assays, screens, Internet domain names, trade dress and general intangibles of like nature (together with goodwill), customer lists, confidential information, licences, software, databases and compilations including any and all collections of data and all documentation thereof (including any registrations or applications for registration of any of the foregoing) all rights in or to any of the foregoing and any other similar type of proprietary intellectual property rights and “ Intellectual Property ” shall be construed accordingly;

IT Services means the IT services more particularly described in Part A of Schedule 1;

IT Services Agreement means any agreement to be entered into by Elan with a third party for the provision of the whole or part of the IT Services;

Nominated Representatives means the representative of each of the Parties for the purposes of this Agreement identified in Schedule 3;

 

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Party has the meaning given in the Recitals;

Personal Data has the meaning given to it under the applicable Data Protection Law;

Personnel means those employees and other personnel of either Party, allocated by such Party to provide the Transitional Services or otherwise to be involved in the performance of this Agreement, including the Nominated Representatives;

Premises means the premises identified in Schedule 4;

Proceedings shall have the meaning given in clause 28.2;

Prothena Business has the meaning given to it in the Demerger Agreement;

Prothena Services Fees has the meaning given to it in clause 6;

Prothena Services means the services to be provided by Prothena and its Affiliates to Elan as set out in Part B of Schedule 1;

Provider means (i) Elan or its Affiliates, as applicable, with respect to the Elan Services and (ii) Prothena or its Affiliates, as applicable, with respect to the Prothena Services;

Service Fees means the fees to be paid for the Transitional Services pursuant to clause 6 as more particularly set out in Schedule 2;

Service Recipient means (i) Prothena or its Affiliates with respect to the Elan Services and (ii) Elan or any Continuing Affiliate with respect to the Prothena Services;

Service Tax or Service Taxes means sales, use, VAT (as defined below), ad volorem, transfer, recording, service, service use, and other similar taxes, fees, premiums, assessments or charges imposed or collected by any governmental entity or political subdivision thereof, together with any related interest and any penalties, additions to such tax or additional amounts imposed with respect thereto by such governmental entity or political subdivision;

Service Term means, in respect of each Transitional Service, the period from the date on which the Transitional Service is scheduled to commence and on which the Transitional Service (or part of a Transitional Service) is provided during the Term as set out in Schedule 1, or if earlier, the date on which the Transitional Service is terminated in accordance with Clause 10;

Transitional Services means either or both of the Elan Services and the Prothena Services, as the context so requires and “ Transitional Service ” shall be construed accordingly;

Transitional Services Commencement Date means the date of Completion;

Transitional Services Management Committee means the committee to be established by the Parties pursuant to clause 7;

Term has the meaning given in clause 5; and

VAT means Value Added Tax.

 

1.2. Interpretation Generally

 

  1.2.1. Any reference to any statute, statutory provision or to any order or regulation shall be construed as a reference to that statute, provision, order or regulation as extended, modified, replaced or re-enacted from time to time (whether before or after the date of this Agreement) and all statutory instruments, regulations and orders from time to time made thereunder or deriving validity therefrom (whether before or after the date of this Agreement);

 

  1.2.2. words denoting any gender include all genders and words denoting the singular include the plural and vice versa;

 

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  1.2.3. all references to recitals, clauses, paragraphs, schedules and annexures are to recitals in, clauses and paragraphs of and schedules and annexures to this Agreement, unless specified otherwise;

 

  1.2.4. headings are for convenience only and shall not affect the interpretation of this Agreement;

 

  1.2.5. words such as “hereunder”, “hereto”, “hereof” and “herein” and other words commencing with “here” shall unless the context clearly indicates to the contrary refer to the whole of this Agreement and not to any particular section, clause or paragraph hereof;

 

  1.2.6. in construing this Agreement general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things and general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words and any reference to the word “include” or “including” is to be construed without limitation;

 

  1.2.7. the word “or” shall unless the context clearly indicates to the contrary be interpreted as “and/or”;

 

  1.2.8. any reference to “Agreement” or any other document or to any specified provision of this Agreement or any other document is to this Agreement, that document or that provision as in force for the time being and as amended from time to time in accordance with the terms of this Agreement or that document;

 

  1.2.9. any reference to a person shall be construed as a reference to any individual, firm, other party, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing;

 

  1.2.10. any reference to a person includes his successors, personal representatives and permitted assigns;

 

  1.2.11. “writing” or any similar expression includes transmission by facsimile sent in accordance with clause 24 of this Agreement;

 

  1.2.12. any references to “EUR,” “€” or “euros” are to euros, the lawful currency of Ireland;

 

  1.2.13. any references to “USD,” “$” or “dollars” are to U.S. dollars, the lawful currency of the United States;

 

  1.2.14. if any action or duty to be taken or performed under any of the provisions of this Agreement would fall to be taken or performed on a day which is not a Business Day such action or duty shall be taken or performed on the Business Day next following such day;

 

  1.2.15. all references to time are references to Irish time;

 

  1.2.16. the contra proferentem rule of construction shall not apply in the interpretation of this Agreement; and

 

  1.2.17. for the avoidance of doubt, any reference to Ireland does not include Northern Ireland.

 

  1.2.18. Capitalized terms used but not defined herein shall have the meanings specified in the Demerger Agreement, as it may be amended from time to time.

 

1.3. Schedules

The contents of the schedules form an integral part of this Agreement and shall have as full effect as if they were incorporated in the body of this Agreement and the expressions “this Agreement” and “the Agreement” as used in any of the schedules shall mean this Agreement and any reference to “this Agreement” shall be deemed to include the schedules.

 

2. SERVICES TO BE PROVIDED

 

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2.1. With effect from the Transitional Services Commencement Date and subject to clauses 10 and 2.7:

 

  2.1.1. Elan or its Affiliates shall provide or procure the provision of the Elan Services to Prothena and its Affiliates for each Service Term as set forth in Part A of Schedule 1; and

 

  2.1.2. Prothena or its Affiliates shall provide or procure the provision of the Prothena Services to Elan and any relevant Continuing Affiliates for the relevant Service Term as set forth in Part B of Schedule 1.

 

2.2. In performing its obligations under this Agreement, each party shall use reasonable endeavours to:

 

  2.2.1. provide the Transitional Services using commercially reasonable skill and judgment, in accordance with the policies and procedures of the Provider in place as of the date of Completion and, to the extent applicable, in a comparable manner and to a comparable level of service as the Service Recipient enjoyed during the twelve (12) month period preceding the Transitional Services Commencement Date and at all times in accordance with Applicable Law;

 

  2.2.2. maintain the necessary resources (human and technological) to provide the Transitional Services; and

 

  2.2.3. use reasonable endeavours to promptly obtain the authorisations, memberships, licences, approvals, consents or qualifications of any person as may be necessary for the performance of its obligations pursuant to this Agreement, including obtaining from third party providers all consents necessary to grant any sublicenses in connection with the performance of Transitional Services hereunder and maintain such authorisations, memberships, licences, approvals, consents and qualifications in full force and effect.

 

2.3 In the event that the consent of a third party provider, if required, is requested by the Provider and is not obtained within thirty (30) days following Completion, the Provider shall notify the Service Recipient and shall cooperate with the Service Recipient to provide an alternate means of providing the Transitional Services affected by such failure to obtain consent, such alternative to be reasonably satisfactory to the Parties. In the event that such an alternative is required and agreed upon by the Parties, the Provider shall provide the Transitional Services in such alternative manner and the Service Recipient shall bear any expenses incurred in the provision of such Transitional Services through such alternative means.

 

2.4 If the Parties do not elect such an alternative plan, either Party may terminate any such affected Transitional Services upon ten (10) days’ prior written notice. The Service Recipient shall be responsible for any costs or expenses incurred in connection with obtaining any consents, approvals or authorizations described in clause 2.2.3 or 2.3.

 

2.5 The Provider shall not be in breach of this Agreement for a failure, delay or other problem in connection with the provision of (or the procurement of the provision of) the Transitional Services (or part thereof) to the extent the Provider’s inability to perform the Transitional Services is directly attributable to a failure by the Service Recipient. Where a failure by the Service Recipient causes a delay in the provision of the Transitional Services, the time allowed in respect of the provision of such delayed Transitional Services shall be extended by the amount of time reasonably required to re-schedule events or steps that would otherwise have occurred, but for, or which were directly impacted as a result of, such failure by the Service Recipient.

 

2.6 Notwithstanding anything to the contrary contained in this Agreement (including the accompanying schedules), no Provider (or any of its Personnel or, if applicable, subcontractors) shall make any substantive business decisions with respect to the Service Recipient in performing Transitional Services. Each provision of this Agreement (including the accompanying schedules) shall be interpreted in a manner consistent with this clause 2.6.

 

2.7

Elan shall provide or procure the provision of the IT Services to Prothena and its Affiliates until (i) 30 th  June 2013, (ii) until the date of commencement of the IT Services Agreement or (iii) until the IT Services are terminated in accordance with Clause 10, whichever date is the earlier.

 

3. WARRANTIES

 

3.1. Each Party warrants to the other Party that it has the corporate power and capacity and all necessary licences, permits and consents to enter into this Agreement and to perform its obligations under this Agreement.

 

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3.2. Except to the extent set out in this Agreement, all representations, warranties, conditions and other terms express or implied by statute or common law are, to the fullest extent permitted by law, excluded from this Agreement.

 

4. PERSONNEL

 

4.1. Each Party shall co-operate as far as is reasonably practicable in providing any information or assistance reasonably requested by the other Party, provided that such information is reasonably necessary in connection with the Transitional Services, and shall ensure that such of its Personnel whose decisions and input are necessary for the provision of the Transitional Services are reasonably available to the other Party for consultation and negotiation in relation to any matter connected with this Agreement and the provision of the Transitional Services.

 

4.2. Each Party shall allow or procure reasonable access to any Premises from which the Transitional Services are provided to suitable qualified Personnel of the other Party, and each Party shall ensure that all of its Personnel allowed access pursuant to the provisions of this clause comply with all reasonable safety, confidentiality and security requirements notified to it from time to time by the Party allowing access.

 

4.3. It is acknowledged by the Parties that this Agreement constitutes a contract for the provision of services and not a contract of employment. Accordingly, during the Term of this Agreement, each Party shall at all times retain overall control of its Personnel who shall perform the relevant Transitional Services at the direction of such Party; and such Party shall be solely responsible for the payment of all remuneration and benefits of any kind (including all salaries, holiday pay, tax, health insurance, pay related social insurance payments and contributions to pension arrangements) and shall make all proper deductions from the remuneration that it pays to its Personnel and sub-contractors.

 

5. DURATION

 

     This Agreement shall come into effect on the Transitional Services Commencement Date and unless earlier terminated pursuant to clause 10, shall continue in full force for each Service Term set forth in part A or part B of Schedule 1, or until 31 December 2013 (whichever date is the earlier) unless terminated prior to the end of such period in accordance with this Agreement (“ Term ”).

 

6. SERVICE FEES

 

6.1. As compensation for the Transitional Services to be provided hereunder, Prothena shall pay to Elan (or a nominated Affiliate) a fee for each Elan Service (the “ Elan Services Fees ”) and Elan shall pay to Prothena (or a nominated Affiliate) a fee for the Prothena Services (the “ Prothena Services Fees ”) in each case in the amount and in accordance with Schedule 2 (which, for the avoidance of doubt, reflects an arm’s length cost-plus standard) and including, as applicable, any fees for any Elan Services or Prothena Services provided by third party providers and invoiced to the Service Recipient at cost (such fees, “ Service Fees ”).

 

6.2. Unless otherwise stated (including in the relevant Schedules) all amounts payable under this Agreement shall be invoiced by the Provider (or its nominated Affiliate) monthly in arrears and shall be due and payable in U.S. dollars within thirty (30) days after the receipt of such invoice.

 

6.3. In addition to the amounts described in clause 6.1, each Service Recipient shall pay, and hold its Provider harmless against, any Service Taxes applicable to the provision of the Transitional Services, which, for the avoidance of doubt, will not include any income or franchise taxes. In connection with the foregoing, all amounts stated to be payable under this Agreement are stated as exclusive of any VAT chargeable on them, which shall be paid by the paying Party at the rate and in the manner prescribed in law from time to time.

 

6.4. If the Service Recipient receives an invoice from the Provider which it disputes in good faith, the Service Recipient shall notify the Provider in writing of such dispute as soon as reasonably practicable and the Service Recipient may withhold payment of such sums as are in dispute pending resolution of such dispute.

 

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6.5. Each party shall be entitled to receive interest on any payment not made to it when properly due to it pursuant to the terms of this Agreement, calculated from day to day at a rate per annum equal to 2% above the providing base rate of the European Central Bank and payable from the day after date on which payment was due up to and including the date of payment.

 

6.6. All Service Fees payable under this Agreement shall become due immediately on termination (in whole or in part) or expiry of this Agreement.

 

7. TRANSITIONAL SERVICES CHANGE MANAGEMENT

 

7.1. The Parties shall establish, operate and maintain the Transitional Services Management Committee during the Term of this Agreement and hereby appoint the respective Nominated Representatives identified in Schedule 3 to serve on such Transitional Services Management Committee.

 

7.2. Without prejudice to the other provisions of this Agreement, the Nominated Representatives of each Party shall meet every month in person or by telephone until termination or expiry of this Agreement to discuss the performance of the Transitional Services.

 

7.3. The Nominated Representatives shall be responsible for the management of all matters relating to the provision of the Transitional Services and for liaising with each other to ensure the smooth operation of this Agreement and the proper discharge by each Party of its respective obligations.

 

7.4. In the event that either Party’s Nominated Representative, shall for any reason, cease to be engaged in the Transitional Services, such Party shall take all reasonable steps to arrange that a suitably qualified replacement is appointed as soon as is reasonably practical, that there is a reasonable handover period, that the adverse effects of a change of Nominated Representative are minimised and where reasonably practicable, that the other Party is notified in writing in advance of the change.

 

7.5. All changes to the Transitional Services shall be managed and agreed in writing between the Nominated Representatives.

 

8. INTELLECTUAL PROPERTY

 

8.1 Save as expressly provided for in this Agreement, no party shall be granted any proprietary or other interest in respect of the Intellectual Property Rights of any other party and, for the avoidance of doubt, nothing in this Agreement shall transfer or grant to Prothena any right, title or interest in or to any trademarks or other Intellectual Property Rights owned or used by Elan.

 

8.2 The Provider hereby grants, or shall procure the grant of, to the Service Recipient a non-exclusive, non-transferable, royalty-free licence (without the right to sub-licence) to use any Intellectual Property Rights owned by the Provider (or licensed to the Provider) for the Term solely to the extent necessary for the receipt of the Transitional Services by the Service Recipient in accordance with and subject to the terms of this Agreement and each such licence shall terminate automatically on cessation of the provision of the relevant Transitional Service to which it relates.

 

8.3 The Service Provider hereby grants to the Provider a non-exclusive, non-transferable, royalty-free licence (without the right to sub-licence) to use any Intellectual Property Rights owned by the Service Recipient (or licensed to the Service Recipient) for the Term solely to the extent necessary for the provision of the Transitional Services by the Provider under this Agreement and each such licence shall terminate automatically on cessation of the provision of the relevant Transitional Service to which it relates.

 

9. DATA PROTECTION

 

9.1 With respect to the Parties’ rights and obligations under this Agreement in relation to Personal Data, the Parties agree that except to the extent set out in this clause 9, they each shall remain solely responsible for determining the contents and use of their Personal Data.

 

9.2 To the extent that the provision of Transitional Services involves the processing of Personal Data by one Party (the “ Data Processor ”) on behalf of the other (the “ Data Controller ”), the Data Processor agrees that:

 

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  9.1.1. it shall only process Personal Data in accordance with the instructions of the Data Controller and solely as strictly necessary for the performance of its obligations under this Agreement;

 

  9.1.2. it shall implement and maintain such technical and organisational security measures as are required to comply with the data security obligations in Data Protection Law;

 

  9.1.3. the Data Controller (or its authorised representative(s)) shall be entitled at its own cost, at reasonable times and on reasonable notice, to audit the technical and organisational security measures adopted by the Processor to ensure that such measures comply with the data security obligations in Data Protection Law; and

 

  9.1.4. the Data Processor shall report any incident which gives rise to a risk of unauthorised disclosure, loss, destruction or alteration of such personal data to the Controller immediately upon becoming aware of such an incident.

 

9.2. In connection with the Parties’ access to the facilities and Computer Systems of the other:

 

  9.2.1. each Party agrees that it will comply, and will ensure that its respective employees, agents and suppliers comply, with its obligations as required under Data Protection Law; and

 

  9.2.2. each Party agrees that it will use best endeavours to procure that its employees, agents and service providers only access and use relevant Premises, facilities, systems and data as required for the performance of their allocated responsibilities and in accordance with such policies and procedures in force from time to time which have been notified to it in writing with respect to access to and use of the other Party’s Premises including, inter alia, security policies and health and safety policies.

 

10. TERMINATION

 

10.1. Either Party may terminate this Agreement at any time forthwith on written notice if a receiver, examiner or administrator is appointed of the whole or any part of the other Party’s assets or the other Party is struck off the Register of Companies in the jurisdiction where it was incorporated or an order is made or a resolution passed for winding up the other Party (unless such order or resolution (i) is part of a voluntary scheme for the reconstruction or amalgamation of the Party as a solvent corporation and the resulting corporation, if a different legal person, undertakes to be bound by this Agreement or (ii) is discharged within twenty (20) Business Days).

 

10.2. The Service Recipient may terminate this Agreement with respect to any Transitional Service at any time prior to the last day of the Service Term for such Transitional Service (as set forth on Schedule 1) upon fifteen (15) days’ written notice to the Provider.

 

10.3 A Party (the “ Initiating Party ”) may terminate this Agreement, only to the extent that it relates to any particular Transitional Service, with immediate effect by written notice to the other Party (the “ Breaching Party ”) if the Breaching Party is in material breach of this Agreement and, if the breach is capable of remedy, fails to remedy the breach within twenty (20) Business Days starting on the day after receipt of written notice from the Initiating Party giving full details of the breach and requiring the Breaching Party to remedy the breach and stating that a failure to remedy the breach may give rise to termination under clause 10.3 of this Agreement.

 

10.4 Termination of this Agreement shall not prejudice any rights of either Party which may have arisen on or before the date of termination, including any rights to payment of Service Fees pursuant to clause 6.

 

10.5 Any waiver by either Party of a breach of any provision of this Agreement shall not be considered as a waiver of any subsequent breach of the same or any other provision.

 

10.6 Upon the termination of this Agreement for any reason, subject as otherwise provided in this Agreement to any rights or obligations which have accrued prior to termination, neither of the Parties shall have any further obligation to the other under this Agreement.

 

10.7 Clauses 8, 9, 10.4, 10.5, 10.6, 11, 12, 13, 14, 24, 25 and 28 (inclusive) shall survive expiry or termination (for whatever reason) of this Agreement.

 

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11. EFFECT OF TERMINATION

 

11.1 Upon any termination or expiry of this Agreement (howsoever occasioned) each Party may require the other Party to return or delete, or to deliver up all or any off-line storage and security and copies of, the requesting Party’s Confidential Information, Background Intellectual Property Rights and Personal Data then in the other Party’s possession or control (excluding documents stored in either party’s back up electronic archives).

 

11.2 The provisions of this clause 11 shall apply mutatis mutandis to any partial termination of this Agreement.

 

12. LIABILITY

 

12.1. Nothing in this Agreement shall limit the liability of either party for:

 

  12.1.1. fraud or fraudulent misrepresentation;

 

  12.1.2. for death or personal injury caused by its negligence or the negligence of its employees, contractors or agents;

 

  12.1.3. any liability which cannot be excluded or limited by law.

 

12.2 Subject to Clause 12.1, no party shall be liable to another party for any indirect or consequential loss or damage even if foreseeable or if such party has been advised of the possibility of such losses.

 

12.3 Subject to Clause 12.1, the total liability of either party arising under or in connection with this Agreement, whether in tort (including negligence), contract, representation (other than fraudulent misrepresentations) or otherwise or for loss (whether direct, indirect or consequential) of business, profits, use, revenue, data, anticipated savings or goodwill shall be limited to USD$500,000.

 

12.4 Neither party shall be liable for any failure to provide, or for any delay in the provision of, any of the Transitional Services to the extent that such failure or delay is directly caused or is contributed to directly by any failure of a third party service provider retained directly by the Provider to provide an element of the Transitional Services.

 

13. AUDIT ACCESS

 

13.1. Each Party shall keep or cause to be kept full and accurate records (the “ Records ”) existing or generated as part of the Transitional Services performed in connection with this Agreement in accordance with Applicable Law and regulation and consistent with Good Industry Practice. Such Records shall be kept for a period of seven (7) years from the date of their creation, and shall be made available to the other Party promptly on request in such format as may be reasonably requested at the requesting Party’s cost.

 

13.2. Each Party shall grant to the other Party, any internal, external and statutory auditors and/or regulators of the other Party and their respective authorised agents the right of reasonable access to the Records and any sites and materials on reasonable notice and shall provide all reasonable assistance at all times for the purposes of carrying out an audit of the other Party’s compliance with this Agreement. Each Party will give and procure such assistance as may be necessary for the other Party, their auditors and regulators, to understand any such information.

 

14. CONFIDENTIALITY

 

14.1. Any Confidential Information of either Party provided to or accessible by the other Party in connection herewith, regardless of form, shall be received and held in confidence and used solely for purposes relating to this Agreement.

 

14.2. “Confidential Information” as defined herein does not include any information (i) lawfully received by the receiving Party from another source free of restriction and without breach of this Agreement, (ii) that becomes generally available to the public without breach of this Agreement, or (iii) known to the receiving Party at the time of disclosure free from any confidentiality obligations (including existing confidentiality obligations to the other Party). Each Party shall be fully responsible for breaches of its obligations under this clause 14 by its agents, employees, contractors or subcontractors.

 

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14.3. Nothing contained in this clause 14 shall prohibit any Party from disclosing, or permitting the disclosure of, Confidential Information if and only to the extent that such Party is compelled to disclose such Confidential Information by judicial or administrative process or by other requirements of Applicable Law.

 

14.4. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made as described in the preceding sentence, the Party receiving such demand or request shall, unless prohibited by Applicable Law, promptly notify the other Party in writing of the existence of such demand or request and shall provide such Party with a reasonable opportunity to seek an appropriate protective order or other remedy at such Party’s expense. In the event that such appropriate protective order or other remedy is not obtained or is not sought, the Party receiving such demand or request shall furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed. The provisions of this clause 14.4 do not apply to any legal proceedings between the Parties to this Agreement.

 

15. FORCE MAJEURE

 

15.1. If any Party is affected by Force Majeure, it shall promptly notify the other Party of the nature and extent of the circumstances in question.

 

15.2. Provided that the Party affected by Force Majeure continues to use all reasonable endeavours to perform its obligations under this Agreement, such Party shall not be deemed to be in breach of this Agreement, or otherwise be liable to the other Party, for any delay in performance or other non-performance of any of its obligations under this Agreement to the extent that the delay or non-performance is due to any Force Majeure of which it has notified the other Party, and the time for performance of that obligation shall be extended accordingly.

 

16. ENTIRE AGREEMENT

 

16.1. This Agreement set out the entire agreement and understanding between the Parties in respect of the provision of Transitional Services and, save to the extent there has been a fraudulent misrepresentation, supersedes all previous agreements, arrangements, representations and understandings between the Parties, whether written or oral, relating to the provision of Transitional Services, which shall cease to have any further force or effect.

 

17. ASSIGNMENT

 

17.1. Neither Party may assign or otherwise transfer its rights or obligations under this Agreement without the prior written consent of the other Party.

 

18. SUB-CONTRACTING

The Provider reserves the right to use sub-contractors to assist it in the provision of the Transitional Services as the Provider deems appropriate.

 

19. NO PARTNERSHIP

Nothing in this Agreement shall create, or be deemed to create, a partnership between the Parties. In providing and/or procuring the provision of the Transitional Services, the Parties shall at all times be independent contractors.

 

20. VARIATION

This Agreement may not be modified except by an instrument in writing signed by the duly authorised representatives of both Parties.

 

21. SEVERABILITY

If any provision of this Agreement is held by any court or other competent authority to be void or unenforceable in whole or in part, the other provisions of this Agreement and the remainder of the affected provisions shall continue to be valid. The Parties shall then use all reasonable endeavours to replace the void or unenforceable provision with a valid and enforceable substitute provision, the effect of which is as close as possible to the intended effect of the void or unenforceable provision.

 

10


22. WAIVER

Either Party may (a) extend the time for the performance of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the warranties contained herein or in any document delivered pursuant to this Agreement or (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. Any failure to assert, or delay in the assertion of, rights under this Agreement shall not constitute a waiver of those rights or of any other rights under this Agreement.

 

23. EXPENSES

Except as otherwise provided in this Agreement, the Parties shall bear their respective direct and indirect costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the transactions contemplated hereby.

 

24. NOTICES

 

24.1.

Any notice or other communication to be given by one Party to the other Party under, or in connection with, this Agreement shall be in writing and signed by or on behalf of the Party giving it. It shall be served by sending it by fax to the number set out in Schedule 3, or delivering it by hand, or sending it by pre-paid recorded delivery, special delivery or registered post, to the address set out in Schedule 3, and in each case marked for the attention of the relevant Party set out in Schedule 3 (or as otherwise notified from time to time in accordance with the provisions of this clause). Any notice is effective when delivered. A notice given by post shall be deemed (if not proved to have been delivered earlier) to have been duly given on the third (3 rd ) day after posting.

 

24.2. A Party may notify the other Parties to this Agreement of a change to its name, relevant addressee, address or fax number for the purposes of this clause, provided that such notice shall only be effective on:

 

  24.2.1. the date specified in the notice as the date on which the change is to take place; or

 

  24.2.2. if no date is specified or the date specified is less than five (5) Business Days after the date on which the notice is received, the date falling five (5) Business Days after notice of any change has been received.

 

25. DISPUTE ESCALATION PROCEDURE

 

25.1. Where at any point during the Term of this Agreement any matter relating to this Agreement cannot be agreed by the Parties, it shall be escalated as follows:

 

  25.1.1. the matter shall be referred as soon as practicable to the Nominated Representative for resolution; and

 

  25.1.2. if the matter has not been resolved within ten (10) Business Days (or such longer period as may be agreed in writing by the Parties) of being referred to the Nominated Representative or if the Nominated Representative determine it is incapable of being resolved at that level, then the matter shall be immediately referred to the Chief Executive Officer of Prothena and the Chief Executive Officer of Elan; and

 

  25.1.3. if after the expiry of 30 Business Days from the time the matter in dispute was referred to the CEO of each of Elan and Prothena the matter remains unresolved, the Parties shall refer the matter to non-binding mediation in accordance with the procedure set out in clause 21.3.1 of the Demerger Agreement.

 

  25.1.4. in the event that:-

 

  (1) having been so requested, the mediation does not commence within 20 Business Days of the request for mediation; or

 

11


  (2) a binding settlement in writing is not reached within a period of 60 Business Days after the delivery of a written request for mediation;

 

  25.1.5. and, in any such case, the dispute or difference referred to in this clause 25 remains unresolved, the Parties (or the relevant one of them) shall then be entitled to instigate legal proceedings

 

25.2. Any joint decision as to a resolution at any stage in the above process shall be recorded in writing and signed on behalf of each Party and shall be final and binding on the Parties.

 

26. NON SOLICITATION

The parties will comply with their non solicitation obligations at clause 17 of the Demerger Agreement.

 

27. COUNTERPARTS

This Agreement may be executed in any number of counterparts and by the Parties to it on separate counterparts, each of which is an original but all of which together constitute one and the same instrument. This Agreement shall be of no effect unless and until each Party has executed at least one counterpart.

 

28. GOVERNING LAW AND JURISDICTION

 

28.1. This Agreement shall be governed by and construed in accordance with the laws of Ireland.

 

28.2. Subject to the provisions of clause 25, each of the Parties irrevocably agrees that the courts of Ireland are to have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement and, for such purposes, irrevocably submits to the non-exclusive jurisdiction of such courts. Any proceeding, suit or action arising out of or in connection with this Agreement (the “ Proceedings ”) may therefore be brought in the courts of Ireland.

 

28.3. Each of the Parties irrevocably waives any objection to Proceedings in the courts referred to in clause 28.2 on the grounds of venue or on the grounds of forum non conveniens.

 

28.4. The submission to the non-exclusive jurisdiction of the courts referred to in clause 28.2 shall not (and shall not be construed so as to) limit the right of the Parties to take Proceedings against the other Party in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law and subject to the provisions of clause 25.

 

12


IN WITNESS whereof this Agreement has been duly executed on the date shown at the beginning of this Agreement.

SIGNED for and on behalf

of ELAN CORPORATION PLC

by

 

       
(Signature)  

in the presence of:

 

Signature of Witness:      
Name of Witness:    
Address of Witness:    
Occupation of Witness:    

 

13


SIGNED for and on behalf

of PROTHENA CORPORATION PLC

by

in the presence of:

 

       
(Signature)  

 

Signature of Witness:      
Name of Witness:    
Address of Witness:    
Occupation of Witness:    

 

14


SCHEDULE 1

Transitional Services

The following categories of services will be provided:

Part A – Elan Services

The Elan Services shall comprise the following:

 

Elan Service

  

Description of Services

  

Date Service

Term

ends

  

Personnel for

provision of the

Elan Services

CMC / QA         
   Chemistry, Manufacturing and Control Project Management for all Prothena Programs. Managing processes with Boehringer Ingelheim on three projects: NEOD001, NEOD002, MCAM    29 March 2013    Gerry Murphy
   Packaging and Labling Management for all Prothena Programs including NEOD001, NEOD002, MCAM    28 June 2013    Phil Chou
   Bio Ananlytical Management for all Prothena Programs including NEOD001, NEOD002, MCAM    28 June 2013    Holly Lin
   Quality Assurance Management for all Prothena Programs including NEOD001, NEOD002, MCAM    1 April 2013    Patrick Smith
   Chemistry, Manufacturing and Control Project Management for all Prothena Programs including NEOD001, NEOD002, MCAM    1 March 2013    David Bruton
   Chemistry, Manufacturing and Control Regulatory Management for all Prothena Programs including NEOD001, NEOD002, MCAM    1 April 2013    Karen Quigley / Amy Smith
Information Services         
   Provide laboratory notebook type services    1 March 2013    Cary Cochrell

 

15


Facilities         
   Environmental Health & Safety Management for Prothena    1 April 2013    David Meyer
   Security Management for Prothena    26 April 2013    Alex Sanchez
   Procurement Management for Prothena    26 April 2013    Jim Latimer
Company Secretary         
   Secretarial and Corporate Support for Prothena’s Irish Companies (Neotope Biosciences Ltd, Onclave Therapeutics Ltd and Prothena plc)    28 June 2013    Liam Daniel
   These services shall not include acting as a company secretary, director or officer for any of Prothena companies or Affiliates (including Neotope Biosciences Ltd., Onclave Therapeutics Ltd and Prothena Plc) or acting as an authorised signatory or providing a registered office for any of the Prothena companies or Affiliates.      
Finance         
   External financial reporting services including assistance with SEC external reporting filing obligations for year end 2012    31 March 2013    Darragh Lyons
   Accounts payable services - provision of temporary accounts payable services as required   

28 February

2013

   Dan Hensley
   Irish tax transition assistance to Prothena finance team - Irish tax compliance and tax registration assistance and general Irish tax advice    31 March 2013    Sean Murphy
   SOX / Internal Audit services - advisory / consulting services, including initial filing setup    31 March 2013   

Edgar Trinidad /

Sandy Alipio

   Assistance with opening bank accounts    31 March 2013   

David Egan

 

16


Legal         
   Oversight of outside IP and corporate counsel, assistance/ guidance on IP, transactional, regulatory, compliance and corporate matters.   

31 December

2012

   Nina Ashton
   Stock Administration Training for Prothena   

31 March

2013

   Liz Fitzgerald
   Assistance with legal obligations associated with the recent formation of Prothena Biosciences Inc.   

31 March

2013

   John Donahue (Legal 5%, HR 10%)
     

31 March

2013

   Diana King
   Ensure transition of appropriate employee data/information from Elan to Prothena; assistance/guidance on select employee relations and employment law topics; other misc. topics, if needed   

31 March

2013

   Mike Feinman
Compliance         
   Assist in the setting up of Compliance Management for Prothena. Assist in the day-to-day operations of the Compliance Program   

31 March

2013

   Fabiana Lacerca-Allen
HR         
   Ensure appropriate/smooth transition of year-end 2012 compensation process; provide access to any 2013 compensation surveys (to extent it already has access); HRIS topics related to compensation (e.g., data requirements, modeling approach); other misc. compensation topics   

31 March

2013

   Tara Cassidy
   Ensure appropriate/smooth transition to 2013 Prothena benefits platform; assistance to deal with immediate needs @ plan-year beginning; HRIS topics related to benefits (e.g., file feeds to carriers); other misc. benefits topics   

31 March

2013

   Laura Klenske

 

17


External Communications    Assist Prothena to establish its investor relation function, including identification and initial management of an external vendor to conduct relations on behalf of Prothena    31 December 2012    Anita Kawatra
Other    Continue to support Prothena’s Research initiatives    31 December 2012    Peter Seubert
   Oversight of operations including facilities, IT, compliance and HR    11 January 2013    Johannes Roebers
IT Services   

•   Helpdesk Support

 

•   IT Procurement support

 

•   Client Software Installations and Support

 

•   Client Hardware Break/Fix Support

 

•   Mobile Device Management

 

•   User Provisioning /Deactivation

 

•   Email Management

 

•   Application User Account Management

 

•   Fixed Line Telephony, and Voicemail support

 

•   File and Print Server management

 

•   Audio Conference Support

 

•   Telecom Support

 

•   Patch Management

 

   Service Term ends in accordance with clause 2.7   

 

18


  

•   Mobility Services

 

•   VPN Remote access

 

•   Data Centre Management

 

•   Provision of IT security Management

 

•   Action vulnerability notifications on IT infrastructure.

 

•   Manage service to minimize the impact on business operations after an IT Security incident has occurred.

 

•   IT Compliance including SOX management

 

•   Lab Systems Support

 

•   Back up & Recovery Management

 

•   Lab System Recovery Support

 

•   Network and Firewall Management,

 

•   Local Area Network Management

 

•   Server Management

 

•   Storage Management

 

•   Infrastructure Backups

 

•   ERP Support

 

•   Domain Registrations and Management

 

•   Technical Website Management

 

     

 

19


  

•   IT Vendor Contract management

     

Part B -Prothena Services

 

Prothena Service

  

Description of Services

  

Date Service Term

ends

  

Personnel for the

provision of the Prothena

Services

Finance    Provision of clinical costing / financial modelling services    31 March 2013    Randy Fawcett
Tysabri Services   

Working with Elan on ongoing studies for VLA4 antagonists including:

 

-CIDP

 

-Spinal Cord Injury

 

-Other similar studies

 

Providing Elan with the assistance necessary to connect with the right laboratories for ongoing VLA4 antagonist studies.

 

Working with Elan on Tysabri risk stratification

 

Working with Elan on PML issues

 

Finalizing discussion papers with BIIB on risk stratification and PML biology

 

Working with Elan medical affairs on educational programs both internally and externally.

 

Providing assistance with the history of Tysabri from a research and clinical development perspective

   31 December 2013   

 

20


Elan Publication Review    At the request of Elan / Guriq Basi; Gene Kinney / Prothena will assist Guriq Basi / Elan in reviewing proposed Elan publications related to work done at Elan prior to Completion. Such assistance shall not require a time commitment of in excess of five percent of any work day of Gene Kinney and shall end no later than June 30, 2013    30 June 2013   

Gene Kinney

 

21


SCHEDULE 2

Service Fees

 

1.1 The Elan Services Fees will comprise:

 

1.1.1 a charge per full time equivalent (“Full Time Equivalent” or “FTE”) allocated by Elan to the provision of the Elan Services (excluding the IT Services, which are addressed below) (plus a mark up of 40% to cover the fully loaded cost (including overheads) and reflect an arm’s length cost-plus standard). The FTE shall be calculated on the basis of the number of Elan staff or contractors supporting the provision of the Elan Services in a particular month, and the portion of time dedicated by them to the provision of the Elan Services. The FTE shall be calculated by using a rate of USD$250,000 per annum (before mark up of 40%) per employee allocated by Elan to provide the Elan Services who are in Elan’s staff wage bands 1-5. A rate of USD$400,000 per annum (before mark up of 40%) shall apply for any employee allocated by Elan to provide the Elan Services who are in Elan’s staff wage band 6 and above.

 

1.1.2 a fixed monthly charge of USD$75,000 (which includes a mark up) in respect of the IT Services for so long as such services are provided in accordance with clause 2.7 of this Agreement, which, for the avoidance of doubt, reflects and arm’s length cost-plus standard.

 

1.2 The Prothena Services Fees will comprise:

 

1.2.1 a charge per full time equivalent (“Full Time Equivalent” or “FTE”) allocated by Prothena to the provision of the Prothena Services (plus a mark up of 40% to cover the fully loaded cost (including overheads) and reflect an arm’s length cost-plus standard). The FTE shall be calculated on the basis of the number of Prothena staff or contractors supporting the provision of the Prothena Services in a particular month, and the portion of time dedicated by them to the provision of the Prothena Services. The FTE shall be calculated by using a rate of USD$250,000 per annum (before the mark up of 40%) for any employee allocated by Prothena to provide the Prothena Services who was last in Elan’s staff wage bands 1-5 prior to Completion. A rate of USD$400,000 per annum (before mark up of 40%) shall apply for any employee allocated by Prothena to provide the Prothena Services who was last in Elan’s staff wage band 6 prior to Completion. If an employee is used by Prothena to provide the Prothena Services who was not employed by Elan or Prothena or an Affiliate in the 12 months prior to Completion then the rate for that employee shall be determined by using (i) a rate of USD$250,000 per annum (before the mark up of 40%) if that employee is in Prothena staff wage tier 4-5 or (ii) a rate of USD$400,000 per annum (before mark up of 40%) if that employee is in Prothena staff wage tier 1-3.

 

1.2.2 a fixed monthly charge of USD$6,000 (which includes a mark up) in respect of the Tysabri services for so long as such services are provided under this Agreement to account for use of lab space and capital equipment for any month in which Elan Employees use Prothena lab space or Tysabri samples are analyzed using Prothena equipment.

 

2. The Provider shall ensure that its payroll system shall be structured so that the payroll costs in respect of FTE’s engaged in the provision of the Transitional Services it is providing shall be separately identifiable and capable of allocation so as to facilitate the calculation of the Service Fees in accordance with this Schedule 2.

 

3. During the Term and at the start of each calendar month, the Provider shall deliver to Service Recipient an estimate which the parties will agree as the estimate of resources and the Provider’s staff or contractors which will be required for the provision of its Transitional Services in that month. The estimate shall state the amount of Service Fees it is estimated will be due in respect of the Provider’s Transitional Services for the relevant period.

 

22


4. At the end of each calendar month, the Provider shall provide the Service Recipient with a report detailing the services provided, and the categories and line items under which its Service Fees have been accrued, in respect of that monthly period (the “Monthly Report” ) which shall include the FTE allocation.

 

5. The Provider shall issue an invoice for the Service Fees detailing the amount due in respect of its Transitional Services respectively for the relevant period. Where costs in Euro have been incurred by the Provider in the relevant period the parties agree to use of an average of the exchange rate between the U.S. dollar and Euro over the relevant period which shall then be reflected in the monthly invoice in U.S. dollars for that period.

 

6. All Service Fees shall be subject to increase or decrease (by way of reconciliation in subsequent invoices) to the extent such increases or decreases are provided for by Schedule 2.

 

7. Any disputes in relation to the Service Fees shall be dealt with in accordance with Clause 25.

The following is an illustrative table showing how the Service Fees will be calculated each month:

Elan Services to Prothena

 

Name / Department

  

Rate

   % time charged to
Prothena for relevant
month
  Monthly Cost  
              (Excluding
uplift of 40%)
 

CMC / QA

       

Gerry Murphy

  

$250,000 per annum

$20,833 per month

   100%   $ 20,833   

Legal

       

Nina Ashton

  

$400,000 per annum

$33,333 per month

   40%   $ 13,333   

IT Services

      Not applicable   $ 75,000   

Total cost per month (excluding IT services):

        $ 34,166   

Plus 40% uplift:

        $ 47,832   

Total cost per month (including uplift and IT services):

        $ 122,832   

 

23


Prothena Services to Elan

 

Name / Department

  

Rate

   % time charged to
Prothena for relevant
month
  Monthly Cost  
              (Excluding
uplift of 40%)
 

Finance

       

Randy Fawcett

  

$250,000 per annum

$20,833 per month

   2.5%   $ 521   

Total Cost per month:

        $ 521   

Plus 40% uplift:

        $ 729   

Total cost per month:

        $ 729   

 

24


SCHEDULE 3

Transitional Services Committee

Nominated Representative

Elan Nominated Representative

 

Name & Contact Details

Name: Mary Sheahan

Address: Elan Corporation plc, Treasury Building, Lower Grand Canal Street, Dublin 2

Telephone: +353 1 709 4039

Fax: +353 1 709 4700

E-mail: Mary.Sheahan@elan.com

Prothena Nominated Representative

 

Name & Contact Details

Name: Randy Fawcett

Address: Prothena Biosciences Inc, 650 Gateway Boulevard, South San Fancisco, California 94080

Telephone: 650 837 8550

Fax: 837 8560

E-mail:

Elan Nominated Representative for Invoices and Invoice related correspondence

 

Name & Contact Details

Name: Mary Sheahan

Address: Elan Corporation plc, Treasury Building, Lower Grand Canal Street, Dublin 2

Telephone: +353 1 709 4039

Fax: +353 1 709 4700

E-mail: Mary.Sheahan@elan.com

Prothena Nominated Representative for Invoices and Invoice related correspondence

 

Name & Contact Details

Name:

Address:

Telephone:

Fax:

E-mail:

 

25


SCHEDULE 4

Premises

Elan Premises

Treasury Building, Lower Grand Canal Street, Dublin 2

Prothena Premises

650 Gateway Boulevard

South San Francisco

CA 94080

Exhibit 10.4

[                        ] 2012

ELAN CORPORATION PLC

AND

PROTHENA CORPORATION PLC

RESEARCH AND DEVELOPMENT SERVICES

AGREEMENT


Contents

 

     

Clause

  

Page

 

1.

  Interpretation      1   

2.

  Projects      4   

3.

  Services      4   

4.

  Governance      5   

5.

  Payments      5   

6.

  Intellectual Property Rights and Publication:      6   

7.

  Confidentiality      7   

8.

  Warranties      7   

9.

  Insurance      8   

10.

  Dispute Resolution      8   

11.

  Data Protection      8   

12.

  Term and Termination      8   

13.

  Liability      9   

14.

  Personnel      9   

15.

  Force Majeure      9   

16.

  Assignment      9   

17.

  Relationship between the parties      10   

18.

  Notices      10   

19.

  Variation      10   

20.

  Waiver      10   

21.

  Rights Cumulative      10   

22.

  Severability      11   

23.

  Entire Agreement      11   

24.

  Survival      11   

25.

  Further Assurances      11   

26.

  Governing Law and Jurisdiction      11   

Schedule 1 – Prothena Services

Schedule 2 – Charges


This Agreement is made on                      2012

Between

 

(1) Elan Corporation Plc a public limited company incorporated in Ireland, with registered number 30356 having its registered office at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland ( Elan ); and

 

(2) Prothena Corporation Plc a public limited company incorporated in Ireland with registered number 518146 having its registered office is at 25-28 North Wall Quay, Dublin 2, Ireland ( Prothena ).

(each a Party , together the Parties )

Whereas

 

A. Elan has entered into an agreement with Prothena dated [            ] (the “Demerger Agreement” ) whereby Elan has transferred to Prothena the Prothena Business (as defined in the Demerger Agreement) which comprises the biotechnogy business focused on the discovery and development of novel antibodies for the potential treatment of a broad range of diseases.

 

B. Elan and Prothena have agreed to enter into this agreement in accordance with the terms of the Demerger Agreement in order to make available to Elan certain of Prothena’s resources and services on the terms and conditions and subject to the limitations herein with a view to conducting research and development to identify potential therapeutics or potential targets for intervention for the Projects.

It is agreed

 

1. Interpretation

 

1.1. In this Agreement:

Affiliate means, in relation to either party, any company which is for the time being a holding company of that party or a subsidiary of that party or of any such holding company (as defined in section 155 of the Companies Act 1963 (as amended)).

Applicable Law means:

 

  (a) any statute, regulation, by law, ordinance or subordinate legislation which is in force for the time being to which a party is subject;
  (b) the common law as applicable to the parties (or any one of them);
  (c) any binding court order, judgment or decree applicable to the parties (or any one of them); and
  (d) any applicable industry code, policy, guidance, standard or accreditation terms (i) enforceable by law which is in force for the time being, and/or (ii) stipulated by any regulatory authority to which any party is subject.

Background Intellectual Property means, in respect of any party, any Intellectual Property (other than Foreground Intellectual Property) which is owned by or licensed to such party before the Effective Date or is later developed or otherwise acquired by such party independently of performing its obligations under this Agreement and which is used or is required for use in connection with any Project or services contemplated under this Agreement.

Business Day means a day other than a Saturday, Sunday or public holiday in Ireland

Charges has the meaning given to it in clause 5.1.

Completion has the meaning given to it in the Demerger Agreement

Confidential Information means the confidential information more particularly described in clause 7.

Data means, in respect of either party, all data or records of whatever nature and whatever form (including Personal Data) relating to the business, clients, potential clients or employees of that party, whether subsisting before the date of this Agreement or as created or processed as part of, or in connection with, any Project or Services.


Dispute means any dispute or difference arising out of or in connection with this Agreement.

Data Protection Law means the Data Protection Acts 1988 and 2003 or any other similar Applicable Law and where Data Controller Data Processor and Personal Data or Processing are referred to in this Agreement they shall have the respective meanings set out in Data Protection Law.

Effective Date means the date of Completion.

Fixed Charge has the meaning given to it in Schedule 2.

Final Report means a written report prepared and agreed by Elan and Prothena at the completion of a Project, as more fully described in clause 4.4.

Foreground Intellectual Property means any Intellectual Property that is specifically related to any Project that arises or is created in the course of or in connection with any Project and (i) has no applicability to the Prothena Business (“ Elan Foreground IP ”); or (ii) has applicability to the Prothena Business (“ Prothena Foreground IP ”) which Intellectual Property arises or is created in the course of or in connection with the provision of the Prothena Services, including adaptations, amendments, variations and derivatives to the other party’s Background Intellectual Property.

Full Time Equivalent or FTE has the meaning given to it in Schedule 2

Good Industry Practice means the exercise of that degree of reasonable skill, diligence, prudence and foresight which would be expected from a skilled and experienced provider of services similar to the Prothena Services, seeking in good faith to comply with its contractual obligations including, without limitation compliance with all Applicable Laws.

Insolvency Event means in respect of a party (the Affected Party):

 

  (a) if the Affected Party enters into liquidation whether compulsory or voluntary (other than for the purposes of amalgamation or reconstruction approved in writing by the former party on the basis that the resulting company undertakes that other party’s obligations under this Agreement and is commercially acceptable to the former party which approval shall not be unreasonably withheld or delayed); or

 

  (b) if the Affected Party has a receiver or administrative receiver or administrator or similar official appointed over all or any of its assets and not discharged within a period of thirty (30) days; or

 

  (c) if the Affected Party is declared insolvent or makes any general composition with its creditors; or

 

  (d) if the Affected Party ceases or threatens to cease to carry on the whole or any material part of its business and any such cessation, in the reasonable opinion of the party terminating this Agreement, would be likely to affect adversely the other party’s ability to observe and perform properly and punctually all or any of its obligations under or pursuant to this Agreement.

Intellectual Property means all (a) inventions (whether or not patentable and whether or not reduced to practice), records of inventions, test information, developments, applications, improvements, formulae, concepts, ideas, methods or processes, research property rights, all improvements to any of the foregoing, and all Patents, (b) Trademark Rights and all copyrightable works, (c) copyrights, and all applications, registrations, and renewals in connection therewith, (d) trade secrets, know-how rights and confidential information (including all ideas, concepts, research and development, know-how, composition information and embodiments, manufacturing and production processes, techniques and information, specifications, technical and business data, designs, drawings, supplier lists, pricing and cost information, and data and know-how embodied in business and marketing plans and proposals), (e) computer software, firmware and applications (including source code, executable code, data, databases, programming and notes and documents and other related documentation) , (f) works and designs embodied in advertising and promotional materials, (g) other proprietary rights and (h) copies and tangible embodiments of the foregoing in whatever form or medium.

 

2


Mark-Up has the meaning given to it in Schedule 2.

Monthly Report has the meaning given to it in Schedule 2.

Owning Party means: (a) in the case of any Elan Background Intellectual Property, Elan; (b) in the case of any Prothena Background Intellectual Property, Prothena; and (c) in the case of Elan Foreground IP, Elan and (d) in the case of Prothena Foreground IP, Prothena

Person means any individual, firm, partnership, company, corporation, government authority or other entity.

Personnel means any individuals engaged in the provision of the Prothena Services on behalf of a party, including any employees, agents and sub-contractors of that party.

Processing means obtaining, recording or holding Personal Data or carrying out any operation or set of operations on Personal Data.

Project(s) means research and development activity in support of the programs referred to in Schedule 1.

Project Manager means the person to be appointed in accordance with clause 4.1.

Project Plan means the project plan agreed to by the parties in respect of each Project.

Prothena Services means those services more particularly described in Schedule 1 provided that any “Prothena Services” shall be substantially similar to services provided, prior to Completion, by Prothena to Elan in conducting the Prothena Business.

Research Costs has the meaning given to it in Schedule 2.

Term means the term of this Agreement as set out in clause 12.

Third Party Contract has the meaning as set out in clause 3.6.

Trademark Rights All trademarks, trademark rights, service marks, service mark rights, trade dress, logos, slogans, trade names, trade name rights, Internet domain names and subdomains (including all website content associated therewith), together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith.

Variable Change has the meaning given to it in Schedule 2.

 

1.2. In this Agreement, unless the context otherwise requires:

 

  (a) any recitals and schedules form part of this Agreement and references to this Agreement include them;

 

  (b) references to recitals, clauses and schedules are to recitals and clauses of, and schedules to, this Agreement and references in a schedule or part of a schedule to paragraphs are to paragraphs of that schedule or that part of that schedule;

 

  (c) references to this Agreement or any other document are to this Agreement or that document as in force for the time being and as amended from time to time in accordance with this Agreement or that document (as the case may be);

 

  (d) words importing a gender include every gender, references to the singular include the plural and vice versa and words denoting persons include individuals and bodies corporate, partnerships, unincorporated associations and other bodies (in each case, wherever resident and for whatever purpose) and vice versa; and

 

  (e)

a reference to a statute, statutory provision or subordinate legislation (as so defined) shall be construed as including a reference to that statute, provision or subordinate legislation as in

 

3


  force at the date of this Agreement and as from time to time modified or consolidated, superseded, re-enacted or replaced (whether with or without modification) after the date of this Agreement).

 

  1.3. The headings and contents table in this Agreement are for convenience only and do not affect its interpretation. The schedules to this Agreement shall form part of this Agreement.

 

  1.4. If there is a conflict or inconsistency between any clause of, and any schedule to, this Agreement the clause prevails. For this purpose an omission (whether deliberate or inadvertent) is not, by itself, to be construed as giving rise to a conflict or inconsistency.

 

  1.5. In this Agreement the words “other”, “includes”, “including” and “in particular” do not limit the generality of any preceding words and any words which follow them shall not be construed as being limited in scope to the same class as the preceding words where a wider construction is possible.

 

2. Projects

 

2.1. Elan and Prothena agree to undertake the Projects

 

3. Services

 

3.1. Prothena shall provide two FTE’s worth of effort per year in performance of the Prothena Services for the benefit of Elan and its Affiliates.

 

3.2. In respect of the Prothena Services, Prothena is appointed by Elan under this Agreement as the non-exclusive provider of the Prothena Services and nothing in this Agreement prevents Elan or any of its Affiliates from acquiring the Prothena Services or services similar to the Prothena Services in any territory from any third party or from performing any such services for itself internally. Each Person who performs the Prothena Services shall be an employee of Prothena (or an Affiliate thereof) under Applicable Law, and, at all times, shall perform the Prothena Services solely at the direction of such Person’s employer.

 

3.3. Prothena shall develop the Project Plan for the applicable Project, which Project Plan shall include a reasonable timetable and shall be agreed in writing by the parties. Prothena will deliver an appropriate draft Project Plan to Elan within one month of Elan’s request.

 

3.4. Prothena shall perform all of its obligations under this Agreement, including the provision of the Prothena Services:

 

  (a) in accordance with any applicable Project Plan;

 

  (b) in accordance with Good Industry Practice; and

 

  (c) in compliance with all Applicable Laws.

 

3.5. Prothena shall provide the Prothena Services in a timely manner and in accordance with any timetable identified in the applicable Project Plan. If at any time, Prothena believes that any of its obligations will not, or are unlikely to, be met in accordance with the timetable in the Project Plan, it shall as soon as reasonably practical:

 

  (a) inform Elan in writing of the reasons for not meeting, or being unable to meet, the timetable in the Project Plan;

 

  (b) inform Elan in writing of the consequences of not meeting the timetable in the Project Plan; and

 

  (c) take all steps reasonably necessary, including all additional resources, to mitigate such failure and to ensure the timetable in the Project Plan is met as soon as reasonably practical.

 

3.6.

Where the Prothena Services require contracting with a third party ( “Third Party Contract” ) , such Third Party Contract shall be entered into between Elan and such third party and Prothena shall not be a party thereto. Invoices for a Third Party Contract shall be sent to and paid by Elan and Prothena shall have no responsibility with regard the charges incurred thereunder. Elan shall be responsible for

 

4


  maintaining all data generated under such Third Party Contract. For the avoidance of doubt Prothena shall not be responsible for meeting its timetable in the Project Plan or the reporting obligations at clause 3.5 where the Prothena Services require a Third Party Contract and Elan, without bona fide reason, unduly delays entering into a Third Party Contract

 

4. Governance

 

4.1. The parties shall each appoint a Project Manager to assume overall responsibility for their respective roles and obligations under this Agreement. The parties’ respective Project Managers will be responsible for:

 

  (a) co-ordinating all development work in respect of each Project, including overseeing the performance and quality of the Project and completion of any milestones;

 

  (b) arranging and attending (personally or by representative), at each party’s own cost, management meetings as described in clause 4.5 and other meetings, at intervals and locations as agreed between the parties from time to time, to discuss developments and seek to resolve any issues arising. The parties’ respective Project Managers shall use reasonable endeavours to resolve issues arising under this Agreement, but shall refer all problems which are outside their ordinary authority to resolve to appropriate members of the parties’ respective senior management;

 

  (c) co-ordinating day to day liaison between the parties;

 

  (d) co-ordinating the preparation of the Final Reports; and

 

  (e) co-ordinating the identification of any Foreground Intellectual Property created or developed, or to be created or developed, in the course of any Project, prior to or as soon as reasonably practicable following creation or development of the same in the course of any Project.

 

4.2. Either party may replace its appointed Project Manager at any time on prior written notice to the other party.

 

4.3. Each party shall permit the other’s Project Manager (and other duly authorised representatives) such access to its premises at which any Project is being conducted as may be reasonably appropriate having regard to the nature and progress of such Project at any time.

 

4.4. On completion of each Project, the parties shall jointly inspect and evaluate the work performed and shall jointly produce and sign a Final Report in respect of the Project, incorporating such matters and details as may be agreed between the parties from time to time.

 

4.5. The parties agree, at least once every 12 months during the term hereof, or at such other intervals, and at such locations, including by teleconference, as may be agreed between them from time to time, to procure that their respective Project Managers meet (each such meeting a Management Meeting ) to discuss and review the progress and status of any Project performed hereunder, and consider proposals and agree actions in relation to the same with a view to ensuring the due and proper completion of all Projects in accordance with such dates and quality standards as may be agreed between the parties. Minutes of each management meeting are to be prepared by Elan and agreed by both Project Managers.

 

5. Payments

 

5.1. As compensation for the Prothena Services to be provided hereunder, Elan (or an Affiliate nominated by them) shall pay Prothena the charges in the amount and in accordance with Schedule 2 (the “ Charges ”).

 

5.2. Unless otherwise stated (including in the relevant Schedules), Prothena shall invoice Elan (or an Affiliate nominated by them) monthly in arrears in respect of the Charges and the Charges shall be due and payable in US Dollars within thirty (30) days after the receipt of such invoice.

 

5.3.

Reasonable travel and expense costs shall be reimbursed by Elan (or an Affiliate nominated by them)

 

5


  to any Prothena employee on the assigned Prothena Services (only if such persons home is based outside a 75 mile radius from the relevant Elan premises or designated work location, unless otherwise negotiated and agreed in writing).

 

5.4. Unless otherwise expressly stated between the parties, the Charges and other such amounts expressed to be payable by Elan under this Agreement shall constitute Elan’s entire payment liability under this Agreement.

 

5.5. All amounts stated to be payable under this Agreement are stated as exclusive of any VAT chargeable on them, which shall be paid by the paying party at the rate and in the manner prescribed in law from time to time.

 

5.6. If Elan (or an Affiliate nominated by them) receives an invoice from Prothena which it disputes in good faith, Elan shall notify Prothena in writing of such dispute as soon as reasonably practicable and Elan may withhold payment of such sums as are in dispute pending resolution of such dispute.

 

5.7. Each party shall be entitled to receive interest on any payment not made to it when properly due to it pursuant to the terms of this Agreement, calculated from day to day at a rate per annum equal to 2% above the providing base rate of the European Central Bank and payable from the day after date on which payment was due up to and including the date of payment.

 

6. Intellectual Property Rights and Publication:

 

6.1. All Background Intellectual Property is and shall remain the exclusive property of the party owning it (or, where applicable, the third party from whom its right to use the Background Intellectual Property has derived).

 

6.2. Each party shall grant to the other party for the duration of this Agreement a non-exclusive, non transferable (without the right to sub-licence) licence to use its Background Intellectual Property solely to the extent necessary for the other party to carry out its obligations under this Agreement.

 

6.3. Unless otherwise provided all right, title and interest (including copyright and database right) in and to each party’s Data shall remain the absolute property of that party at all times.

 

6.4. With the exception of Foreground Intellectual Property (below), each party hereby assigns to the other party, all present and future right, title and interest being capable of assignment it may acquire in and to any adaptations, amendments, variations and derivatives that it makes to the other party’s Background Intellectual Property or that have been created or developed by the other party or on its behalf.

 

6.5. If during the term of this Agreement Prothena (or its authorised sub-contractors) develop or create (whether with or without others and whether jointly with the other party or not) any Foreground Intellectual Property, they shall promptly disclose any such Foreground Intellectual Property to Elan.

 

6.6. Unless the parties otherwise agree in writing:

 

  (a) Elan Foreground Intellectual Property shall be owned by Elan, provided, however that Elan hereby grants Prothena a non-exclusive royalty free license to such Foreground Intellectual Property Rights solely for research purposes.
  (b) Prothena Foreground IP shall be owned by Prothena, provided, however, that Prothena hereby grants Elan an exclusive royalty free licence solely for the research, development and commercialization of ELND-005 and ELND-002, including the right to make, have made, use, offer for sale, sell, have sold, import and have imported ELND-005 and ELND-002.

 

6.7. The Owning Party shall have sole responsibility for the filing, prosecution, maintenance and enforcement of its Foreground Intellectual Property. Upon Elan’s request and at Elan’s expense, Prothena will undertake such actions as requested by Elan to secure for the benefit of Elan such Prothena Foreground IP as provided for by clause 6.6.

 

6.8

Subject to the remainder of this clause 6.8, Elan shall, at its own expense, defend or at its option settle any action brought against Prothena which consists of a claim that the use of Elan’s Background Intellectual Property or Foreground Intellectual Property within the scope of any activity contemplated

 

6


  under this Agreement infringes any Intellectual Property right belonging to a third party, and Elan agrees to be responsible for all and indemnify Prothena against all losses, costs (including reasonable legal costs), damages, liabilities, claims and expenses suffered or incurred by Prothena in connection with any such claim. Elan’s obligations under this clause 6.8 shall be conditional on Prothena:

 

  (a) promptly notifying Elan of such claim;

 

  (b) giving Elan express authority to proceed as contemplated by this clause 6.8; and

 

  (c) providing Elan with all such available information and assistance as it may reasonably require in responding to such claim.

 

6.9 Elan agrees to reasonably consider Prothena’s request to publish results of the Prothena Services subject to the remaining obligations of this clause 6 and the obligations of clause 7, and to provide the relevant Personnel with appropriate byline credit in any publication proposed by Elan according to generally accepted standards for authorship.

 

7. Confidentiality

 

7.1. The parties each undertake to keep confidential and not to disclose to any third party nor to use themselves other than for the purposes of the Projects or as permitted under or in accordance with this Agreement (including for the purpose of enjoying the benefit of the rights and licences granted under clause 6) any confidential or secret information in any form directly or indirectly belonging or relating to the other, its Affiliates, its or their business or affairs, disclosed by the one and received by the other pursuant to or in the course of this Agreement or any Project, including without limitation any Background Intellectual Property of the other or Foreground Intellectual Property of the other, and the existence and terms of this Agreement ( Confidential Information ).

 

7.2. Each of the parties undertakes to disclose Confidential Information of the other only to those of its officers, employees, agents and contractors, to whom and to the extent to which, such disclosure is necessary for the purposes contemplated under this Agreement.

 

7.3. The obligations contained in this clause 7 shall survive the expiry or termination of this Agreement for any a period of seven (7) years but shall not apply to any Confidential Information which:

 

  (a) is publicly known at the time of disclosure to the receiving party;

 

  (b) after disclosure becomes publicly known otherwise than through a breach of this Agreement by the receiving party, its officers, employees, agents or contractors;

 

  (c) can be proved by the receiving party to have reached its hands otherwise than by being communicated by the other party including being known to it prior to disclosure, or having been developed by or for it wholly independently of the other party or having been obtained from a third party without any restriction on disclosure on such third party of which the recipient is aware, having made due enquiry; or

 

  (d) is required by law, regulation or order of a competent authority (including any regulatory or governmental body or securities exchange) to be disclosed by the receiving party, provided that, where practicable, the disclosing party is given reasonable advance notice of the intended disclosure.

 

8. Warranties

 

  (a) Each party warrants that it has full power and authority to carry out the actions contemplated under this Agreement, and that its entry into and performance under the terms of this Agreement will not infringe the rights of any third party or cause it to be in breach of any obligations to a third party.

 

  (b) Prothena warrants that it shall perform the Projects in a professional manner with reasonable skill and care, using suitably qualified personnel, and shall use commercially reasonable endeavours to achieve the objectives of each Project;

 

7


  (c) Each party warrants that all information, data and materials provided by it to the other hereunder will be, to the best of its knowledge, accurate and complete in all material respects, and it is entitled to provide the same to the other without recourse to any third party;

 

9. Insurance

 

9.1. Prothena will at all times during the term of this Agreement, maintain in force and effect at its own expense with a reputable insurance company, public and employers’ liability insurance and professional indemnity insurance, each for a minimum level of cover of $2 million which shall remain in effect throughout this Agreement and for 6 years after termination subject to cover availability.

 

10. Dispute Resolution

 

10.1. Where at any point during the Term of this Agreement any matter relating to this Agreement cannot be agreed by the Parties, it shall be escalated as follows:

 

  (a) the matter shall be referred as soon as practicable to the Project Manager for resolution; and

 

  (b) if the matter has not been resolved within ten (10) Business Days (or such longer period as may be agreed in writing by the Parties) of being referred to the Project Manager or if the Project Manager determines it is incapable of being resolved at that level, then the matter shall be immediately referred to the Chief Executive Officer of Prothena and the Chief Executive Officer of Elan; and

 

  (c) if after the expiry of 30 Business Days from the time the matter in dispute was referred to the CEO of each of Elan and Prothena the matter remains unresolved, the Parties shall refer the matter to non-binding mediation in accordance with the procedure set out in clause 21.3.1 of the Demerger Agreement.

 

  (d) in the event that:-

 

  (1) having been so requested, the mediation does not commence within 20 Business Days of the request for mediation; or

 

  (2) a binding settlement in writing is not reached within a period of 60 Business Days after the delivery of a written request for mediation;

 

  (e) and, in any such case, the dispute or difference referred to in this clause 10 remains unresolved, the Parties (or the relevant one of them) shall then be entitled to instigate legal proceedings

 

10.2. Any joint decision as to a resolution at any stage in the above process shall be recorded in writing and signed on behalf of each Party and shall be final and binding on the Parties.

 

11. Data Protection

 

11.1. The parties shall at all times comply with the provisions of the Data Protection Law in their Processing of Personal Data including, without limitation, ensuring that appropriate technical and organisational measures are taken against unauthorised or unlawful processing of the Personal Data and against accidental loss or destruction of, or damage to the Personal Data.

 

12. Term and Termination

 

12.1. This Agreement shall come into effect on the Effective Date and, subject to the remaining terms of this Agreement, shall continue in full force and effect for a period of two (2) years unless the parties agree in writing to extend this Agreement.

 

12.2. Either party (the first party ) shall be entitled to terminate this Agreement at any time by notice in writing to the other (the other party ) if:

 

8


  (a) the other party is in material breach of this Agreement which breach is irremediable or, if remediable, is not remedied by the defaulting party within thirty (30) days of being requested to do so by the other;

 

  (b) the other party is subject to an Insolvency Event; or

 

  (c) the other party is in breach of any of its confidentiality obligations under clause 7

 

12.3. Termination in accordance with this clause 12 shall be without prejudice to the rights of the parties accrued at the date of termination.

 

12.4. Upon termination of any licences hereunder in accordance with this Agreement each party shall forthwith destroy or, at the request of the other party, return all information and materials belonging to the other party then in its or its contractors’ possession, custody or control, including all Confidential Information of the other party relating to such licences with the exception, in the case of the Terminating Party, of such information and materials belonging to the Defaulting Party as shall be reasonably required by the Terminating Party to enjoy the benefit of any continuing licences to it hereunder, and shall not retain any copies of the same except that either party may retain copies of information in its back up electronic systems.

13. Liability

 

13.1. Nothing in this Agreement shall limit the liability of either party for:

 

  (a) fraud or fraudulent misrepresentation;

 

  (b) for death or personal injury caused by its negligence or the negligence of its employees, contractors or agents;

 

  (c) any liability which cannot be excluded or limited by law.

 

13.2 Subject to Clause 13.1, no party shall be liable to another party for any indirect or consequential loss or damage even if foreseeable or if such party has been advised of the possibility of such losses.

 

13.3 Subject to Clause 13.1, the total liability of either party arising under or in connection with this Agreement, whether in tort (including negligence), contract, representation (other than fraudulent misrepresentations) or otherwise or for loss (whether direct, indirect or consequential) of business, profits, use, revenue, data, anticipated savings or goodwill shall be limited to USD$500,000.

 

13.4 Prothena shall not be liable for any failure to provide, or for any delay in the provision of, any of the Prothena Services to the extent that such failure or delay is directly caused or is contributed to directly by any failure of a third party service provider to provide an element of the Prothena Services.

 

14. Personnel

 

14.1 Prothena shall appoint Personnel to perform the Prothena Services who shall have the experience and knowledge to provide the applicable Prothena Services in accordance with Good Industry Practice.

 

14.2 If Elan reasonably determines at any time that a member of the Personnel is not suitable for involvement in the provision of the Prothena Services, it shall notify the other party in writing detailing the reasons for its determination. Where, following any reasonable consultation between Elan and Prothena regarding the said notification, Elan and Prothena agree that the relevant member of the Personnel is not or is no longer suitable for involvement in the provision of the Prothena Services, Prothena shall take or procure that reasonable steps are taken in accordance with its established human resources procedure and Applicable Law to remove the relevant person from his or her position as a member of the Personnel as soon as reasonably practicable. In the event that Elan and Prothena do not agree that a relevant member of the Personnel is no longer suitable, then such matter shall be managed in accordance with clause 10.

 

15. Force Majeure

 

15.1. Neither party shall be liable for any delay in performing or for failure to perform its obligations hereunder if the delay or failure results from any cause or circumstance whatsoever beyond its reasonable control, including any breach or non-performance of this Agreement by the other party (hereinafter event of force majeure ), provided the same arises without the fault or negligence of such party. If an event of force majeure occurs, the date(s) for performance of the obligation affected shall be postponed for as long as is made necessary by the event of force majeure, provided that if any event of force majeure continues for a period of or exceeding three (3) months, either party shall have the right to terminate this Agreement forthwith by written notice to the other party. Each party shall use its reasonable endeavours to minimise the effects of any event of force majeure.

 

16. Assignment

This Agreement shall be binding upon and inure to the benefit of Prothena and Elan and their respective successors and permitted assigns. Neither party may assign all or any part of any benefit of or interest, right or licence in or arising under this Agreement without the prior written consent of the other party, provided, however, that either party may, without prior notice or consent, assign this Agreement and/or the rights and obligations thereunder to an Affiliate or, in connection with the transfer or sale of all or substantially all of its business related to the subject matter of this Agreement, or in the event of a change in control, merger, acquisition, consolidation or similar transaction, to a third party. Any purported assignment or transfer in violation of this Clause 16 shall be void.

 

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17. Relationship between the parties

 

17.1. Nothing in this Agreement is to be construed as establishing or implying any partnership or joint venture between the parties, or as appointing any party as the agent or employee of any other party. No party shall hold out any other party as its partner or joint venturer. Except, and to the extent, that this Agreement expressly states otherwise, no party may incur any expenses or negotiate on behalf of any other party or commit any other party in any way to any person without that other party’s prior written consent.

 

18. Notices

All notices to be given to a party under this Agreement shall be in writing in English detailed for the party below, and sent by overnight courier, first class prepaid post, or by other means of delivery requiring an acknowledged receipt. All notices shall be effective upon receipt.

 

  (a) in the case of Elan:

Address: Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland

Attention: Company Secretary

 

  (b) in the case of Prothena:

Address: [Note: Prothena to insert]

Attention: ¿

A party may change the details recorded for it in this clause by notice to the other in accordance with this clause 18.

 

18.1. A notice shall be treated as having been received:

 

  (a) if delivered by hand between 9.00 am and 5.00 pm on a Business Day (which time period is referred to in this clause as Business Hours ), when so delivered; and if delivered by hand outside Business Hours, at the next start of Business Hours; and

 

  (b) if sent by first class post, at 9.00 am on the second Business Day after posting if posted on a Business Day and at 9.00 am on the third Business Day after posting if not posted on a Business Day.

 

18.2. In proving that a notice has been given it shall be conclusive evidence to prove that delivery was made, or that the envelope containing the notice was properly addressed and posted (as the case may be).

 

19. Variation

No variation of this Agreement shall be effective unless it is in writing and is signed by or on behalf of each of the parties.

 

20. Waiver

Delay in exercising, or failure to exercise, any right or remedy in connection with this Agreement shall not operate as a waiver of that right or remedy. The waiver of a right to require compliance with any provision of this Agreement in any instance shall not operate as a waiver of any further exercise or enforcement of that right and the waiver of any breach shall not operate as a waiver of any subsequent breach. No waiver in connection with this Agreement shall, in any event, be effective unless it is in writing, refers expressly to this clause, is duly signed by or on behalf of the party granting it and is communicated to the other party in accordance with clause 18 (Notices).

 

21. Rights Cumulative

The rights and remedies of the parties in connection with this Agreement are cumulative and, except as

 

10


expressly stated in this Agreement, are not exclusive of any other rights or remedies provided by law or equity or otherwise. Except as expressly stated in this Agreement (or at law or in equity in the case or rights and remedies provided by law or equity) any right or remedy may be exercised (wholly or partially) from time to time.

 

22. Severability

The parties intend each provision of this Agreement to be severable and distinct from the others. If a provision of this Agreement is held to be illegal, invalid or unenforceable, in whole or in part, the parties intend that the legality, validity and enforceability of the remainder of this Agreement shall not be affected.

 

23. Entire Agreement

 

23.1 This Agreement (together with all other documents to be entered into pursuant to it) sets out the entire agreement and understanding between the parties, and supersedes all proposals and prior agreements, arrangements and understandings between the parties, relating to its subject matter.

 

23.2 Each party acknowledges that in entering into this Agreement (and any other document to be entered into pursuant to it) it does not rely on any representation, warranty, collateral contract or other assurance of any person (whether party to this Agreement or not) that is not set out in this Agreement or the documents referred to in it. Each party waives all rights and remedies which, but for this clause, might otherwise be available to it in respect of any such representation, warranty, collateral contract or other assurance. The only remedy available to any party in respect of any representation, warranty, collateral contract or other assurance that is set out in this Agreement (or any document referred to in it) is for breach of contract under the terms of this Agreement (or the relevant document). Nothing in this Agreement shall, however, limit or exclude any liability for fraud.

 

24. Survival

Termination of this Agreement for any reason shall not affect any rights or liabilities that have accrued prior to termination or the coming into force or continuance in force of any term that is expressly or by implication intended to come into or continue in force on or after termination.

 

25. Further Assurances

Each party shall do and execute, or arrange for the doing and executing of, any other act and document reasonably requested of it by any other party to implement and give full effect to the terms of this Agreement.

 

26. Governing Law and Jurisdiction

This Agreement and any non-contractual obligations arising out of or in relation to this Agreement shall be governed by and construed in accordance with Irish law. The parties to this Agreement irrevocably agree that the courts of Ireland are to have non-exclusive jurisdiction to settle any questions or disputes which may arise out of or in connection with this Agreement.

 

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This Agreement has been entered into on the date stated at the beginning of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

 

ELAN CORPORATION PLC   PROTHENA CORPORATION PLC
By:         By:    
  Name:       Name:
  Title:       Title:

 

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SCHEDULE 1

Prothena Services

A.     Support for ELND-005 and ELND-002 programs

 

  (1) Expert advice and opinion in the areas of nonclinical safety/toxicology and pharmacology

 

  a. Attendance in project team meetings

 

  b. Leadership of a nonclinical subteam

i. Development and proposal of nonclinical plans

 

  (2) Representation/presentations of nonclinical areas at external meetings (regulatory/investigator/KOL/investor/scientific)

 

  (3) Regulatory support for nonclinical sections of pertinent documents

 

  a. IND filings and updates

 

  b. IB preparation and updates

 

  c. Regulatory briefing packages

 

  d. NDA filings

 

  e. Ex-US filings

 

  (4) Conducting and interpreting externally conducted nonclinical studies (GLP and non-GLP)

 

  a. Assistance in patent filing based on nonclinical results

 

  (5) Inspection or audit readiness activities

 

  (6) Timely response to regulatory and/or investigator questions

 

  (7) Identification and maintenance of nonclinical expert advisors as needed

 

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SCHEDULE 2

Charges

1.1 The Charges will comprise:

1.1.1. a fixed charge at a rate of USD$250,000 per annum (“ Fixed Charge ”) per the equivalent of one employee working full time (“ Full Time Equivalent” or “FTE ”) allocated by Prothena to the provision of the Prothena Services. In accordance with clause 3.1 of this Agreement, Prothena will allocate two FTE’s during the Term to support the provision of the Prothena Services. Elan will pay Prothena the Fixed Charge per FTE for each full year of the Term so that the total Fixed Charge for each year of the Term will be USD$500,000.

1.1.2 a variable charge at a rate of USD $250,000 per annum (“ Variable Charge ”) per one FTE allocated by Prothena to the provision of the Prothena Services, payable where the Fixed Charge has been exceeded for that year. The actual amount of the Variable Charge payable will be calculated pro rata based on the number of days spent providing the Prothena Services. For the avoidance of doubt, Elan shall only be liable to pay a Variable Charge if the Fixed Charge of $500,000 per annum payable in accordance with clause 1.1.1 of this Schedule, has been exhausted in full in respect of that year.

1.1.3 Research costs (“Research Costs”) which shall comprise the other reasonable direct overhead costs to Prothena of performing the Prothena Services including direct materials and other relevant overheads

1.1.4 a mark-up of 10% (“Mark-Up”) as applied to the Fixed Charge, the Variable Charge (if any) and Research Costs, such that the Fixed Charge, the Variable Charge (if any), Research Costs and Mark-Up, collectively, shall reflect an arm’s length cost-plus standard.

2. 1 Prothena will maintain a range of cost codes (or cost centres) in its books for the purpose of recording the Research Costs.

2.2. At the end of each calendar month, Prothena shall provide Elan with a report detailing the services provided, and the categories and line items under which the Charges have been accrued, in respect of that monthly period (the “Monthly Report” ).

3. Prothena shall issue an invoice for the agreed Charges, detailing the amount due in respect of the Prothena Services respectively for the relevant period.

4. All Charges shall be subject to increase or decrease (by way of reconciliation in subsequent invoices) to the extent such increases or decreases are provided for by this Schedule 2.

5. Any disputes in relation to the Charges shall be dealt with in accordance with Clause 10 of this Agreement.

The following is an illustration of how the Charges will be calculated:

 

Charge

   cost per month USD$

Fixed Charge for 2 FTE

   41,667

Research Costs

   2,000

Mark up of 10%

   4,368

Total Cost

   48,038

 

14

Exhibit 10.13

PROTHENA CORPORATION PLC

INCENTIVE COMPENSATION PLAN

1. Purpose of the Plan . The purpose of the Plan is to provide a link between compensation and performance, to motivate participants to achieve corporate performance objectives and to enable the Company, its subsidiaries and Affiliated Entities to attract and retain high quality Eligible Employees.

2. Definitions . As used herein, the following definitions shall apply:

(a) “ Affiliated Entity ” means any entity other than the Company and its subsidiaries that is designated by the Board or the Committee as a participating employer under the Plan; provided, however, that the Company directly or indirectly owns at least 20% of the combined voting power of all classes of stock of such entity or at least 20% of the ownership interests in such entity.

(b) “ Board ” means the Board of Directors of the Company.

(c) “ Bonus ” means a cash payment made pursuant to the Plan.

(d) “ Code ” means the Internal Revenue Code of 1986, as amended.

(e) “ Committee ” means (i) with respect to Bonuses that are not intended to be Performance-Based Compensation, the Compensation Committee of the Board, or such other Board committee (which may include the entire Board) as may be designated by the Board to administer the Plan, and (ii) with respect to Bonuses that are intended to be Performance-Based Compensation, a committee that consists of two or more persons appointed by the Board, all of whom shall be “outside directors” as defined under Section 162(m) of the Code and related Treasury Regulations.

(f) “ Company ” means Prothena Corporation plc.

(g) “ Covered Employee ” means an Employee who is a “covered employee” under Section 162(m) of the Code.

(h) “ Director ” means a non-Employee member of the Board.

(i) “ Effective Date ” means the date that the spin-off of the Company from Elan Corporation plc is first effective.

(j) “ Eligible Employee ” means any Employee who is selected for participation in the Plan by the Committee.

(k) “ Employee ” means any person who is in the employ of the Company, a subsidiary or an Affiliated Entity, subject to the control and direction of the Company, the subsidiary or the Affiliated Entity as to both the work to be performed and the manner and method of performance. Neither service as a Director nor fees received from the Company, the subsidiary or the Affiliated Entity for service as a Director shall be sufficient to constitute Employee status.


(l) “ Long Term Incentive Plan ” means the Prothena Corporation plc 2012 Long Term Incentive Plan (or any successor to that plan).

(m) “ Performance-Based Compensation ” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

(n) “ Performance Goal ” means any measurable criterion tied to the success of the Company and based on one or more of the business criteria described in Section 6.

(o) “ Performance Period ” means a fixed period established by the Committee that may range in duration from a minimum period of twelve (12) months to a maximum period of thirty-six (36) months and over which the attainment of the applicable Performance Goals set by the Committee is to be measured.

(p) “ Plan ” means the Prothena Corporation plc Incentive Compensation Plan.

3. Administration of the Plan .

(a) The Committee . The Plan shall be administered by the Committee.

(b) Powers of the Committee . Subject the provisions of the Plan (including any other powers given to the Committee hereunder), the Committee shall have the authority, in its discretion, to:

(i) establish the duration of each Performance Period;

(ii) select the Eligible Employees who are to participate in the Plan for such Performance Period;

(iii) determine the specific Performance Goals for each Performance Period and the relative weighting of those goals, establish one or more designated levels of attainment for each such goal and set the Bonus potential for each participant at each corresponding level of attainment;

(iv) certify the level at which the applicable Performance Goals are attained for the Performance Period and determine, on the basis of that certification, the actual Bonus for each participant in an amount not to exceed his or her maximum Bonus potential for the certified level of attainment;

(v) exercise discretionary authority, when appropriate, to reduce the actual Bonus payable to any participant below his or her Bonus potential for the attained level of the Performance Goals for the Performance Period;

(vi) construe and interpret the terms of the Plan and Bonuses awarded under the Plan;

 

2


(vii) establish additional terms, conditions, rules or procedures for the administration of the Plan; provided, however, that no Bonus shall be awarded under any such additional terms, conditions, rules or procedures which are inconsistent with the provisions of the Plan; and

(viii) take such other action, not inconsistent with the terms of the Plan, as the Committee deems appropriate.

All decisions and determinations by the Committee shall be final, conclusive and binding on the Company, its subsidiaries, Affiliated Entities, the participants, and any other persons having or claiming an interest hereunder.

(c) Indemnification . In addition to such other rights of indemnification as they may have as members of the Board, members of the Committee who administer the Plan shall be defended and indemnified by the Company, to the extent permitted by law, on an after-tax basis against (i) all reasonable expenses (including attorneys’ fees) actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Bonus awarded hereunder and (ii) all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within 30 days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to handle and defend the same.

4. Coverage . All Eligible Employees shall be covered by the Plan, except to the extent the Committee may elect to exclude one or more Eligible Employees from participation in a designated Performance Period.

5. Terms and Conditions of Bonus Awards .

(a) Pre-Established Performance Goals for Bonuses Intended to Qualify as Performance-Based Compensation . Payment of Bonuses intended to qualify as Performance-Based Compensation granted to Covered Employees shall be based solely on account of the attainment of one or more pre-established, objective Performance Goals over the designated Performance Period. The Committee shall establish one or more objective Performance Goals with respect to each Covered Employee for a Bonus intended to qualify as Performance-Based Compensation in writing not later than 90 days after the commencement of the Performance Period to which the Performance Goals relate or the date on which twenty-five percent (25%) of such Performance Period has been completed (or such other date as may be required or permitted under Section 162(m) of the Code), provided that the outcome of the Performance Goals must be substantially uncertain at the time of their establishment. Such Performance Goals shall be based solely on one or more of the business criteria described in the Section 6 and shall be weighted, equally or in such other proportion as the Committee shall determine at the time such

 

3


Performance Goals are established, for purposes of determining the actual Bonus amounts that may become payable upon the attainment of those goals. For each such Performance Goal, the Committee may establish one or more designated levels of attainment and set the Bonus potential for each Eligible Employee at each designated performance level. Alternatively, the Committee may establish a linear formula for determining the Bonus potential at various points of Performance Goal attainment. Under no circumstance, however, shall the aggregate Bonus potential for any participant for any Performance Period exceed the applicable maximum dollar amount set forth in Section 5(d).

(b) Performance Goals for Bonuses not Intended to Qualify as Performance-Based Compensation . The Performance Goals for Bonuses awarded to Eligible Employees other than Covered Employees or for Bonuses awarded to Covered Employees, in each case, that are not intended to qualify as Performance-Based Compensation, and the determination of final Bonuses pursuant to the achievement of Performance Goals, may conform to the requirements set forth above in Section 5(a) or may be based on such other quantitative or qualitative performance goals, as specified by the Committee. Performance Goals may differ for Bonuses awarded to different Eligible Employees. The Committee may weight the Performance Goals in such manner as the Committee determines at the beginning of the Performance Period. For the avoidance of doubt, Bonuses paid to Eligible Employees who would have been eligible to receive bonuses from Elan Corporation resulting from their employment by Elan Corporation in calendar year 2012, will be paid pursuant to this Section 5(b) and the terms of such Bonuses shall be consistent with the terms and conditions under the Elan Corporation bonus plan, subject to the limitations set forth herein and the Committee’s discretion pursuant to Section 5(d) below; provided, however that the amounts of such Bonuses shall not be less than the amounts determined under the Elan Corporation bonus plan as of the date immediately preceding the Effective Date.

(c) Committee Certification . As soon as administratively practicable following the completion of the Performance Period, the Committee shall certify the actual levels at which the Performance Goals for that period have been attained and determine, on the basis of such certified levels, the actual Bonus amount to be paid to each Eligible Employee for that Performance Period. Such certification shall be final, conclusive and binding on the participant, and on all other persons, to the maximum extent permitted by law.

(d) Committee Discretion . Except with respect to Bonuses that are not intended to qualify as Performance-Based Compensation, the Committee, in determining the amount of the Bonus actually to be paid to an Eligible Employee, shall in no event award a Bonus in excess of the dollar amount determined on the basis of the Bonus potential established for the particular level at which each of the applicable Performance Goals for the Performance Period is attained. The Committee shall have the discretion to reduce or eliminate the Bonus that would otherwise be payable with respect to one or more Performance Goals on the basis of the certified level of attained performance of those goals. In exercising its discretion to reduce the Bonus payable to any participant, the Committee may utilize such objective or subjective criteria as the Committee deems appropriate in its sole and absolute discretion. With respect to Bonuses that are not intended to qualify as Performance-Based Compensation, the Committee shall have discretion to increase the Bonus that would otherwise be payable with respect to one or more Performance Goals on the basis of the certified level of attained performance of those goals, and

 

4


in exercising its discretion to increase the Bonus payable to any participant, the Committee may utilize such objective or subjective criteria as the Committee deems appropriate in its sole and absolute discretion. Except with respect to Bonuses that are not intended to qualify as Performance-Based Compensation, the Committee shall not waive any Performance Goal applicable to a participant’s Bonus potential for a particular Performance Period, provided that, the Committee may, in its sole discretion, waive the Performance Goal for a particular Performance Period in the event of the participant’s death or disability or under such circumstances as the Committee deems appropriate in the event a Change in Control (as such term is defined in the Long Term Incentive Plan) should occur prior to the completion of that Performance Period.

(e) Individual Limitations on Awards . Notwithstanding any other provision of the Plan, the maximum amount of any Bonus paid to a Covered Employee or other Eligible Employee under the Plan shall be limited to Three Million Dollars ($3,000,000) per each twelve (12)-month period (or portion thereof) included within the applicable Performance Period.

(f) Payment Date . Payment of such Bonus amounts shall be made as soon as administratively practicable after the Committee certification, but in any event, no later than March 15 of the year following the year in which the Performance Period ends. No participant shall accrue any right to receive a Bonus award under the Plan unless that participant remains in Employee status until the end of the applicable Performance Period. Accordingly, no Bonus payment shall be made to any participant who ceases Employee status prior to the end of the Performance Period for that Bonus; provided, however, that the Committee shall have complete discretion to award a full or pro-rated Bonus, based on the level at which the applicable Performance Goals are attained for the Performance Period, to a participant who ceases Employee status prior to the end of such Performance Period by reason of death, disability or a termination of employment by the Company without cause, in each case, as determined by the Committee. Notwithstanding the foregoing, with respect to a Bonus payable for a 12 month Performance Period commencing January 1, an Eligible Employee must have maintained Employee status until at least October 1 of such Performance Period to be eligible to receive a Bonus for such Performance Period.

(g) Withholding Tax . To the extent required by applicable federal, state, local or foreign law, each employer shall withhold all applicable taxes from all Bonus amounts.

6. Business Criteria .

(a) Permitted Criteria . Performance Goals established by the Committee may be based on any one of, or combination of, the following: stock price, earnings per share, price-earnings multiples, net earnings, operating earnings, revenue, number of days sales outstanding in accounts receivable, productivity, margin, EBITDA (earnings before interest, taxes, depreciation and amortization), net capital employed, return on assets, shareholder return, return on equity, return on capital employed, growth in assets, unit volume, sales, cash flow, market share, relative performance to a comparison group designated by the Committee, or strategic business criteria consisting of one or more objectives based on meeting specified revenue goals, market penetration goals, customer growth, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures. Such Performance Goals may be measured not only

 

5


in terms of the Company’s performance but also in terms of its performance relative to the performance of other entities or may be measured on the basis of the performance of any of the Company’s business units or divisions or any parent or subsidiary entity. Performance may also be measured on an absolute basis, relative to internal business plans, or based on growth. As may be applicable, they may also be measured in aggregate or on a per-share basis. Performance Goals need not be uniform as among participants.

(b) Authorized Adjustments . To the extent applicable, subject to the following sentence and unless the Committee determines otherwise, the determination of the achievement of Performance Goals shall be determined based on the relevant financial measure, computed in accordance with U.S. generally accepted accounting principles (“GAAP”), and in a manner consistent with the methods used in the Company’s audited financial statements. To the extent permitted by Section 162(m) of the Code, if applicable, in setting the Performance Goals within the period prescribed in Section 5(a), the Committee may provide for appropriate adjustment as it deems appropriate, including for one or more of the following items: asset write-downs; litigation or claim judgments or settlements; changes in accounting principles; changes in tax law or other laws affecting reported results; changes in commodity prices; severance, contract termination, and other costs related to exiting, modifying or reducing any business activities; costs of, and gains and losses from, the acquisition, disposition, or abandonment of businesses or assets; gains and losses from the early extinguishment of debt; gains and losses in connection with the termination or withdrawal from a pension plan; stock compensation costs and other non-cash expenses; any extraordinary non-recurring items as described in applicable Accounting Principles Board opinions or Financial Accounting Standards Board statements or in management’s discussion and analysis of financial condition and results of operation appearing in the Company’s annual report to stockholders for the applicable year; and any other specified non-operating items as determined by the Committee in setting Performance Goals.

7. Effective Date and Term of Plan . The Plan is effective as of the Effective Date. Assuming that such stockholder approval is obtained, the Plan shall continue in effect until the Board terminates it or until stockholder approval again is required for the Plan to meet the requirements of Code Section 162(m) but is not obtained.

8. Amendment, Suspension or Termination of the Plan . The Board may at any time amend, suspend or terminate the Plan. However, any amendment or modification of the Plan shall be subject to stockholder approval to the extent required under Code Section 162(m) or other applicable law or regulation.

9. General Provisions .

(a) Transferability . No participant in the Plan shall have the right to transfer, alienate, pledge or encumber his or her interest in the Plan, and such interest shall not (to the maximum permitted by law) be subject to the claims of the participant’s creditors or to attachment, execution or other process of law. However, should a participant die before payment is made of the actual Bonus to which he or she has become entitled under the Plan, then that Bonus shall be paid to the executor or other legal representative of his or her estate.

 

6


(b) No Rights to Employment . Neither the action of the Company in establishing or maintaining the Plan, nor any action taken under the Plan by the Committee, nor any provision of the Plan itself shall be construed so as to grant any person the right to remain in Employee status for any period of specific duration, and each participant shall at all times remain an Employee at-will and may accordingly be discharged at any time, with or without cause and with or without advance notice of such discharge.

(c) Acknowledgement of Authority . All Bonuses shall be awarded conditional upon the participant’s acknowledgement, by participation in the Plan, that all decisions and determinations of the Committee shall be final and binding on the participant, his or her beneficiaries and any other person having or claiming an interest in such Bonus.

(d) Company Policies . All Bonuses under the Plan shall be subject to any applicable clawback or recoupment policy of the Company adopted from time to time by the Board.

(e) Unfunded Obligation . Eligible Employees eligible to participate in the Plan shall have the status of general unsecured creditors of the Company. Any amounts payable to such Employees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including (without limitation) Title I of the Employee Retirement Income Security Act of 1974, as amended. The Company shall not be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. Employees shall have no claim against the Company for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

(f) Reliance on Reports . Each member of the Committee shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its subsidiaries or Affiliated Entities and upon any other information furnished in connection with the Plan by any person or persons other than himself or herself. In no event shall any person who is or shall have been a member of the Committee or of the Board be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

(g) Successors . The terms and conditions of the Plan, together with the obligations and liabilities of the Company that accrue hereunder, shall be binding upon any successor to the Company, whether by way of merger, consolidation, reorganization or other change in ownership or control of the Company.

(h) Section 409A . The Plan is intended to comply with the short-term deferral rule set forth in the regulations under Section 409A of the Code in order to avoid application of Section 409A of the Code to the Plan. If and to the extent that any payment under this Plan is deemed to be deferred compensation subject to the requirements of Section 409A of the Code, this Plan shall be administered so that such payments are made in accordance with the requirements of Section 409A of the Code. If an award is subject to Section 409A of the Code, (i) distributions shall only be made in a manner and upon an event permitted under Section 409A of the Code, (ii) payments to be made upon a termination of employment shall only be made upon a “separation from service” under Section 409A of the Code, and (iii) in no event shall a

 

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participant, directly or indirectly, designate the calendar year in which a distribution is made except in accordance with Section 409A of the Code. Any award granted under the Plan that is subject to Section 409A of the Code and that is to be distributed to a key employee (as defined below) upon separation from service shall be administered so that any distribution with respect to such award shall be postponed for six months following the date of the participant’s separation from service, if required by Section 409A of the Code. If a distribution is delayed pursuant to Section 409A of the Code, the distribution shall be paid within 30 days after the end of the six-month period. If the participant dies during such six-month period, any postponed amounts shall be paid within 90 days of the participant’s death. The determination of key employees, including the number and identity of persons considered key employees and the identification date, shall be made by the Committee or its delegate each year in accordance with Section 416(i) of the Code and the “specified employee” requirements of Section 409A of the Code.

(i) Conformity to Section 162(m) of the Code for Bonuses to Covered Employees Intended to Qualify as Performance-Based Compensation . With respect to Bonuses awarded to Covered Employees intended to qualify as Performance-Based Compensation, terms used in the Plan shall be interpreted in a manner consistent with Section 162(m) of the Code and regulations thereunder (including Treasury Regulation Section 1.162-27). If any provision of the Plan with respect such Bonuses or any agreement evidencing such Bonuses hereunder does not comply or is inconsistent with the provisions of Section 162(m)(4)(C) or regulations thereunder (including Treasury Regulation Section 1.162-27(e)) required to be met in order that compensation (other than post-termination compensation) shall constitute Performance-Based Compensation, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no adjustment to a Bonus or its related Performance Goals shall be authorized or made, and no post-termination payment shall be authorized or made under Section 5(f), if and to the extent that such authorization or the making of such adjustment or payment would contravene such requirements.

(j) Governing Law . The validity, construction, interpretation and effect of the Plan shall be governed and construed by and determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof.

IN WITNESS WHEREOF,                                         , by its duly authorized officer acting in accordance with a resolution duly adopted by the Board of Directors of Prothena Corporation plc, has executed this Plan on                                 , 2012, effective as of the Effective Date.

 

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Exhibit 10.15

Dated      December 2012

PROTHENA CORPORATION plc

the Company

and

[            ]

the Director

DEED OF INDEMNITY

 


THIS DEED OF INDEMNITY is dated                  December 2012 and made between:

 

(1) PROTHENA CORPORATION plc incorporated in Ireland under registration no. 518146 and having its registered office at 25-28 North Wall Quay, Dublin 1, Ireland (the Company ); and

 

(2) [Name] of [Address] (the Director )

(together the Parties ).

WHEREAS :

 

A. The Director was a director of the Company and, upon his resignation on the date hereof, wishes to be indemnified in respect of him acting as a director of the Company.

 

B. The Company has agreed to indemnify the Director as hereinafter provided.

WITNESSES as follows:

 

1. INDEMNITY

 

  1.1. The Company covenants with and undertakes to the Director and his personal representatives to indemnify and keep fully indemnified the Director on and with effect from execution of this deed from and against any fines, penalties, awards, claims, actions, proceedings, judgments, decrees, orders, directions, liabilities (including tax liabilities), losses (,costs and expenses of whatsoever nature, howsoever arising and whether arising before or after the date of this letter (including, without limitation, any reasonable professional fees, charges or expenses incurred in, insofar as reasonable, investigating, obtaining advice with respect to or resisting or, subject to the prior consent of the Company (such consent not to be unreasonably withheld or delayed), appealing any such fines, penalties, awards, claims, actions, proceedings, judgments, decrees, orders, directions, liabilities, losses, costs or expenses) suffered or incurred as a consequence of the decisions made by him in his capacity as a director of the Company.

 

  1.2. For the avoidance of doubt, it is agreed by and between the Parties hereto that the liability of the Company pursuant to the indemnity contained in clause 1.1 shall not be deemed to be modified or discharged or affected in any way whatsoever:

 

  1.2.1. by reason of any investigation or enquiry made or which ought to have been made by or on behalf of the Director; or

 

  1.2.2. by any information of which the Director has knowledge (whether actual, imputed or constructive);

and none of the matters set out at sub-clauses 1.2.1 and 1.2.2 above will operate so as to prejudice or limit any claim which the Director or his personal representatives may be entitled to bring or to reduce any amount recoverable by the Directors or his personal representatives under clause 1.1.

 

2. SECTION 200 OF COMPANIES ACT, 1963

The provisions of this Deed shall only have effect insofar as they are not contrary to or in violation of the laws of Ireland and in particular (to the extent applicable) section 200 of the Companies Act, 1963.

 

3. GOVERNING LAW

This Deed shall be governed by and construed in accordance with the laws of Ireland and the Parties irrevocably submit to the exclusive jurisdiction of the Irish courts.

 

2


IN WITNESS whereof the Parties have executed this Deed on the date at the beginning of this Deed.

GIVEN UNDER THE COMMON SEAL of

PROTHENA CORPORATIOIN PLC

 

   

 

    Signature of Director
   

 

    Signature of Director / Company Secretary
SIGNED AND DELIVERED as a Deed    
by [            ]    
in the presence of:    

 

    Signature of Individual

 

   
Signature of Witness    

 

   
Occupation of Witness    

 

   
Address of Witness    

 

3

Exhibit 99.1

[ELAN LETTERHEAD]

[ ], 2012

Dear fellow Elan shareholder:

In August 2012, we announced our intention to separate a substantial portion of our drug discovery business platform, which we refer to as the “Prothena Business,” into a new, publicly traded company incorporated in Ireland which we have named Prothena Corporation plc (“Prothena”).

We believe that the transaction will provide a number of benefits, including (i) greater strategic focus of financial resources and management’s efforts, (ii) direct and differentiated access to capital resources, (iii) enhanced investor choice through investment opportunities in two separate companies and (iv) enhanced management incentive tools.

The separation of the Prothena Business from Elan will be completed through a “demerger” under Irish law. The demerger will be effected by Elan transferring the Prothena Business to Prothena, in exchange for Prothena issuing directly to the holders of Elan ordinary shares and Elan American Depositary Shares (“ADSs”), on a pro rata basis, Prothena ordinary shares representing 99.99% of Prothena’s outstanding shares (with the remaining 0.01% of Prothena’s outstanding shares, which were previously issued to the original incorporators of Prothena and which we refer to as the “incorporator shares,” being mandatorily redeemed by Prothena after the demerger as described below). Prothena’s issuance of 99.99% of its outstanding shares will constitute a deemed “in specie distribution,” or a distribution in the form of assets other than cash (in this case, Prothena shares), by Elan to holders of record of Elan ordinary shares and Elan ADSs as of 11:59 p.m., Dublin Time, on December 14, 2012, which will be the record date. Pursuant to the demerger, each Elan shareholder will receive 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs held as of the record date.

Prior to the separation and distribution, a wholly-owned subsidiary of Elan agreed (conditioned on the consummation of the separation and distribution) to subscribe for newly-issued ordinary shares of Prothena, representing 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription), for a cash payment to Prothena of $26.0 million. This subscription will be consummated immediately following the separation and distribution. Immediately after the consummation of Elan’s subscription for 18% of Prothena’s outstanding ordinary shares (as calculated immediately following the consummation of such subscription), the incorporator shares will be mandatorily redeemed by Prothena pursuant to their terms for their initial subscription price, and cancelled.

Immediately following the separation and distribution, our subscription for Prothena ordinary shares and Prothena’s redemption of the incorporator shares, Elan shareholders will own directly 82% of the outstanding ordinary shares of Prothena, and Elan will own the remaining 18%. For U.S. federal income tax purposes, Elan expects to receive an opinion on the closing date of the separation and distribution from each of Cadwalader, Wickersham & Taft LLP and KPMG LLP to the effect that the separation and distribution should qualify as a reorganization under section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), and the distribution, as such, should qualify as a distribution of our ordinary shares to Elan shareholders under section 355 of the Code. If the separation and distribution are so treated, Elan shareholders should not recognize any gain for U.S. federal income tax purposes on the receipt of our ordinary shares, except with respect to cash received in lieu of fractional Prothena ordinary shares. However, the separation and distribution are not conditioned on the receipt of an opinion confirming these expected U.S. federal income tax consequences, nor will Elan seek a ruling from the United States Internal Revenue Service addressing the separation and distribution and related transactions.

For Irish tax purposes, Elan expects to receive an opinion on the closing date of the separation and distribution from KPMG Ireland to the effect that save with respect to the receipt of cash in lieu of fractional entitlements to Prothena ordinary shares, the distribution should not give rise to a taxable event for those classes


of Irish shareholders specifically referred to in the section below entitled “Material Irish Tax Consequences of the Distribution.” However, the distribution is not conditioned on the receipt of an opinion confirming these expected Irish tax consequences, nor will Elan seek a specific confirmation from the Revenue Commissioners of Ireland in respect of the anticipated tax treatment of the distribution.

On December 12, 2012, Elan shareholders voted to approve the making of the deemed in specie distribution by Elan. You do not need to take any further action to receive the Prothena ordinary shares to which you are entitled as an Elan shareholder. Furthermore, you do not need to pay any consideration to Elan or Prothena or surrender or exchange your Elan ordinary shares or Elan ADSs in connection with the separation and distribution.

Immediately following the separation and distribution, you will own ordinary shares and/or ADSs in Elan, and ordinary shares in Prothena. Elan ordinary shares will continue to trade on the Official List of the Irish Stock Exchange, and Elan ADSs will continue to trade on the New York Stock Exchange under the symbol “ELN.” Prothena’s ordinary shares are expected to be traded on The Nasdaq Global Market under the symbol “PRTA.”

We encourage you to read the attached information statement, which is being provided to holders of record of Elan ordinary shares and ADSs on December 14, 2012. The information statement describes the separation and distribution in detail and contains important business and financial information about Prothena.

On December 7, 2012, the board of directors of Elan approved the separation and distribution and our subscription for Prothena ordinary shares. We believe that these transactions are in the best interests of Elan, our shareholders, and Prothena. We remain committed to working on your behalf to continue to build long-term shareholder value.

Very truly yours,

Robert A. Ingram

Chairman of the Board

Elan Corporation, plc


[PROTHENA CORPORATION PLC LETTERHEAD]

[ ], 2012

Dear future Prothena Corporation plc shareholder:

On behalf of the entire Prothena team, I welcome you as a future shareholder. Prothena is a biotechnology company focused on the discovery and development of novel antibodies for the potential treatment of a broad range of diseases that involve protein misfolding or cell adhesion. Following the separation of the Prothena business from Elan Corporation, plc, Prothena will continue to focus on innovation, differentiated scientific advancement, unique intellectual property creation and translational capability to transform science into clinical assets.

As an independent, publicly-traded company, we believe we can more effectively focus on and execute our objectives and satisfy the capital needs of our company. We believe this will bring more value to you as a shareholder than we could as an operating segment of Elan. In addition, we will have the ability to offer our employees incentive opportunities linked to our performance as an independent, publicly-traded company, which we believe will further enhance employee performance.

Our focused management team is highly motivated to be a growth-oriented company and to enhance value for our shareholders. We believe that following the separation, our talented management and scientific team, who at Elan discovered an approach to immunotherapy for Alzheimer’s disease, will have the resources to accomplish these goals.

I encourage you to learn more about Prothena and our strategic initiatives by reading the attached information statement. Our ordinary shares have been approved for listing on The Nasdaq Global Market under the symbol “PRTA.”

We look forward to continuing our research and development programs and rewarding our shareholders as we begin a new and exciting chapter in our company’s history.

 

Very truly yours,

Lars Ekman, MD, PhD

Chairman of the Board

Prothena Corporation plc


Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

 

PRELIMINARY AND SUBJECT TO COMPLETION, DATED DECEMBER 13, 2012

PRELIMINARY INFORMATION STATEMENT

Prothena Corporation plc

Ordinary Shares

(par value $0.01 per share)

 

 

This information statement is being furnished in connection with the separation of a substantial portion of the drug discovery business platform of Elan Corporation, plc (“Elan”), which we describe more specifically herein and which we refer to as the “Prothena Business,” into a new company, Prothena Corporation plc (“Prothena”), an Irish public limited company. The separation of the Prothena Business from Elan will be completed through a “demerger” under Irish law. The demerger will be effected by Elan transferring the Prothena Business to Prothena, in exchange for Prothena issuing directly to the holders of Elan ordinary shares and Elan American Depositary Shares (“ADSs”), on a pro rata basis, Prothena ordinary shares representing 99.99% of Prothena’s outstanding shares (with the remaining 0.01% of Prothena’s outstanding shares, which were previously issued to the original incorporators of Prothena and which we refer to as the “incorporator shares,” being mandatorily redeemed by Prothena after the demerger as described below). Prothena’s issuance of 99.99% of its outstanding shares will constitute a deemed “ in specie distribution,” or a distribution in the form of assets other than cash (in this case, Prothena shares), by Elan to holders of record of Elan ordinary shares and Elan ADSs as of 11:59 p.m., Dublin Time, on December 14, 2012, which will be the record date. Pursuant to the demerger, each Elan shareholder will receive 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs held as of the record date. We refer to this demerger, including the transfer of the Prothena Business to Prothena and the pro rata issuance by Prothena of 99.99% of its outstanding shares, as the “distribution” and we refer to the reorganization transactions (which will precede the distribution) and the distribution collectively as the “separation and distribution.” The distribution is expected to be effective at 11:59 p.m., Dublin Time, on December 20, 2012, subject to certain conditions described in this information statement; provided, that if the conditions have not been satisfied or waived on or before the effective date of the distribution, the distribution date may be extended until the conditions are satisfied or waived.

Prior to the separation and distribution, a wholly-owned subsidiary of Elan agreed (conditioned on the consummation of the separation and distribution) to subscribe for newly-issued ordinary shares of Prothena, representing 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription), for a cash payment to Prothena of $26.0 million. This subscription will be consummated immediately following the separation and distribution. Immediately after the consummation of Elan’s subscription for 18% of Prothena’s outstanding ordinary shares (as calculated immediately following the consummation of such subscription), the incorporator shares will be mandatorily redeemed by Prothena pursuant to their terms for their initial subscription price, and cancelled. We refer to the separation and distribution, together with Elan’s subsequent subscription for an aggregate of 18% of our outstanding ordinary shares (as calculated immediately following the consummation of such subscription) and the redemption of the incorporator shares, as the “Prothena Transactions.”

We will not distribute any fractional Prothena ordinary shares. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices, and distribute the aggregate net cash proceeds from the sales on a pro rata basis to each holder who would otherwise have been entitled to receive a fractional share in the distribution.

For U.S. federal income tax purposes, Elan expects to receive an opinion on the closing date of the Prothena Transactions from each of Cadwalader, Wickersham & Taft LLP and KPMG LLP to the effect that the separation and distribution should qualify as a reorganization under section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”), and the distribution, as such, should qualify as a distribution of our ordinary shares to Elan shareholders under section 355 of the Code. If the separation and distribution are so treated, Elan shareholders should not recognize any gain for U.S. federal income tax purposes on the receipt of our ordinary shares, except with respect to cash received in lieu of fractional Prothena ordinary shares. However, the separation and distribution are not conditioned on the receipt of an opinion confirming these expected U.S. federal income tax consequences, nor will Elan seek a ruling from the United States Internal Revenue Service (“IRS”) addressing the separation and distribution and related transactions. See “The Separation and Distribution — Material U.S. Federal Income Tax Consequences of the Separation and Distribution and Related Transactions.”

For Irish tax purposes, Elan expects to receive an opinion on the closing date of the separation and distribution from KPMG Ireland to the effect that, save with respect to the receipt of cash in lieu of fractional entitlements to Prothena ordinary shares, the distribution should not give rise to a taxable event for those classes of Irish shareholders specifically referred to in the section below “Material Irish Tax Consequences of the Distribution.” However, the distribution is not conditioned on the receipt of an opinion confirming these expected Irish tax consequences, nor will Elan seek a specific confirmation from the Revenue Commissioners of Ireland in respect of the anticipated tax treatment of the distribution.

On December 12, 2012, Elan shareholders voted to approve the declaration of the deemed in specie distribution by Elan described above. No further shareholder approval of the separation and distribution is required or sought. We are not asking you for a proxy and you are requested not to send us a proxy. Elan shareholders will not be required to pay for the Prothena ordinary shares to be received by them in the separation and distribution, or to surrender or to exchange Elan ordinary shares or Elan ADSs in order to receive Prothena ordinary shares, or to take any other action in connection with the separation and distribution.

There is currently no trading market for Prothena ordinary shares, although we expect that a limited market, commonly known as a “when-issued” trading market, will develop shortly following the record date for the distribution, and we expect “regular-way” trading of Prothena ordinary shares to begin on the first trading day following the completion of the separation and distribution. Our ordinary shares have been approved for listing on The Nasdaq Global Market under the symbol “PRTA.”

 

 

In reviewing this information statement, you should carefully consider the matters described under the caption “ Risk Factors ” beginning on page 21.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities.

 

 

The date of this information statement is [ ], 2012.

This information statement was first mailed to Elan shareholders on or about [ ], 2012.


TABLE OF CONTENTS

 

SUMMARY

     3   

RISK FACTORS

     21   

FORWARD-LOOKING STATEMENTS

     43   

THE SEPARATION AND DISTRIBUTION AND RELATED TRANSACTIONS

     45   

ARRANGEMENTS BETWEEN ELAN AND PROTHENA

     62   

CAPITALIZATION

     69   

LISTING AND TRADING OF OUR ORDINARY SHARES

     70   

DIVIDEND POLICY

     71   

SELECTED HISTORICAL CARVE-OUT COMBINED FINANCIAL DATA

     72   

UNAUDITED PRO FORMA CONDENSED CARVE-OUT COMBINED FINANCIAL STATEMENTS

     74   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     77   

BUSINESS

     87   

CORPORATE GOVERNANCE AND MANAGEMENT

     98   

EXECUTIVE COMPENSATION

     104   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     109   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     111   

DESCRIPTION OF SHARE CAPITAL

     112   

INDEMNIFICATION OF DIRECTORS AND OFFICERS

     127   

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     128   

INDEX TO FINANCIAL STATEMENTS

     F-1   

Industry and Market Data

This information statement includes industry and trade association data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys and other independent sources available to us. Some data are also based on our good faith estimates, which are derived from management’s knowledge of the industry and from independent sources. These third-party publications and surveys generally state that the information included therein has been obtained from sources believed to be reliable, but that the publications and surveys can give no assurance as to the accuracy or completeness of such information.

Trademarks and Service Marks

Unless otherwise indicated, the logos, trademarks, trade names, and service marks mentioned in this information statement are currently the property of, or are used with the permission of, Prothena or Elan. We own or have rights to use the trademarks, service marks and trade names that we use in conjunction with the operation of our business. Some of the more important trademarks that we own or have rights to use that appear in this information statement may be registered in the United States and other jurisdictions. Each trademark, trade name or service mark of any other company appearing in this information statement is owned by such company (including the trademark VELCRO, which is owned by Velcro Industries, B.V.).

About this Information Statement

Except as otherwise indicated or unless the context otherwise requires, all references to “we,” “our,” “us,” “Prothena” or the “Company” refer to Prothena Corporation plc, an Irish public limited company, together with its consolidated subsidiaries. References in this information statement to “Elan” refer to Elan Corporation, plc and its consolidated subsidiaries (other than, for all periods following the separation and distribution, Prothena). All references to “we,” “our,” “us,” “Prothena” or the “Company” in the context of historical results refer to the Prothena Business. Except as otherwise indicated or unless the context otherwise requires, the

 

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information included in this information statement, including the combined financial statements of Prothena, which are comprised of the assets and liabilities of the Prothena Business, assumes the completion of all the transactions referred to in this information statement in connection with the separation of the Prothena Business from Elan (including the issuance of Prothena ordinary shares to Elan immediately following the separation and distribution).

This information statement is being furnished solely to provide information to Elan shareholders who will receive ordinary shares of Prothena in connection with the separation and distribution. It is not provided as an inducement or encouragement to buy or sell any securities. You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information contained in this information statement, unless we are required by applicable securities laws to do so.

 

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SUMMARY

The following is a summary of some of the information contained in this information statement. This summary is included for convenience only and should not be considered complete. This summary is qualified in its entirety by the more detailed information contained elsewhere in this information statement. You should read the entire information statement carefully, including the risks discussed under “Risk Factors” beginning on page 21 and the financial statements and notes thereto included elsewhere in the information statement. Some of the statements in this summary constitute forward-looking statements. See “Forward-Looking Statements.”

Our Company

Overview

Prothena’s business consists of a substantial portion of Elan Corporation, plc’s former drug discovery business platform, including the following former wholly owned subsidiaries of Elan and related tangible assets and liabilities, which we refer to as the “Prothena Business:”

 

   

Neotope Biosciences Limited (“Neotope Biosciences”) . Neotope Biosciences, a wholly owned subsidiary of Prothena, is engaged in the discovery and development of antibodies for the potential treatment of a broad range of indications, including

 

   

AL and AA forms of amyloidosis, complex diseases caused by tissue deposition of misfolded proteins that result in progressive organ damage;

 

   

Parkinson’s disease and related synucleinopathies; and

 

   

Autoimmune disease and metastatic cancers such as melanoma in which melanoma cell adhesion molecule (“MCAM”) mediated cell adhesion may contribute to disease pathology or progression.

Neotope Biosciences’ strategy is to apply its expertise in generating novel therapeutic antibodies, working with a broad range of collaborators in specific disease models, to select candidates for further clinical development. Neotope Biosciences’ portfolio of targets includes alpha-synuclein for the potential treatment of synucleinopathies, such as Lewy body dementia and Parkinson’s disease, MCAM for autoimmune disease and metastatic cancers such as melanoma, and tau for Alzheimer’s disease and other tauopathies. Neotope Biosciences also has a program focused on the potential treatment of type 2-diabetes.

 

   

Onclave Therapeutics Limited (“Onclave”) . Onclave, a wholly-owned subsidiary of Neotope Biosciences, is engaged in the development of our lead program NEOD001, which is being evaluated for the potential treatment of AL amyloidosis. In 2012, Onclave was granted orphan drug designation of NEOD001 by the United States Food and Drug Administration (“FDA”). The FDA may grant orphan drug designation to potential therapeutics intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, which means that, if an applicant is the first to receive FDA approval for a particular active ingredient to treat a particular disease for which it was granted orphan drug designation, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances, for seven years. We also plan to seek Orphan Drug Designation for NEOD001 in the European Union in 2013. In September 2012, Onclave filed an Investigational New Drug Application (“IND”) with the FDA for NEOD001 for AL amyloidosis. In October 2012, the FDA accepted the IND for NEOD001, allowing Onclave to proceed with plans to test NEOD001 in a phase 1 clinical trial. Onclave expects to initiate a phase 1 clinical trial of NEOD001 in AL amyloidosis patients by early 2013. The primary objectives of the phase 1 trial will be to evaluate safety and tolerability of NEOD001 and determine a recommended dose for testing NEOD001 in phase 2 trials. We anticipate that a phase 2 trial of NEOD001 could be initiated by mid-2014 assuming a phase 2 recommended dose is identified prior to that date.

 

 

 

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Prothena Biosciences Inc (“Prothena US”) . Prothena US, a wholly-owned subsidiary of Neotope Biosciences, was organized as part of the reorganization transactions and will provide research and development services to Neotope Biosciences. Pursuant to the terms of the Research and Development Services Agreement, Prothena US will provide research and development services to Elan for a period of no less than 2 years following the separation and distribution.

Neotope Biosciences, Onclave, and Prothena US are collectively referred to herein as the “Prothena Subsidiaries.”

Strategy

We intend to advance and develop novel and proprietary therapeutic antibodies discovered by our scientists internally. Our goal is to be a leading biotechnology company focused on the discovery and development of novel antibodies for the potential treatment of a broad range of diseases that involve protein misfolding or cell adhesion. Key elements of our strategy to achieve this goal are to:

 

   

Continue to discover potential therapeutic antibodies directed against novel targets involved in protein misfolding and cell adhesion;

 

   

Quickly translate our research discoveries into clinical development;

 

   

Establish early clinical proof of concept with our potentially therapeutic antibodies;

 

   

Strategically collaborate or out-license select programs;

 

   

Highly leverage external talent and resources; and

 

   

Collaborate with scientific and clinical experts in disease areas of interest.

Reasons for the Separation and Distribution

The board of directors of Elan has determined that the separation and distribution are in the best interests of Elan and its shareholders because it will provide both Elan and Prothena the following key benefits: (i) greater strategic focus of financial resources and management’s efforts, (ii) direct and differentiated access to capital resources, (iii) enhanced investor choice through investment opportunities in two separate companies and (iv) enhanced management incentive tools.

Risk Factors

Our new company faces both general and specific risks and uncertainties that are described in detail under “Risk Factors” beginning on page 21. These risks and uncertainties relate to:

 

   

Our financial position, our need for additional capital and our business, including without limitation, risks arising out of the fact that we (i) have not generated any third party external revenues to date, (ii) expect to incur substantial losses for the foreseeable future, (iii) believe that our existing cash and cash equivalents will be sufficient to support us through June 30, 2015, following which we will require additional capital, which may or may not be available, (iv) are highly dependent on our ability to retain and attract qualified personnel and (v) will need to provide assurances to collaborators, prospective collaborators and suppliers that our financial resources and stability on a stand-alone basis is sufficient to satisfy their requirements for dong or continuing to do business with us;

 

   

The discovery, development and regulatory approval of drug candidates, including without limitation, risks arising out of the fact that (i) we are highly dependent on research and development programs that are at an early stage, (ii) we have no drug candidates in clinical trials and may not be able to progress drug candidates in the clinic or obtain regulatory approval for such drug candidates at all, or in a timely

 

 

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manner, and (iii) our drug candidates will be subject to regulatory requirements, both before and after receipt of marketing approval, violation of which may subject us to administrative or judicially imposed sanctions;

 

   

The commercialization of our drug candidates, including without limitation, risks arising out of the fact that even if any of our candidates receive regulatory approval, (i) the approved product(s) may not achieve broad market acceptance or significant revenue, (ii) we may not be able to establish sufficient sales and marketing capabilities or enter into agreements with third parties to sell the approved product(s), (iii) the government and third-party payors may fail to provide adequate coverage and reimbursement rates for such drug candidate(s), (iv) the markets for our drug candidate(s) will be subject to intense competition, (v) we could incur substantial liabilities if a successful product liability or clinical trial claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities and (vi) we deal with hazardous materials and must comply with environmental laws and regulations;

 

   

Our dependence on third parties, including without limitation, risks arising out of the fact that we (i) will rely on third parties to conduct our clinical trials, (ii) may have to alter our research and development plans if we do not establish strategic collaborations, (iii) have no manufacturing capacity and have to rely on third-party manufacturers to produce our pre-clinical and clinical trial drug supplies, and (iv) will depend on third-party suppliers for key raw materials used in our manufacturing process;

 

   

Our intellectual property, including without limitation, risks arising out of the fact that (i) we may be unable to adequately protect the intellectual property relating to our drug candidates, (ii) our ability to successfully commercialize our drug candidates will be harmed if we infringe on the intellectual property rights of others, (iii) licenses to patent rights that we intend to enter into may be subject to termination if we fail to comply with our obligations under such licenses, (iv) litigation regarding patents, patent applications and other proprietary rights may be expensive, time consuming and result in delays in bringing drug candidates to market, (v) we may be unable to adequately prevent disclosure of trade secrets and other proprietary information and (vi) we may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employees;

 

   

The separation and distribution, including without limitation, risks arising out of the fact that (i) we may not realize some or all of the potential benefits we expect from our separation, (ii) our ability to operate our business effectively may suffer if we do not establish our own financial, administrative and other support functions, (iii) our accounting and other management systems and resources may not be adequately prepared to meet our financial reporting and other requirements, (iv) our historical and pro forma financial information is not necessarily representative of the results we would have achieved as a separate, publicly-traded company, (v) the agreements entered into with Elan involve conflicts of interest, (vi) the IRS or the Revenue Commissioners of Ireland may successfully challenge the tax-free treatment of the separation and distribution, (vii) we expect to be treated as a “passive foreign investment company” for U.S. federal income tax purposes, (viii) the combined post-separation of value of Elan and Prothena shares may not equal or exceed the pre-separation value of Elan shares, (ix) certain of our executive officers and directors may have conflicts of interest after the distribution and (x) so long as we continue to be an emerging growth company, we will be exempt from certain reporting requirements; and

 

   

Our ordinary shares, including without limitation, risks arising out of the fact that (i) substantial sales of our ordinary shares may occur following the distribution, (ii) there is no existing market for our ordinary shares and a trading market that will provide you with adequate liquidity may not develop for our ordinary shares, (iii) we do not anticipate paying cash dividends, (iv) your percentage ownership in Prothena may be diluted in the future, (v) future sales of our ordinary shares cold adversely effect the trading price of our ordinary shares, (vi) Irish law may afford less protection to holders of our ordinary shares than the laws of the United States and (vii) our auditor is not inspected by the U.S. Public Company Accounting Oversight Board.

 

 

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We urge you to see “Risk Factors” beginning on page 21 for a more thorough discussion of risk factors associated with our business, the separation and distribution and our ordinary shares.

Other Information

Prothena Corporation plc was incorporated as a private limited company, under the name “Neotope Corporation Limited”, under the laws of Ireland on September 26, 2012 and re-registered as a public limited company and changed its name to “Neotope Corporation plc” on October 25, 2012. On November 1, 2012, the shareholders of Prothena resolved, by way of special resolution, to change the name of the company to “Prothena Corporation plc”, and this was approved by the Irish Registrar of Companies on November 7, 2012. Our principal executive offices are located at 650 Gateway Boulevard, South San Francisco, California. Our telephone number is (650) 837-8550. Our registered office is 25-28 North Wall Quay, Dublin 1, Ireland. Our website address is www.prothena.com. Information contained on any website referenced in this information statement is not incorporated by reference in this information statement or in the Form 10 of which this information statement is a part.

Emerging Growth Company

We are an “Emerging Growth Company,” as defined in the Jumpstart Our Business Startups Act (or “JOBS Act”), and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “Emerging Growth Companies.” These include, but are not limited to, (i) reduced obligations with respect to the disclosure of selected financial data in registration statements filed with the Securities and Exchange Commission (including the registration statement on Form 10 of which this information statement is a part), (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, (iii) an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act provides that an “Emerging Growth Company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 (the “Securities Act”) for complying with new or revised accounting standards. In other words, an “Emerging Growth Company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time and that election is irrevocable.

We could remain an “Emerging Growth Company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the “Exchange Act”), which would occur if the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

 

 

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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

The following is a brief summary of the terms of the separation and distribution. Please see “The Separation and Distribution and Related Transactions” for a more detailed description of the matters described below.

 

Q: What is the separation and distribution?

 

A: The separation and distribution is a series of transactions by which Elan will separate its Prothena Business from Elan’s other businesses. To complete the separation and distribution, we will issue 99.99% of our outstanding shares to holders of Elan ordinary shares and Elan ADSs, creating two separate, publicly traded companies. We expect that our ordinary shares will be listed on The Nasdaq Global Market.

 

Q: Will Elan hold any interest in Prothena after the separation and distribution?

 

A: Prior to the separation and distribution, a wholly-owned subsidiary of Elan agreed (conditioned on the consummation of the separation and distribution) to subscribe for newly-issued ordinary shares of Prothena, representing 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription) for a cash payment to Prothena of $26.0 million. This subscription will be consummated immediately following the separation and distribution and immediately prior to the mandatory redemption by Prothena of the incorporator shares.

 

Q: What is Prothena Corporation plc?

 

A: Prothena Corporation plc is a newly formed, public limited company incorporated in Ireland that was created for the purpose of completing the separation and distribution. It will hold, directly or indirectly, all of the assets and liabilities of the Prothena Business, including 100% of the outstanding ordinary shares of Neotope Biosciences. Neotope Biosciences will in turn hold 100% of the outstanding shares of Onclave and 100% of the outstanding common stock of Prothena US. Following the separation and distribution, Prothena will be a separate company from Elan. The number of Elan ordinary shares and/or Elan ADSs that you own prior to the separation and distribution will not change as a result of the separation and distribution.

 

Q: How will the separation and distribution work?

 

A: The separation of the Prothena Business from Elan will be completed through a “demerger” under Irish law. The demerger will be effected by Elan transferring the Prothena Business to Prothena, in exchange for Prothena issuing directly to the holders of Elan ordinary shares and Elan ADSs, on a pro rata basis, Prothena ordinary shares representing 99.99% of Prothena’s outstanding shares. Prothena’s issuance of 99.99% of its outstanding shares will constitute a deemed “ in specie distribution” by Elan to holders of record of Elan ordinary shares and ADSs as of the record date. Immediately after the separation and distribution and consummation of the subscription by Elan for 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription), the remaining 0.01% of Prothena’s outstanding shares, which we refer to as the “incorporator shares,” and which are beneficially held by Goodbody Subscriber One Limited, a private limited company incorporated under the laws of Ireland and unrelated to Elan, will be mandatorily redeemed by Prothena pursuant to their terms for their initial subscription price, and cancelled. For additional information on the distribution, see “The Separation and Distribution and Related Transactions — Manner of Effecting the Separation and Distribution and Related Transactions.”

 

Q: What is being distributed in the separation and distribution?

 

A:

At the effective time of the separation and distribution, we will issue to you 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs that you hold of record on the record date. Based on

 

 

7


  approximately 594.3 million Elan ordinary shares (including 489.2 million ordinary shares held as Elan ADSs) outstanding as of November 30, 2012, a total of approximately 14.5 million Prothena ordinary shares will be issued to the holders of Elan ordinary shares or Elan ADSs. For a more detailed description, see “The Separation and Distribution and Related Transactions.”

 

Q: After the separation and distribution, the consummation of the subscription by a wholly owned subsidiary of Elan for 18% of Prothena’s outstanding ordinary shares (as calculated immediately following the consummation of such subscription) and Prothena’s mandatory redemption of the incorporator shares will the Elan shareholders have the same proportionate ownership in the Prothena Business as they did before these transactions?

 

A: Yes. Before these transactions, the Elan shareholders owned 100% of the Prothena Business through their direct ownership of 100% of the outstanding shares of Elan, which in turn owned the Prothena Business. Immediately after these transactions, Elan shareholders will directly and indirectly own 100% of the Prothena Business, by virtue of their (i) direct ownership of 82% of Prothena’s outstanding shares and (ii) indirect ownership of 18% of Prothena’s outstanding shares. Elan shareholders “indirectly” own 18% of Prothena’s outstanding shares because they own 100% of the outstanding shares of Elan, which in turn (through a wholly owned subsidiary) owns 18% of Prothena’s outstanding shares.

 

Q: Why is the separation of Prothena structured as a distribution and not a sale?

 

A: Elan believes that a tax-free distribution of Prothena ordinary shares to Elan shareholders is an efficient way to separate the Prothena Business from the rest of Elan that will ultimately enhance value for Elan shareholders. Compared to a sale of Prothena, the distribution offers a higher degree of certainty of completion in a timely manner. The distribution is consistent with Elan’s Articles of Association and is customary in demergers by Irish companies.

The Elan business, which generates significant revenue and cash flow from its marketed product, has significantly different operating characteristics than the Prothena Business, which consists entirely of early stage research programs that require significant ongoing cash investment and generate substantial losses. Elan believes that a separation will ultimately enhance value for Elan shareholders because it will enable Elan’s management team to focus solely on its marketed product and late-stage development programs, and our management team to focus solely on our business. The dilution of attention involved in managing a combination of businesses with competing goals and needs will thus be eliminated. In addition, the distribution permits investors to have the flexibility to choose to own Elan, Prothena, or both businesses.

 

Q: What is the record date for the distribution?

 

A: Record ownership will be determined as of 11:59 p.m., Dublin Time, on December 14, 2012, which we refer to as the “record date.” The person in whose name Elan ordinary shares or Elan ADSs are registered at 11:59 p.m. on the record date is the person to whom the Prothena ordinary shares will be issued in the distribution.

 

Q: When will the distribution occur?

 

A: We expect that Prothena ordinary shares will be distributed by the distribution agent, on behalf of Elan, effective at 11:59 p.m., Dublin Time on December 20, 2012, subject to certain conditions described in this information statement; provided, that if the conditions have not been satisfied or waived on or before the effective date of the distribution, that date may be extended until the conditions are satisfied or waived. We refer to the effective date of the distribution as the “distribution date.”

 

Q: What will the relationship between Elan and us be following the Prothena Transactions?

 

A:

Following the Prothena Transactions, a wholly-owned subsidiary of Elan will own an aggregate of 18% of our outstanding ordinary shares for a limited period of time. However, following the Prothena Transactions,

 

 

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  no officers, directors or key employees of Elan will serve as officers or directors, or act on behalf of, Prothena or any of our subsidiaries. In connection with the separation and distribution, we and Elan will enter into the Demerger Agreement and several other agreements for the purpose of accomplishing the separation of our business from Elan’s other businesses. These agreements also will govern our relationship with Elan subsequent to the separation and distribution and provide for the allocation of tax and certain other liabilities and obligations attributable to periods prior to the separation and distribution. These agreements will also include arrangements with respect to transition services, the provision of research services by Prothena for Elan and the acquisition, voting and disposition of Prothena shares subscribed for by Elan immediately after the separation and distribution. The Demerger Agreement will provide that we and Elan agree to provide each other with appropriate indemnities with respect to liabilities arising out of the Prothena Businesses. See “Arrangements between Elan and Prothena.”

 

Q: What does Elan intend to do with the 18% of our outstanding ordinary shares that its wholly-owned subsidiary will subscribe for immediately following the separation and distribution?

 

A: Elan has agreed to dispose of our ordinary shares as soon as a disposition is warranted, consistent with the business purposes for Elan’s retention of our ordinary shares.

 

Q: How will Elan vote our ordinary shares that it subscribes for immediately following the separation and distribution?

 

A: Elan has agreed to vote any of our ordinary shares that it subscribes for immediately following the separation and distribution in proportion to the votes cast by our other shareholders and will grant us a proxy with respect to such shares. For additional information on these voting arrangements, see “Arrangements between Elan and Prothena — Subscription and Registration Rights Agreement.”

 

Q: What do I have to do to participate in the distribution?

 

A: On December 12, 2012, Elan shareholders voted to approve the declaration of the deemed in specie distribution by Elan of 99.99% of Prothena’s outstanding shares. No further action is required on your part. Elan shareholders are not required to pay for the Prothena ordinary shares to be received by them in the separation and distribution, or to surrender or to exchange Elan ordinary shares or Elan ADSs in order to receive Prothena ordinary shares, or to take any other action in connection with the separation and distribution. However, we encourage you to read this information statement carefully.

 

Q: How will Elan distribute Prothena ordinary shares to me?

 

A: Depending on the manner in which you hold your Elan ordinary shares or ADSs, the distribution agent will deliver the Prothena ordinary shares to which you are entitled to your broker or nominee in electronic form, which shares will be credited to your account by such broker or nominee, or the distribution agent will deliver to you physical stock certificates evidencing your Prothena ordinary shares. For a detailed description of the manner in which your Prothena ordinary shares will be distributed, see “The Separation and Distribution and Related Transactions — Distribution of Our Ordinary Shares.”

 

Q: If I sell Elan ordinary shares or Elan ADSs that I held on the record date on or before the distribution date, am I still entitled to receive Prothena ordinary shares distributable with respect to the Elan ordinary shares or Elan ADSs I sold?

 

A:

If you sell your Elan ordinary shares or Elan ADSs on or before the distribution date, you may also be selling your right to receive Prothena ordinary shares. See “The Separation and Distribution and Related

 

 

9


  Transactions — Trading Between the Record Date and Distribution Date.” You are encouraged to consult with your financial advisor regarding the specific implications of selling your Elan ordinary shares or Elan ADSs on or before the distribution date.

 

Q: How will fractional shares be treated in the separation and distribution?

 

A: We will not distribute any fractional Prothena ordinary shares. Instead, as soon as practicable after the distribution date, the distribution agent will aggregate fractional Prothena share interests into whole shares, sell the whole shares in the open market at prevailing market prices, and distribute the aggregate net cash proceeds (after deduction of any required costs and taxes) from the sales on a pro rata basis to each holder who would otherwise have been entitled to receive a fractional share in the distribution. The distribution agent may select one or more broker-dealers, provided that no such entity is an affiliate of Elan or Prothena. None of Elan, Prothena or the distribution agent will guarantee any minimum sale price for the fractional Prothena ordinary share interests aggregated and sold on the open market, or pay any interest with respect to such sale proceeds. Payment of cash in lieu of fractional Prothena ordinary shares will be made solely for the purpose of avoiding the expense and inconvenience to Prothena of issuing fractional Prothena ordinary shares and will not represent separately bargained-for consideration.

 

Q: How will options and other awards linked to Elan ordinary shares or Elan ADSs be treated in the separation and distribution?

 

A: Employees of Elan hold stock options to purchase Elan ordinary shares or Elan ADSs and restricted stock units (“RSUs”) representing a right to receive Elan ordinary shares or Elan ADSs upon settlement.

With respect to Elan options and RSUs held by the majority of Elan employees that become employees of Prothena effective upon the separation and distribution:

 

   

unvested Elan options and RSUs that would otherwise have vested within twelve months following the effective date of the separation and distribution will vest immediately upon the separation and distribution, with the RSUs (which by their terms are settled upon vesting) settled in Elan ordinary shares or Elan ADSs in accordance with their terms;

 

   

other unvested Elan options and RSUs will be forfeited; and

 

   

all vested Elan options (including options the vesting of which were accelerated as described above) will be required to be exercised for Elan ordinary shares or Elan ADSs within twelve months of the effective date of the separation and distribution, or will be forfeited.

However, for Elan employees who are aged 55 or over with at least five years of service and who become employees of Prothena, unvested Elan options and RSUs will become fully vested and exercisable upon the separation and distribution, with the RSUs (which, by their terms, are settled upon vesting) settled in Elan ordinary shares or Elan ADSs in accordance with their terms, and with Elan options being exercisable for one year following the separation and distribution. Similarly, unvested Elan options and RSUs held by Dr. Dale Schenk, who will serve as Prothena’s President and Chief Executive Officer, will become fully vested and exercisable upon the separation and distribution, with the RSUs (which, by their terms are settled upon vesting) settled in Elan ordinary shares or Elan ADSs in accordance with their terms, and with Elan options being exercisable for two years following the separation and distribution.

Elan’s Leadership Development and Compensation Committee (“LDCC”) will make such adjustments as it deems appropriate and in such manner as it may deem equitable to awards made under the Elan equity incentive plans, in the event that the market value of Elan ordinary shares and Elan ADSs immediately prior to the separation and distribution is higher than the market value of Elan ordinary shares and Elan ADSs immediately after the separation and distribution. Any such adjustments will be applied equally to all

 

 

10


outstanding Elan awards (including, for the avoidance of doubt, options to purchase Elan ordinary shares or Elan ADSs held by employees of Elan who become employees of Prothena that have vested or will vest upon the separation and distribution) and will be strictly in accordance with the terms of the applicable Elan equity incentive plan.

 

Q: What are the U.S. federal income tax consequences of the receipt of Prothena ordinary shares by holders of Elan ordinary shares or Elan ADSs?

 

A: For U.S. federal income tax purposes, Elan expects to receive an opinion on the closing date of the Prothena Transactions from each of Cadwalader, Wickersham & Taft LLP and KPMG LLP to the effect that the separation and distribution should qualify as a reorganization under section 368(a)(1)(D) of the Code, and the distribution, as such, should qualify as a distribution of our ordinary shares to Elan shareholders under section 355 of the Code. If the separation and distribution are so treated, Elan shareholders should not recognize any gain for U.S. federal income tax purposes on the receipt of our ordinary shares, except with respect to cash received in lieu of fractional Prothena ordinary shares. However, the separation and distribution are not conditioned on the receipt of an opinion confirming these expected U.S. federal income tax consequences, nor will Elan seek a ruling from the IRS addressing the separation and distribution and related transactions. For further information concerning the U.S. federal income tax consequences of the separation and distribution, see “The Separation and Distribution and Related Transactions — Material U.S. Federal Income Tax Consequences of the Separation and Distribution and Related Transactions.”

 

Q: What are the Irish tax consequences of the receipt of Prothena ordinary shares by holders of Elan ordinary shares or Elan ADSs?

 

A: For Irish tax purposes, Elan expects to receive an opinion on the closing date of the Prothena Transactions from KPMG Ireland to the effect that, save with respect to the receipt of cash in lieu of fractional entitlements to Prothena ordinary shares, the distribution should not give rise to a taxable event for those classes of Irish shareholders specifically referred to in the section below entitled “Material Irish Tax Consequences of the Distribution.” However, the distribution is not conditioned on the receipt of an opinion confirming these expected Irish tax consequences, nor will Elan seek a specific confirmation from the Revenue Commissioners of Ireland in respect of the anticipated tax treatment of the distribution. For further information concerning the Irish tax consequences of the separation and distribution, see “Material Irish Tax Consequences of the Distribution.”

 

Q: What is the reason for the separation and distribution?

 

A: The board of directors of Elan has determined that the separation and distribution are in the best interests of Elan and its shareholders because these transactions will provide both Elan and Prothena the following key benefits: (i) greater strategic focus of financial resources and management’s efforts, (ii) direct and differentiated access to capital resources, (iii) enhanced investor choice through investment opportunities in two separate companies and (iv) enhanced management incentive tools.

For a more detailed discussion of the reasons for the separation and distribution, as well as of the potential negative consequences that Elan’s board of directors considered, see “The Separation and Distribution and Related Transactions — Reasons for the Separation and Distribution and Related Transactions.”

 

Q: Are there significant costs to the separation and distribution?

 

A:

Elan currently expects to incur, non-recurring pre-tax separation transaction costs of approximately $20 million in connection with the consummation of the separation and distribution. To the extent additional separation costs are incurred by Prothena after the separation and distribution, they will be the responsibility

 

 

11


  of Prothena. In addition, there are expected to be total net incremental costs incurred by Prothena on a going-forward basis in connection with operating Prothena as an independent publicly traded company. These net incremental costs are expected to be between $2 million and $4 million annually, based on currently anticipated activities. For more information regarding the costs of the separation and distribution and ongoing incremental costs, see the section entitled “Unaudited Pro Forma Combined Financial Statements.”

 

Q: Can Elan decide to cancel the distribution of the Prothena ordinary shares even if all of the conditions have been met?

 

A: Yes. The distribution is subject to the satisfaction or waiver of certain conditions. For more information, see “The Separation and Distribution and Related Transactions — Conditions to the Distribution.” However, Elan also has the right to terminate the distribution, even if all of the other conditions are satisfied, if at any time the board of directors of Elan determines an event or development shall have occurred or shall exist that, in the judgment of Elan’s board of directors, in its sole and absolute discretion, would make it inadvisable to effect the distribution.

 

Q: What will Prothena’s dividend policy be after the separation and distribution?

 

A: We do not expect to pay any cash dividends on our ordinary shares for the foreseeable future.

 

Q: How will Prothena ordinary shares trade?

 

A: There is not currently a public market for our ordinary shares. Our ordinary shares have been approved for listing on The Nasdaq Global Market under the symbol “PRTA.” It is anticipated that trading will commence on a “when-issued” basis shortly following the record date. On the first trading day following the distribution date, “when-issued” trading in respect of our ordinary shares will have ended and “regular-way” trading will begin.

 

Q: Will the separation and distribution affect the trading price of my Elan ordinary shares or Elan ADSs?

 

A: Until the market has evaluated the operations of Elan without Prothena, the trading price of Elan ordinary shares and Elan ADSs may fluctuate as a result of the separation and distribution. Elan believes the separation and distribution of Prothena from Elan provides the opportunity to unlock significant value for the separated companies and their respective shareholders. However, there can be no assurance as to trading prices after the separation and distribution and it is possible that the combined trading prices of Elan ordinary shares and Elan ADSs and Prothena ordinary shares after the separation and distribution may be lower than the trading price of Elan ordinary shares and Elan ADSs prior to the separation and distribution. See “Risk Factors” beginning on page 21.

 

Q: Do I have appraisal rights?

 

A: No. Holders of Elan ordinary shares and Elan ADSs are not entitled to appraisal rights in connection with the separation and distribution.

 

Q: Following the separation and distribution, will Prothena have cash on hand to fund its working capital expenses?

 

A:

In connection with the reorganization transactions that precede the distribution, Elan intends to make a cash investment of $99.0 million in the Prothena Subsidiaries and, immediately following the separation and

 

 

12


  distribution, a wholly owned subsidiary of Elan will consummate the subscription for approximately 3.2 million newly issued Prothena ordinary shares in exchange for a cash payment of $26.0 million to Prothena. Immediately following the Prothena Transactions, we expect that we will have approximately $125.0 million in cash and cash equivalents, which, we believe will provide us with sufficient liquidity and capital resources to meet our working capital needs through approximately June 30, 2015.

 

Q: What are the risks associated with the separation and distribution?

 

A: There are a number of risks associated with the separation and distribution and ownership of Prothena ordinary shares. See “Risk Factors” beginning on page 21.

 

Q: Where can I get more information?

 

A: If you have questions relating to the mechanics of the distribution, you should contact the distribution agent:

Computershare Trust Company, N.A.

250 Royall Street

Canton, Massachusetts 02021

Tel. 877-498-8861

Before the separation and distribution, if you have questions relating to the separation and distribution, you should contact:

Elan Corporation, plc

Treasury Building

Lower Grand Canal Street

Dublin 2, Ireland

Tel. 353-1-709-4000

After the separation and distribution, if you have questions relating to Prothena, you should contact:

Prothena Corporation plc

c/o Prothena Biosciences Inc

650 Gateway Blvd,

South San Francisco 94080

Tel. 650-837-8550

 

 

13


Summary Historical Carve-out Combined and Pro Forma Carve-out Combined Financial Data

The following tables set forth our summary historical carve-out combined and pro forma carve-out combined financial data for the periods indicated below. Our summary historical carve-out combined income statement data for the nine months ended September 30, 2012 and 2011 and our summary historical carve-out combined balance sheet data as of September 30, 2012 have been derived from our unaudited interim condensed carve-out combined financial statements included in this information statement. Our results of operations for the nine months ended September 30, 2012 presented below are not necessarily indicative of results for the entire fiscal year. Our summary historical carve-out combined income statement data for the fiscal years ended December 31, 2011, 2010 and 2009 and our summary historical carve-out combined balance sheet data as of December 31, 2011 and 2010 have been derived from our audited historical carve-out combined financial statements included elsewhere in this information statement.

The pro forma adjustments and notes to the pro forma financial information give effect to the following transactions:

 

   

the cash investment by Elan of $99.0 million in the Prothena Subsidiaries;

 

   

the issuance of 99.99% of Prothena’s outstanding shares to holders of Elan ordinary shares and Elan ADSs in the distribution; and

 

   

the issuance by Prothena of ordinary shares representing 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such issuance) to Elan in exchange for a cash payment of $26.0 million.

The unaudited pro forma carve-out combined balance sheet as of September 30, 2012 has been prepared as if the separation and distribution and related transactions had occurred on September 30, 2012. The pro forma adjustments are based on the best information available and assumptions that management believes are reasonable given the information available. While such adjustments are subject to change based upon the finalization of the terms of the separation and distribution and the underlying separation and distribution agreements, in management’s opinion, the pro forma adjustments are not expected to materially differ from the final adjustments. The unaudited pro forma financial statements are for illustrative and information purposes only and are not intended to represent, or be indicative of, what Prothena’s operating results or financial position would have been had the Prothena Transactions occurred on the dates indicated.

The historical statements of operations of Prothena include allocations of expenses from Elan which reasonably approximate the costs that would have been incurred as an autonomous entity. In addition, the allocation of general corporate overhead expenses from Elan to Prothena was made on a reasonable basis. As such, pro forma adjustments to revenues or expenses in the statements of operations are not necessary. There are expected to be incremental costs incurred by Prothena on a going forward basis in connection with operating Prothena as an independent publicly traded company. Prothena may also incur separation costs after the separation and distribution. These incremental costs are not included as pro forma adjustments.

Employees of Elan hold stock options to purchase Elan ordinary shares or Elan ADSs and RSUs representing a right to receive Elan ordinary shares or Elan ADSs upon settlement. With respect to Elan options and RSUs held by a majority of Elan employees that become employees of Prothena effective upon the separation and distribution:

 

   

unvested Elan options and RSUs that would otherwise have vested within twelve months following the effective date of the separation and distribution will vest immediately upon the separation and distribution, with the RSUs (which by their terms are settled upon vesting) settled in Elan ordinary shares or Elan ADSs in accordance with their terms;

 

   

other unvested Elan options and RSUs will be forfeited; and

 

 

14


   

all vested Elan options (including options the vesting of which were accelerated as described above) will be required to be exercised for Elan ordinary shares or Elan ADSs within twelve months of the effective date of the separation and distribution, or will be forfeited.

However, for Elan employees who are aged 55 or over with at least five years of service and who become employees of Prothena, unvested Elan options and RSUs will become fully vested and exercisable upon the separation and distribution, with the RSUs (which, by their terms, are settled upon vesting) settled in Elan ordinary shares or Elan ADSs in accordance with their terms, and with Elan options being exercisable for one year following the separation and distribution. Similarly, unvested Elan options and RSUs held by Dr. Dale Schenk, who will serve as Prothena’s President and Chief Executive Officer, will become fully vested and exercisable upon the separation and distribution, with the RSUs (which, by their terms are settled upon vesting) settled in Elan ordinary shares or Elan ADSs in accordance with their terms, and with Elan options being exercisable for two years following the separation and distribution.

We will not recognize any expense going forward in relation to the existing Elan equity-based awards as our employees are not required to provide service after the separation and distribution in order to receive the awards.

The estimated net charge of $1.4 million relating to the changes described above is a non-recurring charge that is directly attributable to Elan as part of the separation and distribution of the Prothena Business; therefore it has not been recorded in the Carve-out Combined Financial Statements or the unaudited pro forma financial statements of the Prothena Business.

Our pro forma net loss per basic and diluted share for the year ended December 31, 2011 and the nine months ended September 30, 2012 was $1.68 and $1.65, respectively. The computation of pro forma net loss per basic and diluted share assumes pro forma weighted-average shares outstanding of 17.7 million, comprised of the assumed issuance of approximately 14.5 million Prothena ordinary shares, which is equal to the distribution ratio of 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs outstanding as of November 30, 2012, and the 3.2 million Prothena ordinary shares assumed to be issued to Elan in connection with the separation and distribution.

The following summary historical and unaudited pro forma combined financial data should be read in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Arrangements Between Elan and Prothena,” and historical and pro forma financial statements and related notes included elsewhere in this information statement.

Statement of Operations Data:

 

     Historical Nine
Months Ended
September 30,
    Historical Year Ended
December 31,
 
     2012     2011     2011     2010     2009  
     (In millions, except per share data)  

Revenue

   $ 2.1      $ 0.4      $ 0.5      $ 1.2      $ 2.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Research and development expenses

     24.3        15.9        24.2        9.8        3.0   

General and administrative expenses

     7.0        4.2        5.6        3.6        0.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     31.3        20.1        29.8        13.4        3.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss and net loss before income taxes

     (29.2     (19.7     (29.3     (12.2     (1.2

Provision for income taxes

     —          0.4        0.5        0.3        0.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (29.2     (20.1     (29.8     (12.5     (1.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma basic and diluted net loss per share (1)

   $ (1.65     $ (1.68    
  

 

 

     

 

 

     

 

 

15


(1) Pro forma net loss per basic and diluted share for the year ended December 31, 2011, and the nine months ended September 30, 2012 was $1.68 and $1.65, respectively. The computation of pro forma net loss per basic and diluted share assumes pro forma weighted-average shares outstanding of 17.7 million, comprised of the assumed issuance of approximately 14.5 million Prothena ordinary shares, which is equal to the distribution ratio of 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs outstanding as of November 30, 2012, and the 3.2 million Prothena ordinary shares assumed to be issued to Elan in connection with the separation and distribution.

Balance Sheet Data:

 

     Historical At
September 30,
    Pro Forma At
September 30,
    Historical At
December 31,
 
     2012     2012     2011     2010  
     (In millions)  

Current assets:

        

Cash and cash equivalents

   $ —        $ 125.0 (1)    $ —        $ —     

Prepaid and other current assets

     0.1        0.1        0.1      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     0.1        125.1        0.1        —     

Non-Current assets:

        

Property, plant and equipment, net

     2.5        2.5        2.5        2.4   

Intangible assets, net

     0.1        0.1        0.1        —     

Other non-current assets

     0.9        —   (2)      0.9        0.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 3.6        127.7      $ 3.6      $ 3.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Current liabilities:

        

Accounts payable

   $ —        $ —   (3)    $ 0.4      $ 0.1   

Accruals and other current liabilities

     4.8        1.7 (3)      7.9        1.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     4.8        1.7        8.3        1.8   

Other non-current liabilities

     1.9        —   (2)      1.7        1.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     6.7        1.7        10.0        3.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Parent company and shareholders’ equity:

        

Share capital

     —          0.2 (4)      —          —     

Additional paid-in capital

     —          125.8 (4)(5)      —          —     

Parent company equity

     (3.1     —   (5)      (6.4     0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Parent company and shareholders’ equity

     (3.1     126.0        (6.4     0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and parent company equity (shareholders’ equity pro forma)

   $ 3.6        127.7      $ 3.6      $ 3.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Amount represents the pro forma cash investment by Elan of $99.0 million and the consideration received of $26.0 million for the 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription) subscribed for by a wholly-owned subsidiary of Elan as of September 30, 2012.
(2) In connection with the Prothena Transactions, certain assets and liabilities that were allocated from Elan to Prothena are not transferable to Prothena, including, employee deferred compensation plan assets and liabilities and deferred rent liabilities. As such, on the effective date of the distribution, Prothena would not record these assets and liabilities on its books. The amount of such assets was $0.9 million and amount of such liabilities was $1.9 million as of September 30, 2012.
(3) Under the terms of the Demerger Agreement, Elan is obligated to pay 50% of all trade payables and operating accruals and 100% of all payroll and bonus accruals that were incurred by Prothena through the effective date of the distribution. As such, these pro forma adjustments reflect that on the effective date of the distribution, Prothena would record 50% of all trade payable and operating accruals on its books.

 

 

16


(4) Amounts represent the pro forma capitalization of Prothena, including (i) the assumed issuance of approximately 14.5 million Prothena ordinary shares at $0.01 par value to the shareholders of Elan, which is based on the number of Elan’s outstanding ordinary shares as of November 30, 2012 and the distribution ratio; (ii) the redemption by Prothena of all of the incorporator shares; (iii) the 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription) issued to a wholly-owned subsidiary of Elan and (iv) the cash investment by Elan in Prothena of $99.0 million.

The pro forma adjustment to additional paid-in capital is equal to the amount of net assets transferred by Elan to Prothena of $1.0 million (taking account of the current liabilities that will not transfer to Prothena); the consideration of $26.0 million for the 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription) issued to a wholly-owned subsidiary of Elan; the cash investment by Elan in Prothena of $99.0 million; the reclassification of parent company equity to additional paid-in capital less the nominal value of the shares issued of $0.2 million.

(5) Amount represents the reclassification of Elan’s parent company equity to additional paid-in capital.

 

 

17


Terms of the Separation and Distribution and Related Transactions

The following provides a summary of the material terms of the separation and distribution.

 

Distributed company

Prothena Corporation plc is the distributed company. Prothena is a newly-formed public limited company incorporated in Ireland that was formed to acquire all of the assets and liabilities of the Prothena Business. After the distribution, Prothena will be an independent publicly traded company.

 

Distributed company structure

Prothena is a holding company. At the effective time of the distribution, Prothena will own directly, 100% of the outstanding ordinary shares of Neotope Biosciences. Neotope Biosciences will own directly 100% of the outstanding ordinary shares of Onclave and 100% of the outstanding common stock of Prothena US.

 

Distribution method

The separation of the Prothena Business from Elan will be completed through a “demerger” under Irish law. The demerger will be effected by Elan transferring the Prothena Business to Prothena, in exchange for Prothena issuing directly to the holders of Elan ordinary shares and Elan ADSs, on a pro rata basis, Prothena ordinary shares representing 99.99% of Prothena’s outstanding shares. Prothena’s issuance of 99.99% of its outstanding shares will constitute a deemed in specie distribution by Elan to holders of record of Elan ordinary shares and ADSs as of 11:59 p.m., Dublin Time, on December 14, 2012, which will be the record date.

 

Distribution ratio

Each holder of Elan ordinary shares or Elan ADSs will receive 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs held on the record date.

 

Distributed securities

We will issue our ordinary shares to holders of Elan ordinary shares and Elan ADSs. Based on the approximately 594.3 million Elan ordinary shares (including 489.2 million ordinary shares held as Elan ADSs) outstanding on November 30, 2012, and applying the distribution ratio of 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs, approximately 14.5 million Prothena ordinary shares will be distributed to Elan shareholders who hold Elan ordinary shares or Elan ADSs as of the record date.

 

Distribution mechanics

Depending on the manner in which you hold your Elan ordinary shares or ADSs, the distribution agent will deliver the Prothena ordinary shares to which you are entitled to your broker or nominee in electronic form, which shares will be credited to your account by such broker or nominee, or the distribution agent will deliver to you physical stock certificates evidencing your Prothena shares. For a detailed description of the manner in which your Prothena ordinary shares will be distributed, see “The Separation and Distribution and Related Transactions — Distribution of Our Ordinary Shares.”

 

Fractional shares

No fractional Prothena ordinary shares will be issued. The shareholders who would otherwise be entitled to a fractional share

 

 

18


 

will (after the deduction of all expenses and commissions including any amounts in respect of value added tax or any applicable sales tax payable thereon) receive a cash payment for the value thereof.

 

Record date

The record date for the distribution is 11:59 p.m., Dublin Time, on December 14, 2012.

 

Distribution date

The distribution date is expected to be 11:59 p.m., Dublin Time, on December 20, 2012, subject to certain conditions described in this information statement; provided, that if the conditions have not been satisfied or waived on or before the distribution date, the distribution date may be extended until the conditions shall be satisfied or waived.

 

Conditions to the distribution

The distribution is subject to the satisfaction or waiver of certain conditions. For more information, see “The Separation and Distribution and Related Transactions — Conditions to the Distribution.” However, the satisfaction of the foregoing conditions does not create any obligations on Elan’s part to effect the separation and distribution, and Elan’s board of directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the separation and distribution, including by accelerating or delaying the timing of the consummation of all or part of the separation and distribution, at any time prior to the distribution date.

 

Subscription for Prothena Ordinary Shares by Elan

Prior to the separation and distribution, a wholly-owned subsidiary of Elan agreed (conditioned on the consummation of the separation and distribution) to subscribe for newly-issued ordinary shares of Prothena, representing 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription) for a cash payment to Prothena of $26.0 million. This subscription will be consummated immediately following the separation and distribution and immediately prior to the mandatory redemption by Prothena of the incorporator shares.

 

Trading market and symbol

Our ordinary shares have been approved for listing on The Nasdaq Global Market under the symbol “PRTA.”

 

U.S. federal income tax consequences

Elan expects to receive an opinion on the closing date of the Prothena Transactions from each of Cadwalader, Wickersham & Taft LLP and KPMG LLP to the effect that the separation and distribution should qualify as a reorganization under section 368(a)(1)(D) of the Code, and the distribution, as such, should qualify as a distribution of our ordinary shares to Elan shareholders under section 355 of the Code. If the separation and distribution are so treated, Elan shareholders should not recognize any gain for U.S. federal income tax purposes on the receipt of our ordinary shares, except with respect to cash received in lieu of fractional Prothena ordinary shares. However, the separation and distribution are not conditioned on the receipt of an opinion confirming these expected U.S. federal income tax consequences, nor will Elan seek a ruling from the IRS addressing the separation and distribution and related transactions.

 

 

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Irish tax consequences

For Irish tax purposes, Elan expects to receive an opinion on the closing date of the Prothena Transactions from KPMG Ireland to the effect that, save with respect to the receipt of cash in lieu of fractional entitlements to Prothena ordinary shares, the distribution should not give rise to a taxable event for those classes of Irish shareholders specifically referred to in the section below “Material Irish Tax Consequences of the Distribution.” However, the distribution is not conditioned on the receipt of an opinion confirming these expected Irish tax consequences, nor will Elan seek a specific confirmation from the Revenue Commissioners of Ireland in respect of the anticipated tax treatment of the distribution.

 

Certain agreements with Elan

In connection with the separation and distribution, we and Elan will enter into the Demerger Agreement and several other agreements for the purpose of accomplishing the separation of our business from Elan’s other businesses. These agreements also will govern our relationship with Elan subsequent to the separation and distribution and provide for the allocation of tax and certain other liabilities and obligations attributable to periods prior to the separation and distribution. These agreements will also include arrangements with respect to transition services, the provision of research services by Prothena for Elan, and the acquisition, voting and disposition of Prothena shares subscribed for by Elan immediately after the separation and distribution.

 

  For a discussion of these arrangements, see the section entitled “Arrangements between Elan and Prothena.”

 

Dividend policy

We do not anticipate paying any dividends on our ordinary shares in the foreseeable future. See “Dividend Policy.”

 

Distribution agent

Computershare Trust Company, N.A. (“Computershare”).

 

 

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RISK FACTORS

You should carefully consider each of the following risks, which we believe are the principal risks that we face, and all of the other information in this information statement. Some of the risks described below relate to our business, while others relate to our separation from Elan. Other risks relate principally to the securities markets and ownership of our ordinary shares. Should any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially and adversely affected and the trading price of our ordinary shares could decline or even lose all of their value.

Risks Relating to Our Financial Position, Our Need for Additional Capital and Our Business

We have not generated any third party external revenue to date, we anticipate that we will incur losses for the foreseeable future and we may never achieve or sustain profitability.

We may not generate the cash that is necessary to finance our operations in the foreseeable future. We have not generated any third party external revenues to date. We have incurred losses of $29.8 million, $12.5 million and $1.3 million for the years ended December 31, 2011, 2010 and 2009, respectively, and a loss of $29.2 million for the nine months ended September 30, 2012. We expect to continue to incur substantial losses for the foreseeable future as we:

 

   

conduct our planned Phase 1 clinical trial for NEOD001 and initiate additional clinical trials, if supported by the results of the Phase 1 trial;

 

   

complete preclinical development of other product candidates and initiate clinical trials, if supported by positive preclinical data;

 

   

pursue our early stage research and seek to identify additional drug candidates and potentially acquire rights from third parties to drug candidates through licenses, acquisitions or other means; and

 

   

add operational, financial and management information systems and other personnel.

We must generate significant revenue to achieve and sustain profitability. Even if we succeed in discovering, developing and commercializing one or more drug candidates, we may not be able to generate sufficient revenue and we may never be able to achieve or sustain profitability.

We will require additional capital to fund our operations, and if we are unable to obtain such capital, we will be unable to successfully develop and commercialize drug candidates.

Following our separation from Elan, we believe that our existing cash and cash equivalents, will be sufficient to support us through approximately June 30, 2015. We will require additional capital in order to continue the research and development of our drug candidates. Our future capital requirements will depend on many factors that are currently unknown to us, including:

 

   

the timing of initiation, progress, results and costs of our clinical trials;

 

   

the results of our research and preclinical studies;

 

   

the costs of clinical manufacturing and of establishing commercial manufacturing arrangements;

 

   

the costs of preparing, filing, and prosecuting patent applications and maintaining, enforcing, and defending intellectual property-related claims;

 

   

the costs and timing of capital asset purchases;

 

   

our ability to establish research collaborations and strategic collaborations and licensing or other arrangements;

 

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the costs to satisfy our obligations under potential future collaborations; and

 

   

the timing, receipt, and amount of revenues or royalties, if any, from any approved drug candidates.

We cannot assure you that additional funds will be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available on a timely basis, we may be required to:

 

   

terminate or delay clinical trials or other development for one or more of our drug candidates;

 

   

delay arrangements for activities that may be necessary to commercialize our drug candidates; or

 

   

curtail or eliminate our drug research and development programs that are designed to identify new drug candidates or cease operations.

Immediately following the Prothena Transactions, we expect that we will hold cash and cash equivalents of approximately $125 million and an immaterial amount of working capital. Our cash flow projections through the period ended June 30, 2015, estimate average negative net cash flows of between $3 million to $4 million per month. These cash flows exclude any potential net cash inflows from any of our future financing and investing activities through the period ended June 30, 2015.

We are not able to provide specific estimates of the timelines or total costs to complete the Phase 1 clinical trial for NEOD001. In the pharmaceutical industry, the research and development process is lengthy and involves a high degree of risk and uncertainty. This process is conducted in various stages and, during each stage, there is a substantial risk that potential products in our research and development pipeline will experience difficulties, delays or failures. This makes it very difficult for us to estimate the total costs to complete the Phase 1 clinical trial for NEOD001, or any potential future drug candidates, and to estimate the anticipated completion date with any degree of accuracy, and raises concerns that attempts to provide estimates of timing may be misleading by implying a greater degree of certainty than actually exists.

We may seek to raise any necessary funds through public or private equity offerings, debt financings, strategic alliances, joint ventures and licensing arrangements. We may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions may make it very difficult for us to seek financing from the capital markets. We may be required to relinquish rights to our technologies or drug candidates or grant licenses on terms that are not favorable to us in order to raise additional funds through strategic alliances, joint ventures or licensing arrangements.

Our future success depends on our ability to retain our chief executive officer and to attract, retain, and motivate qualified personnel.

We are highly dependent on Dr. Dale Schenk, our President and Chief Executive Officer. We expect that we will pay our key executives less cash compensation than what they were paid by Elan. There can be no assurance that we will be able to retain Dr. Schenk or any of our key executives. We do not anticipate entering into employment agreements with any of our executive officers prior to completion of the separation and distribution. The loss of the services of Dr. Schenk or any other person on which we become highly dependent might impede the achievement of our research and development objectives. Recruiting and retaining qualified scientific personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and research institutions.

Our collaborators, prospective collaborators and suppliers may need assurances that our financial resources and stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with us.

Some of our collaborators, prospective collaborators and suppliers may need assurances that our financial resources and stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to

 

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do business with us. If our collaborators, prospective collaborators or suppliers are not satisfied with our financial resources and stability, it could have a material adverse effect on our ability to develop our drug candidates, enter into licenses or other agreements and on our business, financial condition or results of operations.

Risks Related to the Discovery, Development and Regulatory Approval of Drug Candidates

Our success is largely dependent on the success of our research and development programs which are at an early stage. We have no drug candidates in clinical trials and may not be able to progress drug candidates in the clinic. In the next two years we only have plans to conduct a phase 1 clinical trial in an orphan indication. We may not be able to successfully develop, obtain regulatory approval for or successfully commercialize any drug candidates.

We will continue to invest most of our time and financial resources in our research programs. We have no drug candidates in clinical trials and may not be able to progress drug candidates in the clinic. In the next two years we only have plans to conduct a phase 1 clinical trial in an orphan indication. We have not identified product candidates for many of our research programs. Our success will depend on the discovery, development, receipt of regulatory approval and successful commercialization of drug candidates. The success of drug candidates will depend on many factors, including the following:

 

   

our ability to provide acceptable evidence of their safety and efficacy;

 

   

receipt of marketing approval from the United States Food and Drug Administration (the “FDA”) and any similar foreign regulatory authorities;

 

   

obtaining and maintaining commercial manufacturing arrangements with third-party manufacturers;

 

   

collaborating with pharmaceutical companies or contract sales organizations to market and sell any approved drug; and

 

   

acceptance of any approved drug in the medical community and by patients and third-party payors.

Many of these factors are beyond our control. Accordingly, we may never generate revenues through the sale of products.

Our drug candidates are still in early stages of development and remain subject to clinical testing and regulatory approval. If we are unable to successfully discover, develop and test our drug candidates, we will not be successful.

We have not marketed, distributed or sold any drugs. The success of our business depends substantially upon our ability to discover, develop and commercialize our drug candidates successfully. We have no drug candidates in clinical trials and may not be able to progress drug candidates in the clinic. In the next two years we only have plans to conduct a phase 1 clinical trial in an orphan indication. Our research programs are prone to the significant and likely risks of failure inherent in drug development. Before obtaining regulatory approvals for the commercial sale of any drug candidate for a target indication, we must demonstrate with substantial evidence gathered in well-controlled clinical trials, and, with respect to approval in the United States, to the satisfaction of the FDA and, with respect to approval in other countries, similar regulatory authorities in those countries, that the drug candidate is safe and effective for use for that target indication. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain, and subject to unanticipated delays. Despite our efforts, our drug candidates may not:

 

   

offer improvement over existing, comparable drugs;

 

   

be proven safe and effective in clinical trials;

 

   

meet applicable regulatory standards; or

 

   

be successfully commercialized.

 

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Positive results in preclinical studies of a drug candidate may not be predictive of similar results in humans during clinical trials, and promising results from early clinical trials of a drug candidate may not be replicated in later clinical trials. Interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from completed preclinical studies and clinical trials for our drug candidates may not be predictive of the results we may obtain in later stage trials or studies. Our preclinical studies or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials, or to discontinue clinical trials altogether. We do not expect any of our drug candidates to be commercially available for at least seven years and some or all may never become commercially available.

If clinical trials for our drug candidates are prolonged, delayed, suspended or terminated we may be unable to commercialize our drug candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any revenue from potential product sales.

We cannot predict whether we will encounter problems with our planned clinical trials that will cause us or any regulatory authority to delay or suspend those clinical trials or delay the analysis of data derived from them. A number of events, including any of the following, could delay the completion of our planned clinical trials and negatively impact our ability to obtain regulatory approval for, and to market and sell, a particular drug candidate:

 

   

conditions imposed on us by the FDA or any foreign regulatory authority regarding the scope or design of our clinical trials;

 

   

delays in obtaining, or our inability to obtain, required approvals from institutional review boards, or IRBs, or other reviewing entities at clinical sites selected for participation in our clinical trials;

 

   

insufficient supply or deficient quality of our drug candidates or other materials necessary to conduct our clinical trials;

 

   

delays in obtaining regulatory agency agreement for the conduct of our clinical trials;

 

   

lower than anticipated enrollment and retention rate of subjects in clinical trials for a variety of reasons, including size of patient population, nature of trial protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

 

   

serious and unexpected drug-related side effects experienced by patients in clinical trials; or

 

   

failure of our third-party contractors to meet their contractual obligations to us in a timely manner.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety monitoring board, or DSMB, overseeing the clinical trial at issue, or other regulatory authorities due to a number of factors, including:

 

   

failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

 

   

inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

 

   

varying interpretation of data by the FDA or similar foreign regulatory authorities;

 

   

failure to achieve primary or secondary endpoints or other failure to demonstrate efficacy;

 

   

unforeseen safety issues; or

 

   

lack of adequate funding to continue the clinical trial.

 

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Additionally, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the cost, timing or successful completion of a clinical trial.

We do not know whether our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Delays in our clinical trials will result in increased development costs for our drug candidates. In addition, if we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our drug candidates may be harmed and our ability to generate product revenues will be jeopardized. Furthermore, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a drug candidate.

Even if our drug candidates receive regulatory approval in the United States, we may never receive approval or commercialize our products outside of the United States.

In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval would impair our ability to develop foreign markets for our drug candidates.

Both before and after marketing approval, our drug candidates are or would be subject to ongoing regulatory requirements, and if we fail to comply with these continuing requirements, we could be subject to a variety of sanctions and the sale of any approved products could be suspended.

Both before and after regulatory approval to market a particular drug candidate, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping related to the drug are subject to extensive regulatory requirements. If we fail to comply with the regulatory requirements of the FDA and other applicable U.S. and foreign regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including:

 

   

restrictions on the products or manufacturing processes;

 

   

warning letters;

 

   

civil or criminal penalties;

 

   

fines;

 

   

injunctions;

 

   

product seizures or detentions;

 

   

import bans;

 

   

voluntary or mandatory product recalls and related publicity requirements;

 

   

suspension or withdrawal of regulatory approvals;

 

   

total or partial suspension of production; and

 

   

refusal to approve pending applications for marketing approval of new products or supplements to approved applications.

 

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If side effects are identified during the time our drug candidates are in development or after they are approved and on the market, we may be required to perform lengthy additional clinical trials, discontinue development of the affected drug candidate, change the labeling of any such products, or withdraw any such products from the market, any of which would hinder or preclude our ability to generate revenues.

Even if any of our drug candidates receives marketing approval, as greater numbers of patients use a drug following its approval, if the incidence of side effects increases or if other problems are observed after approval that were not seen or anticipated during pre-approval clinical trials, a number of potentially significant negative consequences could result, including:

 

   

regulatory authorities may withdraw their approval of the product;

 

   

regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;

 

   

we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;

 

   

we could be sued and held liable for harm caused to patients; and

 

   

our reputation may suffer.

Any of these events could substantially increase the costs and expenses of developing, commercializing and marketing any such drug candidates or could harm or prevent sales of any approved products.

We deal with hazardous materials and must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Some of our research and development activities involve the controlled storage, use, and disposal of hazardous materials. We are subject to federal, state, and local laws and regulations governing the use, manufacture, storage, handling, and disposal of these hazardous materials. Although we believe that our safety procedures for the handling and disposing of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident, state or federal authorities may curtail our use of these materials, and we could be liable for any civil damages that result, which may exceed our financial resources and may seriously harm our business. Because we believe that our laboratory and materials handling policies and practices sufficiently mitigate the likelihood of materials liability or third-party claims, we currently carry no insurance covering such claims. An accident could damage, or force us to shut down, our operations.

Risks Related to the Commercialization of Our Drug Candidates

Even if any of our drug candidates receives regulatory approval, if the approved product does not achieve broad market acceptance, the revenues that we generate from sales of the product will be limited.

Even if any drug candidates we may develop or acquire in the future obtain regulatory approval, they may not gain broad market acceptance among physicians, healthcare payors, patients, and the medical community. The degree of market acceptance for any approved drug candidate will depend on a number of factors, including:

 

   

the indication and label for the product and the timing of introduction of competitive products;

 

   

demonstration of clinical safety and efficacy compared to other products;

 

   

prevalence and severity of adverse side effects;

 

   

availability of reimbursement from managed care plans and other third-party payors;

 

   

convenience and ease of administration;

 

   

cost-effectiveness;

 

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other potential advantages of alternative treatment methods; and

 

   

the effectiveness of marketing and distribution support of the product.

Consequently, even if we discover, develop and commercialize a product, the product may fail to achieve broad market acceptance and we may not be able to generate significant revenue from the product.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell an approved product, we may be unable to generate product revenue.

We do not currently have an organization for the sales, marketing and distribution of pharmaceutical products. In order to market any products that may be approved by the FDA, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and may not become profitable.

If government and third-party payors fail to provide adequate coverage and reimbursement rates for any of our drug candidates that receive regulatory approval, our revenue and prospects for profitability will be harmed.

In both domestic and foreign markets, our sales of any future products will depend in part upon the availability of reimbursement from third-party payors. Such third-party payors include government health programs such as Medicare, managed care providers, private health insurers, and other organizations. These third-party payors are increasingly attempting to contain healthcare costs by demanding price discounts or rebates and limiting both coverage and the amounts that they will pay for new drugs, and, as a result, they may not cover or provide adequate payment for our drug candidates. We might need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of any future products to such payors’ satisfaction. Such studies might require us to commit a significant amount of management time and financial and other resources. Our future products might not ultimately be considered cost-effective. Adequate third-party reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.

U.S. and foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare. For example, in some foreign markets, the government controls the pricing and profitability of prescription pharmaceuticals. In the United States, we expect that there will continue to be federal and state proposals to implement similar governmental controls. In addition, recent changes in the Medicare program and increasing emphasis on managed care in the United States will continue to put pressure on pharmaceutical product pricing. Cost control initiatives could decrease the price that we would receive for any products in the future, which would limit our revenue and profitability. Accordingly, legislation and regulations affecting the pricing of pharmaceuticals might change before our drug candidates are approved for marketing. Adoption of such legislation could further limit reimbursement for pharmaceuticals.

The markets for our drug candidates are subject to intense competition. If we are unable to compete effectively, our drug candidates may be rendered noncompetitive or obsolete.

The research, development and commercialization of new drugs is highly competitive. We will face competition with respect to all drug candidates we may develop or commercialize in the future from pharmaceutical and biotechnology companies worldwide. The key factors affecting the success of any approved product will be its indication, label, efficacy, safety profile, drug interactions, method of administration, pricing, reimbursement and level of promotional activity relative to those of competing drugs.

Furthermore, many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies, and other public and private research organizations are pursuing the development of novel drugs that

 

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target the same indications we are targeting with our research and development program. We face, and expect to continue to face, intense and increasing competition as new products enter the market and advanced technologies become available. Many of our competitors have:

 

   

significantly greater financial, technical and human resources than we have and may be better equipped to discover, develop, manufacture and commercialize drug candidates;

 

   

more extensive experience in preclinical testing and clinical trials, obtaining regulatory approvals and manufacturing and marketing pharmaceutical products;

 

   

drug candidates that have been approved or are in late-stage clinical development; and/or

 

   

collaborative arrangements in our target markets with leading companies and research institutions.

Competitive products may render our research and development program obsolete or noncompetitive before we can recover the expenses of developing and commercializing our drug candidates. Furthermore, the development of new treatment methods and/or the widespread adoption or increased utilization of any vaccine or development of other products or treatments for the diseases we are targeting could render any of our drug candidates noncompetitive, obsolete or uneconomical. If we successfully develop and obtain approval for a drug candidate, we will face competition based on the safety and effectiveness of the approved product, the timing of its entry into the market in relation to competitive products in development, the availability and cost of supply, marketing and sales capabilities, reimbursement coverage, price, patent position and other factors. Even if we successfully develop drug candidates but those drug candidates do not achieve and maintain market acceptance, our business will not be successful.

If a successful product liability or clinical trial claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, we could incur substantial liability.

The use of our drug candidates in clinical trials and the sale of any products for which we obtain marketing approval will expose us to the risk of product liability and clinical trial liability claims. Product liability claims might be brought against us by consumers, health care providers or others selling or otherwise coming into contact with our products. Clinical trial liability claims may be filed against us for damages suffered by clinical trial subjects or their families. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

   

decreased demand for any approved drug candidates;

 

   

impairment of our business reputation;

 

   

withdrawal of clinical trial participants;

 

   

costs of related litigation;

 

   

distraction of management’s attention;

 

   

substantial monetary awards to patients or other claimants;

 

   

loss of revenues; and

 

   

the inability to successfully commercialize any approved drug candidates.

We currently have clinical trial liability insurance coverage for our planned phase 1 clinical trial of NEOD001 with a $10 million annual aggregate coverage limit; however, our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for any of our drug candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain this product liability insurance on commercially reasonable

 

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terms. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

Risks Related to Our Dependence on Third Parties

We will rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of any such clinical trials.

We do not have the ability to independently conduct clinical trials for our drug candidates, and we will need to rely on third parties, such as consultants, contract research organizations, medical institutions, and clinical investigators, to perform this function. Our reliance on these third parties for clinical development activities will reduce our control over these activities. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. Although we have and will enter into agreements with these third parties, we will be responsible for confirming that our clinical trials are conducted in accordance with their general investigational plans and protocols. Moreover, the FDA requires us to comply with regulations and standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected. Our reliance on third parties does not relieve us of these responsibilities and requirements. To date, we believe our consultants, contract research organizations and other similar entities with which we are working have performed well; however, if these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them. Although we believe that there are a number of other third-party contractors we could engage to continue these activities, it may result in a delay of our planned clinical trials. Accordingly, we may be delayed in obtaining regulatory approvals for our drug candidates and may be delayed in our efforts to successfully develop our drug candidates.

If we do not establish strategic collaborations, we may have to alter our research and development plans.

Our drug research and development programs and potential commercialization of our drug candidates will require substantial additional cash to fund expenses. Our strategy includes potentially collaborating with leading pharmaceutical and biotechnology companies to assist us in furthering development and potential commercialization of some of our drug candidates, in some or all geographies. It may be difficult to enter into one or more of such collaborations in the future. We face significant competition in seeking appropriate collaborators and these collaborations are complex and time-consuming to negotiate and document. We may not be able to negotiate collaborations on acceptable terms, or at all. If that were to occur, we may have to curtail the development of a particular drug candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring our drug candidates to market and generate product revenue.

We have no manufacturing capacity and depend on third-party manufacturers to produce our pre-clinical and clinical trial drug supplies.

We do not currently operate manufacturing facilities for pre-clinical or clinical production of any of our drug candidates. We have limited experience in drug manufacturing, and we lack the resources and the capabilities to manufacture any of our drug candidates on a clinical or commercial scale. As a result, we will rely on a third-party manufacturer to supply, store, and distribute drug supplies for our planned clinical trials until we increase the number of manufacturers with whom we contract. Any performance failure on the part of our existing or future manufacturers could delay clinical development or regulatory approval of our drug candidates or commercialization of any approved products, producing additional losses and depriving us of potential product revenue.

 

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Our drug candidates require precise, high quality manufacturing. Failure by our contract manufacturer to achieve and maintain high manufacturing standards could result in patient injury or death, product recalls or withdrawals, delays or failures in testing or delivery, cost overruns, or other problems that could seriously hurt our business. Contract manufacturers may encounter difficulties involving production yields, quality control, and quality assurance. These manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state and foreign agencies to ensure strict compliance with current Good Manufacturing Practice, or cGMP, and other applicable government regulations and corresponding foreign standards; however, we do not have control over third-party manufacturers’ compliance with these regulations and standards.

If for some reason our contract manufacturer cannot perform as agreed, we may be required to replace it. Although we believe there are a number of potential replacements as our manufacturing processes are not manufacturer specific, we may incur added costs and delays in identifying and qualifying any such replacements because the FDA must approve any replacement manufacturer prior to manufacturing our drug candidates. Such approval would require new testing and compliance inspections. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our drug candidates after receipt of FDA approval.

We anticipate continued reliance on third-party manufacturers if we are successful in obtaining marketing approval from the FDA and other regulatory agencies for any of our drug candidates.

To date, our drug candidates have been manufactured in small quantities for preclinical testing by third-party manufacturers. If the FDA or other regulatory agencies approve any of our drug candidates for commercial sale, we expect that we would continue to rely, at least initially, on third-party manufacturers to produce commercial quantities of approved drug candidates. These manufacturers may not be able to successfully increase the manufacturing capacity for any approved drug candidates in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. If third party manufacturers are unable to successfully increase the manufacturing capacity for a drug candidate, or we are unable to establish our own manufacturing capabilities, the commercial launch of any approved products may be delayed or there may be a shortage in supply.

We depend on third-party suppliers for key raw materials used in our manufacturing processes, and the loss of these third-party suppliers or their inability to supply us with adequate raw materials could harm our business.

We rely on third-party suppliers for the raw materials required for the production of our drug candidates. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of raw materials involve several risks, including limited control over pricing, availability, quality and delivery schedules. We cannot be certain that our suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified. Although we believe there are several other suppliers of these raw materials, we may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of our drug candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.

Risks Related to Our Intellectual Property

If we are unable to adequately protect the intellectual property relating to our drug candidates, or if we infringe the rights of others, our ability to successfully commercialize our drug candidates will be harmed.

Following the separation and distribution, we will own or hold licenses to a number of issued patents and U.S. pending patent applications, as well as foreign patents and pending Patent Corporation Treaty applications and foreign counterparts. In connection with our program targeting AL and AA amyloid for the potential

 

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treatment of amyloidosis, we have ownership rights in patents expiring between 2020 and 2029. In connection with our program targeting synuclein for the potential treatment of Parkinson’s disease and other synucleinopathies, we have ownership rights and licenses related to patents expiring between 2024 and 2029. We also own patent applications relating to AL and AA, synuclein, MCAM and various discovery programs that are pending in the United States and other countries, which, if issued, would have expiration dates in the range of 2020 through 2032, excluding any available patent term adjustment. See “Business — Patents and Intellectual Property Rights” for a detailed description of our owned and licensed intellectual property rights.

Our success depends in part on our ability to obtain patent protection both in the United States and in other countries for our drug candidates. Our ability to protect our drug candidates from unauthorized or infringing use by third parties depends in substantial part on our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any issued patents may not provide us with sufficient protection for our drug candidates or provide sufficient protection to afford us a commercial advantage against competitive products or processes.

In addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or enforceable or will provide us with any significant protection against competitive products or otherwise be commercially valuable to us. Patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the U.S. Patent and Trademark Office, or the U.S. Patent Office, for the entire time prior to issuance as a U.S. patent. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Consequently, we cannot be certain that we or our licensors or co-owners were the first to invent, or the first to file patent applications on, our drug candidates or their use as drugs. In the event that a third party has also filed a U.S. patent application relating to our drug candidates or a similar invention, we may have to participate in interference or derivation proceedings declared by the U.S. Patent Office to determine priority of invention in the United States. The costs of these proceedings could be substantial and it is possible that our efforts would be unsuccessful, resulting in a loss of our U.S. patent position. Furthermore, we may not have identified all U.S. and foreign patents or published applications that affect our business either by blocking our ability to commercialize our drugs or by covering similar technologies.

The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed.

We intend to license patent rights from third-party owners. Such licenses may be subject to early termination if we fail to comply with our obligations in our licenses with third parties.

We intend to enter into licenses that will give us rights to third-party intellectual property that is necessary or useful for our business. We expect that any such licensors may be able to terminate any agreements with us in the event we breach the applicable license agreement and fail to cure the breach within a specified period of time. Under potential license agreements we may be obligated to pay the licensor fees, which may include annual license fees, royalties, a percentage of revenues associated with the licensed technology and a percentage of sublicensing revenue. In addition, under most such agreements, we will be required to diligently pursue the development of products using the licensed technology.

 

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Litigation regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in such litigation, it could cause delays in bringing drug candidates to market and harm our ability to operate.

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. Although we are not currently aware of any litigation or other proceedings or third-party claims of intellectual property infringement related to our drug candidates, the pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may obtain patents in the future and allege that the use of our technologies infringes these patent claims or that we are employing their proprietary technology without authorization. Elan is involved in litigation with the Alzheimer’s Institute of America (“AIA”). While the law suit was dismissed with prejudice, AIA appealed the result and if the appeal is successful, AIA may institute suit against us related to our research activities. If we become entangled in this matter it will be a distraction to management and a potential cash drain, although Elan is contractually obligated pursuant to the terms of the Demerger Agreement to reimburse us for our expenses and indemnify us for any damages.

In addition, third parties may challenge or infringe upon our existing or future patents. Proceedings involving our patents or patent applications or those of others could result in adverse decisions regarding:

 

   

the patentability of our inventions relating to our drug candidates; and/or

 

   

the enforceability, validity or scope of protection offered by our patents relating to our drug candidates.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may:

 

   

incur substantial monetary damages;

 

   

encounter significant delays in bringing our drug candidates to market; and/or

 

   

be precluded from participating in the manufacture, use or sale of our drug candidates or methods of treatment requiring licenses.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable; however, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees were previously employed at universities or other Elan or biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be

 

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subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Risks Relating to the Separation and the Distribution

We may not realize some or all of the potential benefits we expect from our separation from Elan.

We may not realize the benefits we anticipate from our separation from Elan. These benefits include the following:

 

   

greater strategic focus of financial resources and management’s efforts;

 

   

direct and differentiated access to capital resources;

 

   

enhanced investor ability to evaluate our financial performance and strategy against our peer group; and

 

   

improved ability to align management incentive compensation with our performance by issuing Prothena stock options.

We may not achieve the anticipated benefits from our separation for a variety of reasons, including the following:

 

   

the process of separating our business from Elan and the regulatory and other managerial challenges of operating as an independent public company may distract our management team from focusing on our business and strategic priorities;

 

   

we will require substantial ongoing cash investment for the foreseeable future, we will no longer be supported by the revenue and cash flows of Elan’s business and we may not be able to issue debt or equity on terms acceptable to us or at all;

 

   

our ability to differentiate our company against our peer group and attract early stage biotechnology investors is largely dependent on the success of our research and development programs, which are at an early stage; and

 

   

we expect to pay our key executives less cash compensation than what they were paid at Elan, so even though we will be able to provide potential equity compensation tied specifically to our business, we may not be able to attract and retain employees as desired.

We also may not fully realize the anticipated benefits from our separation if any of the matters identified as risks in this “Risks Factors” section were to occur. If we do not realize the anticipated benefits from our separation for any reason, our business may be materially adversely affected.

Our ability to operate our business effectively may suffer if we do not establish our own financial, administrative and other support functions in order to operate as a separate, stand-alone company, and the transition services Elan has agreed to provide may not be sufficient for our needs.

Prior to the separation, our business was operated by Elan as part of its broader corporate organization rather than as a standalone company. Historically, we have relied on financial, administrative and other resources, including the business relationships, of Elan to support the operation of our business. In conjunction with our separation from Elan, we will need to expand our financial, administrative and other support systems or contract with third parties to replace some of Elan’s systems. We will also need to maintain our own credit and banking relationships and perform our own financial and operational functions. We have entered into separation-related agreements with Elan, and Elan has agreed to provide transition services for up to 6 months following the

 

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separation. However, after the expiration of these transition services, we may not be able to adequately replace those resources or replace them at the same cost. We also may not be able to successfully put in place the financial, operational and managerial resources necessary to operate as a public company or that we will be able to be profitable doing so. Any failure or significant downtime in our own financial or administrative systems or in Elan’s financial or administrative systems during the transition period could impact our results or prevent us from performing other administrative services and financial reporting on a timely basis and could materially harm our business, financial condition and results of operations.

Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the transactions. If we are unable to achieve and maintain effective internal controls, our business, financial position and results of operations could be adversely affected.

Our financial results previously were included within the consolidated results of Elan; however, we were not directly subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended, (the Exchange Act). As a result of the separation, we will be directly subject to the reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which will require annual management assessments of the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act of 2002. These reporting and other obligations will place significant demands on our management and administrative and operational resources, including accounting resources.

To comply with these requirements, it is anticipated that we will need to upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional legal, accounting and finance staff. We expect to incur additional annual expenses for the purpose of addressing these requirements, and those expenses may be significant. If we are unable to upgrade our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. In addition, if we are unable to conclude that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports.

Our management will be responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Any failure to achieve and maintain effective internal controls could have an adverse effect on our business, financial position and results of operations.

Our historical and pro forma financial information is not necessarily representative of the results we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.

The historical financial and pro forma financial information we have included in this information statement may not reflect what our results of operations, financial position and cash flows would have been had we been an independent, publicly traded company during the periods presented or what our results of operations, financial position and cash flows will be in the future when we are an independent company. This is primarily because:

 

   

Our historical and pro forma financial information reflects allocations for services historically provided to us by Elan, which allocations may not reflect the costs we will incur for similar services in the future as an independent company; and

 

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Subsequent to the completion of the separation and distribution, the cost of capital for our business may be higher than Elan’s cost of capital prior to the separation and distribution because Elan’s current cost of debt will likely be lower than ours following the separation and distribution; and

 

   

Our historical and pro forma financial information does not reflect changes that we expect to incur in the future as a result of our separation from Elan, including changes in the cost structure, personnel needs, financing and operations of the contributed business as a result of the separation from Elan and from reduced economies of scale.

Following the separation and distribution, we also will be responsible for the additional costs associated with being an independent, public company, including costs related to corporate governance and listed and registered securities. Prior to the separation and distribution, our business was operated by Elan as part of its broader corporate organization, rather than as an independent company. Elan or one of its affiliates performed various corporate functions for us, including, but not limited to, legal, treasury, accounting, auditing, risk management, information technology, human resources, corporate affairs, tax administration, certain governance functions and external reporting. Our historical and pro forma financial results include allocations of corporate expenses from Elan for these and similar functions. These allocations of cash and non-cash expenses are likely to be less than the comparable expenses we expect to incur as a separate publicly traded company, which are estimated to be between $2 million and $4 million higher per year than the annualized allocated expenses for the latest interim period, based on currently anticipated activities. Therefore, our financial statements may not be indicative of our future performance as an independent company. For additional information about our past financial performance and the basis of presentation of our financial statements, please see “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes thereto included elsewhere in this information statement.

In addition, we will incur costs and expenses, including professional fees, to comply with Irish corporate and tax laws and financial reporting requirements and costs and expenses incurred in connection with holding the meetings of our board of directors in Ireland. There can be no assurance that these costs will not exceed the costs historically borne by Elan and those allocated to us in the pro forma financials contained in this information statement.

The agreements we have entered into or will enter into with Elan involve conflicts of interest and therefore may have materially disadvantageous terms to us.

We expect to enter into certain agreements with Elan, including the Demerger Agreement, Tax Matters Agreement, Transitional Services Agreement, Research and Development Services Agreement and the Subscription and Registration Rights Agreement, which will set forth the main terms of the separation and will provide a framework for our initial relationship with Elan following the separation. We are negotiating the terms of these agreements and the separation while still a part of Elan, and accordingly these agreements may have terms that are materially disadvantageous to us or are otherwise not as favorable as those that might be negotiated between unaffiliated third parties. For additional information, see “Arrangements between Elan and Prothena.”

If the IRS successfully challenges the tax-free treatment of the separation and distribution, Elan’s U.S. shareholders may incur substantial U.S. federal income tax liability.

Elan expects to receive an opinion on the closing date of the Prothena Transactions from each of Cadwalader, Wickersham & Taft LLP and KPMG LLP to the effect that the separation and distribution should qualify as a reorganization under section 368(a)(1)(D) of the Code, and the distribution, as such, should qualify as a distribution of our ordinary shares to Elan shareholders under section 355 of the Code. If the separation and distribution are so treated, Elan shareholders should not recognize any gain for U.S. federal income tax purposes on the receipt of our ordinary shares, except with respect to cash received in lieu of fractional Prothena ordinary shares. However, the separation and distribution are not conditioned on the receipt of an opinion confirming these expected U.S. federal income tax consequences, nor will Elan seek a ruling from the IRS addressing the

 

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separation and distribution and related transactions. It also should be noted that there is a lack of binding administrative and judicial authority addressing the qualification under sections 355 and 368(a)(1)(D) of the Code of transactions substantially similar to the separation and distribution and related transactions. As a result, the IRS could subsequently assert, and a court could determine, that the separation and distribution constitute a taxable transaction for U.S. federal income tax purposes. If the distribution of our ordinary shares fails to qualify as a tax-free transaction to Elan shareholders for U.S. federal income tax purposes, you could be taxed on the full value of the Prothena ordinary shares that you receive, without reduction for any portion of your tax basis in your Elan ordinary shares and/or Elan ADSs, since distributions generally are presumed to be taxable dividends for U.S. federal income tax purposes.

In addition, under the Tax Matters Agreement, we generally would be required to indemnify Elan against any tax-related losses Elan incurs to the extent such losses are attributable to any action, misrepresentation or omission of Prothena or any of its affiliates.

The tax consequences of the separation and distribution are complicated and depend on your individual situation. You should consult your own tax advisor as to the specific tax consequences of the distribution to you, including the effect of any U.S. federal, state or local or non-U.S. tax laws and of any changes in applicable tax laws. For further information concerning the U.S. federal income tax consequences of the separation and distribution, see “The Separation and Distribution and Related Transactions — Material U.S. Federal Income Tax Consequences of the Separation and Distribution and Related Transactions.”

We expect that we will be treated as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to our U.S. shareholders.

Special U.S. federal income tax rules apply to U.S. holders owning stock of a passive foreign investment company (“PFIC”). A non-U.S. corporation will be treated as a PFIC for any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to the applicable “look through” rules, either (i) 75 percent or more of such corporation’s gross income is passive income, or (ii) 50 percent or more of the average value of such corporation’s assets are considered “passive assets” (generally, assets that generate passive income). Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. Cash and assets readily convertible into cash are categorized as passive assets. For purposes of determining whether a non-U.S. corporation will be considered a PFIC, the corporation will be treated as holding its proportionate share of the assets, and receiving directly its proportionate share of the income, of any other corporation in which such non-U.S. corporation owns, directly or indirectly, more than 25 percent (by value) of the stock.

While the determination of PFIC status for any taxable year is very fact specific and generally cannot be made until the close of the taxable year in question, we expect to be treated as a PFIC immediately after the distribution and to remain a PFIC in the immediate future. If we are classified as a PFIC in any taxable year during which a U.S. holder holds its Prothena ordinary shares, we generally would continue to be treated as a PFIC as to such holder in all succeeding taxable years, regardless of whether we continue to meet the PFIC income test or PFIC asset test discussed above. In such case, subject to the discussion below of the mark-to-market election, a U.S. holder of Prothena ordinary shares would be subject to increased tax liability (generally including an interest charge) upon the sale or other disposition of our ordinary shares or upon the receipt of certain distributions that constitute “excess distributions” under the PFIC rules (generally, the portion of any distributions received by such holder on Prothena ordinary shares in a taxable year in excess of 125% of the average annual distributions received in the preceding three taxable years or, if shorter, such holder’s holding period for the Prothena ordinary shares).

If we are or become a PFIC, and Prothena ordinary shares are treated as “marketable stock” for purposes of the PFIC rules, a U.S. holder of Prothena ordinary shares generally could make a mark-to-market election to elect out of the PFIC rules described above regarding excess distributions and recognized gains. In such case, a U.S.

 

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holder generally would include in income, as ordinary income, for each taxable year that we are a PFIC the excess, if any, of the fair market value of such holder’s Prothena ordinary shares at the end of such taxable year over such holder’s adjusted tax basis in such Prothena ordinary shares, and generally would be allowed to take an ordinary loss in respect of the excess, if any, of such holder’s adjusted tax basis in Prothena ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). A U.S. holder’s tax basis in the Prothena ordinary shares would be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of Prothena ordinary shares would be treated as ordinary income, and any loss recognized would be treated as ordinary loss to the extent of any net mark-to-market income for prior taxable years. The reduced rates of taxation applicable to qualified dividend income under current law generally would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded other than in de minimis quantities on at least 15 days during each calendar quarter for any calendar year on a qualified exchange or other market as defined in the applicable Treasury regulations. Once made, the election cannot be revoked without the consent of the IRS, unless the shares cease to be marketable. Because a mark-to-market election may not be available for equity interests in any lower-tier PFICs that Prothena owns, a U.S. holder of Prothena ordinary shares may continue to be subject to the PFIC rules with respect to such holder’s indirect interest in any investments held by Prothena that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.

In addition to the mark-to-market election, a U.S. holder of Prothena ordinary shares may, subject to certain limitations, avoid the PFIC rules described above regarding excess distributions and recognized gains by making a timely qualified electing fund (“QEF”) election to be taxed currently on such holder’s pro rata portion of the PFIC’s net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income). However, this option would not be available to U.S. holders of Prothena ordinary shares because we do not intend to prepare, or share, the information that would enable holders to make a QEF election.

You should consult your own tax advisor as to the specific tax consequences to you of our expected PFIC classification. For additional information, see “The Separation and Distribution and Related Transactions — Material U.S. Federal Income Tax Consequences of the Separation and Distribution and Related Transactions — Passive Foreign Investment Company Considerations.”

If there is any change to Irish tax law or the anticipated tax treatment of the distribution was challenged by the Revenue Commissioners of Ireland, relevant Irish holders of Elan ordinary shares or Elan ADSs may incur a charge to Irish tax as a result of receiving shares in connection with the distribution.

Statements contained in this information statement concerning the taxation of Irish holders of Elan ordinary shares or Elan ADSs are based on current Irish tax law and the published practice of the Revenue Commissioners of Ireland as at the date of this information statement, either of which is subject to change, possibly with retrospective effect.

The taxation of the distribution depends on the individual circumstances of the Irish holders of Elan ordinary shares or Elan ADSs and the summary of the Irish tax treatment of the distribution set out in the section headed “Material Irish Tax Consequences of the Distribution” is intended as a general guide only. It does not address the specific tax position of every Irish holder of Elan ordinary shares or Elan ADSs and only deals with rules of Irish taxation of general application. Therefore any investors who are in any doubt as to their tax position (from an Irish perspective) as a result of receiving Prothena ordinary shares in connection with the distribution should consult their own independent tax advisers.

No specific confirmation as to the tax treatment of the distribution for relevant Irish holders of Elan ordinary shares or Elan ADSs will be sought by Elan. Accordingly, the anticipated tax treatment of the distribution as outlined in the section “Material Irish Tax Consequences of the Distribution” may be challenged by the Revenue

 

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Commissioners of Ireland. In the event of a successful challenge, Irish holders of Elan ordinary shares or Elan ADSs may incur a charge to Irish tax as a result of receiving Prothena ordinary shares in connection with the distribution.

The combined post-separation value of Elan and Prothena shares may not equal or exceed the pre-separation value of Elan shares.

After the separation and distribution, Elan’s ordinary shares will continue to be listed and traded on the Irish Stock Exchange (“ISE”) and Elan’s ADSs will continue to be listed and traded on the New York Stock Exchange under the symbol “ELN.” Our ordinary shares have been approved for listing on The Nasdaq Global Market under the symbol “PRTA.” The combined trading prices of Elan ordinary shares and Elan ADSs and our ordinary shares after the separation and distribution, as adjusted for any changes in the combined capitalization of these companies, may not be equal to or greater than the trading price of Elan ordinary shares and Elan ADSs prior to the separation and distribution. Until the market has fully evaluated the business of Elan without the Prothena Business, the price at which Elan ordinary shares and Elan ADSs trade may fluctuate. Similarly, until the market has fully evaluated our company, the price at which our ordinary shares trade may fluctuate significantly.

After the distribution, certain of our executive officers and directors may have actual or potential conflicts of interest because of their ownership of Elan equity or their current or former positions in Elan.

Certain of the persons we expect will be our executive officers and directors will be former officers and employees of Elan and thus have professional relationships with Elan’s executive officers and directors. Our Chairman of the Board, Lars Ekman, is Elan’s former President of Research and Development and a current member of Elan’s Board of Directors. Our Chief Executive Officer and director, Dale Schenk, has held the position of EVP and Chief Scientific Officer for Elan and beneficially owns 768,173 Elan ordinary shares. Our director, Shane Cooke, is a former director of Elan and Elan’s former Chief Financial Officer, Executive Vice President and Head of Elan Drug Technologies and beneficially owns 890,119 Elan ordinary shares. Our director, Richard T. Collier, is Elan’s former Executive Vice President and General Counsel and beneficially owns 50,000 Elan ordinary shares. Our Head of Corporate and Business Development and Secretary, Tara Nickerson, has held the position of Vice President and Head of Business Development for Elan Pharmaceuticals, Inc., a subsidiary of Elan, and beneficially owns 35,640 Elan ordinary shares. Our Chief Scientific Officer and Head of Research and Development, Gene Kinney, has held the position of SVP, Pharmacological Sciences for Elan and beneficially owns 223,142 Elan ordinary shares. Our controller and chief accounting officer, John Randall Fawcett, has held the position of Senior Director, Financial Analysis & Planning for Elan and beneficially owns 28,359 Elan ordinary shares . In addition, many of our other expected officers have a substantial financial interest in Elan as a result of their ownership of Elan ordinary shares, options and other equity awards. These relationships and financial interests may create, or may create the appearance of, conflicts of interest when these expected directors and officers face decisions that could have different implications for Elan than for us.

For as long as we are an emerging growth company, we will be exempt from certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

In April 2012, President Obama signed into law the Jumpstart Our Business Startups Act, or the JOBS Act. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for emerging growth companies, including certain requirements relating to accounting standards and compensation disclosure. We are classified as an emerging growth company, which is defined as a company with annual gross revenues of less than $1 billion, that has been a public reporting company for a period of less than five years, and that does not have a public float of $700 million or more in securities held by non-affiliated holders. We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter,

 

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(ii) the end of the fiscal year in which we have total annual gross revenues of $1 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period or (iv) the end of the fiscal year following the fifth anniversary of the date of the first sale of our ordinary shares pursuant to an effective registration statement filed under the Securities Act (including Form S-8).

For as long as we are an emerging growth company, unlike other public companies, unless we elect not to take advantage of applicable JOBS Act provisions, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “Emerging Growth Companies.” These include, but are not limited to, (i) reduced obligations with respect to the disclosure of selected financial data in registration statements filed with the Securities and Exchange Commission (including the registration statement on Form 10 of which this information statement is a part), (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, (iii) an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain shareholder approval of any golden parachute payments not previously approved.

As noted above, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. We intend to take advantage of such extended transition period. Since we would then not be required to comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies, our financial statements may not be comparable to the financial statements of companies that comply with public company effective dates. If we were to elect to comply with these public company effective dates, such election would be irrevocable pursuant to Section 107 of the JOBS Act.

Risks Related to Our Ordinary Shares

Substantial sales of ordinary shares may occur following the distribution, which could cause our share price to precipitously decline.

The ordinary shares that we distribute to holders of Elan ordinary shares and Elan ADSs generally may be sold immediately in the public market. It is possible that many holders of Elan ordinary shares and Elan ADSs, including possibly some of our large holders, will sell some or all of our ordinary shares received in the distribution for many reasons, such as that our business profile or market capitalization as an independent company does not fit their investment objectives. The sales of significant amounts of our ordinary shares, or the perception in the market that this will occur, could cause the market price of our ordinary shares to sharply decline.

There is no existing market for our ordinary shares and a trading market that will provide you with adequate liquidity may not develop for our ordinary shares. In addition, once our ordinary shares begin trading, the market price of our shares may fluctuate widely.

There is no public market for our ordinary shares. It is anticipated that shortly following the record date for the distribution, trading of our ordinary shares will begin on a “when-issued” basis and will continue through the distribution date; however, there can be no assurance that an active trading market for our ordinary shares will develop as a result of the distribution or be sustained in the future. We cannot predict the prices at which our ordinary shares may trade after the distribution. The market price of our ordinary shares may fluctuate widely, depending upon many factors, some of which may be beyond our control, including:

 

   

our ability to obtain financing as needed;

 

   

progress in and results from our planned clinical trials;

 

   

failure or delays in advancing our preclinical drug candidates or other drug candidates we may develop in the future, into clinical trials;

 

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results of clinical trials conducted by others on drugs that would compete with our drug candidates;

 

   

issues in manufacturing our drug candidates;

 

   

regulatory developments or enforcement in the United States and foreign countries;

 

   

developments or disputes concerning patents or other proprietary rights;

 

   

introduction of technological innovations or new commercial products by our competitors;

 

   

changes in estimates or recommendations by securities analysts, if any, who cover our company;

 

   

public concern over our drug candidates;

 

   

litigation;

 

   

future sales of our ordinary shares;

 

   

general market conditions;

 

   

changes in the structure of healthcare payment systems;

 

   

failure of any of our drug candidates, if approved, to achieve commercial success;

 

   

economic and other external factors or other disasters or crises;

 

   

period-to-period fluctuations in our financial results;

 

   

overall fluctuations in U.S. equity markets;

 

   

the sale of our shares by some Elan shareholders after the separation and distribution because our business profile and market capitalization may not fit their investment objectives;

 

   

our quarterly or annual results, or those of other companies in our industry;

 

   

announcements by us or our competitors of significant acquisitions or dispositions;

 

   

the operating and stock price performance of other comparable companies;

 

   

investor perception of our company and the drug development industry;

 

   

natural or environmental disasters that investors believe may affect us; and

 

   

fluctuations in the budget of federal, state and local governmental entities around the world.

These and other external factors may cause the market price and demand for our ordinary shares to fluctuate substantially, which may limit or prevent investors from readily selling their ordinary shares and may otherwise negatively affect the liquidity of our ordinary shares. In particular, stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our ordinary shares. In the past, when the market price of a stock has been volatile, some holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.

We do not anticipate paying cash dividends, and accordingly, shareholders must rely on share appreciation for any return on their investment.

We anticipate losing money for the foreseeable future and, even if we do ever turn a profit, we intend to retain future earnings, if any, for the development, operation and expansion of our business. Thus, we do not anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in our ordinary shares will depend upon appreciation in their value and in order to receive any income or realize a return on your investment, you will need to sell your Prothena ordinary shares. There can be no assurance that our ordinary shares will maintain their price, much less appreciate in value.

 

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Your percentage ownership in Prothena may be diluted in the future.

As with any publicly traded company, your percentage ownership in Prothena may be diluted in the future because of equity issuances by us for acquisitions, capital market transactions or otherwise. We will need to raise additional capital. If we are able to raise additional capital, we may issue equity or convertible debt instruments, which may severely dilute your ownership interest in us. In addition, initially we will grant stock option awards to our directors, officers and employees, which will dilute your ownership stake in us. We expect that the number of shares authorized under our equity plan will be 2,650,000. For a more detailed description of the long term incentive plan, see “Executive Compensation.”

Future sales of our ordinary shares could adversely affect the trading price of our ordinary shares following the separation and distribution.

All of the ordinary shares will be freely tradable without restriction or further registration under the Securities Act unless the shares are “restricted securities” under the Securities Act or are owned by our “affiliates” as that term is defined in the rules under the Securities Act. Restricted Securities and shares held by “affiliates” may be sold in the public market if registered or if they qualify for an exemption from registration under Rule 144 which is summarized under “Listing and Trading of Our Ordinary Shares.” Further, we plan to file a registration statement to cover the shares issuable under our equity-based benefit plans. It is possible that some holders of Elan ordinary shares or Elan ADSs, including possibly some of our large holders, will sell Prothena ordinary shares received in the distribution for various reasons, for example, if our business profile or market capitalization as an independent company does not fit their investment objectives.

In addition, a wholly-owned subsidiary of Elan has agreed (conditioned on the consummation of the separation and distribution) to subscribe for 18% of our outstanding ordinary shares (as calculated immediately following the consummation of such subscription). This subscription will be consummated immediately following the separation and distribution. The ordinary shares held by a wholly-owned subsidiary of Elan will be restricted securities, and Elan has agreed to cause the disposition of our ordinary shares as soon as a disposition is warranted consistent with the business purposes for Elan’s retention of our ordinary shares. We have agreed that, upon the request of Elan, we will use our reasonable best efforts to effect a registration under applicable federal and state securities laws of any of our ordinary shares acquired by Elan. See “Arrangements Between Elan and Prothena — Subscription and Registration Rights Agreement”. The sales of significant amounts of our ordinary shares or the perception in the market that this will occur may result in the lowering of the market price of our ordinary shares.

Index funds that hold Elan ordinary shares or Elan ADSs likely will be required to sell our ordinary shares that such funds received in the distribution to the extent we are not included in the relevant index. In addition, many of the Elan shareholders may sell their shares immediately following the distribution. The sale of significant amounts of our ordinary shares for the above or other reasons, or the perception that such sales will occur, may cause the price of our ordinary shares to decline.

Irish law differs from the laws in effect in the United States and may afford less protection to holders of our ordinary shares.

It may not be possible to enforce court judgments obtained in the United States against us in Ireland based on the civil liability provisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have been advised that the United States currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be enforceable in Ireland.

 

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As an Irish company, we are governed by the Irish Companies Acts, which differ in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of our ordinary shares may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the United States.

Irish law differs from the laws in effect in the United States with respect to defending unwanted takeover proposals and may give our board of directors less ability to control negotiations with hostile offerors.

Prothena is subject to the Irish takeover rules. Under the Irish takeover rules, Prothena’s board of directors is not permitted to take any action that might frustrate an offer for the shares of Prothena once Prothena’s board of directors has received an approach that may lead to an offer or has reason to believe that such an offer is or may be imminent, subject to certain exceptions. Potentially frustrating actions such as (i) the issue of shares, options or convertible securities, (ii) material acquisitions or disposals, (iii) entering into contracts other than in the ordinary course of business or (iv) any action, other than seeking alternative offers, which may result in frustration of an offer, are prohibited during the course of an offer or at any earlier time during which Prothena’s board of directors has reason to believe an offer is or may be imminent. These provisions may give the board of directors less ability to control negotiations with hostile offerors and protect the interests of holders of ordinary shares than would be the case for a corporation incorporated in a jurisdiction of the United States. See “Description of Share Capital-Anti-Takeover Provisions — Frustrating Action.”

Our auditor is not inspected by the U.S. Public Company Accounting Oversight Board, or the PCAOB, and as such, our investors currently do not have the benefits of PCAOB oversight.

As an auditor of companies that are publicly traded in the United States and a firm registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, our independent registered public accounting firm is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and the professional standards of the PCAOB. However, because our auditor is located in Ireland, a jurisdiction where the PCAOB is currently unable to conduct inspections, our auditor is not currently inspected by the PCAOB.

Inspections of other auditors conducted by the PCAOB outside of Ireland have at times identified deficiencies in those auditor’s audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections in Ireland prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. In addition, the inability of the PCAOB to conduct auditor inspections in Ireland makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors located outside of Ireland that are subject to regular PCAOB inspections. As a result, investors will be deprived of the benefits of PCAOB inspections, and may lose confidence in our reported financial information and procedures and the quality of our financial statements.

 

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FORWARD-LOOKING STATEMENTS

This information statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, our and Elan’s financial condition, results of operations and business prospects and the products in research that involve substantial risks and uncertainties.

These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “will” and similar terms and phrases, including references to assumptions. These statements are contained in sections entitled “Summary,” “Risk Factors,” and other sections of documents and reports contained or incorporated in this information statement.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expected, estimated or projected. Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

 

   

the risks and uncertainties described in the “Risk Factors” section beginning on page 21 of this information statement;

 

   

our ability to obtain additional financing;

 

   

restrictions on our taking certain actions due to tax rules and covenants with Elan;

 

   

our ability to successfully complete research and development of our drug candidates and the growth of the markets for those drug candidates;

 

   

our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors;

 

   

our ability to protect our patents and other intellectual property;

 

   

loss of key employees;

 

   

the impact of our separation from Elan and risks relating to our ability to operate effectively as a stand-alone, publicly traded company, including, without limitation:

 

   

our ability to achieve benefits from our separation;

 

   

changes in our cost structure, management, financing and business operations following the separation and distribution;

 

   

growth in costs and expenses;

 

   

our ability to maintain financial flexibility and sufficient cash, cash equivalents, and investments and other assets capable of being monetized to meet our liquidity requirements;

 

   

disruptions in the U.S. and global capital and credit markets;

 

   

fluctuations in foreign currency exchange rates;

 

   

the failure to comply with anti-kickback and false claims laws in the United States;

 

   

extensive government regulation;

 

   

risks from potential environmental liabilities;

 

   

changes in weather conditions, natural disasters and other events beyond our control;

 

   

the volatility of our share price;

 

   

general changes in U.S. generally accepted accounting principles and International Financial Reporting Standards as adopted by the European Union; and

 

   

business disruptions caused by information technology failures.

 

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You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this document to conform these statements to actual results or to changes in our expectations.

 

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THE SEPARATION AND DISTRIBUTION AND RELATED TRANSACTIONS

Background

Elan’s board of directors and its management team from time to time assess the optimal alignment of Elan’s assets, and in particular the benefits and risks of maintaining both a late-stage products development business and an early-stage discovery business and the income statement dynamics such businesses present to the marketplace and Elan shareholders. On August 13, 2012, Elan announced that its board of directors had approved the separation of Elan and its drug discovery business into two independent, publicly traded companies: Elan and Prothena. On December 7, 2012, the Elan board of directors approved a deemed in specie distribution that will be satisfied (after the transfer of the Prothena Business to Prothena as described below) by Prothena issuing directly to the holders of Elan ordinary shares and Elan ADSs, on a pro rata basis, Prothena ordinary shares representing 99.99% of Prothena’s outstanding shares (with the remaining 0.01% of Prothena’s outstanding shares, which were previously issued to the original incorporators of Prothena and which we refer to as the “incorporator shares,” being mandatorily redeemed by Prothena after the demerger as described below). On December 12, 2012, shareholders of Elan voted to approve the “ in specie distribution” as required by Elan’s Articles of Association. On December 20, 2012, the anticipated distribution date, we expect each holder of Elan ordinary shares or ADSs will receive 1 Prothena ordinary share for every 41 Elan ordinary shares or Elan ADSs held at the close of business on the record date, as described below, subject to certain conditions described in this information statement; provided, that if the conditions have not been satisfied or waived on or before the distribution date, the distribution date may be extended until the conditions shall be satisfied or waived.

Prior to the separation and distribution, a wholly-owned subsidiary of Elan agreed (conditioned on the consummation of the separation and distribution) to subscribe for newly-issued ordinary shares of Prothena, representing 18% of the outstanding ordinary shares of Prothena (as calculated immediately following the consummation of such subscription), for a cash payment to Prothena of $26.0 million. This subscription will be consummated immediately following the separation and distribution. Immediately after the consummation of Elan’s subscription for 18% of Prothena’s outstanding ordinary shares (as calculated immediately following the consummation of such subscription), the incorporator shares will be mandatorily redeemed by Prothena pursuant to their terms for their initial subscription price, and cancelled.

Immediately following the separation and distribution and Elan’s purchase of Prothena ordinary shares, Elan shareholders will own directly 82% of the outstanding ordinary shares of Prothena, and Elan will own the remaining 18%.

Reasons for the Separation and Distribution and Related Transactions

The board of directors of Elan has determined that the separation and distribution are in the best interests of Elan and its shareholders because it will provide both Elan and Prothena the following key benefits: (i) greater strategic focus of financial resources and management’s efforts, (ii) direct and differentiated access to capital resources, (iii) enhanced investor choice through investment opportunities in two separate companies and (iv) enhanced management incentive tools.

Greater Strategic Focus of Financial Resources and Management’s Efforts

Our business historically exhibited different financial and operating characteristics than Elan’s other businesses. In particular, unlike Elan, which generates significant revenue and cash flow from its marketed product, Tysabri, Prothena’s business consists entirely of early-stage research programs that require significant on-going cash investment and currently generate substantial losses. As a result, we have very different capital requirements and operating characteristics than Elan. Owing to these and other factors, we and Elan’s other businesses employ different capital expenditure and operational strategies. Consequently, Elan has determined that its current structure may not be optimized to design and implement the distinct strategies necessary to

 

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operate its businesses in a manner that maximizes the long-term value of each business. We and Elan believe that our respective management resources would be more efficiently utilized if Elan’s management concentrated solely on the success of Tysabri and its late-stage development programs and our management concentrated solely on our business. The dilution of attention involved in managing a combination of businesses with competing goals and needs will thus be eliminated.

Both we and Elan expect to more efficiently use management and financial resources as a result of having board and management teams solely focused on our respective businesses. We believe the separation and distribution will allow us to better align our management’s attention, compensation and resources to pursue opportunities in our respective fields of operation and to manage our cost structure more actively. Elan similarly expects to benefit from its management’s ability to focus on the operation of its businesses.

Direct and Differentiated Access to Capital Resources

After the separation and distribution, we will no longer need to compete with Elan’s other businesses for capital resources. We are focused on the development of early-stage research programs, which currently generate no third party, external revenue and will require substantial on-going cash investment for the foreseeable future. As a result, the financial and operating characteristics of our business differ from Elan’s other businesses. In order for us to fund the investment required by our business, we expect to require access to additional capital in the future. Both we and Elan believe that direct and differentiated access to capital resources will allow us to better optimize the amounts and terms of the capital needed for our respective businesses, aligning financial and operational characteristics with investor and market expectations. Elan also believes that, as a stand-alone company, we will attract investors who are interested in the unique characteristics of our business.

Enhanced Investor Choices by Offering Investment Opportunities in Separate Entities

We believe that after the separation and distribution, investors will be better positioned to evaluate our financial performance and strategy within the context of our particular field of operations and peer groups and that this will enhance the likelihood that we achieve an appropriate market valuation. Elan’s management and financial advisors believe that our investment characteristics may appeal to types of investors who differ from Elan’s current investors. We expect that, as a result of the separation and distribution, our management will be better positioned to implement goals and evaluate strategic opportunities in light of investor expectations within the context of our particular field of operation.

Improved Management Incentive Tools

We expect to use our equity to compensate current and future employees. It is more difficult for multi-business companies such as Elan to structure equity incentives that reward managers in a manner directly related to the performance of their respective business units. By granting shares linked to a specific business, we will be able to offer our managers equity compensation that is linked more directly to their work product than Elan’s current equity compensation arrangements.

Risks and Costs Relating to the Separation and Distribution and Related Transactions

In determining whether to effect the separation and distribution, Elan’s board of directors also considered various risks and costs associated with the transaction. The risks and costs of the transaction include the following:

Market Reception and Execution Risk

The Elan board’s objective is to consummate the separation and distribution as quickly as reasonably possible so that each of Elan and Prothena can focus on its respective businesses, contribute to overall shareholder value and minimize ongoing business disruption relating to the transaction. The board considered the

 

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potential for negative receptions of the announcement of the proposed transaction from its shareholders and other corporate stakeholders, the analyst community and other market participants and relevant legal and regulatory bodies in order to make a reasonable assessment of potential market reaction and the likely time required to complete the transaction.

Loss of Financing Support and the Increased Significance to Prothena of Potential Liabilities

Prior to the separation, our business was operated by Elan as part of its broader corporate organization rather than as a standalone company. As part of Elan, our financing needs were supported by the revenue and cash flows of Elan’s other businesses and Elan’s ability to access capital markets. We will require significant amounts of capital in order to commercialize our drug candidates, and after the transaction we will no longer be supported by Elan’s capital resources. Similarly, potential costs or liabilities of our business, such as possible future commercial litigation, including relating to intellectual property rights or other aspects of our business, will have increased significance to us as a standalone entity with significantly more limited financial resources than Elan, than would be the case if we remained part of Elan. The risks associated with our need for capital are discussed in more detail under “Risk Factors — Risks Relating to Our Financial Position, Our Need for Additional Capital and Our Business”.

Potential Loss of Business Focus Pending the Transaction

The separation and distribution requires significant amounts of our and Elan’s management’s time and attention relating to the transaction, including identifying executive officers and lines of managerial authority, composing our board of directors, establishing and operating our own financial, administrative and public company support functions, and engaging in similar activities involved in establishing and operating an independent publicly traded company and engaging in a strategic transaction like the separation and distribution. These activities could divert both Elan’s management’s attention from its business and our attention from our primary business purpose of discovering and developing antibodies for the potential treatment of disease.

The Risks of Being Unable to Achieve the Benefits Expected from the Separation and Distribution

The benefits the board of directors of Elan expects the separation and distribution will provide to Elan and Prothena are described above under the heading “Reasons for the Separation and Distribution Related Transactions.” However, these anticipated benefits may not ultimately be realized for a variety of reasons, including the following:

 

   

the process of separating our business from Elan and the regulatory and other managerial challenges of operating as an independent public company may distract our management team from focusing on our business and strategic priorities;

 

   

although we will no longer compete with Elan’s other businesses for capital, we will require substantial ongoing cash investment for the foreseeable future, we may not be able to issue debt or equity on terms acceptable to us or at all and we will no longer be supported by the revenue and cash flows of Elan’s business;

 

   

our ability to differentiate our company against our peer group and attract early stage biotechnology investors is largely dependent on the success of our research and development programs, which are at an early stage; and

 

   

we expect to pay our key executives less cash compensation than what they were paid at Elan, so even with equity compensation tied specifically to our business, we may not be able to attract and retain employees as desired.

In addition, the board considered various other risks associated with the separation and distribution and the operation of our business following the separation and distribution, including those described under “Risk Factors” beginning on page 21. In view of the wide variety of factors considered in connection with the

 

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evaluation of the separation and distribution and the complexity of these matters, Elan’s board of directors did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to the factors considered.

Manner of Effecting the Separation and Distribution and Related Transactions

The general terms and conditions relating to the separation and distribution will be set forth in the Demerger Agreement between Elan and Prothena.

Internal Reorganization

The assets constituting the Prothena Business have historically been held by various Elan legal entities located in both Ireland and the United States. Prior to the effective time of the demerger, pursuant to a series of internal reorganization transactions between and among Elan and certain of its subsidiaries which will remain with Elan following the separation and distribution, on the one hand, and the Prothena Subsidiaries, on the other hand, Elan will allocate, assign and transfer, or cause to be allocated, assigned and transferred, to the Prothena Subsidiaries the assets and liabilities that comprise the Prothena Business. The internal reorganization transactions will also include Elan making a cash investment of $99.0 million in the Prothena Subsidiaries. The reorganization will result in the Prothena Business being owned prior to the effective time of the demerger by Neotope Biosciences, a private limited company incorporated in Ireland and a direct wholly owned subsidiary of Elan, and two direct wholly owned subsidiaries of Neotope Biosciences, Onclave, a private limited company incorporated in Ireland, and Prothena US, a corporation organized under the laws of Delaware. See “Arrangements Between Elan and Prothena—Pre-Demerger Restructuring Transactions” for more information.

Formation of Prothena

Prothena Corporation plc was incorporated as a private limited company, under the name “Neotope Corporation Limited”, in Ireland (registered number 518146), on September 26, 2012, for the purposes of effecting the demerger and owning the Prothena Business after the demerger is effective. Prothena subsequently re-registered to a public limited company and changed its name to “Neotope Corporation plc” on October 25, 2012. On November 1, 2012, the shareholders of Prothena resolved, by way of special resolution, to change the name of the company to “Prothena Corporation plc”, and this was approved by the Irish Registrar of Companies on November 7, 2012. Immediately prior to the completion of the demerger, the issued share capital of Prothena will be comprised of 1,750 Euro deferred shares, with a par value of €22 per share, which we refer to as the “incorporator shares”. At all times until the completion of the demerger, Prothena will be an independent company in which Elan will not hold any shares. Prior to the demerger, Prothena will not have conducted any activities other than those incident to its formation, and the preparation of applicable filings under the U.S. securities laws and regulatory filings made in connection with the Prothena Transactions.