INVESTMENT AND SHAREHOLDERS AGREEMENT

EXHIBIT 10.1

INVESTMENT AND SHAREHOLDERS’ AGREEMENT
Spepharm Holding B.V.

by and among

1.

TVM Life Science Ventures VI L.P. , c/o M&C Corporate Services Ltd., P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman Islands

- hereinafter referred to as “ TVM LP ” -

2.

TVM Life Science Ventures VI GmbH & Co. KG , Maximilianstr. 35 c, D-80539 Munich, Germany

- hereinafter referred to as “ TVM KG ” -

3.

Life Sciences Opportunities Fund (Institutional) II, L.P. , 126 East 56 th Street, 28 th Floor, New York, NY 10022, U.S.A.

- hereinafter referred to as “ LSOFI ” -

4.

Life Sciences Opportunities Fund II, L.P. , 126 East 56 th Street, 28 th Floor, New York, NY 10022, U.S.A.

- hereinafter referred to as “ LSOF ” -

5.

ARCADE SARL , 40 Rue des Mathurins, 75008 Paris, France

- hereinafter referred to as “ ARCADE ” -

- TVM LP, TVM KG, LSOFI, LSOF and ARCADE hereinafter referred to as “ Investors ” -

as well as

6.

Valera Pharmaceuticals Inc. , 7 Clarke Drive, Cranbury, NJ, USA 08512-3617

- hereinafter referred to as “ Valera ” -

- Valera and the Investors as well as other future shareholders of Spepharm Holding B.V., which may accede to this
Shareholders Agreement, hereinafter referred to as “ Shareholders ” -

and

7.

Jean-François Labbé , 27 Allée des Bocages, 78110 Le Vésinet, France

- hereinafter referred to as “ JFLAB ” -

as well as, upon its incorporation and accession hereto,

8.

Spepharm Holding B.V. , c/o Mr Wim van Bree, Heinsiuslaan 43, 3818 JG Amersfoort, The Netherlands

- hereinafter referred to as the “ Company ” -.

All of the above stated parties — as well as any third party that accedes to this Investment and Shareholders’ Agreement (“ this Agreement ”) in the future as of such accession — hereinafter: the “ Parties ”.

Recitals

Sec. 1 Foundation of Spepharm and Loan Commitment by LSOFI and LSOF

Sec. 2 First Capital Increase

Sec. 3 Second Capital Increase

Sec. 4 General Obligations with regard to Capital Increases / Syndication

Sec. 5 Default on Investment Obligation

Sec. 6 Valera’s Covenant to obtain Shire Waiver/Licence

Sec. 7 Other Covenants

Sec. 8 Intellectual Property Rights

Sec. 9 Transfer of Shares / Notification

Sec. 10 Rights of First Refusal

Sec. 11 Tag-Along Rights

Sec. 12 Drag-Along Rights

Sec. 13 Restrictions of Transfer

Sec. 14 Share Transfers and Share Issuance under Accession to this Agreement

Sec. 15 Transfers to Affiliated Companies and Funds

Sec. 16 Stock Incentive Scheme

Sec. 17 Supervisory Board

Sec. 18 Information

Sec. 19 Refinancing by KfW

Sec. 20 Effective Date / Succession of Rights

Sec. 22 Amendments to and Cancellation of this Agreement

Sec. 23 Miscellaneous

Recitals

Valera and the Investors intend to jointly create, incorporate and finance a Dutch B.V. under the name of Spepharm Holding B.V. with its registered office in Amsterdam to serve as the parent company of a European specialty pharmaceutical group of companies with the vision to become one of the leading suppliers of specialty urology and endocrinology products to the European market place. For this purpose and in order to regulate the legal relationship among themselves as future shareholders of the Company, Valera and the Investors enter into the following agreement, which they expect the Company to accede to in due course:

Sec. 1
Foundation of Spepharm and Loan Commitment by LSOFI and LSOF

(1)

Immediately after signing this Agreement, the Investors and Valera shall set up a new B.V. under Dutch law to be named Spepharm Holding B.V. (the “ Company ”), and shall provide all information necessary to apply to the ministry of justice for its consent to the Company’s incorporation. The Investors and Valera shall be entitled and obliged to subscribe for the Company’s initial shares and make payments in the following amounts (with the term “cost” referring to Sec. 23 (4) below):

				Payment in EUR
		Shares		Nominal		Premium		Total
TVM LP		181,700		1,817		668,396 - cost		670,213 - cost
TVM KG		655,400		6,554		2,410,935 - cost		2,417,489 - cost
LSOFI		469,900		4,699		1,728,561 - cost		1,733,260 - cost
LSOF		84,100		841		309,368 - cost		310,209 - cost
ARCADE		88,100		881		324,082 - cost		324,963 - cost
Valera		367,492		3,674.92		—		3,674.92

The payments of the nominal amounts shall be effected to the Company’s bank account and the payments of the premium shall be effected to a notary’s third party account, in each case immediately upon the consent to the Company’s incorporation by the ministry of justice having been granted. Without delay upon the receipt of all payments set forth above on the Company’s bank account and on the notary’s third party account, respectively, the notarial deed for incorporation of the Company shall be executed.

(2)

The Shareholders shall adopt articles of association for the Company in the form set out in Appendix 1.2.

(3)

JFLAB shall become the Company’s initial director. Immediately after the foundation deed of the Company has been executed, JFLAB shall offer to the Company the conclusion of a service agreement at terms and conditions as set forth in Appendix 1.3.

(4)

The Shareholders shall appoint Messrs. David Tierney, James Gale, Hubert Birner and Bernd Seibel as members of the Company’s initial supervisory board. The Parties shall, to the extent legally permissible and respecting the independence of the supervisory board and its members, use their best efforts and all the influence they have to the effect that the supervisory board adopts the Rules of Procedure for the Management as set forth in Appendix 1.4 immediately upon their appointment.

(5)

LSOFI and LSOF undertake to grant to the Company, immediately upon the Company’s incorporation, short term loans in the amount of EUR 890,568 and EUR 159,432, respectively, at the terms and conditions set forth in the draft loan agreement as attached hereto as Appendix 1.5 .

(1)

If the Company requires additional funds, it shall inform the Shareholders accordingly in writing. Each Investor shall, within six weeks as of receipt of such information, notify the Company and the Shareholders whether such Investor supports the additional funding. If Investors, who hold (together) a Qualified Investor Majority (as defined in Sec. 23 (1) below), notify the Company and the Shareholders within such six weeks period of their support of the additional funding, the Company shall without delay call for a written shareholders resolution of an increase of the Company’s share capital from EUR 18,466.92 by up to EUR 25,536.83 to up to EUR 44,003.75 by issuing new shares in the Company (the “ First Capital Increase ”) to Valera and the Investors. All Shareholders shall participate in, and vote in favour of, the resolution on the First Capital Increase, waiving all requirements as to the form and time period for calling such shareholders resolution.

(2)

The Investors shall then each be entitled and obliged to subscribe for the Company’s new             shares from the First Capital Increase and make payments in the following amounts (with the term “cost” referring to Sec. 23 (4) below):

				Payment in EUR
		Shares		Nominal		Premium		Total
TVM LP		86,000		860		316,357 - cost		317,217 – cost
TVM KG		310,400		3,104		1,141,828 - cost		1,144,932 – cost
LSOFI		576,300		5,763		2,119,960 - cost		2,125,723 – cost
LSOF		103,200		1,032		379,629 - cost		380,661 – cost
ARCADE		88,100		881		—		881

provided, that one or more third party investors (or any of the Investors) agree to subscribe for new shares from the First Capital Increase and make payments in the following amounts:

Payment in EUR

Shares

Nominal

Premium

Total

Third party investor(s)

881,500

8.815

3,242,660 — cost

3,251,475 – cost

The payments set forth above in this Sec. 2 (2) shall be effected, within one week after the resolution on the First Capital Increase has been taken, to a notary’s third party account, instructing the notary to pay these amounts to the Company upon the execution of the notarial deed on the First Capital Increase and issuance of the new shares as set forth in the above table.

(3)

Immediately upon payment of all of the above stated amounts, but in any event after the lapse of four weeks as of the Shareholders’ resolution on the First Capital Increase, the Company shall inform Valera on the extent to which the First Capital Increase has been subscribed and paid pursuant to Sec. 2 (2), and shall offer to issue to Valera 19.9% of the entire new shares from the First Capital Increase (i.e., the aggregate amount of the new shares subscribed and paid for pursuant to Sec. 2 (2) plus the shares to be allotted to Valera pursuant to this Sec. 2 (3) so that following such issuance Valera would own 19.9%, or – in case of Sec. 6 (2) – 19.4%, of the outstanding shares of the Company) at a price that equals such shares’ nominal amount. Valera shall subscribe and pay for those shares within one week as of receipt of such offer, or the offer shall lapse. Valera’s payment shall be made to the same notary’s third party account as used for the purpose of Sec. 2 (2), equally instructing the notary to pay these amounts to the Company upon the execution of the notarial deed on the First Capital Increase and issuance of the respective new shares to Valera.

(4)

In addition to the payment set forth to be made to the Company by ARCADE in the table in Sec. 2 (2), ARCADE hereby commits towards the Shareholders, but without obliging itself towards the Company, and provided that the Company has not filed for insolvency or has become obliged to file for insolvency prior to such payment, to make an additional payment of EUR 324,082 minus cost (see Sec. 23 (4) below) into the Company’s capital reserves at the latest immediately prior to any of the following events: (i) a Trade Sale (as defined in Sec. 12 (1) below); (ii) an initial public offering of shares of the Company; (iii) the liquidation of the Company (but not in the context of an insolvency); and (iv) any transfer of any shares by ARCADE except for share transfers under Sec. 15 (1) if the acquirer assumes this payment obligation. Nothing in this Sec. 2 (4) shall be interpreted to grant to the Company any right or claim to the additional payment by ARCADE.

Second Capital Increase

(1)

If after implementation of the First Capital Increase the Company requires additional funds, it shall inform the Shareholders accordingly in writing. Each Investor shall, within six weeks as of receipt of such information, notify the Company and the Shareholders whether such Investor supports the additional funding. If Investors, who hold (together) a Qualified Investor Majority (as defined in Sec. 23 (1) below), notify the Company and the Shareholders within such six weeks period of their support of the additional funding, the Company shall without delay call for a written shareholders resolution of a further increase of the Company’s share capital by up to EUR 23,691.64 by issuing new shares in the Company (the “ Second Capital Increase ”) to Valera and the Investors. All Shareholders shall participate in, and vote in favour of, the resolution on the Second Capital Increase, waiving all requirements as to the form and time period for calling such shareholders resolution.

(2)

The Investors shall then each be entitled and obliged to subscribe for the Company’s new shares from the Second Capital Increase and make payments in the following amounts:

				Payment in EUR
		Shares		Nominal		Premium		Total
TVM LP		144,200		1,442		530,450		531,892
TVM KG		520,100		5,201		1,913,225		1,918,426
LSOFI		563,400		5,634		2,072,507		2,078,141
LSOF		100,900		1,009		371,168		372,177
ARCADE		95,000		950		—		950
Third party investor(s)		474,100		4.741		1,744,011		1,748,752

Such payments shall be effected, within one week after the resolution on the Second Capital Increase has been taken, to a notary’s third party account, instructing the notary to pay these amounts to the Company upon the execution of the notarial deed on the Second Capital Increase and issuance of the new shares as set forth in the above table.

(3)

Immediately upon payment of all of the above stated amounts, but in any event after the lapse of four weeks as of the Shareholders’ resolution on the Second Capital Increase, the Company shall inform Valera on the extent to which the Second Capital Increase has been subscribed and paid pursuant to Sec. 3 (2), and shall offer to issue to Valera 19.9%, or – in case of Sec. 6 (2) – 19.4%, of the entire new shares from the Second Capital Increase (i.e., the aggregate amount of the new shares subscribed and paid for pursuant to Sec. 3 (2) plus the shares to be allotted to Valera pursuant to this Sec. 3 (3) so that following such issuance Valera would own 19.9%, or – in case of Sec. 6 (2) – 19.4%, of the outstanding shares of the Company, provided that Valera has fully subscribed to the shares offered to Valera pursuant to Sec. 2 (3)) at a price that equals such shares’ nominal amount. Valera shall subscribe and pay for those shares within one week as of receipt of such offer, or the offer shall lapse. Valera’s payment shall be made to the same notary’s third party account as used for the purpose of Sec. 3 (2), equally instructing the notary to pay these amounts to the Company upon the execution of the notarial deed on the Second Capital Increase and issuance of the respective new shares to Valera.

(4)

In addition to the payment set forth to be made to the Company by ARCADE in the table in Sec. 3 (2), ARCADE hereby commits towards the Shareholders, but without obliging itself towards the Company, and provided that the Company has not filed for insolvency or has become obliged to file for insolvency prior to such payment, to make an additional payment of EUR 349,464 (on top of the additional payment under Sec. 2 (2) above) into the Company’s capital reserves at the latest immediately prior to any of the following events: (i) a Trade Sale (as defined in Sec. 12 (1) below); (ii) an initial public offering of shares of the Company; (iii) the liquidation of the Company (but not in the context of an insolvency); and (iv) any transfer of any shares by ARCADE except for share transfers under Sec. 15 (1) if the acquirer assumes this payment obligation. Nothing in this Sec. 3 (4) shall be interpreted to grant to the Company any right or claim to the additional payment by ARCADE.

Sec. 4
General Obligations with regard to Capital Increases / Syndication

(1)

To the extent necessary to implement Secs. 2 and 3, the Shareholders shall waive their statutory subscription rights for the First and Second Capital Increase.

(2)

The Parties shall make any and all statements and undertake any and all actions necessary or appropriate, including the co-operation with the execution of any relevant notarial deeds, to implement the aforesaid resolutions set out in Secs. 1 to 3 as soon as reasonably practicable.

(3)

Each of the Investors listed on the cover page of this Agreement shall be entitled to transfer and assign its rights and obligations to subscribe and pay for shares from the First and Second Capital Increase to a third party, provided that such third party (i) meets the approval of Shareholders who hold (together) a majority of the shares held by all Shareholders at the time of the approval, and (ii) accedes to this Agreement as an Investor by a syndication and accession agreement as set forth in draft form as Appendix 4.3a hereto, which shall be accepted on behalf of all Parties by the respective Investor who transfers and assigns its rights and obligations. The same requirements shall apply to the third party investor or third party investors envisaged in Secs. 2(2) and 3(2) to invest in the First and Second Capital Increase, except that in such case, such third party investor shall accede to this Agreement as an Investor by an accession agreement as set forth in draft form as Appendix 4.3b , which shall be accepted on behalf of all Parties by any of the Investors.

Sec. 5
Default on Investment Obligation

(1)

If an Investor fails (i) to subscribe for shares from the First or Second Capital Increase, or (ii) to make any of the payments under Sec. 2 (2) and 3 (2), in each case within the time period provided for with regard to such subscription or payment in the respective Sections above plus a grace period of one additional week (“ Default ”), such Investor’s right to acquire shares from the respective First or Second Capital Increase shall lapse. In addition, such Investor (the “ Defaulting Investor ”) shall be obliged to transfer 50% of the shares held by such Investor at that time to the other Shareholders (who shall be entitled to acquire such shares pro rata to their shareholdings) for an aggregate consideration of EUR 1, such amount to be pro rated among the Shareholders receiving such transferred shares. The share transfer shall be implemented without delay upon the lapse of the respective applicable time period plus the grace period of one week, and the Defaulting Investor shall, in particular, provide all co-operation needed for the execution of the notarial deed of the share transfer. Secs. 9 – 11 of this Agreement shall not apply to such share transfer. The Company shall immediately inform all Shareholders of such lapse of time and failure to subscribe or make payments.

(2)

Each Investor hereby assigns, subject to the condition precedent that he commits a Default, all of the Relevant Claims (as defined hereinafter) to all other Shareholders (at the time of Default) pro rata to their shareholdings at the time of Default. The Relevant Claims are 50% of all claims of the Defaulting Investor for dividends, liquidation proceeds, trade sale proceeds and redemption compensation with respect to all of the shares held by him at the time of Default, provided, however, that such claims arise or become payable in the time period between the Default and the share transfer pursuant to Sec. 5 (1).

Valera’s Covenant to obtain Shire Waiver/Licence

(1)

Valera hereby undertakes to obtain from Shire US Inc. a license to the Development Data for the development, manufacture, use, supply and sale of the Licensed Product in Ireland (each capitalised term as defined in the Termination Agreement, License Back and Option dated 21 December 2001 between Hydro Med Sciences, Inc. (n/k/a Valera Pharmaceuticals, Inc.) and Shire US Inc.).

(2)

If Valera fails to obtain from Shire such license by the lapse of six months as of the date of incorporation of the Company, Valera shall transfer to the Company without consideration such number of Valera’s shares which represent 0.5% of the entire outstanding shares of the Company at that time. All Parties shall in such event, without delay upon the lapse of six

months after the incorporation of the Company, take all steps, measures and resolutions necessary to implement such share transfer, including – but not limited to – the shareholders resolution on the Company’s acquisition of such shares and the Company’s consent to such share transfer. Secs. 9 – 11 shall not apply to such share transfer.

(1)

Valera and the Investors shall ensure that immediately upon the Company’s incorporation the Company will accede to this Agreement by signing it.

(2)

Valera hereby offers to the Company or any of its subsidiaries the conclusion of the Licence and Distribution Agreement set out in Appendix 7.2 , and all Parties shall ensure that the Company or its appropriate subsidiary without delay accepts such offer and enters into said Distribution and Licence Agreement upon the Company’s or the appropriate subsidiary’s incorporation.

(3)

It is the parties’ joint intention that the Company sets up subsidiaries and a structure as set out in Appendix 7.3 as amended from time to time by the Company’s management with the approval of the Company’s supervisory board. The Parties shall make any and all statements and undertake any and all actions necessary or appropriate to implement the aforesaid structure as soon as reasonably practicable, provided, however, that no Shareholder shall be obliged under this Sec. 7.3 to accept or enter into any financial obligations other than expressly provided for in this Agreement. The Parties agree to procure that the articles of association or similar instruments of any future subsidiaries of the Company will be established in such a manner that they will provide that prior approval of the respective subsidiary’s shareholders meeting shall be required for those resolutions or actions by such subsidiary’s management for which, if such resolution or action was to be taken by the management of the Company, the management would require the consent of the Company’s supervisory board, thus ensuring that any such resolution or action ultimately requires the consent of the supervisory board of the Company.

(4)

All Parties shall ensure that the Company without delay upon its incorporation issues the Management Rights Letter attached in draft form as Appendix 7.4 hereto to TVM LP as well as to TVM KG. By signing and acceding to this Agreement, the Company undertakes to issue such Management Right Letters without delay.

Intellectual Property Rights

(1)

The parties agree that JFLAB does not have any rights in or relating to intellectual property rights (including, without limitation, any inventions, patents, copyrights and other industrial property rights, especially with a view to software and related materials or rights for remuneration) (hereinafter collectively referred to as the “ IP Rights ”) in the field of speciality urology and endocrinology products (the “ Field ”). For the avoidance of doubt, JFLAB hereby offers to transfer to the Company or the appropriate subsidiary, to the extent legally possible, any and all IP Rights owned by him in the Field without any additional compensation. Where such transfer is not possible for any legal reasons, JFLAB herewith offers to grant to the Company or the appropriate subsidiary an exclusive and irrevocable licence to use such IP Rights for all currently known uses without any fee or other consideration being payable. The offered grant of licence is as broad as legally possible and shall specifically, without limitation, be unlimited (in respect of duration, territorial scope and scope of the rights concerned), exclusive, transferable and shall include the right to modify the IP Rights and to grant sub-licences to third parties. The licence shall also include the permanent or temporary reproduction of the work results by any means and in any form, in part or in whole, the loading, displaying, running, transmission or storage of the work results, the translation,

adaptation, arrangement and any other alteration of the work results and the reproduction of the results thereof, without prejudice to the rights of the person who alters the work results, any form of distribution to the public, including the rental, of the original work results or of copies thereof, and the right to make available to the public the work results by any means.

(2)

Where the above transfer of rights and the grant of licences requires any further deeds, acts or declarations, JFLAB agrees to give and make any such deeds, acts and declarations forthwith. Any costs accruing in this context shall be borne by the Company or the appropriate subsidiary.

(3)

At the request of the Company or the appropriate subsidiary, JFLAB shall demonstrate and explain all IP Rights, know-how and any knowledge or work results in the Field to an expert named by the Company or the appropriate subsidiary and answer all questions such expert may have. JFLAB shall make available to the Company or the appropriate subsidiary all of his documentation on IP Rights, know-how and any knowledge or work results in the Field.

Sec. 9
Transfer of Shares / Notification

(1)

In the event that a Shareholder intends to transfer all or part of his shares in the Company to any third person (including other Shareholders) with or without consideration, or to enter into any commercially equivalent transaction (the “ Selling Shareholder ”), the Selling Shareholder shall be obliged to notify the other Shareholders of such intent in writing (the “ Notification ”) with a copy to the chairman of the Company’s supervisory board.

(2)   The Notification of the Selling Shareholder shall contain the following information:

	a)		name / firm name and address / registered office of the Selling Shareholder;
	b)		name / firm name and address / registered office of the prospective purchaser;
	c)		description of business of the prospective purchaser;
	d)		purchase price or other consideration for the proposed transfer, if any;
	e)		due date for payment of the purchase price and / or other consideration, if any;
	f)		number of shares to be transferred;
	g)		representations and warranties as well as indemnities to be given and covenants to be assumed by each party to the proposed transfer.

(3)

If, however, the Selling Shareholder intends to transfer shares for consideration other than cash, the Selling Shareholder shall, for the purpose of the right of first refusal under Sec. 10, indicate in the Notification the value of any non-cash consideration in cash according to the consideration’s fair market value. In the event that another Shareholder has reasonable doubt as to the accuracy of the consideration’s value, such Shareholder (the “ Objecting Shareholder ”) shall inform the Selling Shareholder accordingly in writing within two weeks as of the receipt of the Notification, indicating the value which the Objecting Shareholder believes to be accurate, with a copy of such information to all other Shareholders. If the Objecting Shareholder and the